40-F

U.S. Securities and Exchange Commission

Washington, D.C. 20549

Form 40-F

[Check one]

☐ Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

☒ Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended October 31, 2018 Commission File Number 001-13354

BANK OF MONTREAL

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English (if applicable))

Canada

(Province or other jurisdiction of incorporation or organization)

6029

(Primary Standard Industrial Classification Code Number (if applicable))

Not Applicable

(I.R.S. Employer Identification Number (if applicable))

100 King Street West, 1 First Canadian Place, Toronto, Ontario, Canada M5X 1A1 (416-867-6785)

(Address and telephone number of Registrant’s principal executive offices)

Colleen Hennessy, Bank of Montreal, 111 West Monroe Street, P.O. Box 755, Chicago, Illinois

60690 (312-461-7745)

(Name, address (including zip code) and telephone number (including area code)

of agent for service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title Of Each Class	Name Of Each Exchange On Which Registered
Common Shares	New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Not Applicable

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

Not Applicable

For annual reports, indicate by check mark the information filed with this Form:

☒  Annual information form            ☒  Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common Shares	647,816,318
Class B Preferred Shares Series 25	9,425,607
Class B Preferred Shares Series 26	2,174,393
Class B Preferred Shares Series 27 (Non-Viability Contingent Capital (NVCC))	20,000,000
Class B Preferred Shares Series 29 (Non-Viability Contingent Capital (NVCC))	16,000,000
Class B Preferred Shares Series 31 (Non-Viability Contingent Capital (NVCC))	12,000,000
Class B Preferred Shares Series 33 (Non-Viability Contingent Capital (NVCC))	8,000,000
Class B Preferred Shares Series 35 (Non-Viability Contingent Capital (NVCC))	6,000,000
Class B Preferred Shares Series 36 (Non-Viability Contingent Capital (NVCC))	600,000
Class B Preferred Shares Series 38 (Non-Viability Contingent Capital (NVCC))	24,000,000
Class B Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC))	20,000,000
Class B Preferred Shares Series 42 (Non-Viability Contingent Capital (NVCC))	16,000,000
Class B Preferred Shares Series 44 (Non-Viability Contingent Capital (NVCC))	16,000,000

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☒                                                 No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes  ☒                                                 No  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.

Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

TABLE OF CONTENTS

DISCLOSURE CONTROLS AND PROCEDURES

INTERNAL CONTROL OVER FINANCIAL REPORTING

AUDIT AND CONDUCT REVIEW COMMITTEE FINANCIAL EXPERT

CODE OF ETHICS

PRINCIPAL ACCOUNTANT FEES AND SERVICES

OFF-BALANCE SHEET ARRANGEMENTS

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

IDENTIFICATION OF THE AUDIT AND CONDUCT REVIEW COMMITTEE

SUMMARY OF SIGNIFICANT CORPORATE GOVERNANCE DIFFERENCES

NOTE ON CERTAIN ACTIVITIES

UNDERTAKING

SIGNATURES

EXHIBIT INDEX

Annual Information Form

Management’s Discussion and Analysis for the Fiscal Year Ended October 31, 2018

Consolidated Financial Statements for the Fiscal Year Ended October 31, 2018

Consent of Independent Registered Public Accounting Firm dated December 4, 2018

Section 302 Certifications of Chief Executive Officer

Section 302 Certifications of Chief Financial Officer

Section 906 Certifications

Interactive Data File

Page 2 of 6

DISCLOSURE CONTROLS AND PROCEDURES

The information provided under the heading “Management’s Annual Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting — Disclosure Controls and Procedures” (page 123) contained in the Bank’s Management’s Discussion and Analysis for the fiscal year ended October 31, 2018 (“2018 MD&A”), filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

INTERNAL CONTROL OVER FINANCIAL REPORTING

a. Management’s annual report on internal control over financial reporting

The information provided under the heading “Management’s Annual Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting — Internal Control over Financial Reporting” (page 123) contained in the 2018 MD&A, filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

b. Auditor’s attestation report on internal control over financial reporting

The Bank’s shareholders’ auditors, KPMG LLP, have issued an audit report on our internal control over financial reporting. This audit report appears on page 142 of the Bank’s Consolidated Financial Statements for the fiscal year ended October 31, 2018 (“2018 Financial Statements”), filed as Exhibit 99.3 to this annual report on Form 40-F and is incorporated by reference herein.

c. Changes in internal control over financial reporting

The information provided under the heading “Management’s Annual Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting — Changes in Internal Control Over Financial Reporting” (page 123) contained in the 2018 MD&A, filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

AUDIT AND CONDUCT REVIEW COMMITTEE FINANCIAL EXPERT

The information provided under the heading “Audit and Conduct Review Committee Information – Composition of the Audit and Conduct Review Committee” (page 13) identifying the Audit and Conduct Review Committee Financial Experts, and confirming the independence of the Audit and Conduct Review Committee Financial Experts, as set forth in the Bank’s Annual Information Form (dated December 4, 2018), filed as Exhibit 99.1 to this annual report on Form 40-F, is incorporated by reference herein.

CODE OF ETHICS

BMO’s Code of Conduct is its code of business conduct and ethics, which is applicable to every director and employee of the Bank. BMO’s Code of Conduct is available on the Bank’s website www.bmo.com and is available in print without charge to any shareholder upon request.

Page 3 of 6

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information provided under the heading “Shareholders’ Auditors’ Services and Fees — Shareholders’ Auditors’ Fees” and “— Pre-Approval Policies and Procedures” (page 122) contained in the 2018 MD&A, filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

OFF-BALANCE SHEET ARRANGEMENTS

The information provided under the heading “Off-Balance Sheet Arrangements” (page 77) contained in the 2018 MD&A, filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The information provided under the heading “Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments” (pages 107 and 108) contained in the 2018 MD&A, filed as Exhibit 99.2 to this annual report on Form 40-F, is incorporated by reference herein.

IDENTIFICATION OF THE AUDIT AND CONDUCT REVIEW COMMITTEE

The information provided under the heading “Audit and Conduct Review Committee Information — Composition of the Audit and Conduct Review Committee” (page 13) identifying the Bank’s Audit and Conduct Review Committee and confirming the independence of the Audit and Conduct Review Committee as set forth in the Bank’s Annual Information Form (dated December 4, 2018), filed as Exhibit 99.1 to this annual report on Form 40-F, is incorporated by reference herein.

SUMMARY OF SIGNIFICANT CORPORATE GOVERNANCE DIFFERENCES

A summary of significant ways corporate governance practices followed by the Bank differ from corporate governance practices required to be followed by U.S. domestic companies under The New York Stock Exchange’s listing standards (disclosure required by Section 303A.11 of the NYSE Listed Company Manual) is available on the Bank’s website at www.bmo.com.

NOTE ON CERTAIN ACTIVITIES

In 2014, through a subsidiary, the Bank acquired F&C Asset Management plc (“F&C”), a company located in the United Kingdom. In 2016, the Bank identified that a subsidiary of F&C maintained an investment account for an individual that appears on the Specially Designated Nationals (“SDN”) list of the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) under Executive Order 13224 (the “Executive Order”). The F&C subsidiary closed that investment account in May 2016, and has engaged in no further activities with that individual. There had been no activity on that investment account from the time that the Bank identified such account until the closure of such account.

During the year ended October 31, 2018, the Bank maintained a Canadian dollar personal chequing account and personal savings account with a Canadian resident citizen that appears on the SDN list of OFAC under the Executive Order. The Bank continues to maintain these accounts and monitors their use, prohibiting access to U.S. currency and the U.S. financial system.

Page 4 of 6

Pursuant to Section 13(r) of the Exchange Act, the Bank is required to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings with certain individuals or entities, including those listed on OFAC’s SDN list under the Executive Order. Disclosure is generally required even where the activities, transactions or dealings were conducted outside the U.S. in compliance with applicable law. The Bank is not prohibited from doing business with this customer under applicable law or regulation. Revenues and profits from this relationship was not calculated but would be considered negligible.

UNDERTAKING

Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises or transactions in said securities.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.

Registrant: BANK OF MONTREAL

By:	/s/ Thomas E. Flynn
	Thomas E. Flynn
	Chief Financial Officer
Date: December 4, 2018

Page 5 of 6

EXHIBIT INDEX

Exhibits	Description
99.1	Annual Information Form
99.2	Management’s Discussion and Analysis for the Fiscal Year Ended October 31, 2018
99.3	Consolidated Financial Statements for the Fiscal Year Ended October 31, 2018
99.4	Consent of Independent Registered Public Accounting Firm dated December 4, 2018
99.5	Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.6	Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
99.7	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Interactive Data File

Page 6 of 6

EX-99.1

Exhibit 99.1

BANK OF MONTREAL

ANNUAL INFORMATION FORM

FOR THE YEAR ENDED OCTOBER 31, 2018

Dated December 4, 2018

	Annual Information Form	2018 Financial Statements		Management’s Discussion and Analysis1
EXPLANATORY NOTES AND CAUTIONS	2
Caution Regarding Forward-Looking Statements	2				29
CORPORATE STRUCTURE	3		Note 26
GENERAL DEVELOPMENT OF THE BUSINESS	3				25, 28, 43-61
Three-Year History	3
DESCRIPTION OF THE BUSINESS	3
Business	3		Note 25		25, 28, 43-61
Supervision and Regulation in Canada	4				69-71, 80, 106, 112-114
Supervision and Regulation in the United States	4				69-71, 80, 112-114
International Supervision and Regulation	5				69-71, 80, 112-114
Competition	5
Environmental, Social and Governance Issues	6				81, 115-116
DIVIDENDS	6		Note 16		75
DESCRIPTION OF CAPITAL STRUCTURE	6		Note 16 and 19		71-75
Description of Common Shares	7		Note 16
Description of Preferred Shares	7		Note 16
Certain Conditions of the Class A Preferred Shares as a Class	7		Note 16
Certain Conditions of the Class B Preferred Shares as a Class	7
Restraints on Bank Shares under the Bank Act	8
Ratings	8		Note 8
MARKET FOR SECURITIES	9
Trading Price and Volume	9
Prior Sales	10		Note 15 and 16		68
DIRECTORS AND EXECUTIVE OFFICERS	10
Board of Directors	10
Board Committee Members	11
Executive Officers	11
Shareholdings of Directors and Executive Officers	12
Additional Disclosure for Directors and Executive Officers	12
LEGAL PROCEEDINGS AND REGULATORY ACTIONS	12		Note 24
TRANSFER AGENT AND REGISTRAR	12
INTERESTS OF EXPERTS	13		141-142
AUDIT AND CONDUCT REVIEW COMMITTEE INFORMATION	13
Composition of the Audit and Conduct Review Committee	13
Shareholders’ Auditors Pre-Approval Policies and Procedures and Fees	13				122
ADDITIONAL INFORMATION	14
APPENDIX I: BANK OF MONTREAL AUDIT AND CONDUCT REVIEW COMMITTEE CHARTER	I-1
APPENDIX II: CREDIT RATING CATEGORIES	II-1

¹ As indicated, parts of the Bank’s Consolidated Financial Statements (2018 Financial Statements) and Management’s Discussion and Analysis (2018 MD&A) for the fiscal year ended October 31, 2018 are incorporated by reference into this Annual Information Form. The 2018 Financial Statements and the 2018 MD&A are available on SEDAR (www.sedar.com).

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EXPLANATORY NOTES AND CAUTIONS

Unless specifically stated otherwise in this Annual Information Form:

● all amounts are in Canadian dollars

● BMO Financial Group, the Bank, BMO, we, or our means Bank of Montreal and, as applicable, its subsidiaries

● information is as at October 31, 2018

Caution Regarding Forward-Looking Statements

Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the “safe harbor” provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2019 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, the regulatory environment in which we operate and the results of or outlook for our operations or for the Canadian, U.S. and international economies, and include statements of our management. Forward-looking statements are typically identified by words such as “will”, “would”, “should”, “believe”, “expect”, “anticipate”, “project”, “intend”, “estimate”, “plan”, “goal”, “target”, “may” and “could”.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct, and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements, as a number of factors – many of which are beyond our control and the effects of which can be difficult to predict – could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; the Canadian housing market; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; the level of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to us; our ability to execute our strategic plans and to complete and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; changes to our credit ratings; political conditions, including changes relating to or affecting economic or trade matters; global capital markets activities; the possible effects on our business of war or terrorist activities; outbreaks of disease or illness that affect local, national or international economies; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; information and cyber security, including the threat of hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please see the discussion in the Risks That May Affect Future Results section on page 79 of the 2018 MD&A and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational, model, legal and regulatory, business, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section on page 78 of the 2018 MD&A, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained or incorporated by reference in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Material economic assumptions underlying the forward-looking statements contained or incorporated by reference in this document are set out in the Economic Developments and Outlook section on page 30 of the 2018 MD&A. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by governments, historical relationships between economic and financial variables, and the risks to the domestic and global economy.

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CORPORATE STRUCTURE

Bank of Montreal started business in Montreal in 1817 and was incorporated in 1821 by an Act of Lower Canada as the first Canadian chartered bank. Since 1871, the Bank has been a chartered bank under the Bank Act (Canada) (the Bank Act), and is named in Schedule I of the Bank Act. The Bank Act is the charter of the Bank and governs its operations.

The Bank’s head office is 129 rue Saint Jacques, Montreal, Quebec, H2Y 1L6. Its executive offices are 100 King Street West, 1 First Canadian Place, Toronto, Ontario, M5X 1A1.

Bank of Montreal brands the organization’s member companies as BMO Financial Group. Note 26 to the 2018 Financial Statements lists the intercorporate relationships among Bank of Montreal and its significant subsidiaries. We incorporate this Note by reference. These subsidiaries are incorporated or organized under the laws of the state or country of their principal office, except for: BMO Financial Corp.; BMO Asset Management Corp.; BMO Capital Markets Corp.; BMO Harris Financial Advisors, Inc.; BMO Harris Financing, Inc. and CTC myCFO, LLC, which are incorporated under the laws of the State of Delaware, U.S. F&C Asset Management plc is incorporated under the laws of Scotland.

GENERAL DEVELOPMENT OF THE BUSINESS

Three-Year History

As at October 31, 2018, BMO was the eighth largest bank in North America by assets.

On December 1, 2015, BMO completed the acquisition of General Electric Capital Corporation’s (GE Capital) Transportation Finance business in the United States and Canada with net assets on closing of approximately $12.1 billion (U.S. $9.0 billion), and rebranded it BMO Transportation Finance. The acquisition built on our position as a market leader in commercial banking, and enhanced our business position in the United States by further diversifying net income, adding scale and enhancing profitability and margins. In fiscal 2017, BMO completed the integration of BMO Transportation Finance, allowing us to leverage the combined capabilities and suite of financial solutions to better meet our customers’ needs.

On October 28, 2016, BMO announced the appointments of Franklin J. Techar as Vice-Chair, BMO Financial Group, Darryl White as Chief Operating Officer, BMO Financial Group, Patrick Cronin as Group Head, BMO Capital Markets, Gilles Ouellette as Group Head, BMO Asset Management and Joanna Rotenberg as Group Head, BMO Wealth Management. Each of these appointments was effective November 1, 2016.

On April 7, 2017, BMO announced its intention to appoint Darryl White, Chief Operating Officer, BMO Financial Group, to the office of Chief Executive Officer, BMO Financial Group effective November 1, 2017, as successor to William Downe, who had announced his intention to retire effective October 31, 2017. Mr. White was appointed to the Bank’s board of directors on May 24, 2017. On October 31, 2017, Mr. Downe retired as Chief Executive Officer of the Bank and, on November 1, 2017, Mr. White became Chief Executive Officer.

On October 10, 2018, BMO announced the appointments of Patrick Cronin as Chief Risk Officer, BMO Financial Group and Dan Barclay as Group Head, BMO Capital Markets. Each of these appointments was effective November 1, 2018.

BMO has had common share buyback programs in place for several years. The 2018-2019 program expires on May 31, 2019. During the year ended October 31, 2018, the Bank repurchased and cancelled a total of 10 million common shares, 3 million of which were purchased pursuant to a specific share repurchase program agreement.

For additional information on the general development of BMO’s business and our strategies for the upcoming year, see pages 25, 28, and 43 to 61 of the 2018 MD&A, which we incorporate herein by reference.

This Three-Year History section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements on page 2.

DESCRIPTION OF THE BUSINESS

Business

BMO Financial Group is a highly diversified financial services provider based in North America. BMO offers a broad range of products and services directly and through Canadian and non-Canadian subsidiaries, offices, and branches. As at October 31, 2018, BMO had more than 12 million customers and more than 45,000 full-time equivalent employees. The Bank has approximately 1,500 bank branches in Canada and the United States and operates internationally in major financial markets and trading areas through its offices in 27 jurisdictions. BMO Financial Corp. (BFC) is based in Chicago and wholly-owned by Bank of Montreal. BFC operates primarily through its subsidiary BMO Harris Bank N.A. (BHB), which provides banking, financing, investing, and cash management services in select markets in the U.S. Midwest. BMO provides a full range of investment dealer services through entities, including BMO Nesbitt Burns Inc., a major fully integrated Canadian investment dealer, and BMO Capital Markets Corp., Bank of Montreal’s wholly-owned registered securities dealer in the United States.

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BMO conducts business through three operating groups: Personal and Commercial Banking (P&C), made up of Canadian P&C and U.S. P&C; Wealth Management; and BMO Capital Markets. Canadian P&C operates across Canada, offering a broad range of products and services, including banking, lending and treasury management. Operating predominately in the U.S. Midwest under the BMO Harris brand, U.S. P&C offers personal and commercial clients banking, lending, and treasury management products and services. Wealth Management serves a full range of clients from mainstream to ultra-high net worth and institutional, with a broad offering of wealth management products and services including insurance. Wealth Management is a global business with an active presence in markets across Canada, the United States, Europe, the Middle East and Africa (EMEA) and Asia. BMO Capital Markets is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. These include equity and debt underwriting, institutional sales and trading, corporate lending and project financing, mergers and acquisitions advisory services, securitization, treasury management, risk management and equity and fixed income research. Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics, and innovation. T&O manages, maintains and provides governance of information technology, cyber security and operations services for BMO Financial Group.

For additional information regarding BMO’s businesses, see pages 25, 28, and 43 to 61 of the 2018 MD&A and Note 25 to the 2018 Financial Statements. We incorporate these pages and Note by reference.

This Business section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements on page 2.

Supervision and Regulation in Canada

Bank of Montreal’s activities in Canada are governed by the Bank Act.

Under the Bank Act, a bank can operate its regular banking business as well as some additional activities, such as dealing with real property and various financial technology and information services. A bank is restricted when it undertakes certain activities, including fiduciary activities, dealing in securities, insurance activities, and personal property leasing. For example, other than for authorized types of insurance, a bank may not offer insurance products through its branch system or bank website.

The Bank Act grants a bank broad power to invest in the securities of other corporations and entities, but limits substantial investments. Under the Bank Act, a bank generally has a substantial investment in a body corporate when (1) the bank and entities controlled by the bank beneficially own more than 10% of the voting shares of the body corporate or (2) the bank and entities controlled by the bank beneficially own shares representing more than 25% of the total shareholders’ equity of the body corporate. A bank can have a substantial investment in entities that meet the substantial investment requirements as set out in Part IX of the Bank Act. In certain cases, the Minister of Finance or the Superintendent of Financial Institutions (Canada) (the Superintendent) must approve before making an investment.

The Superintendent is responsible to the Minister of Finance for administering the Bank Act. The Superintendent provides guidelines for disclosing a bank’s financial information. The Superintendent must also examine each bank annually to ensure compliance with the Bank Act and that each bank is in sound financial condition. The Superintendent’s examination report is submitted to the Minister of Finance.

The Bank’s Canadian trust, loan and insurance subsidiaries are federally regulated financial institutions governed by the Trust and Loan Companies Act (Canada) and the Insurance Companies Act (Canada), respectively, and under provincial laws in respect of their activities in the provinces. The Bank and its Canadian trust, loan and insurance subsidiaries are also subject to regulation by the Financial Consumer Agency of Canada (the FCAC). The FCAC enforces consumer-related provisions of the federal statutes which govern these financial institutions. Certain activities of the Bank and its subsidiaries acting as securities brokers, dealers, underwriters, advisors and investment fund managers are regulated in Canada under provincial securities legislation and, in some cases, by a self-regulatory organization (the Investment Industry Regulatory Organization of Canada or the Mutual Fund Dealers Association of Canada).

Under Canadian bank resolution powers, the Canada Deposit Insurance Corporation (CDIC) may, in circumstances where the Bank has ceased, or is about to cease, to be viable, assume temporary control or ownership of the Bank and may be granted broad powers by one or more orders of the Governor in Council (Canada), including the power to sell or dispose of all or a part of the assets of the Bank, and the power to carry out or cause the Bank to carry out a transaction or a series of transactions the purpose of which is to restructure the business of the Bank. As part of the Canadian bank resolution powers, certain provisions of, and regulations under the Bank Act, the Canada Deposit Insurance Corporation Act (CDIC Act) and certain other Canadian federal statutes pertaining to banks (collectively, the bail-in regime) provide for a bank recapitalization regime for banks designated by the Superintendent as domestic systemically important banks. Effective September 23, 2018, under the bail-in regime, subject to an order of the Governor in Council (Canada) having been issued, CDIC may, having assumed temporary control or ownership of the Bank, amongst other actions, carry out a conversion, by converting or causing the Bank to convert, in whole or in part – by means of a transaction or series of transactions and in one or more steps – the shares and liabilities of the Bank that are subject to the bail-in regime into common shares of the Bank or any of its affiliates. For a more detailed description of Canadian bank resolution powers and the consequent risk factors attaching to certain liabilities of the Bank, reference is made to https://www.bmo.com/ir/files/F18%20Files/Bail_In_TLAC_Disclosure.pdf. The information on our website does not form a part of this Annual Information Form.

Additional information about supervision and regulation in Canada is found under the headings “Regulatory Capital Requirements” and “Capital Regulatory Developments” in the Enterprise-Wide Capital Management section on pages 69 to 71, “Regulatory Requirements” in the Risks That May Affect Future Results section on page 80, “Regulatory Developments” in the Liquidity and Funding Risk section on page 106, and “Legal and Regulatory Risk” on pages 112 to 114 of the 2018 MD&A, which we incorporate herein by reference.

Supervision and Regulation in the United States

In the United States, the operations of Bank of Montreal and its subsidiaries are supervised, regulated, and examined by regulatory and government agencies at the federal and state level. As a foreign bank, Bank of Montreal is subject to various U.S. laws and regulations, including the United States International Banking Act of 1978, the United States Bank Holding Company Act of 1956, and related regulations. The Board of Governors of the Federal Reserve System, including the Federal Reserve Banks (the Federal Reserve), and state banking regulators oversee the Bank of Montreal’s branch and office operations in the United States. The U.S. Securities and Exchange Commission (the SEC), the Financial Industry Regulatory Authority, and state securities regulators regulate broker-dealer subsidiaries. The SEC and state securities regulators regulate registered investment advisor subsidiaries.

Bank of Montreal and its subsidiaries own two Federal Deposit Insurance Corporation (FDIC) insured depository institutions in the United States, BHB and BMO Harris Central N.A. (BHC). BHB provides banking, financing, investing, and cash management services in select markets in the U.S. Midwest. BHC provides limited cash management services. They are subject to examination by the Office of the Comptroller of the Currency (OCC). The Federal Reserve generally

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needs to approve acquiring (a) more than 5% of voting shares, (b) control, or (c) all (or substantially all) of the assets of a bank holding company, bank, or savings association.

The Bank is also subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank reforms include heightened consumer protection, revised regulation of over-the-counter derivatives markets, restrictions on proprietary trading and the ownership and sponsorship of private investment funds by banks and their affiliates (referred to as the Volcker Rule), imposition of heightened prudential standards, and broader application of leverage and risk-based capital requirements.

The Federal Reserve Board’s rule for strengthening supervision and regulation of foreign banking organizations (FBO Rule) implemented Dodd Frank’s enhanced prudential standards for the U.S. operations of non-U.S. banks, such as BMO. The rule established new requirements relating to an intermediate holding company structure, risk based capital and leverage requirements, capital stress testing requirements, U.S. risk management and risk governance, liquidity risk management and liquidity stress testing frameworks. We have certified our compliance with this rule. In May 2018, the U.S. Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), which made reforms to Dodd-Frank, including raising the threshold for heightened prudential standards from US$50 billion to US$250 billion in total consolidated assets. EGRRCP rulemaking will likely continue for at least the next year and may impact our U.S. operations, including with respect to any changes to the FBO Rule.

The OCC has issued guidelines that establish heightened standards for large national banks with average total consolidated assets of US$50 billion or more, including BHB. The guidelines set out minimum standards for the design and implementation of a bank’s risk governance framework and minimum standards for oversight of that framework by a bank’s board of directors. The framework must ensure the bank’s risk profile is easily distinguished and separate from that of its parent for risk management purposes. A bank’s board of directors is responsible for informed oversight of, and providing credible challenge to, management’s risk management recommendations and decisions. We comply with these guidelines.

Additional information about supervision and regulation in the United States is found under the headings “Regulatory Capital Requirements” and “Capital Regulatory Developments” in the Enterprise-Wide Capital Management section on pages 69 to 71, “Regulatory Requirements” in the Risks That May Affect Future Results section on page 80, and “Legal and Regulatory Risk” on pages 112 to 114 of the 2018 MD&A, which we incorporate herein by reference.

This Supervision and Regulation in the United States section contains forward-looking statements. Please see the Cautionary Statement on page 2.

International Supervision and Regulation

Outside Canada and the U.S., each of Bank of Montreal’s branches, agencies and subsidiaries must comply with the regulatory requirements of the country or jurisdiction where it conducts business. These include the Basel Committee on Banking Supervision capital, liquidity and prudential rules (Basel III), or local variations on Basel III, which are intended to strengthen the banking sector’s capital and liquidity frameworks. Since the first quarter of 2013, regulatory capital requirements for Bank of Montreal have been determined on a Basel III basis. Additional information about international supervision and regulation is found under the headings “Regulatory Capital Requirements”, “Regulatory Capital Ratios”, “Regulatory Capital Elements” and “Capital Regulatory Developments” in the Enterprise-Wide Capital Management section on pages 69 to 71, “Regulatory Requirements” in the Risks That May Affect Future Results section on page 80, and “Legal and Regulatory Risk” on pages 112 to 114 of the 2018 MD&A, which we incorporate herein by reference.

Competition

Canada’s financial services industry is highly competitive. It includes 35 domestic banks and 53 foreign bank subsidiaries, branches, and lending branches, as well as a multitude of trust companies, credit unions, online and full-service brokerages, investment dealers, life and property and casualty insurance companies, mutual fund dealers, and large monoline financial institutions, among others. Bank of Montreal competes with most of these companies in some form in our different businesses. However, our range of services compares to those of the other five major Canadian banks, and they are our direct competitors in almost all our businesses and markets in Canada. Bank of Montreal was the fourth largest chartered bank in Canada as measured by assets, equity, and market capitalization as at October 31, 2018. In North America, we are the eighth largest bank by assets, tenth largest by equity and by market capitalization as at October 31, 2018 for BMO. BMO is the second largest Canadian bank as measured by retail branches in Canada and the United States.

The financial services industry continues its rapid change, as technology enables new non-traditional entrants to compete in certain segments of banking, in some cases with reduced regulatory requirements and oversight. New entrants may leverage new technologies, advanced data and analytical tools, lower cost to serve and/or faster processes to challenge traditional banks, including new business models in retail payments, consumer and commercial lending, foreign exchange and low-cost investment advisory services. Failure to keep pace with these new technologies and competition may potentially impact our overall revenues and earnings if customers choose the services of these new market entrants. While we closely monitor technology disruptors, we also continue to adapt by increasing our investment in technology and innovation to keep pace with dynamic client expectations. This includes improving our mobile and internet banking capabilities, building new branch formats, and refining our credit decisioning, analytic and modelling data and tools and, where appropriate, bringing new and enhanced customer solutions to market. We further mitigate this risk by providing our customers with access to banking services across different channels, focusing on improving customer loyalty and trust, enhancing our advanced data and analytical tools, and leveraging current and future partnerships in order to deliver an exceptional customer experience with reduced costs and simplified processes. However, matching the pace of innovation exhibited by new and differently-situated competitors may require us and policy-makers to adapt at a faster pace.

The six major banks play a prominent role in the Canadian banking system, each maintaining an extensive and evolving branch network, augmented by automated banking machines, as well as telephone, internet, and mobile banking systems. The industry is considered mature with moderate growth, supported by an overall focus on productivity, investments in infrastructure and technology integration. Although the major banks offer similar products and services, they compete on offerings, pricing, service models and technology, as well as entering into partnerships and alliances, with a goal of gaining a strategic advantage and serving customers better. Increased competition is also evident in the drive for scale and operating efficiencies.

BMO’s Canadian P&C banking business is one of the top five in Canada in all core product areas, providing a full range of lending, deposit and treasury management products and services to eight million customers. Canadian P&C continues to focus on strengthening customer loyalty in order to generate growth in a competitive environment, as well as increasing digital capabilities to augment the customer experience. Personal Banking provides customers with a wide range of products and services, including chequing and savings accounts, credit cards, mortgages and everyday financial and investment advice. Our employees are focused on providing exceptional service to all of our customers every time they interact with us.

Canadian P&C’s award winning¹ commercial bank possesses a strong competitive position in commercial lending, with a number two market share for business loans of up to $25 million. Commercial Banking provides small business and commercial banking customers with a broad suite of commercial products and

5

services, including business deposit accounts, commercial credit cards, business loans and commercial mortgages, cash management solutions, foreign exchange and specialized banking programs. Our Commercial bankers partner with our customers to help them grow and manage their business.

¹ In 2018, the Bank was named the Best Commercial Bank in Canada by World Finance Magazine for the fourth consecutive year.

In Canada, Wealth Management competes with domestic banks, insurance companies, trust companies, global private banks, investment counselling firms, and mutual fund companies. Wealth Management’s Canadian businesses have strong brand recognition and market position. Wealth Management has a strong market share in each of its full-service brokerage, online brokerage, and private banking businesses and investment funds. In the United States, Wealth Management competes primarily in U.S. personal wealth and asset management, with our strategic presence in the Chicago and Milwaukee area and in select high-growth wealth markets across the country. In EMEA and Asia, Wealth Management competes primarily in asset management through BMO Global Asset Management.

BMO Capital Markets operates in a highly competitive environment and our businesses face a diverse range of competitors. With approximately 2,700 professionals in 33 locations around the world, including 19 offices in North America, BMO Capital Markets works proactively with clients to provide innovative ideas and tailored financial solutions. Our success is based on a highly integrated, client-focused North American capital markets business with a well-diversified platform and business mix – by sector, geography, product and currency. This includes a strong, scalable and relevant U.S. business, and strong risk management and regulatory compliance practices.

Competition in the United States is more complex than in Canada, given the market’s size and activity, as well as personal and commercial banking competitors at the community, regional, and national level, plus other financial service providers. U.S. P&C operations are primarily based in the six states of the U.S. Midwest (Illinois, Wisconsin, Indiana, Minnesota, Missouri and Kansas). In addition, our personal business serves customers in Arizona and Florida, while our commercial business provides targeted nationwide coverage for key specialty sectors. The personal and commercial banking environment is vibrant and competitive, and with a rising rate environment, there is added pressure on deposit market share. Indicators of sustainable economic growth within our footprint include unemployment rates that are at historic lows, higher consumer and commercial spending amid lower income taxes, encouraging credit growth and a healthy housing market. Financial conditions reflect improved business spend, driven by economic growth and the benefit from corporate tax reform. The main risks to the U.S. economic outlook relate to trade protectionism, geopolitical tensions and the possibility of rising inflation. The commercial business remains the engine of our growth, as our main priorities are to build out a presence in new markets, accelerate growth in existing markets and deepen our relationships with our current customers. We’re committed to achieving growth in loans that leads our peer group by investing in talent and enhancing the customer experience. We’re also committed to the development of our personal banking business through the adoption of digital solutions and progressive product offerings as we align our strategic initiatives with market trends and consumer needs. Our initiatives include operational efficiencies, market penetration efforts, online mobility and product offering enhancements. To support these initiatives as they begin to drive customer adoption and growth, we’re investing in competitive digital capabilities that address the needs of our current and potential customers.

Consolidation has been underway in the financial services industry in Canada and the United States in recent years. This affects trust companies, mutual fund managers, life insurers, and credit unions. Canadian federal government policy discourages large banks from merging. It is uncertain whether this will change in the near future but further consolidation and increased competition in the financial services industry overall is likely.

This Competition section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements on page 2.

Environmental, Social and Governance Issues

The Bank publishes an Environmental, Social and Governance Report and Public Accountability Statement, outlining how the Bank is addressing environmental, social, and governance issues. This report and other related information is available on the Bank’s website, www.bmo.com. Additional information about our environmental and social risks is under the heading “Risks that May Affect Future Results – Other Factors that May Affect Future Results – Environmental Events” and “Environmental and Social Risk” in the Enterprise-Wide Risk Management section on page 81 and pages 115-116 of the 2018 MD&A, which we incorporate herein by reference.

DIVIDENDS

You can find information about the Bank’s dividends paid or payable per share on the common shares and each outstanding series of preferred shares in each of the three most recently completed years in Note 16 of the 2018 Financial Statements and under the heading “Outstanding Shares and NVCC Capital Instruments” on page 75 of the 2018 MD&A, which Note and page we incorporate herein by reference.

We cannot declare dividends on our preferred or common shares if paying those dividends would contravene the capital adequacy, liquidity, or other regulations under the Bank Act. Also, we cannot pay common share dividends unless we have paid all dividends declared and payable on the Bank’s preferred shares or set aside sufficient funds to do so. The Board of Directors determines the amount and payment of future dividends. The determination by the Board of Directors depends on the Bank’s operations, financial condition, cash requirements, future regulatory restrictions on the payment of dividends, and other factors the Board of Directors finds relevant. You can find information about our dividends and our dividend payout range on page 75 of the 2018 MD&A, which we incorporate herein by reference.

DESCRIPTION OF CAPITAL STRUCTURE

The following summarizes certain provisions of our common and preferred shares. This summary is qualified in its entirety by the actual terms and conditions of such shares. For more detail on the Bank’s capital structure, see pages 71 to 75 of the 2018 MD&A and Notes 16 and 19 of the 2018 Financial Statements. We incorporate those pages and Notes by reference.

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Description of Common Shares

The authorized capital of the Bank includes an unlimited number of common shares without nominal or par value for unlimited consideration. The holders of common shares are entitled to:

(i) Vote at all Bank shareholders’ meetings, except for meetings where only holders of a specified class or series of shares are entitled to vote.

(ii) Receive dividends as and when declared by the Board of Directors, subject to the preference of the Bank’s holders of preferred shares.

(iii) Receive the remaining property of the Bank if it is liquidated, dissolved, or wound up, only after paying the Bank’s holders of preferred shares and paying all outstanding debt.

Description of Preferred Shares

The authorized capital of the Bank includes an unlimited number of Class A Preferred Shares and Class B Preferred Shares without nominal or par value, in series, for unlimited consideration. Class B Preferred shares may be issued in a foreign currency. The following describes certain general terms and conditions of the preferred shares.

Certain Conditions of the Class A Preferred Shares as a Class

Issuable in Series

From time to time, the Board of Directors may resolve to issue Class A Preferred Shares in one or more series with rights, privileges, restrictions, and conditions, which the Board of Directors may also decide. As at December 3, 2018, there were no outstanding Class A Preferred Shares.

The Class A Preferred Shares of each series rank equally to all other series of Class A and Class B Preferred Shares and are entitled to preference over the common shares and over any other shares ranking junior to the Class A Preferred Shares and the Class B Preferred Shares with respect to the payment of dividends and in the distribution of property in the event of the liquidation, dissolution or winding up of the Bank.

Creating and Issuing Shares

Under the Bank Act, we need approval from the holders of Class A Preferred Shares to create any other class of shares with equal or superior rank to Class A Preferred Shares. Shareholders must give this approval as set out below in “Shareholder Approvals.” The Bank Act and other laws may also require other forms of approval.

We do not require shareholder approval to create or issue additional Class A Preferred Shares or shares of equal rank if, on the date they are created or issued, we have declared and paid or set apart for payment all dividends payable on cumulative and non-cumulative Class A Preferred Shares, including for the most recently completed fiscal period.

Voting Rights

The holders of the Class A Preferred Shares only have voting rights as a class on certain matters (see below) or as the law requires.

Shareholder Approvals

Holders of the Class A Preferred Shares can give their approval if 66 ²/₃% or more holders casting vote in favour of doing so at a meeting where the majority of Class A Preferred Shares is represented, or if no quorum is present at such a meeting, at an adjourned meeting at which no quorum requirements apply.

Certain Conditions of the Class B Preferred Shares as a Class

Issuable in Series

From time to time, the Board of Directors may resolve to issue Class B Preferred Shares in one or more series with rights, privileges, restrictions, and conditions, which the Board of Directors may also decide.

The Class B Preferred Shares of each series rank equally to all the other series of Class B and Class A Preferred Shares and are entitled to preference over the common shares and any other shares ranking junior to the Class A Preferred Shares and the Class B Preferred Shares with respect to the payment of dividends and in the distribution of property in the event of the liquidation, dissolution or winding up of the Bank.

Creating and Issuing Shares

Under the Bank Act, we need approval from holders of Class B Preferred Shares to create any other class of shares with equal or superior rank to Class B Preferred Shares. The Bank Act or other laws may also require other forms of approval.

We do not require shareholder approval to create or issue additional Class B Preferred Shares or shares of equal rank if, on the date they are created or issued, we have declared and paid or set apart for payment all dividends payable on cumulative and non-cumulative Class B Preferred Shares, including for the most recently completed fiscal period. As at December 3, 2018, none of the outstanding Class B Preferred Shares have the right to cumulative dividends.

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Voting Rights

The holders of the Class B Preferred Shares only have voting rights as a class on certain matters (see below) or as the law requires.

Shareholder Approvals

Holders of the Class B Preferred Shares can give their approval if 66 ²/₃% or more holders casting vote in favour of doing so at a meeting where the majority of Class B Preferred Shares is represented, or if no quorum is present at such meeting, at an adjourned meeting at which no quorum requirements apply.

Contingent Conversion of Certain Series of Class B Preferred Shares

Upon the occurrence of certain specified trigger events relating to the viability of the Bank, the Class B Preferred Shares Series 27 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 29 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 31 (Non-Viability Contingent Capital) (NVCC)), Class B Preferred Shares Series 33 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 35 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 36 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 38 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)), Class B Preferred Shares Series 42 (Non-Viability Contingent Capital (NVCC)) and Class B Preferred Shares Series 44 (Non-Viability Contingent Capital (NVCC)) will immediately and automatically be converted into common shares of the Bank. The number of common shares into which such Class B Preferred Shares would be converted upon the occurrence of such a trigger event will be determined in accordance with a pre-determined conversion formula specified at the time of issuance of such Class B Preferred Shares.

Restraints on Bank Shares under the Bank Act

The Bank Act restricts the beneficial ownership of shares of a bank. No person may be a major shareholder of a bank if the bank has equity of $12 billion or more, which applies to the Bank. A major shareholder is defined as a person, or group of persons under common control or acting jointly or in concert, that beneficially owns more than 20% of any class of voting shares or more than 30% of any class of non-voting shares of the bank.

In addition, no person may have a significant interest in any class of shares of a bank, including the Bank, unless the person first receives the approval of the Minister of Finance. A person has a significant interest in a class of shares of a bank when the person, or group of persons under common control or acting jointly or in concert, beneficially owns more than 10% of any class of shares of the bank.

Governments and their agents are also restricted from acquiring shares of a bank, except for certain cases that require the Minister of Finance’s consent.

Ratings

The following table sets out ratings the Bank has received for its outstanding securities from the rating agencies, which are current as at December 3, 2018.

	S&P		Moody’s		DBRS		Fitch
	Rating	Rank1	Rating	Rank1	Rating	Rank1	Rating	Rank1
Short-term instruments	A-1	1 of 6	P-1	1 of 4	R-1 (high)	1 of 6	F1+	1 of 6
Senior debt4	A-	3 of 10	A2	3 of 9	AA (low)	2 of 10	AA-	2 of 10
Long Term Deposits / Legacy Senior Debt5	A+	3 of 10	Aa2	2 of 9	AA	2 of 10	AA-	2 of 10
Subordinated debt Subordinated debt – NVCC2	A- BBB+	3 of 10 4 of 10	Baa1 Baa1	4 of 9 4 of 9	A (high) A (low)	3 of 10 3 of 10	A+ A+	3 of 10 3 of 10
Preferred shares3 Preferred shares – NVCC2,3	BBB BBB-	4 of 10 4 of 10	Baa3 Baa3	4 of 9 4 of 9	Pfd-2 (high) Pfd-2	2 of 6 2 of 6	N/A N/A	N/A N/A
Trend/Outlook	Stable	--	Stable	--	Stable	--	Stable	--

Notes: ¹ Rank, according to each rating agency’s public website, refers to the assigned ratings ranking of all major assignable ratings for each debt or share class, 1 being the highest. Each assignable major rating may be modified further (+/-, high/low) to show relative standing within the major rating categories.

² Non-viability contingent capital or NVCC.

³ It is the practice of S&P to present an issuer’s preferred share ratings on both the global rating scale and on the Canadian national scale when listing the ratings for a particular issuer.

⁴ Subject to conversion under the Bank Recapitalization (“Bail-In”) Regime. Defined as “Junior Senior Unsecured” by Moody’s, “Bail-in Eligible Senior Debt” by S&P, “Bail-in Eligible Debt” by Fitch, and “Bailinable Senior Debt” by DBRS.

⁵ Long Term Deposits / Legacy Senior Debt Includes: (a) Senior debt issued prior to September 23, 2018; and (b) Senior debt issued on or after September 23, 2018 which is excluded from the Bank Recapitalization (“Bail-In”) Regime. Defined as “Senior Unsecured” by Moody’s and S&P; and “Legacy Senior” by Fitch and DBRS.

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A definition of the categories of each rating as at December 3, 2018 from each rating agency’s website is outlined in Appendix II to this Annual Information Form. Further information may be obtained from the applicable rating agency. S&P, Moody’s DBRS and Fitch each have a stable outlook on BMO’s long-term credit ratings.

On April 19, 2018, following the finalization of the Bail-In Regime in Canada, DBRS changed the trend to Stable from Negative on the long-term issuer ratings, senior debt ratings and deposit ratings of Bank of Montreal; ratings of legacy subordinated debt were downgraded by one notch for all Canadian domestic systemically important banks.

On July 16, 2018, Moody’s took various actions on its ratings of Canadian banks following the introduction of a bank resolution framework. The actions included an upgrade to the ratings for BMO’s senior unsecured debt and junior subordinated bank debt (NVCC). The outlook was changed to Stable from Negative.

On August 14, 2018, S&P upgraded its stand-alone credit profile on BMO to ‘a’ from ‘a-‘, to reflect improvements in its assessment of BMO’s risk position. S&P affirmed its ‘A+/A-1’ long-term and short-term issuer credit ratings on BMO and its operating subsidiaries, and the outlook remains Stable. At the same time, S&P raised its ratings on BMO’s subordinated debt and additional Tier 1 instruments by one notch, reflecting improvements in the bank’s stand-alone creditworthiness.

All of the rating agencies have also assigned provisional ratings to senior unsecured debt subject to the Bail-In Regime. Moody’s, S&P, Fitch and DBRS have assigned provisional ratings of A2, A-, AA- and AA (low) respectively.

The credit ratings that external rating agencies assign to some of our securities are important in the raising of both capital and funding to support our business operations. Maintaining strong credit ratings allows the Bank to access the capital markets at competitive pricing levels. Should our credit ratings experience a downgrade, our cost of funds would likely increase and our access to funding and capital through capital markets could be reduced. A material downgrade of our ratings could also have other consequences, including those set out in Note 8 of the 2018 Financial Statements.

Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a specific security for a particular investor. Credit ratings may not reflect the potential impact of all risks on the value of securities. In addition, real or anticipated changes in the rating assigned to a security will generally affect the market value of that security. We cannot know for certain that a rating will remain in effect for any given period of time or that a rating agency will not revise or withdraw it entirely in the future.

The Bank paid fees to credit rating agencies to obtain its credit ratings. The Bank may also pay fees for other services from credit rating agencies in the ordinary course of business.

MARKET FOR SECURITIES

Trading Price and Volume

The outstanding common shares of the Bank are listed for trading on the Toronto Stock Exchange (TSX) and on the New York Stock Exchange (NYSE) under the trading symbol BMO. The outstanding preferred shares of the Bank set out below are listed on the TSX with the following trading symbols: BMO.PR.Q for the Class B Preferred Shares Series 25, BMO.PR.A for the Class B Preferred Shares Series 26, BMO. PR.S for the Class B Preferred Shares Series 27 (Non-Viability Contingent Capital (NVCC)), BMO.PR.T for the Class B Preferred Shares Series 29 (Non-Viability Contingent Capital (NVCC)), BMO. PR.W for the Class B Preferred Shares Series 31 (Non-Viability Contingent Capital (NVCC)), BMO.PR.Y for the Class B Preferred Shares Series 33 (Non-Viability Contingent Capital (NVCC)), BMO.PR.Z for the Class B Preferred Shares Series 35 (Non-Viability Contingent Capital (NVCC)), BMO.PR.B for the Class B Preferred Shares Series 38 (Non-Viability Contingent Capital (NVCC)), BMO.PR.C for the Class B Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)), BMO.PR.D for the Class B Preferred Shares Series 42 (Non-Viability Contingent Capital (NVCC)) and BMO.PR.E for the Class B Preferred Shares Series 44 (Non-Viability Contingent Capital (NVCC)).

The following table sets out the reported high and low trading prices in Canadian dollars and the trading volumes of the common and preferred shares of Bank of Montreal on the TSX for the given periods. Prices are based on the reported data from the TSX Historical Data Access. The Class B Preferred Shares Series 16 (BMO.PR.M) and the Class B Preferred Shares Series 17 (BMO.PR.R) were redeemed by the Bank on August 25, 2018.

	BMO  Common  Shares		PR.M  Series 16		PR.R  Series 17		PR.Q  Series 25		PR.A  Series 26		PR.S  Series 27		PR.T  Series 29		PR.W  Series 31		PR.Y  Series 33		PR.Z  Series 35		PR.B  Series 38		PR.C  Series 40		PR.D  Series 42		PR.E  Series 44
November 2017
- High Price ($)		100.00		24.96		24.98		22.79		22.59		24.04		23.35		23.41		24.92		25.40		26.47		25.94		25.75		n.a.
- Low Price ($)		97.51		24.72		24.55		22.34		22.10		23.70		22.95		22.80		24.40		25.10		26.08		25.35		25.25		n.a.
- Volume		21,343,615		447,688		68,430		115,368		12,809		332,286		270,684		383,788		45,738		69,616		165,697		521,034		279,647		n.a.
December 2017
- High Price ($)		101.62		25.08		25.07		23.94		23.28		24.00		23.38		23.15		25.10		25.49		26.37		25.95		25.59		n.a.
- Low Price ($)		98.61		24.88		24.74		22.25		22.38		23.03		22.31		22.25		24.06		25.10		25.90		25.25		25.00		n.a.
- Volume		24,355,569		149,078		17,816		101,896		24,158		364,439		364,974		159,955		135,638		49,477		784,350		158,506		289,015		n.a.
January 2018
- High Price ($)		105.55		25.28		25.08		23.44		23.43		24.71		24.25		24.00		25.34		25.49		26.46		25.90		25.59		n.a.
- Low Price ($)		100.04		24.86		24.89		22.66		22.73		23.89		23.30		23.16		24.44		25.00		26.04		25.26		25.15		n.a.
- Volume		30,215,256		226,456		217,007		130,419		45,624		329,238		683,200		166,754		81,272		195,495		412,647		286,343		349,357		n.a.
February 2018
- High Price ($)		101.35		24.95		24.85		22.93		22.88		24.40		23.94		23.57		24.86		25.10		26.49		25.57		25.42		n.a.
- Low Price ($)		93.60		24.66		24.68		22.28		22.49		23.58		23.18		22.92		24.27		24.76		25.75		25.15		24.90		n.a.
- Volume		32,985,346		594,430		233,757		96,055		13,511		170,388		320,233		434,421		50,317		132,010		135,200		315,865		332,189		n.a.
March 2018
- High Price ($)		99.92		24.82		24.97		22.60		22.98		23.98		23.56		23.26		24.55		24.87		26.30		25.42		25.25		n.a.
- Low Price ($)		95.58		24.75		24.66		22.16		22.45		23.47		22.99		22.70		24.10		24.42		25.94		25.10		24.98		n.a.
- Volume		33,321,359		25,591		21,115		77,609		12,700		198,153		149,977		148,767		109,982		67,269		454,126		372,238		253,797		n.a.
April 2018

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- High Price ($)	98.59	25.05	25.04	22.95	23.10	23.66	23.03	22.78	24.55	25.05	26.26	25.59	25.55	n.a.
- Low Price ($)	94.67	24.70	24.80	22.20	22.45	23.10	22.57	22.42	24.03	24.47	25.83	25.18	25.00	n.a.
- Volume	22,724,888	136,682	37,355	236,947	15,960	253,421	453,247	179,848	42,910	51,103	176,444	274,428	153,576	n.a.
May 2018
- High Price ($)	102.29	24.95	25.00	23.31	23.60	24.14	23.67	23.50	24.89	25.07	26.45	25.63	25.39	n.a.
- Low Price ($)	96.97	24.76	24.80	22.55	23.01	23.30	22.69	22.50	24.19	24.65	25.95	25.17	25.05	n.a.
- Volume	31,037,783	203,788	378,234	211,579	12,639	724,572	285,792	140,792	55,470	40,890	193,714	95,867	249,445	n.a.
June 2018
- High Price ($)	103.89	25.14	25.10	23.11	23.42	23.70	23.34	23.10	24.88	25.35	26.27	25.42	25.09	n.a.
- Low Price ($)	99.78	24.90	24.76	22.62	23.10	23.23	23.05	22.84	24.52	24.82	26.08	25.08	24.82	n.a.
- Volume	28,311,180	67,442	112,900	37,942	7,830	447,445	137,203	234,400	31,908	57,070	164,694	229,456	221,594	n.a.
July 2018
- High Price ($)	104.68	25.20	25.15	23.26	23.57	23.77	23.48	23.31	24.88	25.34	26.47	25.55	25.39	n.a.
- Low Price ($)	101.31	25.12	24.96	22.70	23.12	23.23	23.02	22.84	24.36	24.96	26.08	25.10	24.93	n.a.
- Volume	18,980,616	45,035	398,120	57,230	12,904	147,335	258,354	253,072	356,578	36,146	113,117	581,387	211,752	n.a.
August 2018
- High Price ($)	107.93	24.99	25.00	23.70	24.00	23.87	23.35	23.27	24.74	25.50	26.29	25.55	25.50	n.a.
- Low Price ($)	102.26	24.97	24.97	22.95	23.25	23.50	23.10	22.98	24.50	24.89	26.09	25.27	25.11	n.a.
- Volume	26,588,582	76,315	359,727	268,049	29,636	114,377	415,311	389,001	63,037	67,616	183,284	455,240	229,247	n.a.
September 2018
- High Price ($)	109.00	n.a.	n.a.	23.68	24.52	23.86	23.35	23.22	24.70	25.40	26.27	25.56	25.55	25.15
- Low Price ($)	105.51	n.a.	n.a.	23.41	23.93	23.39	22.93	22.69	24.39	25.00	25.93	25.27	25.04	24.90
- Volume	24,532,187	n.a.	n.a.	174,642	27,463	487,613	501,575	138,720	171,270	27,526	119,327	200,162	307,788	2,796,859
October 2018
- High Price ($)	107.64	n.a.	n.a.	23.51	24.40	23.99	23.99	23.57	24.96	25.10	26.29	25.99	25.95	25.48
- Low Price ($)	97.39	n.a.	n.a.	23.03	23.91	22.25	22.03	21.95	23.50	24.12	25.45	24.96	24.50	24.71
- Volume	36,190,464	n.a.	n.a.	105,156	33,575	208,892	527,672	208,805	64,534	56,538	154,299	492,885	423,175	1,489,319

Prior Sales

From time to time, the Bank issues principal at risk notes, securities for which the amount payable at maturity is determined by reference to the price, value or level of an underlying interest such as a stock index, an exchange traded fund or a notional portfolio of equities or other securities. For information about the Bank’s issuances of subordinated indebtedness since October 31, 2017, see the “Subordinated Debt” section on page 68 of our 2018 MD&A and Note 15 of our 2018 financial statements, which section and note are incorporated herein by reference.

DIRECTORS AND EXECUTIVE OFFICERS

Board of Directors

As at December 3, 2018, the following were directors of the Bank.

DIRECTOR NAME AND PRINCIPAL OCCUPATION	MUNICIPALITY OF RESIDENCE	DIRECTOR SINCE
Jan Babiak Corporate Director	Nashville, Tennessee USA	October 23, 2012
Sophie Brochu, C.M. President and Chief Executive Officer Énergir, a diversified energy company	Bromont, Québec Canada	March 22, 2011
Craig Broderick Senior Director Goldman, Sachs & Co., a global investment bank	Greenwich, Connecticut	August 27, 2018
George A. Cope, C.M. President and Chief Executive Officer BCE and Bell Canada, communications companies	Toronto, Ontario Canada	July 25, 2006
Christine Edwards Capital Partner Winston & Strawn LLP, a law firm	Lake Forest, Illinois U.S.A.	August 1, 2010
Dr. Martin S. Eichenbaum Charles Moskos Professor of Economics Northwestern University	Glencoe, Illinois U.S.A.	March 31, 2015
Ronald H. Farmer Managing Director Mosaic Capital Partners, a management and holding company	Markham, Ontario Canada	November 25, 2003
David Harquail Chief Executive Officer Franco-Nevada Corporation, a royalty and streaming company	Toronto, Ontario	April 5, 2018
Linda S. Huber Corporate Director	New York, New York U.S.A.	April 4, 2017

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DIRECTOR NAME AND PRINCIPAL OCCUPATION	MUNICIPALITY OF RESIDENCE	DIRECTOR SINCE
Eric R. La Flèche President and Chief Executive Officer Metro Inc., a food retailer and distributor	Montreal, Québec Canada	March 20, 2012
Lorraine Mitchelmore Corporate Director	Calgary, Alberta Canada	March 31, 2015
Philip S. Orsino, O.C., F.C.A. President and Chief Executive Officer Brightwaters Strategic Solutions Inc., a consulting and advisory services company	Toronto, Ontario Canada	July 1, 1999
J. Robert S. Prichard, O.C., O.Ont., FRSC Chairman of the Board, Bank of Montreal Non-Executive Chair, Torys LLP, a law firm	Toronto, Ontario Canada	July 18, 2000
Darryl White Chief Executive Officer BMO Financial Group	Toronto, Ontario Canada	May 24, 2017
Don M. Wilson III Corporate Director	Vero Beach, Florida U.S.A	March 28, 2008

A director of the Bank holds office until the next annual meeting of shareholders or until a successor is elected or appointed, unless their seat is vacated before they can do so.

Since November 1, 2013, the directors have held the principal occupations above, or other positions with the same, predecessor, or associated firms except for Mr. Broderick who before January 2018 was Chief Risk Officer of Goldman Sachs & Co., Ms. Huber who before July 2018 was the Executive Vice-President and Chief Financial Officer of Moody’s Corporation, Mr. Orsino, who, before April 2014, was the President and Chief Executive Officer of Jeld-Wen Inc., Ms. Mitchelmore, who before July 2018 was the President and Chief Executive Officer of Enlighten Innovations Inc. and before January 2016, was the President, Canada Country Chair & Executive Vice President, Heavy Oil, Shell Canada Limited and Mr. White who, from November 2016 until October 2017 was Chief Operating Officer of the Bank, from November 2014 until October 2016, was Group Head, BMO Capital Markets, and, from April 2012 until October 2014, was Global Head, Investment and Corporate Banking.

Board Committee Members

There are four committees of the Board of Directors made up of the following members:

Audit and Conduct Review Committee: Jan Babiak (Chair), Sophie Brochu, Dr. Martin S. Eichenbaum, David Harquail, Linda S. Huber and Philip Orsino.

Governance and Nominating Committee: Christine Edwards (Chair), Jan Babiak, George Cope, Ronald Farmer, Robert Prichard, and Don Wilson III.

Human Resources Committee: Ronald Farmer (Chair), George Cope, Christine Edwards, Lorraine Mitchelmore, Robert Prichard and Don Wilson III.

Risk Review Committee: Don Wilson III (Chair), Craig Broderick, Christine Edwards, Dr. Martin S. Eichenbaum, Ronald Farmer, Linda Huber, Eric La Flèche, Lorraine Mitchelmore, Philip Orsino and Robert Prichard.

Executive Officers

At December 1, 2018, the following were executive officers of the Bank:

EXECUTIVE OFFICER NAME	PRINCIPAL OCCUPATION	MUNICIPALITY OF RESIDENCE
Darryl White	Chief Executive Officer	Toronto, Ontario Canada
Dan Barclay	Group Head, BMO Capital Markets	Toronto, Ontario Canada
David R. Casper	Chief Executive Officer, BMO Financial Corporation and Group Head, North America Commercial Banking	Northbrook , Illinois U.S.A.
Patrick Cronin	Chief Risk Officer	Toronto, Ontario Canada
Simon A. Fish	General Counsel	Toronto, Ontario Canada
Thomas E. Flynn	Chief Financial Officer	Toronto, Ontario Canada
Cameron Fowler	President, North American Personal and Business Banking	Toronto, Ontario Canada
Ernie Johannson	Group Head, U.S. Personal and Business Banking	Toronto, Ontario Candida
Gilles G. Ouellette	Group Head, BMO Asset Management and Vice-Chair, International	Toronto, Ontario Canada
Catherine Roche	Head, Marketing and Strategy	Toronto, Ontario Canada

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EXECUTIVE OFFICER NAME	PRINCIPAL OCCUPATION	MUNICIPALITY OF RESIDENCE
Joanna Rotenberg	Group Head, BMO Wealth Management	Toronto, Ontario Canada
Richard Rudderham	Chief Human Resources Officer	West Vancouver, British Columbia Canada
Steve Tennyson	Chief Technology Officer & Operations Officer	Toronto, Ontario Canada

All the executive officers named above have held their present positions or other senior positions with Bank of Montreal or its subsidiaries for the past five years, except for Catherine Roche who, prior to May 2016, was Partner and Managing Director at the Boston Consulting Group.

Shareholdings of Directors and Executive Officers

To the knowledge of the Bank, as at October 31, 2018, the directors and executive officers of Bank of Montreal, as a group, beneficially owned, directly or indirectly, or exercised control or direction over an aggregate of 318,887 common shares of Bank of Montreal, representing less than 0.1% of Bank of Montreal’s issued and outstanding common shares.

Additional Disclosure for Directors and Executive Officers

To the Bank’s knowledge, no director or executive officer of the Bank:

(a) is, as at October 31, 2018, or was, within the 10 years before, a director, chief executive officer or chief financial officer of any company (including the Bank):

(i) subject to an order (including a cease trade order or an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days), that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer; or

(ii) subject to an order (including a cease trade order or an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation for a period of more than 30 consecutive days) that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer;

(b) is, as at October 31, 2018, or has been, within the 10 years before, a director or executive officer of any company (including the Bank), that while that person was acting in that capacity or within a year of the person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or

(c) has, within the 10 years before October 31, 2018, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director or executive officer.

To the Bank’s knowledge, none of our directors or executive officers have been subject to: (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

A description of certain legal proceedings to which the Bank is a party appears under the heading “Legal Proceedings” in Note 24 of the 2018 Financial Statements.

In the ordinary course of business, the Bank and its subsidiaries may be assessed fees or fines by a Canadian securities regulatory authority in relation to administrative matters, including late filings or reporting, which may be considered penalties or sanctions pursuant to Canadian securities regulations but which are not, individually or in the aggregate, material to the Bank. In addition, the Bank and its subsidiaries are subject to numerous regulatory authorities around the world, and accordingly fees, administrative penalties, settlement agreements and sanctions may be categorized differently by certain regulators. Any such penalties imposed under these categories against the Bank and its subsidiaries in the 2018 fiscal year, however, are not material, nor would they likely be considered important to a reasonable investor in making an investment decision. Since November 1, 2017, the Bank and its subsidiaries have not entered into any material settlement agreements with a court relating to securities legislation or with a securities regulatory authority.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for the Bank’s common and preferred shares is Computershare Trust Company of Canada. This agent has transfer facilities in Montreal, Toronto, Calgary and Vancouver. In addition, Computershare Investor Services PLC and Computershare Trust Company, N.A. serve as transfer agents and registrars for the common shares in Bristol, United Kingdom and Canton, Maine, respectively.

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INTERESTS OF EXPERTS

The Bank’s Shareholders’ Auditors are KPMG LLP, who have prepared the Shareholders’ Auditors’ Reports on pages 141 and 142 of the 2018 Financial Statements. KPMG LLP have confirmed that they are independent with respect to the Bank and within the meaning of the relevant rules and related interpretations prescribed by the relevant professional bodies in Canada and any applicable legislation or regulation, and that they are independent accountants with respect to the Bank under all relevant United States professional and regulatory standards.

AUDIT AND CONDUCT REVIEW COMMITTEE INFORMATION

Composition of the Audit and Conduct Review Committee

The following six members make up the Bank’s Audit and Conduct Review Committee: Jan Babiak (Chair), Sophie Brochu, Dr. Martin S. Eichenbaum, David Harquail, Linda S. Huber and Philip Orsino. The Committee’s responsibilities and duties are set out in the Committee’s charter. We include the charter in Appendix I to this Annual Information Form.

The Board of Directors has determined that the members of the Audit and Conduct Review Committee reflect a high level of financial literacy and expertise. Each member of the Audit and Conduct Review Committee is “independent” and “financially literate” according to the definitions under Canadian and United States securities laws and the NYSE corporate governance listing standards, and each of Ms. Babiak, Ms. Huber and Mr. Orsino is an “Audit Committee Financial Expert” as defined under United States securities laws. The Board bases these decisions on each Committee member’s education and experience. The following paragraphs describe the relevant education and experience of each Committee member:

Ms. Babiak holds a B.B.A. in accounting from the University of Oklahoma and an M.B.A. from Baldwin Wallace University. She is a Chartered Accountant in the United Kingdom and a Certified Public Accountant in the United States. Ms. Babiak serves on the boards of other public and private companies and was formerly a Managing Partner at Ernst & Young LLP.

Ms. Brochu is a graduate in economics from Université Laval and is the President and Chief Executive Officer of Énergir (formerly Gaz Metro), part of Valener Inc., a publicly traded company. Ms. Brochu also serves on the board of another Canadian public company. Ms. Brochu is a member of the Order of Canada.

Dr. Eichenbaum received a B.Comm from McGill University and a Doctorate in Economics from the University of Minnesota. He serves on the advisory council of the Global Markets Institute at Goldman Sachs. He completed a four-year term as co-editor of the American Economic Review in 2015. He has served as a consultant to the Federal Reserve Banks in Atlanta and Chicago and the International Monetary Fund.

Mr. Harquail is Chief Executive Officer of Franco-Nevada Corporation, a publicly traded company. He is also the current Chair of the World Gold Council which works to stimulate the demand for gold on behalf of the leading gold producers. Mr. Harquail has over 35 years of experience on public and non-profit boards and task force advisories. He is currently active on the United Way Toronto & York Region Campaign Cabinet. Mr. Harquail holds a B.A.Sc. in Geological Engineering from the University of Toronto, an MBA from McGill University and is a registered Professional Engineer in Ontario. He is also a major benefactor of the School of Earth Sciences and its Mineral Exploration Research Centre (MERC) at Laurentian University in Sudbury as well as the Centre for Neuromodulation at Sunnybrook Health Sciences Centre in Toronto.

Ms. Huber was formerly Executive Vice President and Chief Financial Officer of Moody’s Corporation, with executive responsibility for the corporation’s global finance, information technology, communications and corporate services functions, as well as the The Moody’s Foundation. Before joining Moody’s in 2005, Ms. Huber served in several senior roles in financial services, including Executive Vice President and Chief Financial Officer at U.S. Trust Company, a subsidiary of Charles Schwab & Company, Inc.; Managing Director at Freeman & Co.; Vice President of Corporate Strategy and Development and Vice President and Assistant Treasurer at PepsiCo. Ms. Huber holds an M.B.A. from the Stanford Graduate School of Business and a B.S. (with high honors) in business and economics from Lehigh University.

Mr. Orsino has a B.A. from University of Toronto and is a Fellow of the Chartered Professional Accountants of Canada. He is the President and Chief Executive Officer of Brightwaters Strategic Solutions Inc., a consulting and advisory services company. He was formerly the President and Chief Executive Officer of Jeld-Wen Inc., a global integrated manufacturer of building products until April 2014, and was also formerly the President and Chief Executive Officer of Masonite International Corporation until October 2005, which was listed on the TSX and NYSE. Mr. Orsino was appointed an Officer of the Order of Canada in 2004 and received the 2003 Canada’s Outstanding CEO of the Year Award.

Shareholders’ Auditors Pre-Approval Policies and Procedures and Fees

For information about the fees paid to KPMG LLP, in the years ended October 31, 2018 and 2017, and the related pre-approval policies and procedures, see page 122 of the 2018 MD&A, which we incorporate herein by reference.

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ADDITIONAL INFORMATION

You can find additional information about Bank of Montreal on the Bank’s web site at www.bmo.com/investorrelations, on SEDAR (System for Electronic Document Analysis and Retrieval) at www.sedar.com, and on the SEC’s web site at www.sec.gov/edgar.

Our proxy circulars contain more information, including directors’ and executive officers’ compensation, debt, and shareholdings under equity compensation plans. The most recent circular is dated February 12, 2018, in connection with the Bank’s Annual Meeting of Shareholders on April 5, 2018 (the 2018 Proxy Circular). We expect the next proxy circular to be dated as of February 7, 2019, in connection with the Bank’s Annual Meeting of Shareholders on April 2, 2019 (the 2019 Proxy Circular).

The 2018 Financial Statements and the 2018 MD&A for the fiscal year ended October 31, 2018 provide additional financial information.

You can get copies of this Annual Information Form, as well as copies of the 2018 Financial Statements, the 2018 MD&A, the Bank’s 2018 Annual Report, and the 2018 Proxy Circular (after we have mailed these documents to shareholders) by contacting us at:

Bank of Montreal

Corporate Secretary’s Department

100 King Street West

1 First Canadian Place, 21^st Floor

Toronto, Ontario

Canada M5X 1A1

Telephone: 416 867 6785

Fax: 416 867 6793

Email: corp.secretary@bmo.com

14

APPENDIX I

BANK OF MONTREAL

AUDIT AND CONDUCT REVIEW COMMITTEE CHARTER

The Committee is responsible for assisting the Board in fulfilling its oversight responsibilities for the integrity of the Bank’s financial reporting; the effectiveness of the Bank’s internal controls; the independent auditor’s qualifications, independence and performance; the Bank’s compliance with legal and regulatory requirements; transactions involving related parties; conflicts of interest and confidential information; and standards of business conduct and ethics.

In addition, the Committee will also act as the audit and conduct review committee of Designated Subsidiaries.
	PART I MANDATE

The Committee will, either directly or through one or more sub-committees, perform the duties set out in this Charter and such other duties as may be necessary or appropriate including:

1.1 Financial Reporting

1.1.1 reviewing, together with management and the Shareholders’ Auditors:

(i) the appropriateness of, and any changes to, the Bank’s accounting and financial reporting;

(ii) the accounting treatment, presentation and impact of significant risks and uncertainties;

(iii) any material relevant proposed changes in accounting standards and securities policies or regulations;

(iv) key estimates and judgments of management;

(v) significant auditing and financial reporting issues and the method of resolution; and

(vi) tax matters that are material to the financial statements.

1.1.2 reviewing, together with management and the Shareholders’ Auditors, and approving or, if appropriate, recommending to the Board:

(i) prior to Board review or public disclosure, the audited annual and unaudited interim financial statements and related management’s discussion and analysis, the annual information form, and any other financial or non-financial (as considered appropriate) information in material public disclosure documents (other than earnings coverage ratios, capitalization tables and summary financial information derived from any of the foregoing); and

(ii) such returns to OSFI requiring review under the Bank Act (Canada);

1.1.3 seeking confirmation from management that the Bank’s annual and interim financial filings, fairly present in all material respects the financial condition, results of operations and cash flows of the Bank as of the relevant date and for the relevant periods, prior to recommending to the Board for approval;

1.1.4 reviewing the types of information to be provided and types of presentations to be made to rating agencies and analysts (if any) relating to earnings guidance, and

1.1.5 satisfying itself that adequate procedures are in place for the review of financial information extracted or derived from the Bank’s financial statements that is to be publicly disclosed and has not otherwise been reviewed by the Committee.

1.2 Internal Controls

1.2.1 reviewing and approving the Bank’s Internal Control Corporate Policy and overseeing the design, implementation, maintenance and effectiveness of the Bank’s internal controls, including those related to the prevention, identification and detection of fraud; and reviewing and monitoring other Bank Corporate Policies as the Committee considers appropriate;

1.2.2 requiring management to design, implement, and maintain appropriate internal control procedures;

1.2.3 reviewing management’s certifications and assessment of the Bank’s internal control over financial reporting and the associated Shareholders’ Auditors’ report;

1.2.4 reviewing reports on the effectiveness of disclosure controls and procedures;

1.2.5 reviewing and discussing reports from management and the Chief Auditor as to the identification of any significant deficiencies or material weaknesses in the design or operation of the Bank’s internal control, risk management, and governance systems and processes, including controls over financial reporting; reviewing any recommendations, as well as remediation plans, including the status of remediation plans implemented by management to rectify any such deficiencies identified; and discussing whether similar or related deficiencies may exist elsewhere in the Bank; and

1.2.6 reviewing as required, correspondence relating to inquiries or investigations by regulators concerning internal controls.

I-1

1.3 Internal Audit Function

1.3.1 overseeing and reviewing at least annually the overall internal audit function, its resources and independence, and reviewing and approving the annual audit plan, including assurance that the audit plan is risk-based and encompasses appropriate audit coverage, audit cycle requirements, and provides a basis for reliance by the Committee;

1.3.2 reviewing and approving the Bank’s Corporate Audit Mandate setting out the terms of reference of the internal audit function and the Chief Auditor;

1.3.3 reviewing, and jointly with the Human Resources Committee, recommending to the Board, the appointment, re-assignment or dismissal of the Chief Auditor, as required; and annually assessing the effectiveness of the Chief Auditor, in conjunction with the Human Resources Committee, and reviewing and approving his or her mandate;

1.3.4 annually reviewing and approving the organizational structure, budget, resource plan and strategic priorities of this function and assessing its effectiveness having regard to its role as an independent control function;

1.3.5 reviewing the results of periodic independent reviews of the Corporate Audit function;

1.3.6 reviewing the quarterly report of the Chief Auditor, together with management’s response;

1.3.7 reviewing any other reports submitted to the Committee by the Chief Auditor; and

1.3.8 communicating directly with the Chief Auditor and participating in his or her initial and ongoing engagement and evaluation.

1.4 Shareholders’ Auditors

1.4.1 reviewing and evaluating the quality, independence, objectivity and professional skepticism of the Shareholders’ Auditors and the lead auditor;

1.4.2 annually reviewing the performance of the Shareholders’ Auditors including assessing their effectiveness and quality of service, to facilitate an informed recommendation on re-appointment of the Shareholders’ Auditors and, on a periodic basis, performing a comprehensive review of the performance of the Shareholders’ Auditors over multiple years to assess the audit firm, its independence and application of professional skepticism;

1.4.3 reviewing Shareholders’ Auditors’ audit findings reports with the Shareholders’ Auditors, the Chief Auditor, and management including:

(i) the quality of the financial statements;

(ii) the Shareholders’ Auditors’ evaluation of the Bank’s internal control over financial reporting;

(iii) the degree of cooperation the Shareholders’ Auditors received from management; any problems or difficulties experienced by the Shareholders’ Auditors in conducting the audit, including management’s responses in respect thereof, any restrictions imposed by management or significant accounting issues on which there was a disagreement with management;

(iv) any concerns expressed by the Shareholders’ Auditors related to accounting and auditing matters, including the risk of material misstatements;

(v) the appropriateness and quality of all critical accounting policies and practices used by the Bank and of the selection of new policies and practices; and

(vi) any material judgments that have been discussed with management, the ramifications of their use and the Shareholders’ Auditors’ preferred treatment, as well as any other material communications with management, and advising the Board of these matters as considered appropriate;

1.4.4 overseeing the resolution of any disagreements between the Shareholders’ Auditors and management;

1.4.5 reviewing all material correspondence between the Shareholders’ Auditors and management related to audit findings;

1.4.6 reviewing the Shareholders’ Auditors’ report under Section 328 of the Bank Act (Canada);

1.4.7 obtaining and reviewing a report from the Shareholders’ Auditors at least annually addressing: (i) the Shareholders’ Auditors’ internal quality control procedures; (ii) any material issues raised by the most recent internal quality-control review or peer review of the Shareholders’ Auditors, or by any inquiry or investigation by governmental or professional authorities including the Canadian Public Accountability Board and the Public Company Accounting Oversight Board, within the preceding five years, respecting one or more audits carried out by the Shareholders’ Auditors; (iii) any steps taken to deal with any such issues; (iv) the Shareholders’ Auditors’ internal procedures to ensure independence; and (v) the delineation of all relationships between the Shareholders’ Auditors and the Bank;

1.4.8 reviewing any notices required to be communicated/delivered by the Shareholders’ Auditors to the Committee, including those required by the Canadian Public Accountability Board, Office of the Superintendent of Financial Institutions, and the U.S. Public Accounting Oversight Board, and taking such action and making recommendations to the Board as appropriate in connection therewith;

1.4.9 reviewing the terms of the Shareholders’ Auditors’ engagement, the annual audit plan, including assurance that the audit plan is risk-based and appropriately addresses the risks of material misstatement, as well as any change in the materiality level used by the Shareholders’ Auditors, and total fees payable and making recommendations to the Board as appropriate;

1.4.10 reviewing an annual written confirmation of the Shareholders’ Auditors that they are independent in accordance with applicable independence rules and report directly to the Committee, as representatives of the Bank’s shareholders;

1.4.11 reviewing and recommending to the Board the approval of the Bank’s Auditor Independence Standard;

1.4.12 pre-approving audit services and permitted non-audit services by the Shareholders’ Auditors in accordance with the Bank’s Auditor Independence Standard; and

I-2

1.4.13 reviewing and approving the Bank’s policies for hiring current or former partners or employees of the current or former Shareholders’ Auditors and reviewing the Shareholders’ Auditors’ partner rotation.

1.5 Finance, Legal and Regulatory Compliance Functions

1.5.1 reviewing and, jointly with the Human Resources Committee, recommending to the Board the respective appointment, re-assignment or dismissal of the Chief Financial Officer, the General Counsel and the Chief Compliance Officer, as required; and annually assessing, in conjunction with the Human Resources Committee, the effectiveness of the Chief Financial Officer, the General Counsel and the Chief Compliance Officer, and reviewing and approving their respective mandates;

1.5.2 reviewing and, jointly with the Human Resources Committee, recommending to the Board the appointment, re-assignment or dismissal of the Chief Anti-Money Laundering Officer, as required; and annually assessing, in conjunction with the Human Resources Committee, the effectiveness of the Chief Anti-Money Laundering Officer, and reviewing and approving his or her mandate;

1.5.3 annually reviewing and approving the organizational structure, budget, resource plan and strategic priorities of the finance, legal and compliance, and anti-money laundering functions and assessing their effectiveness having regard to their respective roles as independent control functions;

1.5.4 reviewing the results of periodic independent reviews of the finance and compliance functions; and

1.5.5 reviewing and overseeing the status of remediation plans implemented by management to rectify any deficiencies identified.

1.6 Financial Risk Management

1.6.1 monitoring the Bank’s major financial risk exposures and the steps management has taken to monitor and control such exposures; and

1.6.2 reviewing investments or transactions that could adversely affect the wellbeing of the Bank which the Shareholders’ Auditors or any officer of the Bank may bring to the Committee’s attention.

1.7 Legal and Regulatory Compliance

1.7.1 reviewing and approving the Legal, Regulatory and Reputation Risk Corporate Policy;

1.7.2 reviewing, with the Bank’s General Counsel and the Chief Compliance Officer, the adequacy and effectiveness of the Bank’s enterprise compliance program and the results of related monitoring and oversight activities;

1.7.3 reviewing an annual report on significant litigation matters and reviewing quarterly any material developments;

1.7.4 reviewing and approving the Bank’s Anti-Money Laundering and Anti-Terrorist Financing Program framework, including key policies and any significant amendments;

1.7.5 meeting, at least annually, with the Chief Anti-Money Laundering Officer and the Chief Auditor to review their respective reports on the Anti-Money Laundering and Anti-Terrorist Financing Program;

1.7.6 meeting annually with representatives of OSFI as a Committee or as part of the Board, to receive OSFI’s report on the results of its annual examination of the Bank; and

1.7.7 reviewing any other relevant reports of regulators to the Bank and any required action by management.

1.8 Business Conduct and Sustainability

1.8.1 reviewing and recommending for Board approval BMO’s Code of Conduct, and reviewing and approving the Bank’s Disclosure and Anti-Money Laundering and Anti-Terrorist Financing Corporate Policies;

1.8.2 approving any exceptions from BMO’s Code of Conduct, as appropriate;

1.8.3 assessing the effectiveness of the Bank’s governance frameworks aimed at (i) fostering an ethical culture, (ii) encouraging compliance with both the letter and spirit of applicable laws, regulations and consumer protections, and (iii) reducing misconduct;

1.8.4 reviewing procedures for the receipt, retention and treatment of complaints received by the Bank regarding accounting, internal control over financial reporting or auditing matters; and the confidential anonymous submission of concerns by employees of the Bank regarding questionable accounting or auditing matters;

1.8.5 reviewing reports relating to employee and/or customer concerns received through the Office of the Ombudsman;

1.8.6 approving BMO’s environmental social and governance report and Public Accountability Statement prior to disclosure;

1.8.7 reviewing any “up the ladder” report received by the Committee in accordance with written procedures adopted by the Committee. The Bank’s “up the ladder” procedure, adopted by the Bank’s Legal Group, sets out reporting protocols that comply with s.307 of the Sarbanes Oxley Act of 2002 for the Bank’s lawyers in the event of a material violation of certain laws;

1.8.8 determining the necessity of, and overseeing any, investigations in connection with any “up the ladder” report; and

1.8.9 assessing the effectiveness of the Bank’s governance of sustainability issues.

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1.9 Self Dealing

1.9.1 overseeing the effectiveness of self-dealing identification and procedures established by management for related and affected parties and monitoring compliance with applicable laws;

1.9.2 reviewing and approving as considered appropriate: (i) practices to identify related party transactions that could have a material effect on the stability or solvency of the Bank and; (ii) the measurement criteria and benchmarks for permitted related party transactions;

1.9.3 reviewing and, if advisable, approving the terms and conditions of related party loans that exceed established benchmarks; and

1.9.4 reviewing reports to the Committee on related and affected party transactions.

1.10 Conflicts of Interest and Confidential Information

1.10.1 overseeing the Bank’s procedures to identify, resolve and, where possible, reduce incidences of, conflicts of interest;

1.10.2 overseeing the Bank’s procedures to restrict the use and disclosure of confidential information;

1.10.3 reviewing and approving the Bank’s Disclosure Corporate Policy;

1.10.4 reviewing reports to the Committee relating to the use and disclosure of customer and employee information; and

1.10.5 overseeing the Bank’s compliance with privacy legislation.

1.11 Consumer Protection Measures and Complaints

1.11.1 overseeing the Bank’s procedures to make disclosure of information to Bank customers as required by the Bank Act (Canada), the Trust and Loan Companies Act (Canada), and the Insurance Companies Act (Canada);

1.11.2 overseeing the Bank’s procedures for dealing with complaints;

1.11.3 reviewing the annual report of the Office of the Ombudsman on complaint resolution;

1.11.4 overseeing the Bank’s procedures for complying with obligations imposed by the Financial Consumer Agency of Canada and applicable U.S. regulatory agencies; and

1.11.5 reviewing reports to the Committee relating to disclosure of information to customers and complaints.

1.12 Aircraft and Chief Executive Officer Expense Accounts

1.12.1 reviewing and approving, on an annual basis, the report on Bank aircraft and Chief Executive Officer expense accounts; and

1.12.2 the chair of the Committee will review, on a quarterly basis, the report on Chief Executive Officer expense accounts.

PART II

COMPOSITION

2.1 Members

2.1.1 The Committee will consist of three or more directors as determined by the Board. At least a majority of the members of the Committee will not be “affiliated” with the Bank for the purposes of the Bank Act (Canada). Each member of the Committee will be: (i) a director who is not an officer or employee of the Bank or an affiliate of the Bank; and (ii) “independent” for the purposes of applicable Canadian and United States securities laws and the New York Stock Exchange Rules.

2.1.2 Committee members will be Financially Literate or become so within a reasonable period after appointment to the Committee. At least one Committee member will qualify as an Audit Committee Financial Expert. Committee members will not serve on more than three public company audit committees without the approval of the Board.

2.1.3 The Board will, having considered the recommendation of the Governance and Nominating Committee, appoint the members of the Committee and the chair of the Committee annually following the meeting of the shareholders at which directors are elected each year. The Board may appoint a member to fill a vacancy which occurs in the Committee between annual elections of directors and increase the number of Committee members as it determines appropriate. If a member of the Committee becomes “affiliated” with the Bank for the purposes of the Bank Act (Canada), the member may continue as a member of the Committee with the approval of the Governance and Nominating Committee, in consultation with the Bank’s General Counsel. Any member of the Committee may be removed or replaced at any time by the Board.

2.1.4 In addition to any orientation provided by the Governance and Nominating Committee, the chair of the Committee will provide orientation to new members of the Committee with respect to their duties and responsibilities as members of the Committee.

2.1.5 The Committee may invite other directors to attend Committee meetings or otherwise provide input as needed to acquire additional specific skills as required to carry out its mandate.

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PART III

COMMITTEE PROCEDURE

3.1 Meetings

3.1.1 The Committee will meet as frequently as it determines necessary but not less than once each quarter. Meetings may be called by the chair of the Board, the chair of the Committee or any two members of the Committee. The chair of the Committee must call a meeting when requested to do so by any member of the Committee, the Shareholders’ Auditors, the Chief Auditor, the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer or the General Counsel

3.1.2 Notice of the time and place of each meeting of the Committee, other than ad hoc meetings, will be given to each member of the Committee and the Shareholders’ Auditors, not less than 48 hours before the time when the meeting is to be held. A quorum of the Committee will be a majority of its members. The powers of the Committee may be exercised at a meeting at which a quorum of the Committee is present in person or by telephone or other electronic means or by a resolution signed by all members entitled to vote on that resolution at a meeting of the Committee. Each member is entitled to one vote in Committee proceedings.

3.1.3 Notice of the time and place of ad hoc meetings will be given to each member not less than two hours before the time when the meeting is to be held.

3.1.4 The chair of the Committee will preside at all meetings of the Committee at which he or she is present and will, in consultation with the Chief Financial Officer, the Chief Auditor, the General Counsel and the Shareholders’ Auditors, develop the agenda for each Committee meeting. The agenda for each meeting of the Committee, other than ad hoc meetings, will be delivered together with such other materials as the chair determines necessary, to each member of the Committee at least 48 hours prior to the meeting. The chair will designate from time to time a person who may be, but need not be, a member of the Committee, to be secretary of the Committee. Minutes will be kept of all meetings of the Committee and will be maintained by the Bank’s Corporate Secretary.

3.1.5 The procedure at meetings is to be determined by the Committee unless otherwise determined by the By-Laws of the Bank, by a resolution of the Board or by this Charter.

3.1.6 The Committee will meet at least quarterly in separate private sessions with each of the Shareholders’ Auditors and the Chief Auditor, and as appropriate with management including the Chief Financial Officer, the General Counsel, the Chief Compliance Officer and the Chief Anti-Money Laundering Officer.

3.1.7 The Committee will meet at the end of each meeting with only members of the Committee present.

3.1.8 The Committee may invite any director, officer or employee of the Bank or the Bank’s counsel or the Shareholders’ Auditors or any other person, as appropriate, to attend meetings of the Committee to assist in the discussion and examination of the matters under consideration by the Committee. The Shareholders’ Auditors will, at the expense of the Bank, be entitled to attend and be heard at any meeting of the Committee.

3.2 Reports

3.2.1 The Committee will report the proceedings of each meeting and all recommendations made by the Committee at such meeting to the Board at the Board’s next meeting. The Committee will make such recommendations to the Board as it may deem appropriate and will have such decision-making authority as the Board may determine from time to time. The Committee will approve the report of the Committee to be included in the Bank’s Management Proxy Circular and such other reports relating to the activities of the Committee as may be required by the Bank or the Board from time to time. In addition, the Committee will prepare and submit to the Board for its review and approval the report required to be submitted by the Board to OSFI within 90 days after the financial year-end of the Bank concerning the activities of the Committee during the year in carrying out its conduct review responsibilities.

3.3 Access to Management and Outside Advisors and Continuing Education

3.3.1 The Committee will have full, free and unrestricted access to management and employees, the Chief Auditor and the Shareholders’ Auditors. The Committee has the authority to engage independent legal counsel, consultants or other advisors, with respect to any issue or to assist it in fulfilling its responsibilities without consulting or obtaining the approval of any officer of the Bank and the Bank will provide appropriate funding, as determined by the Committee, for the payment of: compensation to the Shareholders’ Auditors engaged for the purpose of preparing or issuing an auditor’s report or performing the audit, review or attest services for the Bank; compensation to any advisors employed by the Committee; and ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

3.3.2 The Committee will have access to continuing education programs to assist the Committee in fulfilling its responsibilities and the Bank will provide appropriate funding for such programs.

3.4 Annual Review and Assessment

3.4.1 The Committee will ensure that an annual review and assessment of the Committee’s performance and effectiveness, including a review of its compliance with this Charter, will be conducted in accordance with the process developed by the Board’s Governance and Nominating Committee and approved by the Board. The results thereof will be reported in accordance with the process established by the Board’s Governance and Nominating Committee and approved by the Board.

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3.4.2 The Committee will review and assess the adequacy of this Charter on an annual basis taking into account all legislative and regulatory requirements applicable to the Committee as well as any best practice guidelines recommended by regulators or stock exchanges with whom the Bank has a reporting relationship and, if appropriate, will recommend changes to the Board’s Governance and Nominating Committee.

3.5 Definitions

“Audit Committee Financial Expert” means a person who has the following attributes:

(i) an understanding of generally accepted accounting principles and financial statements;

(ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

(iii) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Bank’s financial statements, or experience actively supervising one or more persons engaged in such activities;

(iv) an understanding of internal control over financial reporting; and

(v) an understanding of audit committee functions, acquired through any one or more of the following:

a) education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;

b) experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;

c) experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or

d) other relevant experience.

“Auditor Independence Standard” means the Bank’s Auditor Independence Standard that provides guidance for engaging the Shareholders’ Auditors to perform audit and permitted non-audit services for the Bank, its subsidiaries and material entities over which the Bank has significant influence.

“Bank” means Bank of Montreal and as the context requires, subsidiaries of the Bank.

“Board” means the Board of Directors of Bank of Montreal.

“Committee” means the Audit and Conduct Review Committee of the Board of Directors of Bank of Montreal.

“Chief Anti-Money Laundering Officer” means the Bank’s officer appointed as Chief Anti-Money Laundering Officer.

“Designated Subsidiary” means as requested by the Board, those subsidiaries of the Bank for which the Committee will act as audit and conduct review committee.

“Financially Literate” means the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Bank’s financial statements.

“OSFI” means the Office of the Superintendent of Financial Institutions.

“Shareholders’ Auditors” mean the independent financial statement auditors of the Bank.

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APPENDIX II

CREDIT RATING CATEGORIES

(a) Standard & Poor’s (“S&P”)

S&P has different rating scales for short-term debt, long-term debt and preferred shares. S&P short-term issue credit ratings are generally assigned to those obligations considered short-term in the relevant market. Short-term ratings are also used to indicate the creditworthiness of an obligor with respect to put features on long-term obligations. A short-term obligation rated A-1 indicates S&P’s view that the Bank’s capacity to meet its financial commitments on these obligations is strong.

S&P long-term issue credit ratings are based, in varying degrees, on the following considerations: likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on a financial obligation in accordance with the terms of the obligation; nature of and provisions of the financial obligation; and protection afforded by, and relative position of, the financial obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors’ rights. A rating in the ‘A’ category means the obligation is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories, however, the obligor’s capacity to meet its financial commitment on the obligation is still strong. An obligation rated in the BBB category indicates that the obligation exhibits adequate protection parameters, however, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation. Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (–) sign to show relative standing within the major rating categories.

The S&P preferred share rating on the Canadian scale is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific preferred share obligation issued in the Canadian market, relative to preferred shares issued by other issuers in the Canadian market. The Canadian scale rating is fully determined by the applicable global scale rating, and there are no additional analytical criteria associated with the determination of ratings on the Canadian scale. A reference to “high”, “medium” or “low” reflects the relative strength within the rating category.

A rating outlook assesses the potential direction of a long-term credit rating over the intermediate term (typically six months to two years). In determining a rating outlook, consideration is given to any changes in the economic and/or fundamental business conditions. An outlook is not necessarily a precursor of a rating change or future CreditWatch action.

The “Stable” rating outlook means that a rating is not likely to change.

(b) Moody’s Investors Service (“Moody’s”)

Moody’s has different rating scales for short-term ratings and long-term ratings.

Ratings assigned by Moody’s, based on its global long-term and short-term rating scales, are forward-looking opinions of the relative credit risks of financial obligations issued by non-financial corporates, financial institutions, structured finance vehicles, project finance vehicles, and public sector entities.

Moody’s short-term ratings are assigned to obligations with an original maturity of 13 months or less and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default. The P-1 rating is the highest of four rating categories and indicates issuers (or supporting institutions) that have a superior ability to repay short-term debt obligations.

Moody’s long-term ratings are assigned to issuers or obligations with an original maturity of one-year or more and reflect both on the likelihood of a default on contractually promised payments and the expected financial loss suffered in the event of default. Obligations rated in the Aa category are judged to be of high quality and are subject to very low credit risk. Obligations rated in the A category are judged to be upper-medium grade and subject to low credit risk. Obligations rated in the Baa category are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics. Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.

Moody’s Issuer Ratings are opinions of the ability of entities to honour senior unsecured debt and debt-like obligations.

The Moody’s rating outlook is an opinion regarding the likely rating direction over the medium term.

The “Stable” rating outlook indicates a low likelihood of a rating change over the medium term.

(c) DBRS Limited (“DBRS”)

DBRS has different rating scales for short-term debt, long-term debt and preferred shares. DBRS rating approach is based on a combination of quantitative and qualitative considerations.

The DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner. The R-1 and R-2 rating categories are further denoted by the subcategories “high”, “middle” and “low”. An obligation rated R-1(high) is of the highest credit quality and indicates the capacity for the payment of short-term financial obligations as they fall due is exceptionally high; unlikely to be adversely affected by future events.

The DBRS long-term rating scale provides an opinion on the risk of default. That is, the risk that an issuer will fail to satisfy its financial obligations in accordance with the terms under which the obligations have been issued. All rating categories other than AAA and D also contain subcategories “(high)” and “(low)”. The absence of either a “(high)” or “(low)” designation indicates the rating is in the middle of the category. Long-term financial obligations rated AA are of superior credit quality and

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capacity for the payment is considered high; credit quality differs from AAA only to a small degree; unlikely to be significantly vulnerable to future events. Long-term financial obligations rated A are of good credit quality and capacity for payment is considered substantial, but of lesser credit quality than AA, and may be vulnerable to future events but qualifying negative factors are considered manageable.

The DBRS preferred share rating scale is used in the Canadian securities market and is meant to give an indication of the risk that a borrower will not fulfill its full obligations in a timely manner, with respect to both dividend and principal commitments. Each rating category is denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the middle of the category. The Pfd-2 rating indicates that the preferred shares are of satisfactory credit quality.

Rating trends provide guidance in respect of DBRS’s opinion regarding the outlook for a rating.

The “Stable” rating trend indicates a lower likelihood that the rating could change in the future than would be the case if the rating trend was positive or negative.

(d) Fitch

Fitch publishes opinions on a variety of scales.

A short-term issuer or obligation rating is based on the short-term vulnerability to default of the rated entity and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short term” based on market convention. A rating of F1+ indicates the strongest intrinsic capacity for the timely payment of financial commitments. The added “+” denotes an exceptionally strong credit feature.

Rated entities in a number of sectors, including financial and non-financial corporations, are generally assigned Issuer Default Ratings (“IDRs”). IDRs opine on an entity’s relative vulnerability to default on financial obligations. A rating of AA denotes expectation of very low default risk and indicates very strong capacity for payment of financial commitments; this capacity is not significantly vulnerable to foreseeable events. A rating of A denotes expectations of low default risk and the capacity for payment of financial commitments is considered strong; this capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings. Within some of the rating categories, Fitch may append the rating with the modifiers “+” or “-” to denote relative status within major rating categories.

Rating Outlooks indicate the direction a rating is likely to move over a one-to-two year period.

The “Stable” rating outlook means that the rating is not likely to change over a one to two-year period.

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EX-99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s Discussion and Analysis

BMO’s Chief Executive Officer and its Chief Financial Officer have signed a statement that outlines management’s responsibility for financial information in the annual consolidated financial statements and Management’s Discussion and Analysis (MD&A). The statement, which can be found on page 140, also explains the roles of the Audit and Conduct Review Committee and Board of Directors in respect of that financial information.

The MD&A comments on BMO’s operations and financial condition for the years ended October 31, 2018 and 2017. The MD&A should be read in conjunction with our consolidated financial statements for the year ended October 31, 2018. The MD&A commentary is as of December 4, 2018. Unless otherwise indicated, all amounts are stated in Canadian dollars and have been derived from consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. We also comply with interpretations of IFRS by our regulator, the Office of the Superintendent of Financial Institutions Canada. References to generally accepted accounting principles (GAAP) mean IFRS.

Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Prior periods have not been restated. Since November 1, 2011, the bank’s financial results have been reported in accordance with IFRS. Results for years prior to 2011 have not been restated and are presented in accordance with Canadian GAAP as defined at that time (CGAAP). As such, certain growth rates and compound annual growth rates (CAGR) may not be meaningful. Prior periods have been reclassified for methodology changes and transfers of certain businesses between operating groups. See page 44.

Index

25	Who We Are provides an overview of BMO Financial Group, our financial objectives and outlines “Reasons to invest in BMO” along with relevant key performance data.
26	Financial Highlights
27	Non-GAAP Measures
28	Enterprise-Wide Strategy outlines our enterprise-wide strategy and the context in which it is developed.
29	Caution Regarding Forward-Looking Statements advises readers about the limitations and inherent risks and uncertainties of forward-looking statements.
30	Economic Developments and Outlook includes commentary on the Canadian, U.S. and international economies in 2018 and our expectations for 2019.
32	Value Measures reviews financial performance on the four key measures that assess or most directly influence shareholder return.
32	Total Shareholder Return
32	Earnings per Share Growth
33	Return on Equity
33	Common Equity Tier 1 Ratio
34	2018 Financial Performance Review provides a detailed review of BMO’s consolidated financial performance by major income statement category. It also includes a summary of the impact of changes in foreign exchange rates.
43	2018 Operating Groups Performance Review outlines the strategies and key priorities of our operating groups and the challenges they face, along with their strengths and value drivers. It also includes a summary of their achievements in 2018, their focus for 2019, and a review of their financial performance for the year and the business environment in which they operate.
43	Summary
44	Personal and Commercial Banking
45	Canadian Personal and Commercial Banking
48	U.S. Personal and Commercial Banking
52	BMO Wealth Management
56	BMO Capital Markets
60	Corporate Services, including Technology and Operations
62	Summary Quarterly Earnings Trends, Review of Fourth Quarter 2018  Performance and 2017 Financial Performance Review provide commentary on results for relevant periods other than fiscal 2018.

67	Financial Condition Review comments on our assets and liabilities by  major balance sheet category. It includes a review of our capital adequacy and our approach to optimizing our capital position to support our business strategies and maximize returns to our shareholders. It  also includes a review of off-balance sheet arrangements and certain select financial instruments.
67	Summary Balance Sheet
69	Enterprise-Wide Capital Management
76	Select Financial Instruments
77	Off-Balance Sheet Arrangements
78	Enterprise-Wide Risk Management outlines our approach to managing key financial risks and other related risks we face.
79	Risks That May Affect Future Results
81	Risk Management Overview
82	Framework and Risks
87	Credit and Counterparty Risk
95	Market Risk
100	Insurance Risk
100	Liquidity and Funding Risk
109	Operational Risk
111	Model Risk
112	Legal and Regulatory Risk
114	Business Risk
115	Strategic Risk
115	Environmental and Social Risk
116	Reputation Risk
117	Accounting Matters and Disclosure and Internal Control reviews critical accounting estimates and changes in accounting policies in 2018  and for future periods. It also outlines our evaluation of disclosure controls and procedures and internal control over financial reporting, and provides an index of disclosures recommended by the Enhanced Disclosure Task Force.
117	Critical Accounting Estimates
121	Changes in Accounting Policies in 2018
121	Future Changes in Accounting Policies
121	Transactions with Related Parties
122	Shareholders’ Auditors’ Services and Fees
123	Management’s Annual Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting
124	Enhanced Disclosure Task Force
126	Supplemental Information presents other useful financial tables and more historical detail.

Regulatory Filings

Our continuous disclosure materials, including our interim consolidated financial statements and interim MD&A, annual audited consolidated financial statements and annual MD&A, Annual Information Form and Notice of Annual Meeting of Shareholders and Management Proxy Circular, are available on our website at www.bmo.com/investorrelations, on the Canadian Securities Administrators’ website at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov. BMO’s Chief Executive Officer and its Chief Financial Officer certify the appropriateness and fairness of BMO’s annual and interim consolidated financial statements, MD&A and Annual Information Form, the effectiveness of BMO’s disclosure controls and procedures and the effectiveness of, and any material weaknesses relating to, BMO’s internal control over financial reporting.

24 BMO Financial Group 201st Annual Report 2018

Who We Are

Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. We are the eighth largest bank in North America by assets, with total assets of $774 billion, and an engaged and diverse base of employees. BMO provides a broad range of personal and commercial banking, wealth management and investment banking products and services, conducting business through three operating groups: Personal and Commercial Banking, BMO Wealth Management and BMO Capital Markets. We serve eight million customers across Canada through our Canadian personal and commercial arm, BMO Bank of Montreal. In the United States, we serve customers through BMO Harris Bank, based in the U.S. Midwest, with more than two million personal, business banking and commercial customers. We also serve customers through our wealth management businesses – BMO Global Asset Management, BMO Nesbitt Burns, BMO Private Banking, BMO Insurance and BMO InvestorLine. BMO Capital Markets, our investment and corporate banking and trading products division, provides a full suite of financial products and services to North American and international clients.

Our Financial Objectives

BMO’s medium-term financial objectives for certain important performance measures are set out below. These objectives establish a range of expected performance over time. We believe we will deliver top-tier total shareholder return and meet our financial objectives by aligning our operations with, and executing on, our strategic priorities. We consider top-tier returns to be top-quartile shareholder returns relative to our Canadian and North American peer groups.

BMO’s business planning process is rigorous, sets ambitious goals and considers the prevailing economic conditions, our risk appetite, our customers’ evolving needs and the opportunities available across our lines of business. It includes clear and direct accountability for annual performance that is measured against both internal and external benchmarks and progress toward our strategic priorities.

Our medium-term financial objectives on an adjusted basis are to achieve average annual earnings per share (adjusted EPS) growth of 7% to 10%, earn an average annual return on equity (adjusted ROE) of 15% or more, generate average annual net operating leverage of 2% or more and maintain capital ratios that exceed regulatory requirements. These objectives are guideposts as we execute against our strategic priorities. In managing our operations and risk, we recognize that current profitability and the ability to meet these objectives in a single period must be balanced with the need to invest in our businesses for their future long-term health and growth prospects.

Our one-year adjusted EPS growth rate in 2018 was 10.1%, slightly above our target growth range of 7% to 10%. After achieving our adjusted net operating leverage target of 2% or more in each of the prior two years, adjusted net operating leverage for 2018 was 1.2%, in part reflecting softer Capital Markets revenue and continued investment in our business. Our one-year adjusted ROE was 14.6%, up from 13.7% in 2017, and nearing our target of 15% or more. We are well-capitalized with a Common Equity Tier 1 Ratio of 11.3%.

Reasons to Invest in BMO

• Diversified businesses that continue to deliver robust earnings growth and long-term value for shareholders

• Strong foundation built for growth and differentiating strengths that drive competitive advantage:

• Large and growing North American commercial banking business with advantaged market share

• Well-established, highly profitable flagship banking business in Canada

• Diversified U.S. operations well positioned to capture growth opportunities

• Award-winning wealth franchise with an active presence in markets across Canada, the United States, Europe and Asia, well positioned to accelerate growth

• Competitively advantaged Canadian capital markets franchise with a scalable U.S. platform

• Transformative technology architecture, data and digital capabilities delivering customer and business value

• Well-capitalized with an attractive dividend yield

• Creating sustainable efficiency and reinvestment capacity through resource optimization, simplification and innovation

• Leading employee engagement and award-winning culture

• Adherence to industry-leading standards of corporate governance, including principles that ensure our strategic goals are aligned with managing our environmental and social impacts to deliver long-term sustainable growth for our stakeholders

As at and for the periods ended October 31, 2018	1-year		5-year*		10-year*
Average annual total shareholder return		3.3		10.5		13.7
Average growth in annual EPS		3.1		5.9		9.4
Average growth in annual adjusted EPS		10.1		7.7		7.1
Average annual ROE		13.2		13.0		13.6
Average annual adjusted ROE		14.6		13.8		14.3
Compound growth in annual dividends declared per share		6.2		5.2		3.0
Dividend yield**		3.8		3.9		4.3
Price-to-earnings multiple**		12.1		12.2		12.4
Market value/book value ratio**		1.52		1.52		1.55
Common Equity Tier 1 Ratio		11.3		na		na

* 5-year and 10-year growth rates reflect growth based on CGAAP in 2008 and IFRS in 2013 and 2018, respectively.

** 1-year measure as at October 31, 2018; 5-year and 10-year measures are the average of year-end values.

na – not applicable

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

The Our Financial Objectives section above and the Enterprise-Wide Strategy and Economic Developments and Outlook sections that follow contain certain forward-looking statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the Caution Regarding Forward-Looking Statements on page 29 of this MD&A for a discussion of such risks and uncertainties and the material factors and assumptions related to the statements set forth in such sections.

BMO Financial Group 201st Annual Report 2018 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Highlights

(Canadian $ in millions, except as noted)	2018			2017		2016
Summary Income Statement
Net interest income		10,313			10,007		9,872
Non-interest revenue		12,724			12,253		11,215
Revenue		23,037			22,260		21,087
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)		1,352			1,538		1,543
Revenue, net of CCPB		21,685			20,722		19,544
Provision for credit losses on impaired loans (1)		700			na		na
Provision for (recovery of) credit losses on performing loans (1)		(38	)		na		na
Total provision for credit losses (1)		662			746		771
Non-interest expense		13,613			13,330		13,041
Provision for income taxes		1,960			1,296		1,101
Net income		5,450			5,350		4,631
Attributable to bank shareholders		5,450			5,348		4,622
Attributable to non-controlling interest in subsidiaries		–			2		9
Net income		5,450			5,350		4,631
Adjusted net income		5,979			5,508		5,020
Common Share Data ($, except as noted)
Earnings per share		8.17			7.92		6.92
Adjusted earnings per share		8.99			8.16		7.52
Earnings per share growth (%)		3.1			14.5		5.3
Adjusted earnings per share growth (%)		10.1			8.5		7.4
Dividends declared per share		3.78			3.56		3.40
Book value per share		64.73			61.92		59.56
Closing share price		98.43			98.83		85.36
Number of common shares outstanding (in millions)
End of period		639.3			647.8		645.8
Average diluted		644.9			652.0		646.1
Total market value of common shares ($ billions)		62.9			64.0		55.1
Dividend yield (%)		3.8			3.6		4.0
Dividend payout ratio (%)		46.2			44.8		49.0
Adjusted dividend payout ratio (%)		41.9			43.5		45.0
Financial Measures and Ratios (%)
Return on equity		13.2			13.3		12.1
Adjusted return on equity		14.6			13.7		13.1
Return on tangible common equity		16.2			16.3		15.3
Adjusted return on tangible common equity		17.5			16.5		16.1
Net income growth		1.9			15.5		5.1
Adjusted net income growth		8.6			9.7		7.2
Revenue growth		3.5			5.6		8.8
Revenue growth, net of CCPB		4.6			6.0		7.8
Non-interest expense growth		2.1			2.2		6.5
Adjusted non-interest expense growth		3.4			3.6		5.9
Efficiency ratio, net of CCPB		62.8			64.3		66.7
Adjusted efficiency ratio, net of CCPB		62.2			62.9		64.1
Operating leverage, net of CCPB		2.5			3.8		1.3
Adjusted operating leverage, net of CCPB		1.2			2.0		2.3
Net interest margin on average earning assets		1.51			1.55		1.59
Effective tax rate		26.5			19.5		19.2
Adjusted effective tax rate		20.7			19.8		19.9
Total PCL-to-average Net Loans and acceptances (annualized)		0.17			0.20		0.22
PCL on impaired loans-to-average net loans and acceptances (annualized)		0.18			0.22		0.22
Balance Sheet (as at, $ millions, except as noted)
Assets		774,048			709,580		687,935
Gross loans and acceptances		404,215			376,886		372,464
Net loans and acceptances		402,576			375,053		370,539
Deposits		522,051			479,792		470,281
Common shareholders’ equity		41,387			40,114		38,464
Cash and securities-to-total assets ratio (%)		29.9			28.5		27.1
Capital Ratios (%)
Common Equity Tier 1 Ratio		11.3			11.4		10.1
Tier 1 Capital Ratio		12.9			13.0		11.6
Total Capital Ratio		15.2			15.1		13.6
Leverage Ratio		4.2			4.4		4.2
Foreign Exchange Rates ($)
As at Canadian/U.S. dollar		1.3169			1.2895		1.3411
Average Canadian/U.S. dollar		1.2878			1.3071		1.3251

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of both specific and collective provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section on page 27.

na – not applicable

26 BMO Financial Group 201st Annual Report 2018

Non-GAAP Measures

Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars, and they have been derived from our consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. They are also presented on an adjusted basis that excludes the impact of certain items as set out in the table below. Results and measures that exclude the impact of Canadian/U.S. dollar exchange rate movements on our U.S. segment are non-GAAP measures (please see the Foreign Exchange section on page 34 for a discussion of the effects of changes in exchange rates on our results). Management assesses performance on a reported basis and on an adjusted basis and considers both to be useful in assessing underlying ongoing business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. It also permits readers to assess the impact of certain specified items on results for the periods presented, and to better assess results excluding those items that may not be reflective of ongoing results. As such, the presentation may facilitate readers’ analysis of trends, as well as comparisons with our competitors. Except as otherwise noted, management’s discussion of changes in reported results in this document applies equally to changes in the corresponding adjusted results. Adjusted results and measures are non-GAAP and as such do not have standardized meanings under GAAP. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, or as a substitute for, GAAP results.

(Canadian $ in millions, except as noted)	2018			2017			2016
Reported Results
Revenue		23,037			22,260			21,087
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)		(1,352	)		(1,538	)		(1,543	)
Revenue, net of CCPB		21,685			20,722			19,544
Provision for credit losses		(662	)		(746	)		(771	)
Non-interest expense		(13,613	)		(13,330	)		(13,041	)
Income before income taxes		7,410			6,646			5,732
Provision for income taxes		(1,960	)		(1,296	)		(1,101	)
Net Income		5,450			5,350			4,631
Diluted EPS ($)		8.17			7.92			6.92
Adjusting Items (Pre-tax) (1)
Acquisition integration costs (2)		(34	)		(87	)		(104	)
Amortization of acquisition-related intangible assets (3)		(116	)		(149	)		(160	)
Cumulative accounting adjustment (4)		–			–			(85	)
Restructuring costs (5)		(260	)		(59	)		(188	)
Decrease in the collective allowance for credit losses (6)		–			76			–
Benefit from the remeasurement of an employee benefit liability (7)		277			–			–
Adjusting items included in reported pre-tax income		(133	)		(219	)		(537	)
Adjusting Items (After tax) (1)
Acquisition integration costs (2)		(25	)		(55	)		(71	)
Amortization of acquisition-related intangible assets (3)		(90	)		(116	)		(124	)
Cumulative accounting adjustment (4)		–			–			(62	)
Restructuring costs (5)		(192	)		(41	)		(132	)
Decrease in the collective allowance for credit losses (6)		–			54			–
Benefit from the remeasurement of an employee benefit liability (7)		203			–			–
U.S. net deferred tax asset revaluation (8)		(425	)		–			–
Adjusting items included in reported net income after tax		(529	)		(158	)		(389	)
Impact on diluted EPS ($)		(0.82	)		(0.24	)		(0.60	)
Adjusted Results
Revenue		23,037			22,260			21,171
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)		(1,352	)		(1,538	)		(1,543	)
Revenue, net of CCPB		21,685			20,722			19,628
Provision for credit losses		(662	)		(822	)		(771	)
Non-interest expense		(13,480	)		(13,035	)		(12,588	)
Income before income taxes		7,543			6,865			6,269
Provision for income taxes		(1,564	)		(1,357	)		(1,249	)
Net Income		5,979			5,508			5,020
Diluted EPS ($)		8.99			8.16			7.52

(1) Adjusting items are generally included in Corporate Services, with the exception of the amortization of acquisition-related intangible assets and certain acquisition integration costs, which are charged to the operating groups.

(2) Acquisition integration costs related to F&C Asset Management plc (F&C) are charged to Wealth Management. Acquisition integration costs related to BMO Transportation Finance are charged to Corporate Services, since the acquisition impacts both Canadian and U.S. P&C businesses. KGS-Alpha acquisition-related integration costs are reported in BMO Capital Markets. Acquisition integration costs are recorded in non-interest expense.

(3) These expenses were charged to the non-interest expense of the operating groups. Before-tax and after-tax amounts for each operating group are provided on pages 44, 46, 50, 54 and 58.

(4) Cumulative accounting adjustment recognized in other non-interest revenue related to foreign currency translation, largely impacting prior periods.

(5) In 2018, we recorded a restructuring charge, primarily related to severance costs, as a result of an ongoing bank-wide initiative to simplify how we work, drive increased efficiency and invest in technology to move our business forward. Restructuring charges in 2017 and 2016 were also taken as we continued to accelerate the use of technology to enhance customer experience and focused on driving operational efficiencies. Restructuring costs are included in non-interest expense in Corporate Services.

(6) Adjustments to the collective allowance for credit losses are recorded in Corporate Services provision for credit losses in 2017 and prior years.

(7) The current year included a benefit of $203 million after-tax ($277 million pre-tax) from the remeasurement of an employee benefit liability as a result of an amendment to our other employee future benefits plan for certain employees that was announced in the fourth quarter of 2018. This amount has been included in Corporate Services in non-interest expense.

(8) Charge due to the revaluation of our U.S. net deferred tax asset as a result of the enactment of the U.S. Tax Cuts and Jobs Act. For more information on the impact of the U.S. Tax Cuts and Jobs Act, see Provision for Income Taxes section on page 42.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Adjusted results and measures in this table are non-GAAP amounts or non-GAAP measures.

BMO Financial Group 201st Annual Report 2018 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

Enterprise-Wide Strategy

Our Strategy in Context

Customers inspire what we do every day.

Our aim is to deliver top-tier shareholder return as we balance our commitments to our customers and employees, the environment and the communities in which we live and work. We are unified in our focus – and we are accelerating.

Our strategy is built on a strong foundation of assets and capabilities that position us well for future growth. Adapting and innovating, we are working hard to anticipate customers’ expectations and deliver growing value to shareholders, as we continue to navigate an increasingly complex world characterized by mixed macroeconomic performance, rapid advances in technology, competitive intensity and a dynamic regulatory environment.

We have a clear plan, anchored in our strategy. Although the fundamentals of our strategy remain consistent, we have refocused our priorities for 2019 to address the changing market landscape. Our group strategic priorities align with and support our enterprise-wide strategy, positioning us well to drive competitive performance. Group strategies are outlined in the 2018 Operating Groups Performance Review, which starts on page 43.

Our Strategic Priorities
●	Drive leading growth in priority areas by earning customer loyalty
●	Simplify, speed up, and improve productivity
●	Harness the power of digital and data to grow
●	Be leaders in taking and managing risk, consistent with our overall risk appetite
●	Activate a high-performance culture

Our Sustainability Principles

BMO is dedicated to pursuing growth in a responsible and sustainable manner. Our sustainability principles sit alongside our strategic priorities and represent the inextricable connection between financial performance and corporate responsibility. Our success as a business depends on meeting our commitments to our community and our planet, our employees and our customers. Where they connect is the source of sustainable growth.

Social Change

Helping people adapt and thrive by embracing diversity and tailoring our products and services to meet changing expectations

Financial Resilience

Working with our customers to achieve their goals, and providing guidance and support to underserved communities

Community-Building

Fostering social and economic well-being in the places where we live, work and give back

Environmental Impact

Reducing our environmental footprint while considering the impacts of our business

28 BMO Financial Group 201st Annual Report 2018

Factors That May Affect Future Results

As noted in the following Caution Regarding Forward-Looking Statements, all forward-looking statements and information, by their nature, are subject to inherent risks and uncertainties, both general and specific, which may cause actual results to differ materially from the expectations expressed in any forward-looking statement. The Enterprise-Wide Risk Management section starting on page 78 describes a number of risks, including credit and counterparty, market, insurance, liquidity and funding, operational, model, legal and regulatory, business, strategic, environmental and social, and reputation risk. Should our risk management framework prove ineffective, there could be a material adverse impact on our financial position.

Caution Regarding Forward-Looking Statements

Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the “safe harbor” provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2019 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, the regulatory environment in which we operate and the results of or outlook for our operations or for the Canadian, U.S. and international economies, and include statements of our management. Forward-looking statements are typically identified by words such as “will”, “would”, “should”, “believe”, “expect”, “anticipate”, “project”, “intend”, “estimate”, “plan”, “goal”, “target”, “may” and “could”.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct, and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements, as a number of factors – many of which are beyond our control and the effects of which can be difficult to predict – could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; the Canadian housing market, weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; the level of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to us; our ability to execute our strategic plans and to complete and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; changes to our credit ratings; political conditions, including changes relating to or affecting economic or trade matters; global capital markets activities; the possible effects on our business of war or terrorist activities; outbreaks of disease or illness that affect local, national or international economies; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; information and cyber security, including the threat of hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please see the discussion in the Risks That May Affect Future Results section on page 79, and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational, model, legal and regulatory, business, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section on page 78, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the Economic Developments and Outlook section on page 30. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by governments, historical relationships between economic and financial variables, and the risks to the domestic and global economy.

BMO Financial Group 201st Annual Report 2018 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

Economic Developments and Outlook

Economic Developments in 2018 and Outlook for 2019

Growth in the Canadian economy moderated in 2018 after a robust expansion in 2017. Consumer spending slowed in response to higher interest rates, elevated household debt and slower employment growth. The level of housing market activity fell in the first half of the year as stricter mortgage rules took effect, although markets in most regions stabilized in the second half of the year as a result of population growth that was the highest in 27 years, reflecting record net immigration. Business investment strengthened early in the year, but weakened subsequently in response to rising concerns about trade protectionism. After a disappointing performance in 2017, export growth accelerated in response to stronger U.S. demand, a robust global economy and the relatively low value of the Canadian dollar compared with the U.S. dollar. The Bank of Canada raised its policy rate by 125 basis points over a 16-month period that ended in October 2018, and it is expected to increase rates by an additional 75 basis points before the end of 2019. After leading all other G7 countries with GDP growth of 3.0% in 2017, the rate of economic expansion in Canada is projected to moderate to 2.1% in 2018 and 2.0% in 2019, while remaining slightly above the country’s longer-term potential growth rate. The unemployment rate is expected to decline modestly to a 45-year low of 5.6% before the end of 2019 from 5.8% in October 2018. Industry-wide consumer credit growth is projected to slow from an estimated 4.7% in 2018 to 3.2% in 2019. Residential mortgage growth is anticipated to moderate to below 4% in both years, the slowest pace since 2001, in response to higher borrowing costs and stricter mortgage rules. Non-financial business loan growth is projected to decelerate from an estimated 6.2% in 2018 to a still-healthy rate of 5.6% in 2019. By removing a downside risk that had been facing Canada’s economy, the new United States-Mexico-Canada Agreement, assuming it is ratified by the legislatures in each country, should support an improvement in business spending and a modest increase in the value of the Canadian dollar to around US$0.78 by year-end 2019.

Growth in the U.S. economy strengthened in 2018 due to expansionary fiscal policies. Deregulation and tax reform, including a sizeable decrease in corporate tax rates, led to sustained increases in business investment. Consumer spending remained strong in response to reductions in personal income taxes, healthy employment growth and record levels of household wealth. However, housing market activity moderated as higher borrowing costs and rising home prices eroded affordability. Despite an appreciation of the U.S. dollar, exports strengthened in response to robust global demand. After accelerating from a rate of 2.2% in 2017 to an estimated 2.9% in 2018, real GDP growth is projected to moderate to 2.5% in 2019 as a result of higher interest rates and reduced fiscal stimulus. The continued economic expansion is expected to reduce the unemployment rate to a 49-year low of 3.5% by the end of 2019 from 3.7% in October 2018. The Federal Reserve is expected to increase policy rates by a further 75 basis points before the end of 2019. The higher cost of borrowing will likely cause industry-wide consumer credit growth to moderate from an estimated 3.9% in 2018 to 3.7% in 2019, with residential mortgage growth easing from 3.9% to 3.8%. Slower growth in business spending is projected to reduce the rate of non-financial business loan growth to a still-healthy 5.8% rate in 2019. The main risks to the U.S. economic outlook relate to trade protectionism, geopolitical tensions and the possibility of rising inflation. While the tariffs imposed to date are unlikely to markedly slow the economy, additional protectionist measures could lead to more pronounced weakness and a rising unemployment rate.

The U.S. Midwest region, which includes the six contiguous states within the BMO footprint, has benefited from the pickup in national and global economic activity and manufacturing. Growth in the region’s GDP is expected to improve from 1.0% in 2017 to 2.1% in 2018 and 1.9% in 2019. However, the regional rate of growth will likely continue to lag the national rate due to slower population growth, downshifting of automobile production in Indiana and continued budgetary constraints in Illinois.

This Economic Developments and Outlook section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements on page 29.

30 BMO Financial Group 201st Annual Report 2018

Data points are averages for the month, quarter or year, as appropriate. References to years are calendar years.

BMO Financial Group 201st Annual Report 2018 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

Value Measures

Total Shareholder Return

The average annual total shareholder return (TSR) is a key measure of shareholder value, and confirms that our strategic priorities drive value creation for our shareholders. Our one-year TSR of 3.3% outperformed the corresponding average returns of both our Canadian bank peer group and the overall market in Canada. Our three-year average annual TSR of 13.3% and our five-year average annual TSR of 10.5% were strong, and each outperformed the corresponding average returns of both our Canadian bank peer group and the overall market in Canada.

The table below summarizes dividends paid on BMO common shares over the past five years and the movements in BMO’s share price. An investment of $1,000 in BMO common shares made at the beginning of fiscal 2014 would have been worth $1,650 at October 31, 2018, assuming reinvestment of dividends, for a total return of 65.0%.

On December 4, 2018, BMO announced that the Board of Directors had declared a quarterly dividend on common shares of $1.00 per share, up $0.04 per share or 4% from the prior quarter and up $0.07 per share or 8% from the prior year. The dividend is payable on February 26, 2019 to shareholders of record on February 1, 2019. We have increased our quarterly dividend declared four times over the past two years from $0.86 per common share for the first quarter of 2017. Dividends paid over a five-year period have increased at an average annual compound rate of 5.0%.

The average annual total shareholder return (TSR) represents the average annual total return earned on an investment in BMO common shares made at the beginning of a fixed period. The return includes the change in share price and assumes dividends received were reinvested in additional common shares.

Total Shareholder Return

For the year ended October 31	2018			2017		2016		2015			2014		3-year CAGR (1)		5-year CAGR (1)
Closing market price per common share ($)		98.43			98.83		85.36		76.04			81.73		9.0		6.3
Dividends paid ($ per share)		3.72			3.52		3.36		3.20			3.04		5.1		5.0
Dividend yield (%)		3.8			3.6		4.0		4.3			3.8		nm		nm
Increase (decrease) in share price (%)		(0.4	)		15.8		12.3		(7.0	)		12.5		nm		nm
Total annual shareholder return (%) (2)		3.3			20.2		17.0		(3.0	)		17.1		13.3		10.5

(1) Compound annual growth rate (CAGR) expressed as a percentage.

(2) Total annual shareholder return assumes reinvestment of quarterly dividends and therefore does not equal the sum of dividend and share price returns in the table.

nm – not meaningful

Earnings per Share Growth The year-over-year percentage changes in earnings per share (EPS) and in adjusted EPS are our key measures for analyzing earnings growth. All references to EPS are to diluted EPS, unless otherwise indicated. EPS was $8.17, up $0.25 or 3% from $7.92 in 2017. Adjusted EPS was $8.99, up $0.83 or 10% from $8.16 in 2017, consistent with our objective of achieving average annual adjusted EPS growth of 7% to 10%. EPS growth primarily reflected increased earnings. Reported net income available to common shareholders was 2% higher year-over-year, while the average number of diluted common shares outstanding decreased by 1%, primarily due to share buybacks.

Earnings per share (EPS) is calculated by dividing net income attributable to bank shareholders, after deducting preferred share dividends, by the average number of common shares outstanding. Diluted EPS, which is our basis for measuring performance, adjusts for possible conversions of financial instruments into common shares if those conversions would reduce EPS, and is more fully explained in Note 23 on page 200 of the consolidated financial statements. Adjusted EPS is calculated in the same manner using adjusted net income.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

32 BMO Financial Group 201st Annual Report 2018

Return on Equity Reported return on equity (ROE) was 13.2% in 2018 and adjusted ROE was 14.6%, compared with 13.3% and 13.7%, respectively, in 2017. Reported ROE decreased in 2018, primarily due to growth in common equity exceeding growth in income, in part due to reported income being impacted by a $425 million one-time non-cash charge due to the revaluation of our U.S. net deferred tax asset due to U.S. tax reform. Adjusted ROE increased in 2018, primarily due to growth in income exceeding growth in common equity. There was an increase of $102 million or 2% in net income available to common shareholders and an increase of $473 million or 9% in adjusted net income available to common shareholders in 2018. Average common shareholders’ equity increased $792 million or 2% from 2017, primarily due to increased retained earnings, partially offset by lower accumulated other comprehensive income. The reported return on tangible common equity (ROTCE) was 16.2%, compared with 16.3% in 2017, and adjusted ROTCE was 17.5%, compared with 16.5% in 2017. Book value per share increased 5% from the prior year to $64.73, largely reflecting the increase in shareholders’ equity.

Return on common shareholders’ equity (ROE) is calculated as net income, less non-controlling interest in subsidiaries and preferred dividends, as a percentage of average common shareholders’ equity. Common shareholders’ equity is comprised of common share capital, contributed surplus, accumulated other comprehensive income (loss) and retained earnings. Adjusted ROE is calculated using adjusted net income rather than net income. Return on tangible common equity (ROTCE) is calculated as net income available to common shareholders adjusted for the amortization of acquisition-related intangible assets as a percentage of average tangible common equity. Tangible common equity is calculated as common shareholders’ equity less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities. Adjusted ROTCE is calculated using adjusted net income rather than net income. ROTCE is commonly used in the North American banking industry and is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed organically.

Return on Equity and Return on Tangible Common Equity

(Canadian $ in millions, except as noted) For the year ended October 31	2018			2017			2016
Reported net income		5,450			5,350			4,631
Attributable to non-controlling interest in subsidiaries		–			(2	)		(9	)
Preferred dividends		(184	)		(184	)		(150	)
Net income available to common shareholders (A)		5,266			5,164			4,472
After-tax amortization of acquisition-related intangible assets		90			116			124
Net income available to common shareholders after adjusting for amortization of acquisition-related intangible assets (B)		5,356			5,280			4,596
After-tax impact of other adjusting items (1)		439			42			265
Adjusted net income available to common shareholders (C)		5,795			5,322			4,861
Average common shareholders’ equity (D)		39,754			38,962			36,997
Return on equity (%) (= A/D)		13.2			13.3			12.1
Adjusted return on equity (%) (= C/D)		14.6			13.7			13.1
Average tangible common equity (E)		33,125			32,303			30,101
Return on tangible common equity (%) (= B/E)		16.2			16.3			15.3
Adjusted return on tangible common equity (%) (= C/E)		17.5			16.5			16.1

(1) Other adjusting items include a charge related to the revaluation of our U.S. net deferred tax asset and the benefit on an employee future benefit liability in 2018, a decrease in the collective allowance in 2017 and a cumulative accounting adjustment in 2016. All periods also include restructuring and acquisition integration costs.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Common Equity Tier 1 Ratio BMO’s Common Equity Tier 1 (CET1) Ratio reflects a well-capitalized position relative to the risk in our business. Our CET1 Ratio was 11.3% at October 31, 2018, compared with 11.4% at October 31, 2017. The CET1 Ratio decreased from the end of fiscal 2017 as higher CET1 capital from retained earnings growth, net of share repurchases, was more than offset by higher risk-weighted assets, including an acquisition.

Common Equity Tier 1 (CET1) Ratio is calculated as CET1 capital, which is comprised of common shareholders’ equity less deductions for goodwill, intangible assets, pension assets, certain deferred tax asset and other items, divided by risk-weighted assets for CET1.

BMO Financial Group 201st Annual Report 2018 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

2018 Financial Performance Review

This section provides a review of our enterprise financial performance for 2018 that focuses on the Consolidated Statement of Income included in our consolidated financial statements, which begin on page 143. A review of our operating groups’ strategies and performance follows the enterprise review. A summary of the enterprise financial performance for 2017 appears on page 65.

Foreign Exchange

The Canadian dollar equivalents of BMO’s U.S. results that are denominated in U.S. dollars decreased relative to 2017 due to the weaker U.S. dollar. The table below indicates the relevant average Canadian/U.S. dollar exchange rates and the impact of changes in the rates on our U.S. segment results. References in this document to the impact of the U.S. dollar do not include U.S. dollar-denominated amounts recorded outside of BMO’s U.S. segment.

Changes in the exchange rate will affect future results measured in Canadian dollars, and the impact on those results is a function of the periods in which revenues, expenses and provisions for (recoveries of) credit losses arise. If future results are consistent with results in 2018, each one cent increase (decrease) in the Canadian/U.S. dollar exchange rate, expressed in terms of how many Canadian dollars one U.S. dollar buys, would be expected to increase (decrease) the Canadian dollar equivalent of our U.S. segment net income before income taxes for the year by $14 million, in the absence of hedging transactions.

Economically, our U.S. dollar income stream was unhedged to changes in foreign exchange rates during 2018 and 2017. During 2016, a portion of the BMO Capital Markets U.S. dollar net income was economically hedged. We regularly determine whether to execute hedging transactions in order to mitigate the impact of foreign exchange rate movements on net income.

See the Enterprise-Wide Capital Management section on page 69 for a discussion of the impact that changes in foreign exchange rates can have on our capital position.

Changes in foreign exchange rates will also affect accumulated other comprehensive income primarily, as a result of the translation of our investment in foreign operations. Each one cent increase (decrease) in the Canadian/U.S. dollar exchange rate, expressed in terms of how many Canadian dollars one U.S. dollar buys, would be expected to increase (decrease) the translation of the unhedged portion of our investment in foreign operations by $148 million.

Effects of Changes in Exchange Rates on BMO’s U.S. Segment Reported and Adjusted Results

(Canadian $ in millions, except as noted)	2018 vs. 2017			2017 vs. 2016
Canadian/U.S. dollar exchange rate (average)
2018		1.2878
2017		1.3071			1.3071
2016					1.3251
Effects on U.S. segment reported results
Decreased net interest income		(58	)		(51	)
Decreased non-interest revenue		(47	)		(40	)
Decreased revenues		(105	)		(91	)
Decreased provision for credit losses		3			–
Decreased expenses		76			68
Decreased income taxes		21			6
Decreased reported net income		(5	)		(17	)
Effects on U.S. segment adjusted results
Decreased net interest income		(58	)		(51	)
Decreased non-interest revenue		(47	)		(40	)
Decreased revenues		(105	)		(91	)
Decreased provision for credit losses		4			2
Decreased expenses		74			66
Decreased income taxes		5			5
Decreased adjusted net income		(22	)		(18	)

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Caution

This Foreign Exchange section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

34 BMO Financial Group 201st Annual Report 2018

Net Income

Reported net income was $5,450 million in 2018, an increase of $100 million or 2% from the prior year. Adjusted net income was $5,979 million, an increase of $471 million or 9%. Adjusted net income excludes a one-time non-cash charge related to the revaluation of our U.S. net deferred tax asset due to U.S. tax reform and a benefit of the remeasurement of an employee benefit liability in the current year, restructuring and acquisition integration costs and the amortization of acquisition-related intangible assets in both years, and a decrease in the collective allowance in the prior year. For more information, see the Non-GAAP Measures section on page 27. The impact of the weaker U.S. dollar on net income was not significant.

Reported and adjusted net income growth largely reflects the benefit of good performance in U.S. P&C, Wealth Management and Canadian P&C. BMO Capital Markets results declined, while Corporate Services net loss was higher on a reported basis, but lower on an adjusted basis.

Canadian P&C reported net income of $2,554 million increased $43 million or 2%, and adjusted net income of $2,556 million, which excludes the amortization of acquisition-related intangible assets, increased $42 million or 2% from the prior year. The prior year benefited from a $168 million after-tax gain on the sale of Moneris Solutions Corporation (Moneris US), which had a negative impact of approximately 7% on net income growth in 2018. Excluding the gain, net income increased as a result of higher balances across most products, higher non-interest revenue, and wider margins, partially offset by higher expenses.

U.S. P&C reported net income of $1,394 million increased $367 million or 36%, and adjusted net income of $1,439 million increased $366 million or 34% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. On a U.S. dollar basis, reported net income of $1,083 million increased $296 million or 37%, and adjusted net income of $1,118 million increased $295 million or 36% from the prior year, due to higher revenue, the benefit of U.S. tax reform and lower provisions for credit losses, partially offset by higher expenses. The benefit of U.S. tax reform was approximately $91 million in reported net income and $95 million in adjusted net income. The prior year results included a $27 million after-tax loss on a loan sale.

Wealth Management reported net income of $1,072 million increased $105 million or 11% from the prior year. Adjusted net income of $1,113 million, which excludes the amortization of acquisition-related intangible assets, increased $81 million or 8%. Traditional wealth reported net income of $805 million increased $76 million or 11% from the prior year. Adjusted net income in traditional wealth of $846 million increased $52 million or 7%, primarily due to growth from our diversified businesses and higher equity markets on average, partially offset by higher expenses and a legal provision. Net income in insurance of $267 million increased $29 million or 12%, primarily due to less elevated reinsurance claims in the current year and business growth, partially offset by unfavourable market movements in the current year relative to favourable market movements in the prior year.

BMO Capital Markets reported net income of $1,156 million decreased $119 million or 9% from the prior year. Adjusted net income of $1,169 million, which excludes the amortization of acquisition-related intangible assets and acquisition integration costs, decreased $108 million or 8%, primarily due to lower revenue.

Corporate Services reported net loss for the year was $726 million, compared with a reported net loss of $430 million a year ago. The adjusted net loss for the year was $298 million, compared with an adjusted net loss of $388 million a year ago. The adjusted net loss excludes a one-time non-cash charge of $425 million related to the revaluation of our U.S. net deferred tax asset due to U.S. tax reform and a benefit of $203 million as a result of the remeasurement of an employee benefit liability in the current year, restructuring costs and acquisition integration costs in both years with higher costs incurred in 2018, and a $54 million decrease in the collective allowance in the prior year. The adjusted net loss improved primarily due to lower expenses and higher revenue, excluding the taxable equivalent basis (teb) adjustment. The reported net loss increased $296 million from the prior year, due to the impact of the adjusting items and other drivers noted above.

Further discussion is provided in the 2018 Operating Groups Performance Review section on pages 43 to 61.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

Revenue ⁽¹⁾

Revenue of $23,037 million increased $777 million or 3% from $22,260 million in the prior year. On a basis that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue (net revenue), revenue increased $963 million or 5% to $21,685 million, driven by good performance in U.S. P&C, Canadian P&C, Wealth Management and higher Corporate Services revenue, partially offset by a decrease in revenue in BMO Capital Markets. The impact of the weaker U.S. dollar on revenue growth was not significant.

BMO analyzes revenue at the consolidated level based on GAAP revenue as reported in the consolidated financial statements, and on an adjusted basis. Consistent with our Canadian peer group, we analyze revenue on a taxable equivalent basis (teb) at the operating group level. The teb adjustments for 2018 totalled $313 million, down from $567 million in 2017.

Canadian P&C revenue increased $269 million or 4% from the prior year. Revenue increased due to higher balances across most products, higher non-interest revenue, including a $39 million gain related to the restructuring of Interac Corporation in the current year, and wider margins. The prior year benefited from a $187 million gain on the sale of Moneris US, which had a negative impact of approximately 3% on revenue growth in 2018.

U.S. P&C revenue increased $366 million or 8% from the prior year on a Canadian dollar basis. On a U.S. dollar basis, revenue of $3,869 million increased $334 million or 9%, mainly due to higher deposit revenue and loan volumes in the current year, and the impact of a loss on a loan sale in the prior year, net of loan spread compression.

Wealth Management revenue, net of CCPB, of $4,942 million increased $266 million or 6% from the prior year. Revenue in traditional wealth of $4,463 million increased $257 million or 6%, due to growth in client assets, including a benefit from higher equity markets on average, and higher deposit and loan revenue, partially offset by the impact of the divestiture of a non-core business in the prior year. Insurance revenue, net of CCPB, of $479 million increased $9 million or 2%, due to less elevated reinsurance claims in the current year and business growth, partially offset by unfavourable market movements in the current year relative to favourable market movements in the prior year.

BMO Capital Markets revenue of $4,355 million decreased $214 million or 5% from the prior year, or 4% excluding the impact of the weaker U.S. dollar, driven by lower revenue in our Trading Products business, primarily in interest rate trading, and lower revenue in Investment and Corporate Banking due to lower underwriting and advisory revenue, partially offset by higher corporate banking-related revenue.

Corporate Services reported and adjusted revenue both increased $276 million from the prior year, largely driven by a lower teb adjustment.

Further discussion is provided in the 2018 Operating Groups Performance Review section on pages 43 to 61.

(1) Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets, caused by movements in interest rates and equities markets. The investments which support policy benefit liabilities are predominantly fixed income assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in insurance claims, commissions and changes in policy benefit liabilities. The discussion of revenue on a net basis reduces this variability in results, which allows for a better discussion of operating results. For additional discussion of insurance claims, commissions and changes in policy benefit liabilities, see page 39.

Taxable equivalent basis (teb) Revenues of operating groups are presented in our MD&A on a taxable equivalent basis (teb). Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. This adjustment is offset in Corporate Services.

Revenue and Adjusted Revenue

(Canadian $ in millions, except as noted) For the year ended October 31	2018		2017		2016		Change from 2017 (%)
Net interest income		10,313		10,007		9,872		3
Non-interest revenue		12,724		12,253		11,215		4
Total revenue		23,037		22,260		21,087		3
Total revenue, net of CCPB		21,685		20,722		19,544		5
Adjusted net interest income		10,313		10,007		9,872		3
Adjusted non-interest revenue		12,724		12,253		11,299		4
Total adjusted revenue		23,037		22,260		21,171		3
Total adjusted revenue, net of CCPB		21,685		20,722		19,628		5

Net Interest Income

Net interest income of $10,313 million increased $306 million or 3%, due to increased loan volumes and higher deposit volumes and margins in the P&C businesses, partially offset by lower net interest income in BMO Capital Markets, due to certain trading businesses where the related revenue is recorded in trading income, non-interest revenue.

Net interest income excluding trading of $10,735 million increased $595 million or 6%, due to increased loan and deposit volumes, and wider margins in the P&C businesses.

Average earning assets of $682.9 billion increased $36.1 billion or 6%, due to loan growth, higher securities, increased cash resources and higher securities borrowed or purchased under resale agreements.

BMO’s overall net interest margin of 1.51% decreased 4 basis points, primarily due to lower net interest income from trading businesses. Net interest margin on an excluding trading basis of 1.87% was flat, compared with the prior year, as higher margins in the P&C businesses were mostly offset by higher volume of lower spread assets.

Table 3 on page 128 provides further details on net interest income and net interest margin.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

36 BMO Financial Group 201st Annual Report 2018

Net interest income is comprised of earnings on assets, such as loans and securities, including interest and certain dividend income, less interest expense paid on liabilities, such as deposits.

Net interest margin is the ratio of net interest income to average earning assets, expressed as a percentage or in basis points.

Net non-interest revenue is non-interest revenue, net of insurance claims, commissions and changes in policy benefit liabilities (CCPB).

Change in Net Interest Income, Average Earning Assets and Net Interest Margin

	Net interest income (teb)									Average earning assets						Net interest margin
(Canadian $ in millions, except as noted) For the year ended October 31							Change							Change		(in basis points)
	2018			2017			%			2018		2017		%		2018		2017		Change
Canadian P&C		5,541			5,261			5			212,965		207,815		2		260		253		7
U.S. P&C		3,843			3,551			8			103,394		96,363		7		372		368		4
Personal and Commercial Banking (P&C)		9,384			8,812			6			316,359		304,178		4		297		290		7
Wealth Management		826			722			14			31,167		28,026		11		265		257		8
BMO Capital Markets		659			1,233			(47	)		271,839		263,128		3		24		47		(23	)
Corporate Services		(556	)		(760	)		27			63,580		51,467		24		nm		nm		nm
Total BMO reported		10,313			10,007			3			682,945		646,799		6		151		155		(4	)
U.S. P&C (US$ in millions)		2,983			2,718			10			80,255		73,752		9		372		369		3

Certain comparative figures have been reclassified to conform with the current year’s presentation.

nm – not meaningful

Non-Interest Revenue

Non-interest revenue, which comprises all revenues other than net interest income, increased $471 million or 4% to $12,724 million in 2018. Reported and adjusted non-interest revenue, net of CCPB, both increased $657 million or 6% to $11,372 million with the majority of the growth driven by BMO Capital Markets. Excluding trading revenue, non-interest revenue, net of CCPB, increased $179 million or 2%.

Trading revenues increased $478 million and are discussed in the Trading-Related Revenues section that follows.

Investment management and custodial fees increased $120 million from the prior year, mainly due to business growth in Wealth Management, partially offset by the impact of a divestiture of a non-core business in the prior year. Mutual fund revenue increased $62 million. Both investment management and custodial fees and mutual fund revenues benefited from higher equity markets on average, compared with the prior year.

Card fees increased $85 million, driven by higher interchange revenue in Canadian P&C.

Lending fees increased $80 million, primarily due to increased lending activity in Canadian P&C and in BMO Capital Markets.

Securities gains, other than trading, increased $68 million, due to higher net securities gains in Corporate Services, Canadian P&C and U.S. P&C, partially offset by lower net securities gains in BMO Capital Markets and Wealth Management.

Securities commissions and fees increased $60 million. These revenues largely consist of brokerage commissions within Wealth Management and institutional equity trading commissions within BMO Capital Markets. The increase was due to growth in fee-based businesses in Wealth Management and higher levels of client activity in both Wealth Management and BMO Capital Markets.

Deposit and payment service charges increased $21 million and other non-interest revenue increased $16 million.

Investments in associates and joint ventures decreased $219 million, primarily due to the $187 million pre-tax gain on sale of Moneris US in 2017.

Gross insurance revenue decreased $191 million from 2017, due to higher increases in long-term interest rates decreasing the fair value of insurance investments in the current year, and stronger equity markets in the prior year, partially offset by higher annuity sales and underlying business growth in the current year. Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets, caused by movements in interest rates and equity markets. The investments that support policy benefit liabilities are predominantly fixed income and equity assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in insurance claims, commissions and changes in policy benefit liabilities (CCPB), as discussed on page 39.

Underwriting and advisory fees decreased $100 million, primarily due to lower equity underwriting activity.

Foreign exchange, other than trading, decreased $9 million.

Table 3 on page 128 provides further details on revenue and revenue growth.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 37

MANAGEMENT’S DISCUSSION AND ANALYSIS

Non-Interest Revenue

(Canadian $ in millions)							Change from 2017
For the year ended October 31	2018		2017		2016		(%)
Securities commissions and fees		1,029		969		924		6
Deposit and payment service charges		1,144		1,123		1,076		2
Trading revenues		1,830		1,352		1,192		35
Lending fees		997		917		859		9
Card fees		564		479		526		18
Investment management and custodial fees		1,742		1,622		1,556		7
Mutual fund revenues		1,473		1,411		1,364		4
Underwriting and advisory fees		936		1,036		820		(10	)
Securities gains, other than trading		239		171		84		39
Foreign exchange, other than trading		182		191		162		(5	)
Insurance revenue		1,879		2,070		2,023		(9	)
Investments in associates and joint ventures		167		386		140		(57	)
Other		542		526		489		3
Total reported		12,724		12,253		11,215		4
Reported, net of CCPB		11,372		10,715		9,672		6
Total adjusted		12,724		12,253		11,299		4
Adjusted, net of CCPB		11,372		10,715		9,756		6
Insurance revenue, net of CCPB		527		532		480		(1	)

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Trading-Related Revenues

Trading-related revenues are dependent on, among other things, the volume of activities undertaken for clients who enter into transactions with BMO to mitigate their risks or to invest and market conditions. BMO earns a spread or profit on the net sum of its client positions by profitably managing, within prescribed limits, the overall risk in its net positions. On a limited basis, BMO also earns revenue from principal trading positions.

Interest and non-interest trading-related revenues on a taxable equivalent basis (teb) decreased $39 million or 2%. Interest rate trading-related revenues decreased $43 million or 9%, primarily due to decreased client activity. Foreign exchange trading-related revenues increased $8 million or 2%, driven by increased client activity. Equities trading-related revenues decreased $18 million or 2%, reflecting lower activity with corporate clients. Commodities trading-related revenues decreased $21 million or 25%, due to decreased client hedging activity in energy products. Other trading-related revenues increased $35 million or 76%, primarily due to fair value gains associated with hedging exposures in our structural balance sheet. These fair value gains were largely offset by lower net interest income.

The Market Risk section on page 95 provides more information on trading-related revenues.

Trading-related revenues include net interest income and non-interest revenue earned from on-balance sheet and off-balance sheet positions undertaken for trading purposes. The management of these positions typically includes marking them to market on a daily basis. Trading-related revenues also include income (expense) and gains (losses) from both on-balance sheet instruments and interest rate, foreign exchange (including spot positions), equity, commodity and credit contracts.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

38 BMO Financial Group 201st Annual Report 2018

Interest and Non-Interest Trading-Related Revenues (1)

(Canadian $ in millions) (taxable equivalent basis)									Change from 2017
For the year ended October 31	2018			2017			2016		(%)
Interest rates		437			480			663		(9	)
Foreign exchange		377			369			349		2
Equities		709			727			629		(2	)
Commodities		63			84			66		(25	)
Other (2)		82			47			25		76
Total (teb)		1,668			1,707			1,732		(2	)
Teb offset		260			488			441		(47	)
Reported total		1,408			1,219			1,291		16
Reported as:
Net interest income		(162	)		355			540		(+100	)
Non-interest revenue – trading revenues		1,830			1,352			1,192		35
Total (teb)		1,668			1,707			1,732		(2	)
Teb offset		260			488			441		(47	)
Reported total, net of teb offset		1,408			1,219			1,291		16
Adjusted net interest income, net of teb offset		(422	)		(133	)		99		(+100	)
Adjusted non-interest revenue – trading revenues		1,830			1,352			1,192		35
Adjusted total, net of teb offset		1,408			1,219			1,291		16

(1) Trading-related revenues are presented on a taxable equivalent basis.

(2) Includes nominal revenues from run-off structured credit activities and hedging exposures in BMO’s structural balance sheet.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) were $1,352 million in 2018, a decrease of $186 million pre-tax from $1,538 million in 2017, due to the impact of higher increases in long-term interest rates decreasing the fair value of policy benefit liabilities in the current year, stronger equity markets in the prior year and less elevated reinsurance claims in the current year, partially offset by higher annuity sales and underlying business growth in the current year. The decrease related to the fair value of policy benefit liabilities and the increase related to annuity sales were largely offset in revenue, as discussed on page 37.

BMO Financial Group 201st Annual Report 2018 39

MANAGEMENT’S DISCUSSION AND ANALYSIS

Provision for Credit Losses

Effective the first quarter of 2018, the bank prospectively adopted IFRS 9. Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. The provision for credit losses on impaired loans under IFRS 9 is consistent with the specific provision under IAS 39 in prior years. The provision for credit losses on performing loans replaces the collective provision under IAS 39. Refer to Note 4 on page 157 of the consolidated financial statements for an explanation of the provision for credit losses. Prior periods have not been restated. The total provision for credit losses (PCL) was $662 million in the current year, down from $746 million in 2017. Adjusted PCL, which excludes a $76 million pre-tax decrease in the collective allowance in the prior year, decreased $160 million. The PCL on impaired loans of $700 million decreased from $822 million in the prior year, reflecting a net recovery of credit losses in BMO Capital Markets in the current year, compared with net provisions in the prior year, lower provisions in Canadian and U.S. P&C and Wealth Management, and higher recoveries in Corporate Services. There was a $38 million net recovery of credit losses on performing loans in the current year, primarily in the U.S. P&C business. Total PCL as a percentage of average net loans and acceptances was 0.17% in 2018, down from 0.20% in the prior year. PCL on impaired loans as a percentage of average net loans and acceptances was 0.18%, down from 0.22% in the prior year. Total PCL in Canadian P&C decreased $14 million to $469 million, due to lower commercial provisions, partially offset by higher consumer provisions. Total U.S. P&C provisions of $220 million decreased $69 million, reflecting lower consumer and commercial PCL on impaired loans, and a $38 million net recovery of credit losses on performing loans. BMO Capital Markets had a net recovery of credit losses of $18 million, compared with net provisions of $44 million in the prior year. Corporate Services total recoveries of credit losses of $15 million decreased $63 million, due to the $76 million collective allowance reduction in the prior year. On a geographic basis, the majority of our provisions relate to our Canadian loan portfolio, reflecting the larger size of this portfolio compared with our U.S. and international loan portfolios. Total PCL in Canada and other countries (excluding the U.S.) was $424 million, compared with $452 million in 2017. Total PCL in the U.S. was $238 million, down from $294 million in 2017. Note 4 on page 157 of the consolidated financial statements provides provision for credit losses information on a geographic basis. Table 15 on page 138 provides further provision for credit losses segmentation information.    

Provision for Credit Losses by Operating Group (1)

(Canadian $ in millions)	Canadian P&C		U.S. P&C			Total P&C			Wealth Management		BMO Capital Markets			Corporate Services (2)			Total Bank
2018
Provision for (recovery of) credit losses on impaired loans		466		258			724			6		(17	)		(13	)		700
Provision for (recovery of) credit losses on performing loans		3		(38	)		(35	)		–		(1	)		(2	)		(38	)
Total provision for (recovery of) credit losses		469		220			689			6		(18	)		(15	)		662
2017
Total specific and collective provision for (recovery of) credit losses		483		289			772			8		44			(78	)		746
2016
Total specific and collective provision for (recovery of) credit losses		506		249			755			9		81			(74	)		771

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in periods prior to 2018 is comprised of specific provisions for operating groups and includes both specific and collective provisions for Corporate Services. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) In prior years the reduction in the collective provision for credit losses was recorded in Corporate Services.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Provision for Credit Losses Performance Ratios

	2018		2017		2016
Total PCL-to-average net loans and acceptances (annualized) (%)		0.17		0.20		0.22
PCL on impaired loans-to-average net loans and acceptances (annualized) (%)		0.18		0.22		0.22

40 BMO Financial Group 201st Annual Report 2018

Non-Interest Expense

Non-interest expense increased $283 million or 2% to $13,613 million in 2018. Adjusted non-interest expense excludes a benefit from the remeasurement of an employee benefit liability in the current year, restructuring costs, the amortization of acquisition-related intangible assets and acquisition integration costs in both years. The benefit from the remeasurement was $277 million pre-tax in the current year and was recorded in other employee compensation. Restructuring costs were $260 million and $59 million in 2018 and 2017, respectively. The amortization of acquisition-related intangible assets was $116 million and $149 million in 2018 and 2017, respectively. Acquisition integration costs were $34 million and $87 million in 2018 and 2017, respectively. Adjusted non-interest expense increased $445 million or 3% to $13,480 million, primarily due to increased technology investments and higher employee-related expenses, partially offset by benefits from disciplined expense management. Reported non-interest expense increased $283 million or 2%, due to the same drivers as adjusted non-interest expense growth, partially offset by the net benefit of the adjusting items noted above. The impact of the weaker U.S. dollar on non-interest expense growth was not significant. The dollar and percentage changes in expense by category are outlined in the Non-Interest Expense and Adjusted Non-Interest Expense tables below. Table 4 on page 129 provides more detail on expenses and expense growth. Performance-based compensation on a reported basis increased $124 million or 5% and on an adjusted basis increased $127 million or 5%, primarily due to improved performance across most operating groups and growth initiatives. Other employee compensation, which includes salaries, benefits and severance, on a reported basis decreased $132 million or 3%, reflecting the benefit resulting from a remeasurement of an employee benefit liability, partially offset by higher restructuring costs in the current year. Other employee compensation decreased $13 million on an adjusted basis, mainly reflecting lower pension costs. Premises and equipment costs on a reported basis increased $262 million or 11% and on an adjusted basis increased $308 million or 13%, primarily due to an increase in technology investments. Other reported expenses increased $11 million and adjusted other expenses decreased $28 million or 1%. BMO’s reported efficiency ratio improved 80 basis points to 59.1% and the adjusted efficiency ratio improved 10 basis points to 58.5% in 2018. On a net revenue basis⁽¹⁾, the reported efficiency ratio improved 150 basis points to 62.8% and the adjusted efficiency ratio improved 70 basis points to 62.2% in 2018. On a net revenue basis ⁽¹⁾, reported operating leverage was 2.5% and adjusted operating leverage was 1.2%.   (1)  This ratio is calculated excluding insurance claims, commissions and changes in policy benefit liabilities (CCPB).    

The efficiency ratio (or expense-to-revenue ratio) is a measure of productivity. It is calculated as non-interest expense divided by total revenue (on a taxable equivalent basis in the operating groups), expressed as a percentage. The adjusted efficiency ratio is calculated in the same manner, utilizing adjusted revenue and adjusted non-interest expense.

Operating leverage is the difference between revenue and expense growth rates. Adjusted operating leverage is the difference between adjusted revenue and adjusted expense growth rates.

Non-Interest Expense

(Canadian $ in millions) For the year ended October 31	2018		2017		2016		Change from 2017 (%)
Performance-based compensation		2,510		2,386		2,278		5
Other employee compensation		4,949		5,081		5,104		(3	)
Total employee compensation		7,459		7,467		7,382		–
Premises and equipment		2,753		2,491		2,393		11
Other		2,898		2,887		2,822		–
Amortization of intangible assets		503		485		444		4
Total non-interest expense		13,613		13,330		13,041		2

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Adjusted Non-Interest Expense (1)

(Canadian $ in millions) For the year ended October 31	2018		2017		2016		Change from 2017 (%)
Performance-based compensation		2,508		2,381		2,248		5
Other employee compensation		4,994		5,007		4,894		–
Total employee compensation		7,502		7,388		7,142		2
Premises and equipment		2,738		2,430		2,357		13
Other		2,853		2,881		2,805		(1	)
Amortization of intangible assets		387		336		284		15
Total adjusted non-interest expense		13,480		13,035		12,588		3

(1) Adjusted non-interest expense excludes restructuring costs, the amortization of acquisition-related intangible assets, acquisition integration costs, and the benefit on an employee future benefit liability.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 41

MANAGEMENT’S DISCUSSION AND ANALYSIS

Provision for Income Taxes

The provision for income taxes reflected in the Consolidated Statement of Income is based upon transactions recorded in income, regardless of when such transactions are subject to taxation by taxing authorities, with the exception of the repatriation of retained earnings from subsidiaries, as outlined in Note 22 on page 198 of the consolidated financial statements.

Management assesses BMO’s consolidated results and associated provision for income taxes on a GAAP basis. We assess the performance of the operating groups and associated income taxes on a taxable equivalent basis and report accordingly.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the Act) was signed into law in the United States. Consequently, effective January 1, 2018, the U.S. federal corporate tax rate was reduced from 35% to 21%. The tax rate change resulted in a one-time non-cash charge of $425 million to our net income due to the revaluation of our U.S. net deferred tax asset to the lower tax rate. This one-time non-cash charge for the reduction in the U.S. federal tax rate was recorded in income taxes in the current year. For more information on the impact of U.S. tax reform, see the discussion in the Critical Accounting Estimates section on page 117.

The provision for income taxes was $1,960 million in 2018, compared with $1,296 million in 2017. The reported effective tax rate in 2018 was 26.5%, compared with 19.5% in 2017. The higher reported effective tax rate was primarily due to the one-time non-cash charge due to the revaluation of our U.S. net deferred tax asset noted above. The adjusted provision for income taxes⁽¹⁾ was $1,564 million in 2018, compared with $1,357 million in 2017. The adjusted effective tax rate in 2018 was 20.7%, compared with 19.8% in 2017. The higher adjusted effective tax rate was primarily due to lower tax-exempt income from securities and changes in earnings mix, partially offset by the benefit of U.S. tax reform of approximately US$100 million. On a teb basis, the reported effective tax rate was 29.4% in 2018, compared with 25.8% in 2017. On a teb basis, the adjusted effective tax rate was 23.9% in 2018, compared with 25.9% in 2017.

BMO partially hedges, for accounting purposes, the foreign exchange risk arising from its foreign operations by funding the investments in the corresponding foreign currency. A gain or loss on hedging and an unrealized gain or loss on translation of foreign operations is charged or credited to shareholders’ equity. For income tax purposes, a gain or loss on the hedging activities results in an income tax charge or credit in the current period that is charged or credited to shareholders’ equity, while the associated unrealized gain or loss on the foreign operations does not incur income taxes until the investments are liquidated. The income tax charge/benefit arising from a hedging gain/loss is a function of the fluctuations in exchange rates from period to period. Hedging of foreign operations has given rise to an income tax recovery in shareholders’ equity of $56 million for the current year, compared with an income tax expense of $8 million in 2017. Refer to the Consolidated Statement of Changes in Equity on page 146 of the consolidated financial statements for further details.

Legislative changes and changes in tax policy, including their interpretation by taxing authorities and the courts, may impact our earnings. See the discussion in the Critical Accounting Estimates section on page 117 for additional related details. For instance, the 2018 Canadian federal budget introduced a rule that impacts the tax deductibility of Canadian dividends in certain circumstances, which was effective February 27, 2018. The impact of this rule is to increase our effective tax rate.

Table 4 on page 129 details the $2,714 million of total government levies and taxes incurred by BMO in 2018. $1,539 million of this amount is incurred in Canada, with $990 million included in our provision for income taxes and the remaining $549 million included in total government levies other than income taxes. The increase from $2,025 million in 2017 was primarily due to a higher provision for income taxes.

(1) The adjusted rate is computed using adjusted net income rather than reported net income in the determination of income subject to tax.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

42 BMO Financial Group 201st Annual Report 2018

2018 Operating Groups Performance Review

Summary

This section includes an analysis of the financial results of our operating groups and descriptions of their operating segments, businesses, strategies, strengths, challenges, key value drivers, achievements and outlooks.

	BMO Financial Group
Operating Groups	Personal and Commercial (P&C) Banking		BMO Wealth Management	BMO Capital Markets
Operating Segments	Canadian P&C	U.S. P&C
Lines of Business	• Personal Banking • Commercial Banking	• Personal Banking • Commercial Banking	• BMO Nesbitt Burns • BMO Private Banking • BMO InvestorLine • BMO Global Asset Management • BMO Insurance	• Investment and Corporate Banking • Trading Products
	Corporate Services, including Technology and Operations

BMO’s business mix is well diversified by operating segment and by geography. This robust business mix has long been a key driver of growth, comprising the key geographies and customer segments that are critical to our strategic plans for sustaining growth and delivering value to our shareholders.

*Percentages determined excluding results in Corporate Services.

BMO Financial Group 201st Annual Report 2018 43

MANAGEMENT’S DISCUSSION AND ANALYSIS

How BMO Reports Operating Group Results

Periodically, certain business lines and units within the business lines are transferred between client and corporate support groups to more closely align BMO’s organizational structure with its strategic priorities. In addition, revenue and expense allocations are updated to more accurately align with current experience. Results for prior periods are restated to conform with the current period’s presentation.

Effective the first quarter of 2018, the allocation of certain revenue items from Corporate Services to the operating groups was updated to better align with underlying business activity. Results for prior periods and related ratios have been reclassified to conform with the current presentation.

The following additional reclassifications were made effective the first quarter of 2018. Loan losses related to certain fraud costs have been reclassified from provision for credit losses to other non-interest expense in Canadian P&C and U.S. P&C. Certain fees have been reclassified from deposit and payment service charges to card fees within non-interest revenue in Canadian P&C. Also, cash collateral balances were reclassified from loans and deposits to other assets and other liabilities in BMO Capital Markets. Results for prior periods and related ratios have been reclassified to conform with the current period’s presentation.

Restructuring costs and acquisition integration costs that impact more than one operating group are included in Corporate Services.

BMO analyzes revenue at the consolidated level based on GAAP revenue as reported in the consolidated financial statements rather than on a taxable equivalent basis (teb), which is consistent with our Canadian peer group. Like many banks, we analyze revenue on a teb basis at the operating group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the group teb adjustments is reflected in Corporate Services revenue and provision for income taxes.

Effective with the adoption of IFRS 9, we allocate the provision for credit losses on performing loans and the related allowance to the operating groups. In 2017 and prior years, the collective provision and allowance was held in Corporate Services.

Personal and Commercial Banking

(Canadian $ in millions, except as noted) As at or for the year ended October 31	Canadian P&C							U.S. P&C								Total P&C
	2018			2017		2016		2018			2017			2016		2018			2017		2016
Net interest income (teb)		5,541			5,261		5,080		3,843			3,551			3,491		9,384			8,812		8,571
Non-interest revenue		2,171			2,182		1,909		1,140			1,066			1,119		3,311			3,248		3,028
Total revenue (teb)		7,712			7,443		6,989		4,983			4,617			4,610		12,695			12,060		11,599
Provision for credit losses on impaired loans (1)		466			na		na		258			na			na		724			na		na
Provision for (recovery of) credit losses on performing loans (1)		3			na		na		(38	)		na			na		(35	)		na		na
Total provision for credit losses (1)		469			483		506		220			289			249		689			772		755
Non-interest expense		3,805			3,622		3,500		3,012			2,944			2,914		6,817			6,566		6,414
Income before income taxes		3,438			3,338		2,983		1,751			1,384			1,447		5,189			4,722		4,430
Provision for income taxes (teb)		884			827		766		357			357			396		1,241			1,184		1,162
Reported net income		2,554			2,511		2,217		1,394			1,027			1,051		3,948			3,538		3,268
Amortization of acquisition-related intangible assets (2)		2			3		2		45			46			50		47			49		52
Adjusted net income		2,556			2,514		2,219		1,439			1,073			1,101		3,995			3,587		3,320
Key Performance Metrics and Drivers
Net income growth (%)		1.7			13.2		4.8		35.7			(2.2	)		28.4		11.6			8.3		11.4
Adjusted net income growth (%)		1.7			13.2		4.7		34.0			(2.4	)		26.3		11.4			8.0		11.0
Revenue growth (%)		3.6			6.5		5.0		7.9			0.1			27.9		5.3			4.0		13.0
Non-interest expense growth (%)		5.0			3.5		3.1		2.3			1.0			21.0		3.8			2.4		10.5
Adjusted non-interest expense growth (%)		5.0			3.5		3.2		2.6			1.2			21.7		3.9			2.5		10.7
Return on equity (%)																	18.6			16.7		15.8
Adjusted return on equity (%)																	18.8			16.9		16.1
Operating leverage (teb) (%)		(1.4	)		3.0		1.9		5.6			(0.9	)		6.9		1.5			1.6		2.5
Adjusted operating leverage (teb) (%)		(1.4	)		3.0		1.8		5.3			(1.1	)		6.2		1.4			1.5		2.3
Efficiency ratio (teb) (%)		49.3			48.7		50.1		60.4			63.8			63.2		53.7			54.4		55.3
Adjusted efficiency ratio (teb) (%)		49.3			48.6		50.0		59.3			62.4			61.7		53.2			53.9		54.7
Net interest margin on average earning assets (teb) (%)		2.60			2.53		2.55		3.72			3.68			3.58		2.97			2.90		2.88
Average common equity																	20,914			20,849		20,241
Average earning assets		212,965			207,815		199,527		103,394			96,363			97,651		316,359			304,178		297,178
Average gross loans and acceptances		223,536			215,848		205,973		98,001			90,533			90,959		321,537			306,381		296,932
Average net loans and acceptances		222,673			215,667		205,813		97,346			90,572			90,865		320,019			306,239		296,678
Average deposits		159,483			152,492		142,132		90,738			85,927			87,881		250,221			238,419		230,013
Assets under administration		28,313			29,267		25,439		178,600			148,753			159,448		206,913			178,020		184,887
Full-time equivalent employees		14,644			14,559		14,803		7,188			7,138			7,055		21,832			21,697		21,858

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in periods prior to 2018 is comprised of specific provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) Total P&C before tax amounts of $61 million in 2018, $66 million in 2017 and $71 million in 2016 are included in non-interest expense.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable

The Personal and Commercial Banking (P&C) operating group represents the sum of our two retail and business banking operating segments, Canadian Personal and Commercial Banking (Canadian P&C) and U.S. Personal and Commercial Banking (U.S. P&C). The combined P&C banking business net income of $3,948 million increased $410 million or 12% from the prior year. Adjusted net income, which excludes the amortization of acquisition-related intangible assets, was $3,995 million, an increase of $408 million or 11%. These operating segments are reviewed separately in the sections that follow.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

44 BMO Financial Group 201st Annual Report 2018

Canadian Personal and Commercial Banking

Canadian Personal and Commercial Banking provides financial products and services to eight million customers. We’re here to help our customers make the right financial decisions as they bank with us across our network of 900 branches, contact centres, digital banking platforms and over 3,300 automated teller machines. Our top-tier commercial franchise serves as an advisor and trusted partner to our clients across multiple industry sectors throughout Canada.   Cameron Fowler President North American Personal and Business Banking, BMO Financial Group

Lines of Business

Personal Banking provides customers with a wide range of products and services, including chequing and savings accounts, credit cards, mortgages and everyday financial and investment advice. Our employees are focused on providing all of our customers with an exceptional experience every time they interact with us.

Commercial Banking provides small business and commercial banking customers with a broad suite of commercial products and services, including business deposit accounts, commercial credit cards, business loans and commercial mortgages, cash management solutions, foreign exchange services and specialized banking programs. Our Commercial bankers partner with our customers to help them grow and manage their business.

Strengths and Value Drivers

• Highly engaged team of dedicated employees focused on providing a personalized banking experience, anticipating customers’ needs and finding new ways to help.

• Top-tier commercial banking business, as evidenced by BMO’s number two ranking in Canadian market share for business loans up to $25 million.

• Strong and growing retail banking business, benefiting from nearly 50% year-over-year digital sales growth and 25% digital sales penetration.

• Largest Mastercard^® and AIR MILES^® card issuer in Canada for retail cards and largest Mastercard^® card issuer for commercial cards.

• Consistently applied credit risk management practices that provide customers with reliable access to appropriate financing solutions. Our prudent underwriting standards support responsible personal lending and long-term financial sustainability.

• Proud to be working with Indigenous communities to provide improved access to employment opportunities, education and financial services for more than 25 years.

• The official bank of the Canadian defence community, serving the unique needs of members of the Canadian military and their families since 2008.

Strategy and Key Priorities

Capture key growth and loyalty opportunities by delivering a leading digital experience and personalized advice.

Key Priority	2018 Achievements	2019 Focus
Continue our focus on customer loyalty and growth	•  Achieved strong employee engagement survey results, above leading company benchmarks, demonstrating our employees’ ongoing commitment to deliver a leading customer experience •  Created dedicated teams focused on improving moments that matter, to help enhance the overall experience for our customers •  Upgraded 44 branches across Canada and opened three new Smart Branch locations in Manitoba and Alberta, providing customers with access to the best of our innovative technologies in a unique, smaller format tailored to their needs •  Continued enhancing our automated teller machine (ATM) network by extending the flexibility of choosing bill denominations at 75% of our ATMs across Canada	Continue to improve customer loyalty by deepening primary relationships
	Personal Banking •  Ran effective campaigns in support of key offerings, ranging from home financing and credit cards to Everyday Banking, which helped to increase our new-to-BMO customer base and deepen existing relationships •  Continued to grow our mix of advice-based roles, strengthening our ability to engage with customers on financial issues that are important to them, whenever and however they choose to interact with us	In Personal Banking, deliver a leading customer experience by leveraging new digital channels and enhancing existing networks

BMO Financial Group 201st Annual Report 2018 45

MANAGEMENT’S DISCUSSION AND ANALYSIS

Key Priority	2018 Achievements	2019 Focus
Continue our focus on customer loyalty and growth (continued)	Commercial Banking •  Improved processes and increased platform efficiencies, allowing our sales force to spend more time engaging directly with customers •  Launched new suite of Small Business Banking Mastercard® products that were well received by our clients, with the number of new clients acquired increasing more than 30% from the prior year •  Proud to be named Best Commercial Bank in Canada for the fourth consecutive year by World Finance Magazine at its 2018 Banking Awards in recognition of our strong regional and industry focus, as well as our commitment to building customer relationships and providing innovative solutions, notably in the area of Indigenous banking	In Commercial Banking, focus on maintaining our core strengths, while targeting opportunities for diversification across high-value sectors and businesses
Deliver a leading digital experience	•  Recognized as a leader in mobile banking by Forrester in The Forrester Banking Sales Wave™: Canadian Mobile Sites, Q4 2018 •  Continued to enhance and simplify the account opening process, and launched a new Business Xpress lending platform that has enabled a 95% faster approval time for Small Business loans •  Enhanced customer experience driven by our mobile-first approach throughout 2018, resulting in a 16% growth year-over-year in the number of active mobile users •  Leveraged the power of artificial intelligence in the rollout of BMO Bolt (chatbot for Facebook Messenger) and BMO’s Virtual Assistant (chatbot for Twitter)	Continue to enhance the digital experience through sales and service transactions

Canadian P&C

(Canadian $ in millions, except as noted) As at or for the year ended October 31	2018			2017		2016
Net interest income		5,541			5,261		5,080
Non-interest revenue		2,171			2,182		1,909
Total revenue (teb)		7,712			7,443		6,989
Provision for credit losses on impaired loans (1)		466			na		na
Provision for credit losses on performing loans (1)		3			na		na
Total provision for credit losses (1)		469			483		506
Non-interest expense		3,805			3,622		3,500
Income before income taxes		3,438			3,338		2,983
Provision for income taxes		884			827		766
Reported net income		2,554			2,511		2,217
Amortization of acquisition-related intangible assets (2)		2			3		2
Adjusted net income		2,556			2,514		2,219
Key Performance Metrics and Drivers
Personal revenue		5,013			4,718		4,568
Commercial revenue		2,699			2,725		2,421
Net income growth (%)		1.7			13.2		4.8
Revenue growth (%)		3.6			6.5		5.0
Non-interest expense growth (%)		5.0			3.5		3.1
Adjusted non-interest expense growth (%)		5.0			3.5		3.2
Operating leverage (%)		(1.4	)		3.0		1.9
Adjusted operating leverage (%)		(1.4	)		3.0		1.8
Efficiency ratio (%)		49.3			48.7		50.1
Net interest margin on average earning assets (%)		2.60			2.53		2.55
Average earning assets		212,965			207,815		199,527
Average gross loans and acceptances		223,536			215,848		205,973
Average net loans and acceptances		222,673			215,667		205,813
Average deposits		159,483			152,492		142,132
Full-time equivalent employees		14,644			14,559		14,803

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of specific provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) Before tax amounts of $2 million in 2018 and $3 million in both 2017 and 2016 are included in non-interest expense.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable

46 BMO Financial Group 201st Annual Report 2018

Financial Review

Canadian P&C reported net income of $2,554 million increased $43 million or 2%, and adjusted net income of $2,556 million increased $42 million or 2% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. Net income in the prior year included a $168 million after-tax ($187 million pre-tax) gain on the sale of Moneris US, which had a negative impact of approximately 7% on net income growth and 3% on revenue growth in the year.

Revenue increased $269 million or 4% to $7,712 million. In our personal banking business, revenue increased $295 million or 6% due to an increase in non-interest revenue, including a $39 million gain related to the restructuring of Interac Corporation, higher margins and higher balances across most products. In our commercial banking business, revenue decreased $26 million or 1% as the benefit from higher balances and higher margins was more than offset by lower non-interest revenue, due to the gain on sale of Moneris US in the prior year, which had a 7% negative impact on revenue growth in the current year.

Net interest margin increased 7 basis points to 2.60%, due to higher spreads and a favourable product mix.

The provision for credit losses decreased $14 million or 3% to $469 million. The provision for credit losses on impaired loans decreased $17 million due to lower commercial provisions, partially offset by higher consumer provisions. There was a $3 million provision for credit losses on performing loans in the current year.

Non-interest expense was $3,805 million, an increase of $183 million or 5% from a year ago, largely reflecting continued investment in the business, including increases in technology and sales force investments.

Average gross loans and acceptances increased $7.7 billion or 4% from a year ago to $223.5 billion. Total personal lending balances (excluding retail cards) increased 1% from the prior year, reflecting certain participation choices, including reduced participation in non-proprietary mortgage channels, offset by 4% growth in proprietary mortgages and amortizing home equity line of credit (HELOC) loans. Commercial loan balances (excluding corporate cards) increased 10% year-over-year, with good growth across a number of industry sectors.

Average deposits increased $7.0 billion or 5% to $159.5 billion. Personal deposit balances increased 2%, including growth in chequing account balances of 7%. Commercial deposit balance growth was broad-based, with balances growing 8% from the prior year.

Business Environment, Outlook and Challenges

The personal and commercial banking business in Canada is highly competitive in a rapidly changing environment. Traditional competitors continue to invest in innovative technologies that allow them to serve customers in new ways and focus more effectively on the customer experience. Non-traditional competitors have continued to gain momentum and are deepening their connections with banks in order to enhance their products and build customer relationships.

Growth in the Canadian economy for 2019 is expected to be in line with 2018, with rising interest rates and modestly lower unemployment. This interest rate environment is expected to put pressure on growth in consumer loans, residential mortgages and business lending. Personal and commercial term deposits are expected to grow modestly as interest rates trend higher. Margins are expected to increase slightly as a result of rising interest rates, although any increase may be dampened by the effects of competitive pricing in the market.

We are committed to building out our commercial business by expanding our advisory sales force and targeting commercial opportunities across geographic regions, market segments and industry sectors, especially in high-value sectors and businesses.

We continue to develop our personal business by growing our sales force and deepening primary customer relationships, while leveraging digital technologies to deliver an exceptional customer experience. We are positioning ourselves to thrive in a digital future, investing in talent and enhancing our customers’ experience.

Technology will continue to play a leading role in delivering exceptional experiences for all our customers, while enhancing the efficiency of our operations.

The Canadian economic environment in 2018 and the outlook for 2019 are discussed in more detail in the Economic Developments and Outlook section on page 30.

Caution

This Canadian P&C Banking section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 47

MANAGEMENT’S DISCUSSION AND ANALYSIS

U.S. Personal and Commercial Banking

We help more than two million customers by providing a banking experience with a human touch – delivering a broad range of financial services. Our commercial bank provides a combination of sector expertise, local knowledge, and a breadth of products and services as a trusted partner to our clients. We serve our personal and business banking customers seamlessly across our extensive network of more than 560 branches, our dedicated contact centres, our digital banking platforms, and nationwide access to more than 43,000 automated teller machines.
David R. Casper Chief Executive Officer, BMO Financial Corporation Group Head, North American Commercial Banking	Ernie (Erminia) Johannson Group Head U.S. Personal and Business Banking

Lines of Business
Personal and Business Banking offers a variety of products and services, including deposits, home lending, consumer credit, business lending, credit cards, and other banking services. Our goal in everything we do is to help our customers make sense of complexity, make better choices in saving, investing, and borrowing, and have confidence in their decisions.	Commercial Banking provides clients with a broad range of banking products and services, including multiple financing options and treasury solutions, as well as risk management products. We believe in partnering with our clients, anticipating their financial needs and sharing our expertise and knowledge to help them grow their businesses.

Strengths and Value Drivers

• Rich Midwestern heritage dating back to 1847, with a long-standing commitment to the success of our customers and the communities in which our employees work and live.

• Talented and experienced team that understands our customers and knows how to compete and perform well in our markets.

• Large-scale, diversified national commercial business, centred in the U.S. Midwest and supported by in-depth industry knowledge, best-in-class customer experience, and top-tier market share in our flagship businesses.

• Increasing momentum for continued growth in personal banking, driven by a large and growing customer base, our extensive branch network, a broad suite of products and services and accelerated investment in digital capabilities.

• Comprehensive and integrated control structure that supports the active management of risk and regulatory compliance.

Strategy and Key Priorities

We aim to grow our business and be a leader in our markets by creating a differentiated and intuitive partnership with our customers to address all of their financial needs.

Key Priority	2018 Achievements	2019 Focus
Deliver a great experience for our customers and employees	•  Ranked second among the 40 leading banks in the 2018 Survey of Bank Reputations by American Banker, which assesses financial institutions for their governance, products and services, and innovation •  Community Reinvestment Act performance that was rated Outstanding by the Office of the Comptroller of the Currency, recognizing our commitment to help support low and moderate-income communities •  Named to the 2017 list of America’s Top Corporations for Women’s Business Enterprises by the Women’s Business Enterprise National Council, reflecting our commitment to creating a level playing field for women-owned businesses •  Maintained robust customer growth, continuing to lead in household acquisition for retail deposits and building momentum across commercial segments •  Further improved customer loyalty as measured by Net Promoter Score across all businesses •  Reinforced our second-place ranking in deposit market share in our core Chicago and Wisconsin markets and our top-five ranking across our Midwest footprint	Continue to strengthen our competitive position by investing in key capabilities, such as digital and talent, while leveraging our distinctive cross-border advantage and differentiated “One Bank” value proposition to deliver a great customer experience

48 BMO Financial Group 201st Annual Report 2018

Key Priority	2018 Achievements	2019 Focus
In Personal and Business Banking, accelerate digitization and guidance delivery, drive deposit growth, build a flagship franchise in business banking, and optimize our lending portfolio	•  Enhanced our digital capabilities with new online banking features, including the ability to open accounts digitally, and enhanced branch infrastructure, including instant debit card and in-branch Wi-Fi •  Continued to enhance our deposit product suite with a new Platinum Money Market product, designed to help our customers grow their savings while also maintaining the convenience of liquidity •  Opened our 12th Smart Branch over the past three years, bringing together high-tech convenience and personalized services to offer customers a new and engaging environment •  Launched the second annual BMO Harris/1871 Innovation Program to continue to engage with and mentor early-stage fintech startups across Chicagoland and Wisconsin	Deliver leading deposit growth, build a business banking franchise, drive profitable growth in lending and accelerate digitization and guidance delivery
In Commercial Banking, accelerate growth in high-potential geographies, invest in specialty businesses and high-growth sectors, and deepen deposit capture and share of wallet	•  Continued to grow our geographic footprint, with expansion of our coverage in Dallas, Texas and Columbus, Ohio and investment to build out our presence in the Southeast (Atlanta) •  Developed and launched new sales initiatives and products, including variable rate and term certificates of deposit and increased emphasis on select sectors, as part of a new deposit growth strategy •  Added to our offering in specialty sectors, including expansion of asset-based lending to cover more industries and geographies and the launch of unitranche financing in sponsor finance, to further reinforce our market position and value proposition •  Launched new digital capabilities, such as eSign, to enhance the customer experience in onboarding with our treasury and payment solutions	Invest in underpenetrated markets, expand national presence in high-potential geographies, establish new specialty businesses, increase investment in treasury and payment solutions, and enhance cross-bank collaboration

BMO Financial Group 201st Annual Report 2018 49

MANAGEMENT’S DISCUSSION AND ANALYSIS

U.S. P&C

(Canadian $ equivalent in millions, except as noted) As at or for the year ended October 31	2018			2017			2016
Reported net income		1,394			1,027			1,051
Adjusted net income		1,439			1,073			1,101
Net income growth (%)		35.7			(2.2	)		28.4
Adjusted net income growth (%)		34.0			(2.4	)		26.3
(US$ in millions, except as noted)
Net interest income (teb)		2,983			2,718			2,635
Non-interest revenue		886			817			845
Total revenue (teb)		3,869			3,535			3,480
Provision for credit losses on impaired loans (1)		201			na			na
Provision for (recovery of) credit losses on performing loans (1)		(31	)		na			na
Total provision for credit losses (1)		170			221			188
Non-interest expense		2,338			2,253			2,199
Income before income taxes		1,361			1,061			1,093
Provision for income taxes (teb)		278			274			299
Reported net income		1,083			787			794
Amortization of acquisition-related intangible assets (2)		35			36			37
Adjusted net income		1,118			823			831
Key Performance Metrics and Drivers (US$ basis)
Personal revenue		1,559			1,386			1,417
Commercial revenue		2,310			2,149			2,063
Net income growth (%)		37.5			(0.8	)		21.8
Adjusted net income growth (%)		35.8			(1.0	)		19.8
Revenue growth (%)		9.4			1.6			21.1
Non-interest expense growth (%)		3.8			2.4			14.6
Adjusted non-interest expense growth (%)		4.0			2.6			15.3
Operating leverage (teb) (%)		5.6			(0.8	)		6.5
Adjusted operating leverage (teb) (%)		5.4			(1.0	)		5.8
Efficiency ratio (teb) (%)		60.4			63.7			63.2
Adjusted efficiency ratio (teb) (%)		59.3			62.4			61.7
Net interest margin on average earning assets (teb) (%)		3.72			3.69			3.57
Average earning assets		80,255			73,752			73,724
Average gross loans and acceptances		76,067			69,294			68,670
Average net loans and acceptances		75,558			69,324			68,599
Average deposits		70,431			65,724			66,343
Full-time equivalent employees		7,188			7,138			7,055

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of specific provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) Before tax amounts of US$45 million in 2018, US$49 million in 2017 and US$52 million in 2016 are included in non-interest expense.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable

Financial Review

U.S. P&C reported net income of $1,394 million increased $367 million or 36%, and adjusted net income of $1,439 million increased $366 million or 34% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. All amounts in the remainder of this section are on a U.S. dollar basis.

Reported net income of $1,083 million increased $296 million or 37%, and adjusted net income of $1,118 million increased $295 million or 36%, due to higher revenue, the benefit of U.S. tax reform and lower provisions for credit losses, partially offset by higher expenses. The benefit of U.S. tax reform was $91 million in reported net income and $95 million in adjusted net income. The prior year results included a $27 million after-tax ($43 million pre-tax) loss on a loan sale, which had a favourable impact of approximately 5% on reported net income growth, and 4% on an adjusted basis.

Revenue of $3,869 million increased $334 million or 9%, mainly due to higher deposit revenue and loan volumes in the current year, and the impact of the loss on a loan sale in the prior year, net of loan spread compression.

In our commercial banking business, revenue increased $161 million or 7% to $2,310 million, mainly due to increased loan volumes and deposit revenue, net of loan spread compression.

In our personal and business banking business, revenue increased $173 million or 13% to $1,559 million, primarily due to higher deposit revenue, reflecting higher spreads, and the loss on a loan sale in the prior year.

50 BMO Financial Group 201st Annual Report 2018

Net interest margin increased 3 basis points to 3.72%, mainly due to higher deposit revenue driven by higher interest rates, partially offset by loan spread compression and change in business mix.

The provision for credit losses decreased $51 million or 23% to $170 million. The provision for credit losses on impaired loans decreased $20 million, due to lower consumer and commercial provisions. There was a $31 million net recovery of credit losses on performing loans in the current year.

Non-interest expense of $2,338 million and adjusted non-interest expense of $2,293 million both increased 4%, primarily due to technology and other investments in the business.

Average gross loans and acceptances increased $6.8 billion or 10% to $76.1 billion, driven by growth of 10% in both commercial and personal loan volumes. Commercial loan growth was driven by robust diversified growth from most of our segments, while personal loan growth benefited from the purchase of a mortgage portfolio in the first quarter of 2018, as well as organic growth.

Average deposits of $70.4 billion increased $4.7 billion or 7% from the prior year, driven by 8% growth in personal volumes and 5% growth in commercial volumes.

Business Environment, Outlook and Challenges

U.S. P&C operations are primarily based in the six states of the U.S. Midwest (Illinois, Wisconsin, Indiana, Minnesota, Missouri and Kansas). In addition, our personal business serves customers in Arizona and Florida, while our commercial business provides targeted nationwide coverage for key specialty sectors.

The personal and commercial banking environment is competitive, and with the rising rate environment, there is added pressure on deposit market share and pricing. Indications of sustainable economic growth within our footprint include unemployment rates that are at historic lows, higher consumer and commercial spending amid lower income taxes, encouraging credit growth and a healthy housing market. The main risks to the U.S. economic outlook relate to trade protectionism, geopolitical tensions and the possibility of rising inflation.

Economic growth is expected to moderate, but remain solid in 2019. This growth environment offers notable opportunities for both our businesses, in particular for the expansion of our personal business and for greater national coverage in our commercial business.

In our personal banking business, the adoption of digital solutions and progressive product offerings that align our strategic initiatives with market trends and consumer needs will help drive growth.

In our flagship commercial business, our main priorities of building out a presence in new markets, maintaining good momentum in existing markets and deepening our relationships with customers, will help us to continue to achieve peer-leading growth.

The U.S. economic environment in 2018 and the outlook for 2019 are discussed in more detail in the Economic Developments and Outlook section on page 30.

Caution

This U.S. P&C Banking section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 51

MANAGEMENT’S DISCUSSION AND ANALYSIS

BMO Wealth Management

BMO’s wealth management business serves a full range of clients, from mainstream to ultra-high net worth and institutional, with a broad offering of wealth management products and services, including insurance. BMO Wealth Management is a global business with an active presence in markets across Canada, the United States, EMEA and Asia.
Joanna Rotenberg Group Head BMO Wealth Management (1)	Gilles Ouellette Group Head, BMO Asset Management and Vice-Chair, International, BMO Financial Group (1)

Lines of Business

BMO Nesbitt Burns, our full-service investing business in Canada, offers a broad range of client-focused investment and wealth advisory services delivered with our comprehensive wealth planning capabilities, as well as Canada’s first bank-owned digital portfolio management platform, SmartFolio®. BMO InvestorLine is an online investing service that offers clients two ways to invest: our top-ranked self-directed service, which provides tools to help investors make independent investment decisions; and adviceDirect™, which provides investors with continuous portfolio monitoring and industry-leading analysis. BMO’s Private Banking businesses in Canada, Hong Kong and Singapore offer a comprehensive range of financial services and solutions to high net worth and ultra-high net worth clients.

BMO’s U.S. Wealth Management businesses offer financial solutions to high net worth and ultra-high net worth families and businesses, and under BMO Harris Financial Advisors, to clients in the mass affluent segment. BMO Global Asset Management (GAM) is a globally significant asset manager offering a comprehensive range of investment products and solutions to institutional, retail and high net worth investors around the world. BMO Insurance provides life insurance and wealth solutions. We manufacture life insurance, accident and sickness insurance, annuity products and segregated funds that are marketed through advisors to individuals and group pension customers. We also offer group creditor and travel insurance to bank customers and reinsurance solutions to international reinsurers.

Strengths and Value Drivers

• Planning and advice-based approach for individuals, families and businesses that integrates investment, insurance, specialized wealth management and core banking solutions, offered by a team of highly skilled wealth professionals committed to making a meaningful difference in the lives of our clients.

• Diversified portfolio of solutions, ranging from self-directed online investment to professional money management and integrated trust/banking services, for both retail and institutional clients.

• Well-established presence in North American wealth management, as well as private banking capabilities in Asia.

• Globally significant asset manager with broad distribution capabilities in North America, as well as Europe, the Middle East and Africa (EMEA) and Asia.

• Prestigious brand that is widely recognized and trusted, with access to BMO’s broad client base and distribution networks, and a culture of innovation that anticipates clients’ needs.

• Robust risk management framework supporting alignment with heightened regulatory expectations.

Strategy and Key Priorities

Deliver on our clients’ current and evolving personal wealth, insurance and institutional asset management needs through an exceptional client experience, a focus on innovation and productivity, and strong collaboration across BMO, while maintaining a robust risk management framework.

Key Priority	2018 Achievements	2019 Focus
Deliver on our clients’ current and evolving personal wealth management and insurance needs, with an exceptional client experience	•  Continued to drive stronger client loyalty scores across all our businesses with our focus on delivering holistic wealth planning and great client experiences •  Continued to invest in digital technology solutions to improve processes, drive productivity and provide greater mobility for our client-facing professionals, enabling them to serve clients in the manner most convenient for them •  Launched new digital capabilities to enhance self-serve options for our clients •  Transformed the digital journey for our SmartFolio® clients from onboarding through account funding, and continued to improve their mobile experience	Provide outstanding support and innovative wealth and insurance offerings that anticipate clients’ evolving needs and exceed their expectations

(1) Gilles Ouellette, Group Head, BMO Asset Management and Vice-Chair, International, BMO Financial Group, plans to retire in 2019. Joanna Rotenberg, Group Head, BMO Wealth Management, will then assume an expanded mandate, leading BMO Global Asset Management in addition to her current responsibilities.

52 BMO Financial Group 201st Annual Report 2018

Key Priority	2018 Achievements	2019 Focus
Deliver on our clients’ current and evolving personal wealth management and insurance needs, with an exceptional client experience (continued)	•  Strengthened our cross-border banking capabilities, providing Wealth Management clients with more ways to access and transfer funds, complemented by new outreach and education initiatives •  Added to BMO’s financial planning team, which has doubled in size since 2013, to provide clients and wealth professionals with regional technical expertise in areas such as estate and cross-border planning •  Launched a Cross-Pacific Referral Program with BMO Private Banking Canada and BMO Private Banking Asia to help meet our clients’ global needs •  Continued to address the unique needs of women business owners and clients with our industry-leading BMO for Women program •  Ongoing positive response to the simplicity and flexibility of our Whole Life insurance offering, with sales doubling year-over-year •  Maintained and reinforced our leading position in pension de-risking, supported by a prudent approach to underwriting	Make a meaningful difference in the lives of our clients, enabled by a distinctive talent approach, strong technology and operations, world-class marketing and analytics and client-focused risk and regulatory compliance
Build on our leadership position in key asset management markets through enhanced investment and distribution capabilities	•  Leveraged global investment capabilities to enable delivery of solutions to new markets •  Focused distribution on targeted channels, geographic markets and client segments to differentiate and capture share, for example, in the fiduciary market in EMEA •  Achieved strong investment performance, with 83% of assets under management meeting or surpassing the relevant benchmark over a five-year period •  Ranked #2 in Canadian ETF market share, while leading the market in net sales for the past five years •  BMO Global Asset Management was named the Best Environmental Social and Governance (ESG) Research Team in the Investment Week Sustainable & ESG Investment Awards 2018. This award recognizes our long-standing commitment and leadership in responsible investing, and our belief that prudent management of ESG issues can have an important impact on the creation of long-term investor value	Continue to build scale at BMO Global Asset Management by extending award-winning global investment capabilities for clients around the world, supported by our global operating platform
Bring the best of BMO to our clients through effective collaboration	•  Advanced collaboration among BMO Private Banking Canada, BMO Nesbitt Burns and Business Banking, as well as between U.S. Wealth Management and Commercial partners, to offer banking, investment and holistic wealth planning services to business and commercial clients in Canada and the United States •  Continued to make co-location arrangements for our banking, planning, estate and trust, and investment teams, making it easier for clients to access the best of BMO •  Made further improvements to our engagement model and delivered innovative BMO Global Asset Management offerings to Personal and Commercial Banking clients	Continue to strengthen one team across Wealth Management, across the enterprise and across borders to bring the best of BMO to all clients

BMO Financial Group 201st Annual Report 2018 53

MANAGEMENT’S DISCUSSION AND ANALYSIS

BMO Wealth Management

(Canadian $ in millions, except as noted) As at or for the year ended October 31	2018		2017		2016
Net interest income		826		722		635
Non-interest revenue		5,468		5,492		5,274
Total revenue		6,294		6,214		5,909
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)		1,352		1,538		1,543
Revenue, net of CCPB		4,942		4,676		4,366
Provision for credit losses on impaired loans (1)		6		na		na
Provision for credit losses on performing loans (1)		–		na		na
Total provision for credit losses (1)		6		8		9
Non-interest expense		3,509		3,351		3,337
Income before income taxes		1,427		1,317		1,020
Provision for income taxes		355		350		245
Reported net income		1,072		967		775
Acquisition integration costs (2)		–		–		30
Amortization of acquisition-related intangible assets (3)		41		65		71
Adjusted net income		1,113		1,032		876
Key Performance Metrics and Drivers
Traditional wealth businesses net income		805		729		552
Traditional wealth businesses adjusted net income		846		794		653
Insurance net income		267		238		223
Net income growth (%)		11.0		24.5		(10.0	)
Adjusted net income growth (%)		8.0		17.6		(9.4	)
Revenue growth (%)		1.3		5.2		2.2
Revenue growth, net of CCPB (%)		5.7		7.1		(3.6	)
Non-interest expense growth (%)		4.7		0.4		(0.6	)
Adjusted non-interest expense growth (%)		5.7		1.9		(0.4	)
Return on equity (%)		17.8		15.9		12.7
Adjusted return on equity (%)		18.5		17.0		14.3
Operating leverage, net of CCPB (%)		1.0		6.7		(3.0	)
Adjusted operating leverage, net of CCPB (%)		–		5.2		(3.2	)
Efficiency ratio, net of CCPB (%)		71.0		71.7		76.4
Adjusted efficiency ratio (%)		54.9		52.6		54.3
Adjusted efficiency ratio, net of CCPB (%)		70.0		70.0		73.5
Net interest margin on average earning assets (%)		2.65		2.57		2.45
Average common equity		5,989		6,040		6,078
Average earning assets		31,167		28,026		25,898
Average gross loans and acceptances		20,290		18,068		16,464
Average net loans and acceptances		20,260		18,063		16,458
Average deposits		34,251		33,289		29,931
Assets under administration (4)		382,839		359,773		469,694
Assets under management		438,274		429,448		405,695
Full-time equivalent employees		6,407		6,304		6,282
U.S. Business Select Financial Data (US$ in millions)
Total revenue		600		650		629
Non-interest expense		532		546		575
Reported net income		50		76		39
Adjusted net income		60		88		54
Average earning assets		3,709		3,348		3,446
Average net loans and acceptances		3,619		3,300		3,200
Average deposits		5,748		5,783		5,602

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of specific provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) F&C acquisition integration costs before tax amounts of $nil in both 2018 and 2017 and $38 million in 2016 are included in non-interest expense.

(3) Before tax amounts of $52 million in 2018, $80 million in 2017 and $88 million in 2016 are included in non-interest expense.

(4) Certain assets under management that are also administered by us are included in assets under administration.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable

54 BMO Financial Group 201st Annual Report 2018

Financial Review

Wealth Management reported net income of $1,072 million increased $105 million or 11% from the prior year. Adjusted net income of $1,113 million, which excludes the amortization of acquisition-related intangible assets, increased $81 million or 8%.

Traditional wealth reported net income of $805 million increased $76 million or 11% from the prior year. Adjusted net income in traditional wealth of $846 million increased $52 million or 7%, primarily due to growth from our diversified businesses and higher equity markets on average, partially offset by higher expenses and a legal provision. Net income in insurance of $267 million increased $29 million or 12%, primarily due to less elevated reinsurance claims in the current year and business growth, partially offset by unfavourable market movements in the current year relative to favourable market movements in the prior year.

Revenue of $6,294 million increased $80 million or 1% from the prior year. Revenue, net of CCPB, of $4,942 million increased $266 million or 6%. Revenue in traditional wealth of $4,463 million increased $257 million or 6%, due to growth in client assets, including a benefit from higher equity markets on average, and higher deposit and loan revenue, partially offset by the impact of the divestiture of a non-core business in the prior year. Insurance revenue, net of CCPB, of $479 million increased $9 million or 2%, due to the drivers noted above.

The provision for credit losses was $6 million, compared with $8 million in the prior year. The provision for credit losses on impaired loans decreased $2 million, due to lower consumer provisions. There was no provision for credit losses on performing loans in the current year.

Non-interest expense was $3,509 million, an increase of $158 million or 5%. Adjusted non-interest expense was $3,457 million, an increase of $186 million or 6% from the prior year, reflecting higher revenue-based costs, technology investments and strategic growth in the sales force, partially offset by the impact of the divestiture.

Assets under management increased $8.8 billion or 2% from the prior year to $438.3 billion, primarily driven by growth in client assets. Assets under administration increased $23.1 billion or 6% from the prior year to $382.8 billion, also primarily driven by growth in client assets.

Business Environment, Outlook and Challenges

Wealth Management is a global financial services provider. The operating environment within the wealth management industry, which includes major banks, insurance companies, brokers, and independent mutual fund and asset management companies, is highly competitive. Faced with changing client needs and regulatory demands, the industry continues to evolve. Wealth Management is considered to be an engine of growth for BMO’s operating performance, with many peer group competitors also actively pursuing accelerated growth strategies.

Growth in the Canadian economy is expected to remain steady but subdued in 2019 while the U.S. economy is expected to moderate somewhat compared with 2018. We anticipate good growth in net new assets, and market appreciation is expected to be moderate. Long-term interest rates in Canada and the United States are expected to rise moderately. We anticipate that rising short-term interest rates will have a positive impact on our brokerage businesses. Ongoing changes in the regulatory and competitive environment and client preferences could result in downward pressure on fees for products and services. We expect to maintain our disciplined expense management approach by gaining efficiencies through digitization and by simplifying the way we work and service our clients. Resources conserved through these ongoing initiatives will contribute to fund strategic business investments.

The Canadian and U.S. economic environment in 2018 and the outlook for 2019 are discussed in more detail in the Economic Developments and Outlook section on page 30.

Caution

This Wealth Management section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 55

MANAGEMENT’S DISCUSSION AND ANALYSIS

BMO Capital Markets

BMO Capital Markets is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. BMO Capital Markets has approximately 2,700 professionals in 33 locations around the world, including 19 offices in North America.
Daniel Barclay Group Head BMO Capital Markets (1)	Patrick Cronin Chief Risk Officer BMO Financial Group (1)

Lines of Business Investment and Corporate Banking offers debt and equity capital-raising services to clients, as well as loan origination and syndication, balance sheet management solutions and treasury management services. We provide strategic advice on mergers and acquisitions (M&A), restructurings and recapitalizations, as well as valuation and fairness opinions. We also offer trade finance and risk mitigation services to support the international business activities of our clients, and we provide a wide range of banking and other operating services tailored to North American and international financial institutions.     Trading Products offers research and access to global markets for institutional, corporate and retail clients through an integrated suite of sales and trading solutions that include debt, foreign exchange, interest rate, credit, equity, securitization and commodities. We also offer new product development and origination services, as well as risk management (derivatives) advice and services to hedge against fluctuations in a variety of key inputs, including interest rates and commodities prices. In addition, we provide funding and liquidity management to our clients.

Strengths and Value Drivers

• Unified coverage and integrated distribution across our North American platform and complementary global footprint, delivering a seamless and exceptional client experience.

• Innovative ideas and tailored solutions delivered through a comprehensive coverage team, dedicated to anticipating, understanding and meeting our clients’ needs.

• Top-ranked Canadian equity and fixed income research with sales and trading capabilities and deep expertise in core sectors.

• Well-diversified platform and business mix – by sector, geography, product and currency, including a strong, scalable and relevant U.S. business – positioning BMO well in several key markets and over the long term.

• Strong first-line-of-defence risk management and regulatory and compliance capabilities, enabling effective decision-making in support of our strategic priorities.

Strategy and Key Priorities

BMO Capital Markets’ vision is to be a top 10 North American investment bank, enabling clients to achieve their goals. We offer an integrated platform, differentiated by innovative ideas and unified coverage.

Key Priority	2018 Achievements	2019 Focus
Maintain our leadership position in Canada through our top-tier coverage team	•  Continued to win key mandates in core Canadian industries, including: acting as exclusive financial advisor to Pure Industrial Real Estate Trust on its $3.8 billion sale, the largest industrial real estate transaction in Canadian history; advising METRO on its acquisition of Jean Coutu Group, which created a $16 billion retail leader; and advising steelmaker Stelco as a joint bookrunner on its IPO and two follow-on offerings, which raised $645 million •  Ranked #1 in equity research and trading in Canada in the 2018 Brendan Wood International survey •  Recognized as a 2018 Greenwich Quality Leader in Canadian Equity Sales Trading and Execution Service •  Announced a strategic technology partnership with Clearpool Group to provide a suite of fully customizable algorithms to institutional clients trading Canadian and U.S. equities •  Launched a pilot fixed income issuance transaction using blockchain technology to mirror the transaction, a first of its kind in the Canadian marketplace •  Received the top two Canadian awards for Structured Products from StructuredRetailProducts.com at the 2018 Americas Structured Products and Derivatives Conference, and was also named Best House, Canada (sixth nomination for this award in seven years) and Best Distributor, Canada •  Named Best Bank for the Canadian Dollar by FX Week magazine for the eighth consecutive year	Continue to earn leading market share in Canada by strengthening our client relationships and driving incremental market share growth

(1) Prior to November 1, 2018, Daniel Barclay was Co-Head, Global Investment and Corporate Banking, and Patrick Cronin was Group Head, BMO Capital Markets.

56 BMO Financial Group 201st Annual Report 2018

Key Priority	2018 Achievements	2019 Focus
Drive performance in our U.S. platform with a focused strategy and selectively expand our U.S. corporate bank where we are competitively advantaged	•  Acquired KGS-Alpha Capital Markets (KGS-Alpha), a New York-based fixed income broker-dealer specializing in U.S. mortgage-backed and asset-backed securities in the institutional investor market •  Collaborated with our U.S. P&C business to deliver as “One Bank” in key middle-market M&A transactions, including our exclusive financial advisory role with Lifetouch in its US$825 million sale to Shutterfly •  Acted as lead-left bookrunner on 134 U.S. equity and debt capital raising transactions, up more than 38% from last year •  Closed 38 U.S. and seven cross-border M&A transactions with a total deal volume of US$23.8 billion •  Ranked #1 in the Institutional Investor 2018 All-America Fixed Income Research Team Survey for U.S. Rates Strategy and Technical Analysis •  Expanded our presence with the acquisition of US$3 billion in energy loan commitments from a global financial institution	Continue to leverage our key strategic investment to accelerate growth from our U.S. platform, and selectively expand our U.S. corporate bank where we are competitively advantaged
Leverage our strong North American capabilities and presence in select international markets	•  Named World’s Best Metals & Mining Investment Bank for the ninth consecutive year by Global Finance and hosted one of the industry’s most important events, the 27th Annual Global Metals & Mining Conference, which brought together 550 investors and 800 corporate attendees, including 140 presenting companies •  Named Best Institutional Forex Provider in North America/China for the eighth consecutive year by Global Banking and Finance Review •  Executed live pilot transactions on Batavia, a blockchain-based global trade finance platform jointly developed by a consortium that includes BMO •  Maintained our leadership position in the Supranational Sub-Sovereign & Agency (SSA) sector as joint lead manager on two World Bank Sustainable Development Bonds – one in support of the empowerment of women and girls and the other in support of the health and nutrition of women, adolescents and children – with each offering raising $1 billion •  Underwrote our first social bond issued by a supranational borrower, the Inter-American Development Bank, to help fund childhood education in developing Latin American countries •  Hosted inaugural U.S. Rates Seminar in Seoul, South Korea, with more than 70 participants, demonstrating the growing extent of our reach into Asian market segments	Continue to leverage our strong North American and global capabilities to expand our footprint and establish strategic relationships in select international markets

BMO Financial Group 201st Annual Report 2018 57

MANAGEMENT’S DISCUSSION AND ANALYSIS

BMO Capital Markets

(Canadian $ in millions, except as noted) As at or for the year ended October 31	2018			2017			2016
Net interest income (teb)		659			1,233			1,459
Non-interest revenue		3,696			3,336			2,855
Total revenue (teb)		4,355			4,569			4,314
Provision for credit losses on impaired loans (1)		(17	)		na			na
Provision for credit losses on performing loans (1)		(1	)		na			na
Total provision for credit losses (1)		(18	)		44			81
Non-interest expense		2,851			2,778			2,574
Income before income taxes		1,522			1,747			1,659
Provision for income taxes (teb)		366			472			424
Reported net income		1,156			1,275			1,235
Acquisition integration costs (2)		11			–			–
Amortization of acquisition-related intangible assets (3)		2			2			1
Adjusted net income		1,169			1,277			1,236
Key Performance Metrics and Drivers
Trading Products revenue		2,539			2,694			2,653
Investment and Corporate Banking revenue		1,816			1,875			1,661
Net income growth (%)		(9.4	)		3.2			23.1
Adjusted net income growth (%)		(8.5	)		3.3			23.0
Revenue growth (%)		(4.7	)		5.9			12.7
Non-interest expense growth (%)		2.6			7.9			3.8
Adjusted non-interest expense growth (%)		2.1			7.9			3.8
Return on equity (%)		12.8			15.3			15.8
Adjusted return on equity (%)		13.0			15.4			15.8
Operating leverage (teb) (%)		(7.3	)		(2.0	)		8.9
Adjusted operating leverage (teb) (%)		(6.8	)		(2.0	)		8.9
Efficiency ratio (teb) (%)		65.5			60.8			59.7
Adjusted efficiency ratio (teb) (%)		65.1			60.8			59.6
Net interest margin on average earning assets (teb) (%)		0.24			0.47			0.58
Average common equity		8,464			7,900			7,387
Average earning assets		271,839			263,128			251,962
Average assets		307,087			302,518			301,623
Average gross loans and acceptances		46,724			48,217			44,866
Average net loans and acceptances		46,658			48,191			44,817
Average deposits		138,440			144,357			146,888
Full-time equivalent employees		2,700			2,502			2,353
U.S. Business Select Financial Data (US$ in millions)
Total revenue (teb)		1,249			1,318			1,132
Non-interest expense		985			927			860
Reported net income		196			267			175
Adjusted net income		205			268			176
Average earning assets		92,235			88,044			78,619
Average assets		98,265			93,253			86,137
Average net loans and acceptances		15,249			15,359			14,932
Average deposits		53,008			52,471			52,459

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. The provision for credit losses in prior periods is comprised of specific provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) KGS-Alpha acquisition integration costs before tax amount of $14 million in 2018 is included in non-interest expense.

(3) Before tax amounts of $3 million in 2018, $3 million in 2017 and $1 million in 2016 are included in non-interest expense.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable

58 BMO Financial Group 201st Annual Report 2018

Financial Review

BMO Capital Markets reported net income of $1,156 million decreased $119 million or 9% from the prior year. Adjusted net income of $1,169 million, which excludes the amortization of acquisition-related intangible assets and acquisition integration costs, decreased $108 million or 8%, primarily due to lower revenue.

Revenue of $4,355 million decreased $214 million or 5% from the prior year. Excluding the impact of the weaker U.S. dollar, revenue decreased $189 million or 4%, driven by lower revenue in the Trading Products and Investment and Corporate Banking businesses. Trading Products revenue decreased $155 million or 6% from the prior year, due to lower interest rate trading revenues, lower equity-related activity with corporate clients, and lower net securities gains, partially offset by the impact of the KGS-Alpha acquisition. Investment and Corporate Banking revenue decreased $59 million or 3% from the prior year, primarily due to lower underwriting and advisory revenue, partially offset by higher corporate banking-related revenue.

Total net recovery of credit losses was $18 million, compared with net provisions of $44 million in the prior year. The net recovery of credit losses on impaired loans was $17 million, and there was a $1 million net recovery of credit losses on performing loans in the current year.

Non-interest expense of $2,851 million increased $73 million or 3%, and adjusted non-interest expense of $2,834 million increased $59 million or 2%, or 3% excluding the impact of the weaker U.S. dollar, mainly driven by continued investment in the business, including the acquisition and growth initiatives.

Average assets of $307.1 billion increased $4.6 billion from the prior year. Excluding the impact of the weaker U.S. dollar, average assets increased $6.3 billion. Higher levels of cash and cash equivalents, securities and reverse repos were partially offset by lower derivative financial asset balances.

Business Environment, Outlook and Challenges

In 2018, the operating environment in Canada and the United States remained highly competitive for capital markets businesses. Traditional banks focused on revenue growth opportunities, ongoing cost reduction efforts and technology advancements to improve efficiency, while non-bank competitors continued to seek opportunities to disrupt the business activities of traditional banks in certain trading and investment banking products.

Looking ahead to fiscal 2019, we are focused on executing our consistent strategy of expanding a highly integrated, client-focused North American capital markets business. We continue to project that our U.S. business will be a significant driver of growth, and we expect to further leverage our established U.S. capabilities, as well as our overall franchise and capital position, to differentiate ourselves in the marketplace and selectively grow our loan book. In Canada, we have leading market share positions across all products and sectors in which we operate, and we expect this business to perform well going forward. We are selectively expanding our capabilities to better serve North American-based clients that have a global presence. Our disciplined and integrated approach to risk management, along with our investments in regulatory technology infrastructure, will continue to enable us to meet risk management requirements in the coming years. Stability in the markets could be challenged by macroeconomic concerns and the heightened risk of protracted trade tensions. Assuming markets are constructive, we are confident that we will be able to maintain our strong position and achieve our strategic objectives.

The Canadian and U.S. economic environment in 2018 and the outlook for 2019 are discussed in more detail in the Economic Developments and Outlook section on page 30.

Caution

This BMO Capital Markets section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 59

MANAGEMENT’S DISCUSSION AND ANALYSIS

Corporate Services, including Technology and Operations

Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics, and innovation. T&O manages, maintains and provides governance of information technology, cyber security and operations services.

The costs of these Corporate Units and T&O services are largely transferred to the three operating groups (Personal and Commercial Banking, Wealth Management and BMO Capital Markets), with any remaining amounts retained in Corporate Services results. As such, Corporate Services results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, residual unallocated expenses, certain acquisition integration costs and restructuring costs, as well as the one-time non-cash charge due to the revaluation of our U.S. net deferred tax asset due to U.S. tax reform and the benefit resulting from a remeasurement of an employee benefit liability.

Corporate Services focuses on enterprise-wide priorities related to maintaining a sound risk and control environment and efficiency while supporting our businesses in meeting their customer experience objectives. Notable achievements during the year included:

• Established the Enterprise Initiatives, Infrastructure and Innovation (EI3) Group to drive enterprise-wide, sustainable productivity improvements and create capacity for investment in revenue growth, in partnership with the three operating groups

• Accelerated the deployment of digital technology to transform our business, including the successful implementation of our U.S. digital platform, which is now expediting digital developments across personal and commercial segments

• Invested in information technology initiatives to meet regulatory requirements, while also deploying new capabilities that will reduce time to market and strengthen our technology foundation

• Enhanced our data and analytics platform to add new governance, analytics and robotics capabilities in support of business initiatives. Additionally, we advanced cloud-based efficiencies and established partnerships to drive innovation

• Continued to pursue operational efficiencies through the monetization of our technology architecture and data investment, focusing more new spend on transformation and protection

• Launched a new cross-functional team focused on enhancing our employees’ technology and workplace experience

Financial Review

Corporate Services reported net loss for the year was $726 million, compared with a reported net loss of $430 million a year ago. The adjusted net loss for the year was $298 million, compared with an adjusted net loss of $388 million a year ago. The adjusted net loss excludes a one-time non-cash charge of $425 million related to the revaluation of our U.S. net deferred tax asset due to U.S. tax reform and a $203 million benefit as a result of a remeasurement of an employee benefit liability in the current year, restructuring costs and acquisition integration costs in both years with higher costs incurred in 2018, and a $54 million decrease in the collective allowance for credit losses in the prior year. The adjusted net loss improved primarily due to lower expenses and higher revenue, excluding the taxable equivalent basis (teb) adjustment. The reported net loss increased $296 million from the prior year due to the impact of the adjusting items and other drivers noted above.

60 BMO Financial Group 201st Annual Report 2018

Corporate Services, including Technology and Operations

(Canadian $ in millions, except as noted) As at or for the year ended October 31	2018			2017			2016
Net interest income before group teb offset		(243	)		(193	)		(283	)
Group teb offset		(313	)		(567	)		(510	)
Net interest income (teb)		(556	)		(760	)		(793	)
Non-interest revenue		249			177			58
Total revenue (teb)		(307	)		(583	)		(735	)
Provision for credit losses on impaired loans (1)		(13	)		na			na
Provision for (recovery of) credit losses on performing loans (1)		(2	)		na			na
Total provision for (recovery of) credit losses (1)		(15	)		(78	)		(74	)
Non-interest expense		436			635			716
Loss before income taxes		(728	)		(1,140	)		(1,377	)
Recovery of income taxes (teb)		(2	)		(710	)		(730	)
Reported net loss		(726	)		(430	)		(647	)
Acquisition integration costs (2)		14			55			41
Cumulative accounting adjustment (3)		–			–			62
Restructuring costs (4)		192			41			132
Decrease in the collective allowance for credit losses (5)		–			(54	)		–
U.S. net deferred tax asset revaluation (6)		425			–			–
Benefit from the remeasurement of an employee benefit liability (7)		(203	)		–			–
Adjusted net loss		(298	)		(388	)		(412	)
Adjusted total revenue (teb)		(307	)		(583	)		(651	)
Adjusted provision for credit losses on impaired loans (1)		(13	)		na			na
Adjusted provision for (recovery of) credit losses on performing loans (1)		(2	)		na			na
Total adjusted provision for (recovery of) credit losses (1)		(15	)		(2	)		(74	)
Adjusted non-interest expense		433			489			461
Adjusted net loss		(298	)		(388	)		(412	)
Full-time equivalent employees		14,515			14,697			14,741
U.S. Business Select Financial Data (US$ in millions)
Total revenue (teb)		(39	)		(90	)		(114	)
Recovery of credit losses (1)		(12	)		(23	)		(81	)
Non-interest expense		194			245			218
Recovery of income taxes (teb)		265			(109	)		(71	)
Reported net loss		(486	)		(203	)		(180	)
Adjusted total revenue (teb)		(39	)		(90	)		(114	)
Adjusted recovery of credit losses (1)		(12	)		(2	)		(56	)
Adjusted non-interest expense		139			171			119
Adjusted net loss		(106	)		(170	)		(134	)

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. Changes in the provision for credit losses on performing loans under this methodology will not be considered an adjusting item. The provision for credit losses in periods prior to 2018 is comprised of both specific and collective provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) Acquisition integration costs related to the acquired BMO Transportation Finance business are included in non-interest expense.

(3) Cumulative accounting adjustment recognized in other non-interest revenue related to foreign currency translation.

(4) Restructuring charges before tax amounts of $260 million in 2018, $59 million in 2017 and $188 million in 2016. Restructuring costs are included in non-interest expense.

(5) Decrease in the collective allowance for credit losses before tax amount of $76 million in 2017.

(6) Reported net income in the first quarter of 2018 included a $425 million (US$339 million) charge due to the revaluation of our U.S. net deferred tax asset as a result of the enactment of the U.S. Tax Cuts and Jobs Act. For more information on the impact of the U.S. Tax Cuts and Jobs Act, see Provision for Income Taxes section on page 42.

(7) The current year included a benefit of $277 million pre-tax from the remeasurement of an employee benefit liability as a result of an amendment to our other employee future benefits plan for certain employees that was announced in the fourth quarter of 2018. This amount was included in Corporate Services in non-interest expense.

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

na – not applicable.

BMO Financial Group 201st Annual Report 2018 61

MANAGEMENT’S DISCUSSION AND ANALYSIS

Summary Quarterly Earnings Trends

BMO’s results and performance measures for the past eight quarters are outlined on page 63.

BMO’s quarterly earnings, revenue and expense are modestly affected by seasonal factors. For example, our second fiscal quarter has 89 days (90 in a leap year) and other quarters have 92 days, resulting in lower second-quarter results relative to other quarters. Quarterly earnings are also affected by foreign currency translation.

Reported and adjusted results have generally trended upwards over the past eight quarters, with the exception of a charge related to a revaluation of our U.S. net deferred tax asset in the first quarter of 2018 and the impact of elevated reinsurance claims in Wealth Management in the fourth quarters of 2017 and 2018. Reported results were also impacted by a benefit of an employee future benefit liability in the fourth quarter of 2018, restructuring charges in the second quarter of 2018 and the fourth quarter of 2017, and a decrease in the collective allowance in the third quarter of 2017.

Canadian P&C delivered positive year-over-year net income growth in seven of the past eight quarters, largely reflecting revenue growth driven by higher balances and an increase in non-interest revenue. Results also reflect a $168 million after-tax gain on sale recognized in the first quarter of 2017. U.S. P&C performance in 2018 was largely driven by deposit growth from higher interest rates and volumes, good growth in loan volumes, the benefit of U.S. tax reform and lower credit losses. U.S. P&C results in the first quarter of 2017 also included an after-tax loss of $35 million on the sale of a portion of the indirect auto loan portfolio. Wealth Management delivered good net income performance in 2017 and 2018. In traditional wealth, growth across our diversified businesses also benefited from relatively good performance in North American equity markets, notwithstanding a correction experienced in the fourth quarter of 2018. Quarterly insurance results have been subject to variability, resulting primarily from impacts of interest rates, equity markets and reinsurance claims, as well as methodology and actuarial assumptions changes. BMO Capital Markets results in the second half of 2018 reflect improved performance following the impact of lower underwriting and advisory activity in the first half of the year. BMO Capital Markets’ performance in 2017 was good, notwithstanding the impact of tax law changes with respect to certain clients in our equities business in the second half of the year. Corporate Services results can vary from quarter to quarter, in large part due to the inclusion of adjusting items, which are largely recorded in Corporate Services.

Effective the first quarter of 2018, the bank prospectively adopted IFRS 9. Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. The provision for credit losses on impaired loans under IFRS 9 is consistent with the specific provision under IAS 39 in prior years. The provision for credit losses on performing loans replaces the collective provision for credit losses under IAS 39. Prior periods have not been restated. Refer to Note 4 on page 157 of the consolidated financial statements for an explanation of the provision for credit losses. As a result of the forward-looking nature of IFRS 9, we anticipate there will be increased variability in the bank’s provision for credit losses on performing loans.

BMO’s PCL measured as a percentage of loans and acceptances has been relatively stable, with some quarter-to-quarter variability. Overall, PCL on impaired loans was relatively stable in 2018. Total PCL increased in the third quarter of 2018, primarily due to a $9 million provision for credit losses on performing loans. Total PCL declined in the first quarter of 2018, primarily due to a $33 million recovery of credit losses on performing loans. The decrease in the third quarter of 2017 was due to a decrease in the collective allowance in our reported results, and the increase in the second quarter of 2017 was due to higher provisions in BMO Capital Markets and the P&C businesses.

The effective income tax rate has varied, as it depends on legislative changes, changes in tax policy, including their interpretation by taxing authorities and the courts, earnings mix, including the relative proportion of earnings attributable to the different jurisdictions in which we operate, and the amount of tax-exempt income from securities. The higher reported tax rate in the first quarter of 2018 due to the one-time non-cash tax charge related to a revaluation of our U.S. net deferred tax asset due to U.S. tax reform.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

62 BMO Financial Group 201st Annual Report 2018

Summarized Statement of Income and Quarterly Financial Measures

(Canadian $ in millions, except as noted)	Q4-2018			Q3-2018			Q2-2018			Q1-2018			Q4-2017			Q3-2017			Q2-2017			Q1-2017
Net interest income		2,669			2,607			2,491			2,546			2,535			2,533			2,409			2,530
Non-interest revenue		3,253			3,213			3,126			3,132			3,120			2,926			3,332			2,875
Revenue		5,922			5,820			5,617			5,678			5,655			5,459			5,741			5,405
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)		390			269			332			361			573			253			708			4
Revenue, net of CCPB		5,532			5,551			5,285			5,317			5,082			5,206			5,033			5,401
Provision for credit losses on impaired loans (1)		177			177			172			174			na			na			na			na
Provision for (recovery of) credit losses on performing loans (1)		(2	)		9			(12	)		(33	)		na			na			na			na
Total provision for credit losses (1)		175			186			160			141			202			126			251			167
Non-interest expense		3,224			3,386			3,562			3,441			3,375			3,286			3,284			3,385
Income before provision for income taxes		2,133			1,979			1,563			1,735			1,505			1,794			1,498			1,849
Provision for income taxes		438			443			317			762			278			407			250			361
Reported net income (see below)		1,695			1,536			1,246			973			1,227			1,387			1,248			1,488
Acquisition integration costs (2)		13			7			2			3			15			13			13			14
Amortization of acquisition-related intangible assets (3)		24			22			23			21			26			28			34			28
Restructuring costs (4)		–			–			192			–			41			–			–			–
Decrease in the collective allowance for credit losses (5)		–			–			–			–			–			(54	)		–			–
U.S. net deferred tax asset revaluation (6)		–			–			–			425			–			–			–			–
Benefit from the remeasurement of an employee benefit liability (7)		(203	)		–			–			–			–			–			–			–
Adjusted net income (see below)		1,529			1,565			1,463			1,422			1,309			1,374			1,295			1,530
Operating group reported net income
Canadian P&C reported net income		675			642			590			647			624			613			530			744
Amortization of acquisition-related intangible assets (3)		1			–			1			–			1			1			–			1
Canadian P&C adjusted net income		676			642			591			647			625			614			530			745
U.S. P&C reported net income		372			364			348			310			270			268			240			249
Amortization of acquisition-related intangible assets (3)		11			12			11			11			11			11			12			12
U.S. P&C adjusted net income		383			376			359			321			281			279			252			261
Wealth Management reported net income		219			291			296			266			175			269			254			269
Amortization of acquisition-related intangible assets (3)		10			10			11			10			14			15			21			15
Wealth Management adjusted net income		229			301			307			276			189			284			275			284
BMO Capital Markets reported net income		298			301			286			271			316			281			311			367
Acquisition integration costs (2)		9			2			–			–			–			–			–			–
Amortization of acquisition-related intangible assets (3)		2			–			–			–			–			1			1			–
BMO Capital Markets adjusted net income		309			303			286			271			316			282			312			367
Corporate Services reported net income		131			(62	)		(274	)		(521	)		(158	)		(44	)		(87	)		(141	)
Acquisition integration costs (2)		4			5			2			3			15			13			13			14
Restructuring costs (4)		–			–			192			–			41			–			–			–
Decrease in the collective allowance for credit losses (5)		–			–			–			–			–			(54	)		–			–
U.S. net deferred tax asset revaluation (6)		–			–			–			425			–			–			–			–
Benefit from the remeasurement of an employee benefit liability (7)		(203	)		–			–			–			–			–			–			–
Corporate Services adjusted net income		(68	)		(57	)		(80	)		(93	)		(102	)		(85	)		(74	)		(127	)
Basic earnings per share ($)		2.58			2.32			1.86			1.43			1.82			2.05			1.85			2.23
Diluted earnings per share ($)		2.57			2.31			1.86			1.43			1.81			2.05			1.84			2.22
Adjusted diluted earnings per share ($)		2.32			2.36			2.20			2.12			1.94			2.03			1.92			2.28
Net interest margin on average earning assets (%)		1.49			1.49			1.52			1.54			1.57			1.55			1.52			1.55
PCL-to-average net loans and acceptances (annualized) (%)		0.18			0.19			0.17			0.15			0.22			0.14			0.27			0.18
PCL on impaired loans-to-average net loans and acceptances (annualized) (%)		0.18			0.18			0.18			0.19			0.22			0.22			0.27			0.18
Effective tax rate (%)		20.6			22.4			20.3			43.9			18.5			22.7			16.7			19.5
Adjusted effective tax rate (%)		19.7			22.4			21.2			19.5			19.3			22.5			17.1			19.8
Canadian/U.S. dollar average exchange rate ($)		1.3047			1.3032			1.2858			1.2575			1.2621			1.2974			1.3412			1.3288

(1) Effective the first quarter of 2018, the bank prospectively adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we refer to the provision for credit losses on impaired loans and the provision for credit losses on performing loans. Prior periods have not been restated. Changes in the provision for credit losses on performing loans under this methodology will not be considered an adjusting item. The provision for credit losses in prior periods is comprised of both specific and collective provisions. Refer to the Changes in Accounting Policies section on page 121 for further details.

(2) Acquisition integration costs before tax are included in non-interest expense. BMO Capital Markets amounts of $12 million in Q4-2018 and $2 million in Q3-2018. Corporate Services amounts of $6 million in each of Q4-2018 and Q3-2018, $4 million in each of Q2-2018 and Q1-2018, $24 million in Q4-2017, $20 million in Q3-2017, $21 million in Q2-2017 and $22 million in Q1-2017.

(3) Amortization of acquisition-related intangible assets before tax is charged to the non-interest expense of the operating groups. Canadian P&C amounts of $1 million in Q4-2018, $nil in Q3-2018, $1 million in Q2-2018, $nil in both Q1-2018 and Q4-2017, $1 million in Q3-2017, $nil in Q2-2017 and $1 million in Q1-2017. U.S. P&C amounts of $15 million in each of Q4-2018 and Q3-2018, $14 million in Q2-2018, $15 million in Q1-2018, and $16 million in each of Q4-2017, Q3-2017, Q2-2017 and Q1-2017. Wealth Management amounts of $13 million in each of Q4-2018, Q3-2018, Q2-2018 and Q1-2018, $18 million in Q4-2017, $17 million in Q3-2017, $26 million in Q2-2017 and $19 million in Q1-2017. BMO Capital Markets amounts of $2 million in Q4-2018, $nil in Q3-2018, $1 million in Q2-2018, $nil in each of Q1-2018 and Q4-2017, and $1 million in each of Q3-2017, Q2-2017 and Q1-2017.

(4) Restructuring charges before tax amounts included in non-interest expense in Corporate Services of $260 million in Q2-2018 and $59 million in Q4-2017.

(5) In Q3-2017, the adjustment to the collective allowance for credit losses before tax amount of $76 million was excluded from the Corporate Services adjusted provision for (recovery of) credit losses.

(6) Charge due to the revaluation of our U.S. net deferred tax asset as a result of the enactment of the U.S. Tax Cuts and Jobs Act. For more information on the impact of the U.S. Tax-Cuts and Jobs Act, see the Provision for Income Taxes section on page 42.

(7) The current year included a benefit of $203 million after-tax ($277 million pre-tax) from the remeasurement of an employee benefit liability as a result of an amendment to our other employee future benefits plan for certain employees that was announced in the fourth quarter of 2018. This amount has been included in Corporate Services in non-interest expense.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

Certain comparative figures have been reclassified to conform with the current period’s presentation.

na – not applicable

Caution

This Summary Quarterly Earnings Trends section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

In the opinion of Bank of Montreal management, information that is derived from unaudited financial information, including information as at and for the interim periods, includes all adjustments necessary for a fair presentation of such information. All such adjustments are of a normal and recurring nature. Financial ratios for interim periods are stated on an annualized basis, where appropriate, and the ratios, as well as interim operating results, are not necessarily indicative of actual results for the full fiscal year.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

BMO Financial Group 201st Annual Report 2018 63

MANAGEMENT’S DISCUSSION AND ANALYSIS

Review of Fourth Quarter 2018 Performance

Reported net income was $1,695 million for the fourth quarter of 2018, an increase of $468 million or 38% from the prior year. Adjusted net income was $1,529 million, up $220 million or 17% from the prior year. Adjusted results for the quarter exclude a benefit of $277 million ($203 million after-tax) from the remeasurement of an employee benefit liability, and the amortization of acquisition-related intangible assets and acquisition integration costs recorded in non-interest expense. A full list of adjusting items is included in the Non-GAAP Measures section on page 27.

Reported EPS of $2.57 was up $0.76 or 42% from the prior year. Adjusted EPS of $2.32 was up $0.38 or 19%. Results reflect strong growth in U.S. P&C, good performance in Canadian P&C and a lower loss in Corporate Services, partially offset by lower income in BMO Capital Markets. Wealth Management results increased, largely reflecting less elevated reinsurance claims in the current year.

Summary income statements and data for the quarter and comparative quarters are outlined on page 63.

The combined Personal and Commercial banking business reported net income of $1,047 million and adjusted net income of $1,059 million were both up 17% from the prior year, or 16% excluding the impact of the stronger U.S. dollar. Canadian P&C reported net income of $675 million and adjusted net income of $676 million both increased $51 million or 8%, reflecting revenue growth and lower provisions for credit losses, partially offset by higher expenses. On a Canadian dollar basis, U.S. P&C reported net income of $372 million increased 37%, and adjusted net income of $383 million increased 36%. On a U.S. dollar basis, U.S. P&C reported net income of $285 million increased $71 million or 33%, and adjusted net income of $294 million increased $71 million or 31% from the prior year, due to good revenue growth and lower taxes from the benefit of U.S. tax reform and a favourable U.S. tax item, partially offset by higher expenses and higher provisions for credit losses. The benefit of U.S. tax reform was approximately $28 million in reported net income and $29 million in adjusted net income in the quarter. Wealth Management reported net income of $219 million increased $44 million or 25%, and adjusted net income of $229 million increased $40 million or 21%. Net income in the current quarter was impacted by elevated reinsurance claims and a legal provision. Traditional wealth reported net income of $192 million was unchanged and adjusted net income of $202 million decreased $4 million or 2%, as business growth and lower taxes were more than offset by a legal provision and higher expenses. Insurance net income of $27 million was below trend but increased $44 million from last year, primarily due to less elevated reinsurance claims in the current year, with this partially offset by unfavourable market movements in the current quarter relative to favourable market movements in the prior year. BMO Capital Markets reported net income of $298 million decreased $18 million or 6%, and adjusted net income of $309 million decreased $7 million or 2%, as higher Investment and Corporate Banking revenue and lower taxes were more than offset by higher expenses and lower Trading Products revenue. Corporate Services reported net income for the quarter was $131 million, compared with a net loss of $158 million in the prior year. The adjusted net loss for the quarter was $68 million, compared with an adjusted net loss of $102 million in the prior year. Adjusted results exclude a benefit of $203 million after-tax from the remeasurement of an employee benefit liability in the current year and a restructuring charge in the prior year, as well as acquisition integration costs in both periods. Adjusted results increased, mainly due to higher revenue excluding the teb adjustment and lower expenses. Reported results increased due to the impact of the adjusting items and the other drivers noted above.

Total revenue of $5,922 million increased $267 million or 5% from the fourth quarter a year ago. Total revenue, net of CCPB, of $5,532 million increased $450 million or 9%, or 8% excluding the impact of the stronger U.S. dollar. Canadian P&C revenue increased 4% due to higher balances across most products, increased non-interest revenue and higher margins. U.S. P&C revenue increased 11% on a Canadian dollar basis, and increased 8% on a U.S. dollar basis, mainly due to higher deposit revenue and increased loan volumes, net of loan spread compression. Traditional wealth revenue increased 3% due to business growth from higher deposit and loan revenue, net new client assets and higher equity markets on average, partially offset by a legal provision in the current year and the impact of the divestiture of a non-core business in the prior year. Insurance revenue, net of CCPB, of $79 million increased $36 million from the prior year, primarily due to less elevated reinsurance claims in the current year, with this partially offset by unfavourable market movements in the current quarter relative to favourable market movements in the prior year. BMO Capital Markets revenue increased 1%, and was relatively unchanged excluding the impact of the stronger U.S. dollar. Investment and Corporate Banking revenue increased, mainly due to higher corporate banking-related revenue, while underwriting and advisory revenue decreased slightly from a strong quarter a year ago. Trading Products revenue decreased, primarily due to softer interest rate trading and lower new equity issuances, partially offset by the impact of the acquisition of KGS-Alpha in the quarter. Corporate Services revenue increased due to a lower group teb adjustment and higher revenue excluding teb.

Net interest income of $2,669 million increased $134 million or 5% from the prior year, or 4% excluding the impact of the stronger U.S. dollar. Net interest income, excluding trading, increased $187 million or 7%, largely due to higher deposit and loan volumes in the P&C businesses. Average earning assets of $711.7 billion increased $69.1 billion or 11%, or 9% excluding the impact of the stronger U.S. dollar, due to loan growth, higher securities, higher securities borrowed or purchased under resale agreements and increased cash resources. BMO’s overall net interest margin decreased 8 basis points, or 7 basis points on an excluding trading basis, primarily driven by lower spreads in BMO Capital Markets, mainly due to higher volumes of lower spread assets.

Net non-interest revenue of $2,863 million increased $316 million or 12%. Excluding trading revenue, net non-interest revenue increased $141 million or 6%, with increases in most non-interest revenue categories.

Gross insurance revenue decreased $144 million from the prior year, due to increases in long-term interest rates decreasing the fair value of investments in the current year, compared with decreases in long-term interest rates increasing the fair value of investments in the prior year and weaker equity markets in the current year, partially offset by higher annuity sales. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in insurance claims, commissions and changes in policy benefit liabilities, as discussed below.

The total provision for credit losses was $175 million, a decrease of $27 million from the prior year. The provision for credit losses on impaired loans of $177 million decreased $25 million, primarily due to lower provisions in the P&C businesses and net recoveries in both BMO Capital Markets and Corporate Services, compared with provisions in the prior year. There was a decrease in credit losses on performing loans of $2 million, as net recoveries of credit losses in Canadian P&C, BMO Capital Markets and Corporate Services were largely offset by provisions in U.S P&C.

Insurance claims, commissions and changes in policy benefit liabilities were $390 million in the fourth quarter of 2018, a decrease of $183 million from the fourth quarter of 2017, due to the impact of increases in long-term interest rates decreasing the fair value of policy benefit liabilities in the current quarter, compared with decreases in long-term interest rates increasing the fair value of policy benefit liabilities in the prior

64 BMO Financial Group 201st Annual Report 2018

year, less elevated reinsurance claims in the current year and the impact of weaker equity markets in the current year, partially offset by higher annuity sales. The changes related to the fair value of policy benefit liabilities and annuity sales were largely offset in revenue.

Reported non-interest expense of $3,224 million decreased $151 million or 4% from the fourth quarter in the prior year. Adjusted non-interest expense of $3,452 million increased $194 million or 6%, or 5% excluding the impact of the stronger U.S. dollar, largely reflecting higher employee-related expenses, including an acquisition, higher technology costs and a gain on sale of an office building in the prior year. Adjusted non-interest expense excludes a benefit of $277 million pre-tax in the current quarter from the remeasurement of an employee benefit liability, a restructuring charge of $59 million in the prior year and acquisition integration costs and the amortization of acquisition-related intangible assets in both periods.

The provision for income taxes of $438 million increased $160 million from the fourth quarter of 2017. The effective tax rate for the quarter was 20.6%, compared with 18.5% in the prior year. The adjusted provision for income taxes of $376 million increased $63 million from the prior year. The adjusted effective tax rate was 19.7% in the fourth quarter of 2018, compared with 19.3% in the prior year. The higher reported and adjusted effective tax rates in the current quarter relative to the fourth quarter of 2017 were primarily due to lower tax-exempt income from securities and changes in earnings mix, partially offset by a favourable U.S. tax item and the benefit of U.S. tax reform. On a teb basis, the reported effective tax rate for the quarter was 23.0%, compared with 27.1% in the prior year and the adjusted effective tax rate for the quarter was 22.5%, compared with 27.2% in the prior year.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

2017 Financial Performance Review

The preceding discussions in the MD&A focused on our performance in fiscal 2018. This section summarizes our performance in fiscal 2017 relative to fiscal 2016. As noted on page 24, certain prior-year data has been reclassified to conform with the presentation in 2018, including restatements resulting from transfers between operating groups. Further information on these restatements is provided on page 44.

Net Income

Net income of $5,350 million increased $719 million or 16% in 2017, and adjusted net income of $5,508 million increased $488 million or 10% from 2016. Adjusted net income excludes a decrease in the collective allowance in 2017 and a negative cumulative accounting adjustment in 2016, as well as restructuring costs, the amortization of acquisition-related intangible assets and acquisition integration costs in both years. The impact of the weaker U.S. dollar on net income was not significant. Reported and adjusted net income growth reflected the benefits of good performance in Canadian P&C, Wealth Management and BMO Capital Markets. Corporate Services results were also higher, while results in U.S. P&C were relatively flat compared with 2016.

The impact of the following items on net income and net income growth in 2017 largely offset each other: a net gain of $133 million, reflecting a $168 million after-tax gain on the sale of Moneris US and a $35 million after-tax loss on the sale of a portion of the U.S. indirect auto loan portfolio; elevated insurance claims of $112 million in our reinsurance business, largely resulting from the impact of hurricanes Irma, Maria and Harvey; and the 2016 write-down of an equity investment net of a gain on its subsequent sale.

Return on Equity

Return on equity (ROE) was 13.3% and adjusted ROE was 13.7% in 2017, compared with 12.1% and 13.1%, respectively, in 2016. ROE increased in 2017, primarily due to growth in income exceeding growth in common equity. There was an increase of $692 million or 15% in net income available to common shareholders, and an increase of $461 million or 10% in adjusted net income available to common shareholders in 2017. Average common shareholders’ equity increased $2.0 billion or 5% from 2016, primarily due to an increase in retained earnings, partially offset by lower accumulated other comprehensive income. The reported return on tangible common equity (ROTCE) was 16.3%, compared with 15.3% in 2016, and adjusted ROTCE was 16.5% in 2017, compared with 16.1% in 2016.

Revenue

Revenue, net of commissions and changes in policy benefit liabilities (CCPB), increased $1,178 million or 6% to $20,722 million in 2017. Adjusted revenue, net of CCPB, which excludes a negative cumulative accounting adjustment recorded in 2016 in non-interest revenue, increased $1,094 million or 6% to $20,722 million in 2017. Results were driven by good performance in Canadian P&C, Wealth Management and BMO Capital Markets.

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities

Insurance claims, commissions and changes in policy benefit liabilities were $1,538 million in 2017, a decrease of $5 million from $1,543 million in 2016, with increases in long-term interest rates reducing the fair value of policy benefit liabilities in 2017, compared with reductions in long-term interest rates increasing the fair value of policy benefit liabilities in 2016. This was offset by the impact of higher annuity sales, elevated reinsurance claims and growth in the underlying business. The decrease related to the fair value of policy benefit liabilities and the increase related to annuity sales were largely offset in revenue.

Provision for Credit Losses

The provision for credit losses (PCL) was $746 million in 2017, a decrease from $771 million in 2016. There was a $76 million pre-tax decrease in the collective allowance in 2017, largely as a result of positive portfolio migration, which reduced the total provision for credit losses.

Non-Interest Expense

Non-interest expense increased $289 million or 2% to $13,330 million in 2017. Adjusted non-interest expense increased $447 million or 4% to $13,035 million in 2017. Adjusted non-interest expense excludes restructuring costs, the amortization of acquisition-related intangible assets and acquisition integration costs in both years. Reported and adjusted expenses increased, primarily due to higher employee-related expenses and an increase in technology costs, partially offset by our focus on disciplined expense management.

BMO Financial Group 201st Annual Report 2018 65

MANAGEMENT’S DISCUSSION AND ANALYSIS

Provision for Income Taxes

The provision for income taxes was $1,296 million in 2017, compared with $1,101 million in 2016. The reported effective tax rate in 2017 was 19.5%, compared with 19.2% in 2016. The adjusted provision for income taxes⁽¹⁾ was $1,357 million in 2017, compared with $1,249 million in 2016. The adjusted effective tax rate in 2017 was 19.8%, compared with 19.9% in 2016. The effective tax rate differed from the statutory rate primarily because of tax-exempt income from securities.

Canadian P&C

Reported net income of $2,511 million increased $294 million or 13% during the year and adjusted net income of $2,514 million, which excludes the amortization of acquisition-related intangible assets, increased $295 million or 13% from 2016. Revenue increased $454 million or 7% to $7,443 million due to increased non-interest revenue, including the gain on sale of Moneris US in 2017, and higher balance across most products, partially offset by lower margins. The gain on the sale of Moneris US contributed approximately 8% to net income growth and 3% to revenue growth in 2017. The provision for credit losses decreased $23 million or 5% to $483 million, reflecting lower commercial and consumer provisions. Non-interest expense was $3,622 million, up $122 million or 4% from 2016, reflecting continued investment in the business, including a focus on our digital strategy and select sales force investments.

U.S. P&C

Reported net income of $1,027 million decreased $24 million during the year, and adjusted net income of $1,073 million decreased $28 million from 2016, due to the weaker U.S. dollar which decreased net income by 1% in 2017. Adjusted net income excludes the amortization of acquisition-related intangible assets. All amounts in the following paragraph are on a U.S. dollar basis.

Reported net income of $787 million and adjusted net income of $823 million in 2017 were both relatively flat compared with the prior year. Revenue of $3,535 million increased $55 million or 2%, primarily due to higher deposit revenue and increased loan volumes, net of loan spread compression and the impact of the loss on the sale of a portion of the indirect auto loan portfolio in 2017. The loss on the loan sale had a negative impact of approximately 3% on reported and adjusted net income growth and 1% on revenue growth in 2017. The provision for credit losses of $221 million increased $33 million or 18% from 2016, reflecting higher commercial provisions, partially offset by lower consumer provisions. Non-interest expense of $2,253 million increased $54 million or 2% during the year, and adjusted non-interest expense of $2,204 million increased $57 million or 3% from 2016, mainly due to higher technology investments and marketing costs.

Wealth Management

Reported net income of $967 million increased $192 million or 25% from 2016. Adjusted net income of $1,032 million, which excludes the amortization of acquisition-related intangible assets and acquisition integration costs, increased $156 million or 18%. Traditional wealth reported net income of $729 million increased $177 million or 32% from 2016. Adjusted net income in traditional wealth of $794 million increased $141 million or 22%, primarily due to higher income related to an increase in assets under management resulting from improved equity markets and the accumulation of net new client assets, growth in deposit and loan balances, which were up 11% and 10%, respectively, and the benefits of productivity initiatives. Traditional wealth also included a write-down of an equity investment net of a gain on its subsequent sale in 2016 that had a positive impact of 7% on reported net income, 6% on adjusted net income growth, and 1% on revenue growth in 2017. Net income in insurance of $238 million increased $15 million or 7%, as the benefits from favourable market movements in 2017 relative to unfavourable movements in 2016 and business growth were largely offset by elevated claims of $112 million in our reinsurance business in 2017, largely resulting from the impact of hurricanes Irma, Maria and Harvey. Revenue, net of CCPB, of $4,676 million increased $310 million or 7%, due to the factors noted above. The provision for credit losses was $8 million, compared with $9 million in 2016. Non-interest expense was $3,351 million, compared with $3,337 million in 2016, and adjusted non-interest expense was $3,271 million, compared with $3,211 million in 2016, reflecting higher revenue-based costs, partially offset by the impact of the weaker British pound and U.S. dollar, and divestitures.

BMO Capital Markets

Reported net income of $1,275 million increased $40 million or 3% from the prior year. Adjusted net income of $1,277 million, which excludes the amortization of acquisition-related intangible assets, increased $41 million or 3%, due to increased revenue and lower loan loss provisions, partially offset by higher expenses. The impact of the weaker U.S. dollar was not significant. Revenue of $4,569 million increased $255 million or 6%, due to higher levels of client activity in investment banking and loan growth, as well as solid performance in our Trading Products business. The provision for credit losses of $44 million decreased $37 million from the prior year, largely due to a decrease in new provisions, primarily in the oil and gas sector. Non-interest expense increased $204 million or 8% to $2,778 million due to continued investment in the business and higher employee-related costs.

Corporate Services

Corporate Services reported net loss was $430 million in 2017, compared with a reported net loss of $647 million in 2016. The adjusted net loss was

$388 million in 2017, compared with an adjusted net loss of $412 million in 2016. Adjusted net loss excludes a decrease in the collective allowance in 2017 and a negative cumulative accounting adjustment in 2016, as well as restructuring costs and acquisition integration costs in both years. Adjusted net loss decreased due to higher revenue excluding teb adjustments, partially offset by lower credit recoveries. Reported net loss improved, mainly due to lower restructuring costs in 2017, the negative cumulative accounting adjustment in 2016, a decrease in the collective allowance in 2017, and the net impact of the drivers noted above.

(1) The adjusted provision is calculated using adjusted net income rather than net income in the determination of income subject to tax.

Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

66 BMO Financial Group 201st Annual Report 2018

Financial Condition Review

Summary Balance Sheet

(Canadian $ in millions) As at October 31	2018		2017		2016
Assets
Cash and interest bearing deposits with banks		50,447		39,089		36,102
Securities		180,935		163,198		149,985
Securities borrowed or purchased under resale agreements		85,051		75,047		66,646
Net loans		383,991		358,507		357,518
Derivative instruments		26,204		28,951		39,183
Other assets		47,420		44,788		38,501
Total assets		774,048		709,580		687,935
Liabilities and Shareholders’ Equity
Deposits		522,051		479,792		470,281
Derivative instruments		24,411		27,804		38,227
Securities lent or sold under repurchase agreements		66,684		55,119		40,718
Other liabilities		108,393		97,482		91,942
Subordinated debt		6,782		5,029		4,439
Shareholders’ equity		45,727		44,354		42,304
Non-controlling interest in subsidiaries		–		–		24
Total liabilities and shareholders’ equity		774,048		709,580		687,935

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Overview

Total assets of $774.0 billion increased $64.5 billion from October 31, 2017. The stronger U.S dollar increased assets by $6.5 billion, excluding the impact on derivative assets. Total liabilities of $728.3 billion increased $63.1 billion from October 31, 2017. The stronger U.S dollar increased liabilities by $6.3 billion, excluding the impact on derivative liabilities. Shareholders’ equity increased $1.4 billion from October 31, 2017.

Cash and Interest Bearing Deposits with Banks

Cash and interest bearing deposits with banks increased $11.4 billion, or $10.6 billion excluding the impact of the stronger U.S. dollar, due to higher balances held with central banks.

Securities

(Canadian $ in millions) As at October 31	2018		2017		2016
Trading		99,697		99,069		84,458
FVTPL (1)		11,611		na		na
FVOCI – Debt and equity (2)		62,440		na		na
Available-for-sale		na		54,075		55,663
Amortized cost (3)		6,485		na		na
Held-to-maturity		na		9,094		8,965
Other		702		960		899
Total securities		180,935		163,198		149,985

(1) Comprised of $2,828 million mandatorily measured at fair value and $8,783 million designated at fair value.

(2) Includes allowances for credit losses on FVOCI debt securities of $2 million (na at October 31, 2017).

(3) Net of allowances for credit losses of $1 million (na at October 31, 2017).

na – Not applicable due to IFRS 9 adoption.

Securities increased $17.7 billion, or $16.0 billion excluding the impact of the stronger U.S. dollar, as a result of liquidity management activities and higher balances in BMO Capital Markets reflecting the acquisition.

Securities Borrowed or Purchased Under Resale Agreements

Securities borrowed or purchased under resale agreements increased $10.0 billion, or $9.2 billion excluding the impact of the stronger U.S. dollar, driven by higher liquid asset levels in Corporate Services and higher balances in BMO Capital Markets.

Net Loans

(Canadian $ in millions) As at October 31	2018			2017			2016
Residential mortgages		119,620			115,258			112,277
Non-residential mortgages		14,017			11,744			11,376
Consumer instalment and other personal		63,225			61,944			64,680
Credit cards		8,329			8,071			8,101
Businesses and governments		180,439			163,323			163,009
Gross loans		385,630			360,340			359,443
Allowance for credit losses		(1,639	)		(1,833	)		(1,925	)
Total net loans		383,991			358,507			357,518

Certain comparative figures have been reclassified to conform with the current year’s presentation.

BMO Financial Group 201st Annual Report 2018 67

MANAGEMENT’S DISCUSSION AND ANALYSIS

Net loans increased $25.5 billion, or $22.7 billion excluding the impact of the stronger U.S. dollar, largely due to an increase in business and government loans in the Personal and Commercial Banking businesses and BMO Capital Markets, and higher residential mortgages, in part due to the purchase of a mortgage portfolio in U.S. P&C.

Table 7 on page 132 of the Supplemental Information provides a comparative summary of loans by geographic location and product. Table 9 on page 133 provides a comparative summary of net loans in Canada by province and industry. Loan quality is discussed on page 91 and further details on loans are provided in Notes 4, 6 and 24 on pages 157, 164 and 201 of the consolidated financial statements.

Derivative Financial Assets

Derivative financial assets decreased $2.7 billion, primarily due to a decrease in the fair value of foreign exchange contracts partially offset by an increase in the fair value of commodity and equity contracts.

Other Assets

Other assets include customers’ liability under acceptances, premises and equipment, goodwill and intangible assets, current and deferred tax asset, accounts receivable and prepaid expenses. Other assets increased $2.6 billion, primarily due to a $2.0 billion increase in customers’ liability under acceptances.

Deposits

(Canadian $ in millions) As at October 31	2018		2017		2016
Banks		27,907		28,205		31,489
Businesses and governments		313,300		283,276		275,905
Individuals		180,844		168,311		162,887
Total deposits		522,051		479,792		470,281

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Deposits increased $42.3 billion, or $37.2 billion excluding the impact of the stronger U.S. dollar, reflecting higher levels of customer and wholesale deposits. Deposits by businesses and governments increased $26.7 billion, reflecting higher wholesale funding for loan and liquid asset growth and growth in customer balances. Deposits by individuals increased $11.3 billion. Deposits by banks decreased $0.8 billion. Further details on the composition of deposits are provided in Note 13 on page 178 of the consolidated financial statements and in the Liquidity and Funding Risk section on page 100.

Derivative Financial Liabilities

Derivative liabilities decreased $3.4 billion, due to a decline in the fair value of foreign exchange and equity contracts, partially offset by an increase in the fair value of commodity and interest rate contracts.

Securities Lent or Sold Under Repurchase Agreements

Securities lent or sold under repurchase agreements increased $11.6 billion, or $10.8 billion excluding the impact of the stronger U.S. dollar, driven by activity in BMO Capital Markets, including the acquisition.

Other Liabilities

Other liabilities primarily include securities sold but not yet purchased, securitization and structured entities’ liabilities, acceptances and Federal Home Loan Bank (FHLB) advances. Other liabilities increased $10.9 billion, primarily due to a $4.3 billion increase in FHLB advances and securitization and structured entities liabilities to fund loan and liquid asset growth, a $3.6 billion increase in securities sold but not yet purchased and a $2.0 billion increase in acceptances. Further details on the composition of other liabilities are provided in Note 14 on page 179 of the consolidated financial statements.

Subordinated Debt

Subordinated debt increased $1.8 billion from the prior year, as new issuances exceeded a redemption. Further details on the composition of subordinated debt are provided in Note 15 on page 181 of the consolidated financial statements.

Equity

(Canadian $ in millions) As at October 31	2018		2017		2016
Share capital
Preferred shares		4,340		4,240		3,840
Common shares		12,929		13,032		12,539
Contributed surplus		300		307		294
Retained earnings		25,856		23,709		21,205
Accumulated other comprehensive income		2,302		3,066		4,426
Total shareholders’ equity		45,727		44,354		42,304
Non-controlling interest in subsidiaries		–		–		24
Total equity		45,727		44,354		42,328

Total equity increased $1.4 billion due to a $2.1 billion increase in retained earnings, partially offset by a $0.8 billion decrease in accumulated other comprehensive income. Retained earnings increased as a result of net income in the current year, partially offset by dividends and common shares repurchased for cancellation. Accumulated other comprehensive income decreased, primarily due to the impact of higher interest rates.

Share capital was unchanged, as an increase in preferred shares was offset by a decrease in common shares. Preferred shares increased due to a new issuance, net of redemptions. Common shares decreased due to the repurchase of shares for cancellation, partially offset by the issuance of shares under the Stock Option Plan. Our Consolidated Statement of Changes in Equity on page 146 provides a summary of items that increase or reduce shareholders’ equity, while Note 16 on page 182 of the consolidated financial statements provides details on the components of, and changes in, share capital. Details on our enterprise-wide capital management practices and strategies can be found on the following page.

68 BMO Financial Group 201st Annual Report 2018

Enterprise-Wide Capital Management

Capital Management

Objective

BMO is committed to a disciplined approach to capital management that balances the interests and requirements of shareholders, regulators, depositors, fixed income investors and rating agencies. Our objective is to maintain a strong capital position in a cost-effective structure that:

• is appropriate given our target regulatory capital ratios and internal assessment of required economic capital;

• is consistent with our target credit ratings;

• underpins our operating groups’ business strategies; and

• supports depositor, investor and regulator confidence, while building long-term shareholder value.

Capital Management Framework

The principles and key elements of BMO’s capital management framework are outlined in our Capital Management Corporate Policy and in our annual capital plan, which includes the results of our comprehensive Internal Capital Adequacy Assessment Process (ICAAP).

ICAAP is an integrated process that involves the application of stress testing and other tools to evaluate capital adequacy on both a regulatory and an economic capital basis. The results of this process are used in the establishment of capital targets and the implementation of capital strategies that take into consideration the strategic direction and risk appetite of the enterprise. The capital plan is developed considering the results of our ICAAP and in conjunction with our annual business plan, promoting alignment between our business and risk strategies, regulatory and economic capital requirements and the availability of capital. Enterprise-wide stress testing and scenario analysis are conducted in order to assess the impact of various stress conditions on BMO’s risk profile and capital requirements. The capital management framework seeks to ensure that we are adequately capitalized given the risks we take in the normal course of business, as well as under stress, and it supports the determination of limits, targets and performance measures that are used to manage balance sheet positions, risk levels and capital requirements at both the consolidated entity and operating group levels. BMO evaluates assessments of actual and forecast capital adequacy against the capital plan throughout the year, and updates the plan to reflect changes in business activities, risk profile, operating environment or regulatory expectations.

BMO uses regulatory and economic capital to evaluate business performance and considers capital implications in its strategic, tactical and transactional decision-making. By allocating our capital to operating groups, setting and monitoring capital limits and metrics, and measuring the groups’ performance against these limits and metrics, we seek to optimize our risk-adjusted return to shareholders, while maintaining a well-capitalized position. This approach aims to protect our stakeholders from the risks inherent in our various businesses, while still allowing the flexibility to deploy resources in support of the strategic growth activities of our operating groups.

Refer to the Enterprise-Wide Risk Management section on page 78 for further discussion of the risks underlying our business activities.

Governance

The Board of Directors, either directly or in conjunction with its Risk Review Committee, provides ultimate oversight and approval of capital management, including our Capital Management Corporate Policy framework, capital plan and capital adequacy assessments. The Board regularly reviews BMO’s capital position and key capital management activities, and the Risk Review Committee reviews the ICAAP-determined capital adequacy assessment results. The Balance Sheet and Capital Management Committee provides senior management oversight, including the review of significant capital management policies, issues and activities and, along with the Risk Management Committee, the capital required to support the execution of our enterprise-wide strategy. Finance and Risk Management are responsible for the design and implementation of the corporate policies and the frameworks related to capital and risk management, as well as the ICAAP. The Corporate Audit Division, as the third line of defence, verifies our adherence to controls and identifies opportunities to strengthen our processes.

Regulatory Capital Requirements

Regulatory capital requirements for BMO are determined in accordance with the Capital Adequacy Requirements (CAR) Guideline of the Office of the Superintendent of Financial Institutions Canada (OSFI), which is based on the capital standards developed by the Basel Committee on Banking Supervision (BCBS). The minimum capital ratios set out in the CAR Guideline are a 4.5% Common Equity Tier 1 (CET1) Ratio, 6% Tier 1 Capital Ratio and 8% Total Capital Ratio, which are calculated using a nine-year transitional phase-out of non-qualifying capital instruments that ends in 2022. In addition to the minimum capital requirements, OSFI also expects domestic systemically important banks (D-SIBs) to hold Pillar 1 and Pillar 2 buffers, which are meant to be used as a normal first step in periods of stress. The Pillar 1 buffers include a Capital Conservation Buffer of 2.5%, a D-SIB Common Equity Tier 1 surcharge of 1%, and the Countercyclical Buffer (which can range from 0% to 2.5%, depending on the bank’s exposure to jurisdictions that have activated the buffer). The Domestic Stability Buffer is a Pillar 2 buffer and is currently set at 1.5%. OSFI’s capital requirements are summarized in the following table.

BMO Financial Group 201st Annual Report 2018 69

MANAGEMENT’S DISCUSSION AND ANALYSIS

(% of risk-weighted assets)	Minimum capital requirements			Pillar 1 Capital Buffers (1)			Domestic Stability Buffer (2)			OSFI capital requirements including capital buffers			BMO Capital and Leverage Ratios as at October 31, 2018
Common Equity Tier 1 Ratio		4.5	%		3.5	%		1.5	%		9.5	%		11.3	%
Tier 1 Capital Ratio		6.0	%		3.5	%		1.5	%		11.0	%		12.9	%
Total Capital Ratio		8.0	%		3.5	%		1.5	%		13.0	%		15.2	%
Leverage Ratio		3.0	%		na			na			3.0	%		4.2	%

(1) The minimum 4.5% CET1 Ratio requirement is augmented by 3.5% in Pillar 1 Capital Buffers, which can absorb losses during periods of stress. The Pillar 1 Capital Buffers include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Tier 1 Surcharge for D-SIBs and a Countercyclical Buffer as prescribed by OSFI (immaterial for the fourth quarter of 2018). If a bank’s capital ratios fall within the range of this combined buffer, restrictions on discretionary distributions of earnings (such as dividends, share repurchases and discretionary compensation) would ensue, with the degree of such restrictions varying according to the position of the bank’s ratios within the buffer range.

(2) OSFI requires all D-SIBs to maintain a Domestic Stability Buffer (DSB) against Pillar 2 risks associated with systemic vulnerabilities. The DSB can range from 0% to 2.5% of total RWA and is currently set at 1.5%. Breaches of the DSB will not result in a bank being subject to automatic constraints on capital distributions.

na – not applicable

Regulatory Capital Ratios

The Common Equity Tier 1 Ratio reflects CET1 capital divided by CET1 capital RWA.

The Tier 1 Capital Ratio reflects Tier 1 capital divided by Tier 1 capital RWA.

The Total Capital Ratio reflects Total capital divided by Total capital RWA.

The Leverage Ratio reflects Tier 1 capital divided by the sum of on-balance sheet items and specified off-balance sheet items, net of specified adjustments.

Regulatory Capital Elements

BMO maintains a capital structure that is diversified across instruments and tiers to ensure an appropriate mix of loss absorbency. The major components of our regulatory capital are summarized as follows:

OSFI’s CAR Guideline also requires the implementation of BCBS guidance on non-viability contingent capital (NVCC). NVCC provisions require the conversion of certain capital instruments into a variable number of common shares in the event that OSFI announces that a bank is, or is about to become, non-viable, or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability.

Under OSFI’s CAR Guideline, non-common share capital instruments that do not meet Basel III requirements, including NVCC requirements, will be fully phased out by 2022.

Canada’s Bank Recapitalization (Bail-In) Regime became effective on September 23, 2018. Eligible senior debt (described below) issued after this date is subject to statutory conversion requirements. Canada Deposit Insurance Corporation has the power to trigger the conversion of bail-in debt into common shares. This statutory conversion supplements NVCC securities, which must be converted, in full, prior to the conversion of bail-in debt.

Risk-Weighted Assets

Risk-Weighted Assets (RWA) measure a bank’s exposures, weighted for their relative risk and calculated in accordance with OSFI’s regulatory capital rules. RWA are calculated for credit, market and operational risks based on OSFI’s prescribed rules.

BMO primarily uses the Advanced Internal Ratings Based (AIRB) Approach to determine credit RWA in our portfolio. The AIRB Approach utilizes sophisticated techniques to measure RWA at the exposure level based on sound risk management principles, including estimates of the probability of default, the downturn loss given default and exposure at default risk parameters, term to maturity and asset class type, as prescribed by the OSFI rules. These risk parameters are determined using historical portfolio data supplemented by benchmarking and are updated periodically. Validation procedures related to these parameters are in place and are enhanced periodically in order to quantify and differentiate risks appropriately to reflect changes in economic and credit conditions. Credit RWA related to certain Canadian and U.S. portfolios are determined using the Standardized Approach.

BMO’s market risk RWA are primarily determined using the more advanced Internal Models Approach, but the Standardized Approach is used for some exposures.

70 BMO Financial Group 201st Annual Report 2018

BMO uses the Advanced Measurement Approach, a risk-sensitive capital model, along with the Standardized Approach in certain areas under OSFI rules, to determine capital requirements for operational risk.

For institutions using advanced approaches for credit risk or operational risk, there is a capital floor as prescribed in OSFI’s CAR Guideline. In calculating regulatory capital ratios, there is a requirement to increase RWA when an amount calculated under the Standardized Approach (covering RWA and allowances) is higher than the result of a similar calculation under the more risk-sensitive modelled approach. The capital floor was operative for the bank in 2017 and in the first quarter of 2018, and a floor adjustment was reflected in our total RWA for those periods. We have not had a floor-based RWA adjustment since the revised floor calculation, as outlined below, became effective in the second quarter of 2018.

In accordance with guidance from OSFI, the credit valuation adjustment (CVA) risk capital charge for Canadian banks has been phasing in since the first quarter of 2014. In 2017 and 2018, the CVA risk capital charge applicable to CET1 was 72% and 80% of the fully implemented charge, respectively. The charge will be fully phased in by 2019.

Capital Regulatory Developments

A number of regulatory capital changes, some finalized and some under development, will lead to upward pressure on the amount of capital BMO is required to hold over time. The nature of these changes is outlined below.

In October 2018, OSFI issued the updated version of the CAR Guideline for implementation in the first quarter of 2019. The most significant revisions include the domestic implementation of the Standardized Approach for counterparty credit risk (SA-CCR) and revised capital requirements for bank exposures to central counterparties, as well as a revised securitization framework. The update provides for transitional arrangements under which certain aspects of the revised securitization framework will not apply until fiscal 2020 or 2021. These changes are expected to modestly increase the amount of capital we are required to hold upon implementation. The revised CAR Guideline also incorporates the changes to the capital floor, announced by OSFI in January 2018, which include a shift to the Basel II Standardized Approach and a reduced floor factor transitioning from 70% in the second quarter of fiscal 2018 and 72.5% in the third quarter to 75% from the fourth quarter onward. In October 2018, OSFI issued the final version of the Leverage Requirements (LR) Guideline for implementation in the first quarter of 2019 to align with the changes related to counterparty credit risk and the securitization framework in the revised CAR Guideline. In November 2018, OSFI issued revisions to the Leverage Ratio Disclosure Requirements Guideline, which reflect the changes to the LR and CAR Guidelines, effective for the first quarter of 2019.

In June 2018, OSFI published details on the Domestic Stability Buffer (DSB), which it expects to be maintained by D-SIBs against Pillar 2 risks associated with systemic vulnerabilities. The DSB, which is met with CET1 capital, will range between 0% and 2.5% of a bank’s total RWA and is currently set at 1.5%.

In April 2018, the Government of Canada published the final regulations on Canada’s Bank Recapitalization (Bail-In) Regime, which became effective on September 23, 2018. The Bail-In Regime is consistent with the international standards developed by the Financial Stability Board, but is tailored to the Canadian context. Bail-in debt includes senior unsecured debt, issued directly by the bank on or after September 23, 2018, which has an original term greater than 400 days and is marketable, subject to certain exceptions. Some or all of this debt may be statutorily converted into common shares of the bank under the Bail-In Regime if the bank enters resolution. In conjunction with the regulations, OSFI released its final Total Loss Absorbing Capacity (TLAC) guideline for D-SIBs, which establishes minimum standards for a risk-based TLAC ratio and TLAC leverage ratio that come into effect on November 1, 2021. In August 2018, OSFI set the minimum requirements as a risk-based TLAC ratio of 21.5% RWA and a TLAC leverage ratio of 6.75%. In addition, D-SIBs will be expected to maintain buffers above the minimum TLAC ratios, including the DSB (currently 1.5% of total RWA) and any capital add-ons for idiosyncratic Pillar 2 risks. The D-SIBs’ supervisory target risk-based TLAC ratio is expected to be 23.0% when the minimum requirements come into effect on November 1, 2021, inclusive of buffers as currently set. In May 2018, OSFI issued the final TLAC Disclosure Requirements Guideline effective for the first quarter of fiscal 2019.

In July 2018, OSFI issued for consultation a discussion paper on the proposed domestic implementation of the final Basel III reforms, which include a revised Standardized Approach for credit risk, constraints on the use of internal ratings-based approaches, revisions to the credit valuation adjustment (CVA) framework, a revised Standardized Approach for operational risk, revisions to the leverage ratio framework, and calibration of standardized output floors. The discussion paper sets out OSFI’s preliminary views on the scope and timing of the implementation of the final Basel III reforms in Canada. While the BCBS outlined a five-year transition period for the RWA output floor from 50% in 2022 to 72.5% in 2027, OSFI’s discussion paper proposes to set the output floor at 72.5% upon implementation of the reforms in the first quarter of 2022.

In March 2018, the BCBS issued a consultative document on revisions to the minimum capital requirements for market risk, commonly referred to as the fundamental review of the trading book. The consultative document proposes a number of revisions to the market risk standard published in January 2016, including a simplified alternative to the revised Standardized Approach. The implementation date of the revised market risk standard has been extended to January 1, 2022, allowing additional time for banks to develop the systems infrastructure needed to apply the standard and for BCBS to address certain outstanding issues.

2018 Regulatory Capital Review

BMO is well capitalized, with capital ratios that exceed OSFI’s published requirements for large Canadian banks, including the 1.5% DSB. Our CET1 Ratio was 11.3% at October 31, 2018, compared with 11.4% at October 31, 2017. The CET1 Ratio decreased from the end of fiscal 2017 as higher CET1 capital from retained earnings growth, net of share repurchases, was more than offset by higher RWA, including an acquisition.

Our Tier 1 Capital and Total Capital Ratios were 12.9% and 15.2%, respectively, at October 31, 2018, compared with 13.0% and 15.1%, respectively, at October 31, 2017. The decrease in the Tier 1 Capital Ratio was mainly due to the factors impacting the CET1 Ratio discussed above. The increase in the Total Capital Ratio was mainly due to the issuances of subordinated notes, net of redemptions, partially offset by the factors impacting the Tier 1 Ratio.

The impact of foreign exchange movements on capital ratios was largely offset. BMO’s investments in foreign operations are primarily denominated in U.S. dollars, and the foreign exchange impact of U.S.-dollar-denominated RWA capital deductions may result in variability in the bank’s capital ratios. BMO may manage the impact of foreign exchange movements on its capital ratios and did so during 2018. Any such activities could also impact our book value and return on equity.

BMO’s Leverage Ratio was 4.2% at October 31, 2018, down from 4.4% at October 31, 2017, due to higher leverage exposures driven mainly by business growth.

BMO Financial Group 201st Annual Report 2018 71

MANAGEMENT’S DISCUSSION AND ANALYSIS

While the ratios discussed above reflect the bank’s consolidated capital base, BMO conducts business through a variety of corporate structures, including subsidiaries. A framework is in place such that capital and funding are managed appropriately at the subsidiary level.

As a U.S. bank holding company with total consolidated assets of US$50 billion or more, our subsidiary BMO Financial Corp. (BFC) is subject to the Federal Reserve Board’s (FRB) Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) requirements. CCAR is an annual exercise conducted by the FRB to assess whether the largest bank holding companies operating in the United States have sufficient capital to support operations throughout periods of economic and financial stress and have robust, forward-looking capital planning processes that address their unique risks. DFAST is a forward-looking exercise complementary to CCAR and conducted by the FRB to assess whether the financial companies that it supervises have sufficient capital to absorb losses and support operations during adverse economic conditions. In June 2018, the FRB announced its decision not to object to BFC’s capital plan as evaluated under the 2018 CCAR assessment. Results under the DFAST supervisory severely adverse scenario indicate that the capital ratios for BFC and its bank subsidiary BMO Harris Bank N.A. are above well-capitalized levels, as disclosed in their results in June 2018. BFC’s own mid-cycle company-run stress tests (under DFAST) also indicate that the capital ratios for BFC are above well-capitalized levels, as disclosed in their results in October 2018.

Regulatory Capital (1)

(Canadian $ in millions) As at October 31	2018			2017
Common Equity Tier 1 capital: instruments and reserves
Directly issued qualifying common share capital plus related stock surplus		13,229			13,339
Retained earnings		25,856			23,709
Accumulated other comprehensive income (and other reserves)		2,302			3,066
Goodwill and other intangibles (net of related tax liability)		(8,261	)		(7,885	)
Other common equity Tier 1 capital deductions		(405	)		(1,596	)
Common Equity Tier 1 capital (CET1)		32,721			30,633
Additional Tier 1 capital: instruments
Directly issued qualifying Additional Tier 1 instruments plus related stock surplus		4,050			3,650
Directly issued capital instruments subject to phase-out from Additional Tier 1		740			1,040
Additional Tier 1 instruments (and CET1 instruments not otherwise included) issued by subsidiaries and held by third parties (amount allowed in group AT1)		–			–
of which: instruments issued by subsidiaries subject to phase-out		–			–
Total regulatory adjustments applied to Additional Tier 1 capital		(291	)		(215	)
Additional Tier 1 capital (AT1)		4,499			4,475
Tier 1 capital (T1 = CET1 + AT1)		37,220			35,108
Tier 2 capital: instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus		6,639			3,976
Directly issued capital instruments subject to phase-out from Tier 2 capital		143			1,053
Tier 2 instruments (and CET1 and AT1 instruments not included) issued by subsidiaries and held by third parties (amount allowed in group Tier 2)		–			–
of which: instruments issued by subsidiaries subject to phase-out		–			–
General allowance		235			509
Total regulatory adjustments to Tier 2 capital		(121	)		(50	)
Tier 2 capital (T2)		6,896			5,488
Total capital (TC = T1 + T2)		44,116			40,596

(1) Non-qualifying Tier 1 and Tier 2 capital instruments are phased out at a rate of 10% per year from January 1, 2013 to January 1, 2022.

Our CET1 capital and Tier 1 capital levels were $32.7 billion and $37.2 billion, respectively, at October 31, 2018, up from $30.6 billion and $35.1 billion, respectively, at October 31, 2017. CET1 capital increased, largely driven by retained earnings growth net of share repurchases. The increase in Tier 1 capital since October 31, 2017 was mainly due to the factors impacting CET1 capital.

Total capital was $44.1 billion at October 31, 2018, up from $40.6 billion at October 31, 2017, attributable to the growth in Tier 1 capital discussed above, and the issuances of subordinated notes, net of redemptions.

72 BMO Financial Group 201st Annual Report 2018

Changes in Risk-Weighted Assets

Total CET 1 Capital RWA were $289.2 billion at October 31, 2018, up from $269.5 billion at October 31, 2017. Credit Risk RWA were $240.5 billion at October 31, 2018, up from $219.8 billion at October 31, 2017. The increase was largely due to business growth and foreign exchange impacts, partially offset by positive asset quality changes. As noted above, the impact of foreign exchange movements is largely offset in the CET1 Ratio. Market Risk RWA were $13.5 billion at October 31, 2018, up from $8.4 billion at October 31, 2017, largely attributable to business growth, mainly driven by an acquisition, and market variables, partially offset by methodology and policy changes. Operational Risk RWA were $35.2 billion at October 31, 2018, up from $32.8 billion at October 31, 2017, primarily due to growth in the bank’s average gross income. There was no capital floor RWA adjustment at October 31, 2018, down from $8.4 billion at October 31, 2017.

(Canadian $ in millions) As at October 31	2018		2017
Credit Risk
Wholesale
Corporate, including specialized lending		112,394		100,421
Corporate small and medium-sized enterprises		39,496		35,246
Sovereign		3,323		1,627
Bank		4,790		5,892
Retail
Residential mortgages, excluding home equity line of credit		9,527		7,984
Home equity line of credit		4,846		5,426
Qualifying revolving retail		5,452		5,465
Other retail, excluding small and medium-sized enterprises		12,078		11,258
Retail small and medium-sized enterprises		7,264		7,582
Equity		1,971		1,626
Trading book		9,693		9,542
Securitization		2,295		2,476
Other credit risk assets – non-counterparty managed assets		16,776		15,631
Scaling factor for credit risk assets under AIRB Approach (1)		10,595		9,648
Total Credit Risk		240,500		219,824
Market Risk		13,532		8,448
Operational Risk		35,205		32,773
CET1 Capital Risk-Weighted Assets before Capital floor		289,237		261,045
Basel I Capital Floor (2)		–		8,421
CET1 Capital Risk-Weighted Assets		289,237		269,466
Tier 1 Capital Risk-Weighted Assets before CVA and Capital floor		289,237		261,045
Additional CVA adjustment, prescribed by OSFI, for Tier 1 Capital		183		290
Basel I Capital Floor (2)		–		8,131
Tier 1 Capital Risk-Weighted Assets		289,420		269,466
Total Capital Risk-Weighted Assets before CVA and Capital floor		289,237		261,045
Additional CVA adjustment, prescribed by OSFI, for Total Capital		367		522
Basel I Capital Floor (2)		–		7,899
Total Capital Risk-Weighted Assets		289,604		269,466

(1) The scaling factor is applied to RWA amounts for credit risk under the AIRB Approach.

(2) For institutions using advanced approaches for credit risk or operational risk, there is a capital floor as prescribed in OSFI’s CAR Guideline. OSFI revised its capital floor calculation effective second quarter of fiscal 2018 as discussed in the Regulatory Capital Developments section.

BMO Financial Group 201st Annual Report 2018 73

MANAGEMENT’S DISCUSSION AND ANALYSIS

Economic Capital

Economic capital is an expression of the enterprise’s capital demand requirement relative to the bank’s view of the economic risks in its underlying business activities. It represents management’s estimation of the likely magnitude of economic losses that could occur should severely adverse situations arise, and allows returns to be measured on a consistent basis across such risks. Economic loss is the loss in economic or market value incurred over a specified time horizon at a defined confidence level, relative to the expected loss over the same time horizon. Economic capital is calculated for various types of risk, including credit, market (trading and non-trading), operational and business, based on a one-year time horizon using a defined confidence level.

Economic Capital and RWA by Operating Group and Risk Type

(As at October 31, 2018)

Capital Management Activities

On June 1, 2018, we renewed our normal course issuer bid (NCIB) effective for one year. Under this NCIB, we may purchase up to 20 million of our common shares for cancellation. The NCIB is a regular part of BMO’s capital management strategy. The timing and amount of purchases under the NCIB are subject to management discretion based on factors such as market conditions and capital levels. The bank will consult with OSFI before making purchases under the NCIB. During 2018, we repurchased and cancelled 10 million of our common shares as part of the NCIB at an average cost of $99.05 per share, totalling $991 million. Of these common shares, 7 million were purchased on the TSX and 3 million were purchased pursuant to a specific share repurchase program. Specific share repurchases were made from an arm’s-length third-party seller at a discount to the prevailing market price of our common shares on the TSX at the time of the purchases.

During 2018, BMO issued approximately 1.5 million common shares through the exercise of stock options.

During 2018, BMO completed the following Tier 1 and Tier 2 capital instrument issuances, redemptions and conversions.

Share Issuances, Redemptions and Conversions

(in millions) As at October 31, 2018	Issuance or redemption date		Number of shares			Amount
Common shares issued
Stock options exercised				1.5		$	99
Tier 1 Capital (1)
Issuance of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44		September 17, 2018		16		$	400
Redemption of Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 16		August 25, 2018		(6.3	)	$	(157	)
Redemption of Non-Cumulative Floating Rate Class B Preferred Shares, Series 17		August 25, 2018		(5.7	)	$	(143	)
Tier 2 Capital (1)
Issuance of 3.803% Subordinated Notes due 2032		December 12, 2017				US$	1,250
Issuance of 4.338% Subordinated Notes due 2028		October 5, 2018				US$	850
Redemption of Series F Medium-Term Notes, First Tranche		March 28, 2018				$	(900	)

(1) For further details on subordinated debt and share capital, see Notes 15 and 16 of the consolidated financial statements on pages 181 and 182, respectively.

If an NVCC trigger event were to occur, our NVCC capital instruments would be converted into BMO common shares pursuant to automatic conversion formulas, with a conversion price based on the greater of: (i) a floor price of $5.00; and (ii) the current market price of our common shares at the time of the trigger event (calculated using a 10-day weighted average). Based on a floor price of $5.00, these NVCC capital instruments would be converted into approximately 2.87 billion BMO common shares, assuming no accrued interest and no declared and unpaid dividends.

On November 16, 2018, BMO Capital Trust II, a subsidiary of Bank of Montreal, announced its intention to redeem all of its $450 million issued and outstanding BMO Tier 1 Notes – Series A on December 31, 2018.

Further details are provided in Notes 15 and 16 of the consolidated financial statements on pages 181 and 182, respectively.

74 BMO Financial Group 201st Annual Report 2018

Outstanding Shares and NVCC Capital Instruments

	Number of shares or dollar amount (in millions)		Dividends declared per share
As at October 31, 2018			2018		2017		2016
Common shares		639	$	3.78	$	3.56	$	3.40
Class B Preferred shares
Series 14 (1)		–		–	$	0.66	$	1.31
Series 15 (1)		–		–	$	0.73	$	1.45
Series 16 (2)		–	$	0.64	$	0.85	$	0.85
Series 17 (2)		–	$	0.52	$	0.55	$	0.53
Series 25 (3)	$	236	$	0.45	$	0.45	$	0.84
Series 26 (3)	$	54	$	0.59	$	0.43	$	0.10
Series 27*	$	500	$	1.00	$	1.00	$	1.00
Series 29*	$	400	$	0.98	$	0.98	$	0.98
Series 31*	$	300	$	0.95	$	0.95	$	0.95
Series 33*	$	200	$	0.95	$	0.95	$	0.95
Series 35*	$	150	$	1.25	$	1.25	$	1.25
Series 36*	$	600	$	58.50	$	58.50	$	65.03
Series 38*	$	600	$	1.21	$	1.33		–
Series 40*	$	500	$	1.13	$	0.80		–
Series 42*	$	400	$	1.10	$	0.45		–
Series 44*	$	400		–		–		–
Medium-Term Notes
Series H – First Tranche* (4)	$	1,000		na		na		na
Series H – Second Tranche* (4)	$	1,000		na		na		na
Series I – First Tranche* (4)	$	1,250		na		na		na
Series I – Second Tranche* (4)	$	850		na		na		na
3.803% Subordinated Notes* (4)	US$	1,250		na		na		na
4.338% Subordinated Notes* (4)	US$	850		na		na		na
Stock options
Vested		3.8
Non-vested		2.3

* Convertible into common shares

(1) Redeemed in May 2017.

(2) Redeemed in August 2018.

(3) In August 2016, approximately 2.2 million Series 25 Preferred Shares were converted into Series 26 Preferred Shares on a one-for-one basis.

(4) Note 15 of the consolidated financial statements on page 181 includes details on the Series H Medium-Term Notes, First Tranche and Second Tranche and Series I Medium-Term Notes, First Tranche and Second Tranche, USD 3.803% Subordinated Notes and USD 4.338% Subordinated Notes.

na – not applicable

Note 16 of the consolidated financial statements on page 182 includes details on share capital.

Dividends

Dividends declared per common share in fiscal 2018 totalled $3.78. Annual dividends declared represented 50.9% of reported net income and 43.8% of adjusted net income available to common shareholders on a last twelve months basis.

Our target dividend payout range (common share dividends as a percentage of net income available to shareholders, less preferred share dividends, based on earnings over the last twelve months) is 40% to 50%, providing shareholders with a competitive dividend yield. BMO’s target dividend payout range seeks to provide shareholders with stable income while ensuring sufficient earnings are retained to support anticipated business growth, fund strategic investments and support capital adequacy.

At year end, BMO’s common shares provided a 3.9% annualized dividend yield based on the year-end closing share price. On December 4, 2018, BMO announced that the Board of Directors had declared a quarterly dividend on common shares of $1.00 per share, up $0.04 per share or 4% from the prior quarter and up $0.07 per share or 8% from a year ago. The dividend is payable on February 26, 2019, to shareholders of record on February 1, 2019.

Common shareholders may elect to have their cash dividends reinvested in common shares of BMO in accordance with the Shareholder Dividend Reinvestment and Share Purchase Plan (DRIP). In fiscal 2018, common shares to supply the DRIP were purchased on the open market.

Eligible Dividends Designation

For the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation, BMO designates all dividends paid or deemed to be paid on both its common and preferred shares as “eligible dividends”, unless indicated otherwise.

Caution

This Enterprise-Wide Capital Management section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

BMO Financial Group 201st Annual Report 2018 75

MANAGEMENT’S DISCUSSION AND ANALYSIS

Select Financial Instruments

The Financial Stability Board (FSB) issued a report in 2012 encouraging enhanced disclosure related to financial instruments that market participants had come to regard as carrying higher risk. An index of the disclosures recommended by the Enhanced Disclosure Task Force of the FSB and the pages on which these disclosures appear in our Annual Report or Supplementary Financial Information is provided on page 126.

Consumer Loans

In Canada, our Consumer Lending portfolio is comprised of three main asset classes: real estate secured lending (including residential mortgages and home equity products), instalment and other personal loans (including indirect automobile loans) and credit card loans. We do not have any subprime or Alt-A mortgage or home equity loan programs, nor do we purchase subprime or Alt-A loans from third-party lenders.

In the United States, our Consumer Lending portfolio is primarily comprised of three asset classes: residential first mortgages, home equity products and indirect automobile loans. The impact of aggressive market lending practices (e.g., high loan-to-value ratios and limited documentation), which were prevalent leading up to the global recession and drove high losses, continues to moderate. These lending practices were discontinued early in the recession, and our existing portfolio has performed well within our risk appetite.

In both Canada and the United States, consumer lending products are underwritten to prudent standards relative to credit scores, loan-to-value ratios and capacity assessment. Our lending practices consider the ability of our borrowers to repay and the underlying collateral value.

Further discussion of the Consumer Lending portfolio related to the Canadian housing market is provided in the Top and Emerging Risks That May Affect Future Results section on page 79.

Leveraged Finance

Leveraged finance loans are defined by BMO as loans to private equity businesses and mezzanine financings for which our assessment indicates a higher level of credit risk. BMO has some exposure to leveraged finance loans, which represented 1.7% of our total assets, with $13.5 billion outstanding at October 31, 2018 (1.8% and $12.7 billion, respectively, in 2017). Of this amount, $129 million or 1.0% of leveraged finance loans were classified as impaired ($197 million or 1.6% in 2017).

BMO-Sponsored Securitization Vehicles

BMO sponsors various vehicles that fund assets originated by either BMO (which are then securitized through a bank securitization vehicle) or its customers (which are then securitized through three Canadian customer securitization vehicles and one U.S. customer securitization vehicle). We earn fees for providing services related to these customer securitization vehicles, including liquidity, distribution and financial arrangement fees for supporting the ongoing operations of the vehicles. These fees totalled approximately $97 million in 2018 ($104 million in 2017).

Canadian Customer Securitization Vehicles

The customer securitization vehicles we sponsor in Canada provide our customers with access to financing either from BMO or in the asset-backed commercial paper (ABCP) markets. Customers sell their assets either directly into these vehicles, or indirectly by selling an interest in the securitized assets into these vehicles, which then issue ABCP to either investors or BMO in order to fund the purchases. In all cases, the sellers remain responsible for servicing the transferred assets and are first to absorb any losses realized on the assets. None of the sellers are affiliated with BMO.

Our exposure to potential losses arises from our purchase of ABCP issued by the vehicles, any related derivative contracts we have entered into with the vehicles and the liquidity support we provide to the market-funded vehicles. We use our credit adjudication process in deciding whether to enter into these arrangements, just as we do when extending credit in the form of a loan.

Two of these customer securitization vehicles are market-funded, while the third is funded directly by BMO. BMO does not control these entities and therefore they are not consolidated. Further information on the consolidation of customer securitization vehicles is provided in Note 7 on page 165 of the consolidated financial statements. No losses were recorded on any of BMO’s exposures to these vehicles in 2018 and 2017.

The market-funded vehicles had a total of $4.1 billion of ABCP outstanding at October 31, 2018 ($3.8 billion in 2017). The ABCP issued by the market-funded vehicles is rated R-1(high) by DBRS and P1 by Moody’s. BMO’s purchases of ABCP, as distributing agent of ABCP issued by the market-funded vehicles, totalled $12 million at October 31, 2018 ($6 million in 2017).

BMO provided liquidity support facilities for the market-funded vehicles totalling $5.6 billion at October 31, 2018 ($5.0 billion in 2017). This amount comprised part of our commitments outlined in Note 24 on page 201 of the consolidated financial statements. All of these facilities remain undrawn. The assets of each of these market-funded vehicles consist primarily of exposure to diversified pools of Canadian automobile-related receivables and Canadian insured and conventional residential mortgages. These two asset classes represent 82% (90% in 2017) of the aggregate assets of these vehicles.

U.S. Customer Securitization Vehicle

We sponsor one customer securitization vehicle in the United States that we consolidate under IFRS. Further information on consolidation of customer securitization vehicles is provided in Note 7 on page 165 of the consolidated financial statements. This market-funded customer securitization vehicle provides our customers with access to financing in the U.S. ABCP markets. Our customers remain responsible for servicing the assets involved in the related financing and are first to absorb any losses realized on those assets. None of the sellers are affiliated with BMO.

Our exposure to potential losses arises from our purchase of ABCP issued by the vehicle, any related derivative contracts we have entered into with the vehicle and the liquidity support we provide to the vehicle. We use our credit adjudication process in deciding whether to enter into these arrangements, just as we do when extending credit in the form of a loan. No losses were recorded on any of BMO’s exposures to the vehicle in 2018 and 2017.

The vehicle had US$2.9 billion of ABCP outstanding at October 31, 2018 (US$3.1 billion in 2017). The ABCP issued by the vehicle is rated A1 by S&P and P1 by Moody’s. In order to comply with U.S. risk retention rules that came into effect in 2017, BMO held US$159 million of the vehicle’s ABCP at October 31, 2018 (US$185 million in 2017).

BMO provides a committed liquidity support facility to the vehicle, with the undrawn amount totalling US$5.4 billion at October 31, 2018 (US$5.2 billion in 2017). This amount comprised part of our commitments outlined in Note 24 on page 201 of the consolidated financial statements. The assets of this customer securitization vehicle consist primarily of exposure to diversified pools of U.S. automobile-related receivables and U.S. government-guaranteed Federal Family Education Loan Program loans. These two asset classes represent 74% (78% in 2017) of the aggregate assets of the vehicle.

Caution

This Select Financial Instruments section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

76 BMO Financial Group 201st Annual Report 2018

Off-Balance Sheet Arrangements

BMO enters into a number of off-balance sheet arrangements in the normal course of operations.

Credit Instruments

In order to meet the financial needs of our clients, we use a variety of off-balance sheet credit instruments. These include guarantees and standby letters of credit, which represent our obligation to make payments to third parties on behalf of a customer if the customer is unable to make the required payments or meet other contractual requirements. We also write documentary and commercial letters of credit, which represent our agreement to honour drafts presented by a third party upon completion of specified activities. Commitments to extend credit are off-balance sheet arrangements that represent our commitment to customers to grant them credit in the form of loans or other financings for specific amounts and maturities, subject to meeting certain conditions.

There are a large number of credit instruments outstanding at any time. Our customers are broadly diversified, and we do not anticipate events or conditions that would cause a significant number of our customers to fail to perform in accordance with the terms of their contracts with us. We use our credit adjudication process in deciding whether to enter into these arrangements, just as we do when extending credit in the form of a loan. We monitor off-balance sheet credit instruments in order to avoid undue concentrations in any geographic region or industry.

The maximum amount payable by BMO in relation to these credit instruments was approximately $163 billion at October 31, 2018 ($147 billion in 2017). However, this amount is not representative of our likely credit exposure or the liquidity requirements for these instruments, as it does not take into account customer behaviour, which suggests that only a portion of our customers would utilize the facilities related to these instruments, nor does it take into account any amounts that could be recovered under recourse and collateral provisions.

Further information on these instruments can be found in Note 24 on page 201 of the consolidated financial statements.

For the credit commitments outlined in the preceding paragraphs, in the absence of an event that triggers a default, early termination by BMO may result in a breach of contract.

Structured Entities (SEs)

We carry out certain business activities through arrangements involving SEs, using them to raise capital, secure customer transactions or obtain sources of liquidity by securitizing certain of our financial assets. Note 6 on page 164 of our consolidated financial statements describes our loan securitization activities carried out through third-party programs. Under IFRS, we consolidate SEs if we control the entity.

Our interests in SEs are discussed in detail on page 76 in the BMO-Sponsored Securitization Vehicles section and in Note 7 on page 165 of the consolidated financial statements, which discusses our interests in both consolidated and unconsolidated SEs. We consolidate our securitization vehicles, U.S. customer securitization vehicles, and certain capital and funding vehicles. We do not consolidate our Canadian customer securitization vehicles, certain capital vehicles, various BMO managed funds and various other structured entities where we hold investments.

Guarantees

Guarantees include contracts under which we may be required to make payments to a counterparty based on changes in the value of an asset, liability or equity security that the counterparty holds. Contracts under which we may be required to make payments if a third party does not perform according to the terms of a contract and contracts under which we provide indirect guarantees of indebtedness are also considered guarantees. In the normal course of business, we enter into a variety of guarantees, including standby letters of credit, backstop and other liquidity facilities and derivatives contracts or instruments (including, but not limited to, credit default swaps), as well as indemnification agreements.

The maximum amount payable by BMO in relation to these guarantees was approximately $25 billion at October 31, 2018 ($24 billion in 2017). However, this amount is not representative of our likely exposure, as it does not take into account customer behaviour, which suggests that only a portion of the guarantees would require us to make any payments, nor does it take into account any amounts that could be recovered under recourse and collateral provisions.

For a more detailed discussion of these arrangements, please see Note 24 on page 201 of the consolidated financial statements.

Caution

This Off-Balance Sheet Arrangements section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

BMO Financial Group 201st Annual Report 2018 77

MANAGEMENT’S DISCUSSION AND ANALYSIS

Enterprise-Wide Risk Management

As a diversified financial services company providing banking, wealth management, capital market and insurance services, we are exposed to a variety of risks that are inherent in our business activities. A disciplined and integrated approach to managing risk is fundamental to the success of our operations. Our risk management framework provides independent risk oversight across the enterprise and is essential to building competitive advantage.

Surjit Rajpal Chief Risk Officer BMO Financial Group (1)

Enterprise-Wide Risk Management outlines our approach to managing key financial risks and other related risks that we face, as discussed in the following sections:

79	Risks That May Affect Future Results
81	Risk Management Overview
82	Framework and Risks
87	Credit and Counterparty Risk
95	Market Risk
100	Insurance Risk
100	Liquidity and Funding Risk

109	Operational Risk
111	Model Risk
112	Legal and Regulatory Risk
114	Business Risk
115	Strategic Risk
115	Environmental and Social Risk
116	Reputation Risk

Strengths and Value Drivers

• Disciplined approach to risk-taking.

• Comprehensive and consistent risk frameworks.

• Risk appetite and metrics integrated into strategic planning and the ongoing management of businesses and risks.

• Sustained focus on continuous improvement to drive consistency, effectiveness, and efficiency in the management of risk.

Priorities

• Make our processes simple and accelerate our delivery times to match the increasing pace of business.

• Continue to develop technology and analytics that underpin our risk processes, risk assessment and monitoring, and our cyber and anti-money laundering defences.

• Focus on our people and how we work together to enhance our culture.

Text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of the MD&A form an integral part of the 2018 annual consolidated financial statements. They present required disclosures as set out by the International Accounting Standards Board in IFRS 7, Financial Instruments – Disclosures, which permits cross-referencing between the notes to the consolidated financial statements and the MD&A. See Note 1 on page 148 and Note 5 on page 164 of the consolidated financial statements.

Adjusted results in this Enterprise-Wide Risk Management section are non-GAAP and are discussed in the Non-GAAP Measures section on page 27.

(1) Surjit Rajpal will retire at the end of January 2019. Patrick Cronin, previously Group Head, BMO Capital Markets, was appointed Chief Risk Officer, BMO Financial Group, effective November 1, 2018.

78 BMO Financial Group 201st Annual Report 2018

Risks That May Affect Future Results

Top and Emerging Risks That May Affect Future Results

BMO is exposed to a variety of evolving risks that have the potential to affect our business, the results of our operations and our financial condition. The essential tasks in our risk management process are to proactively identify, assess, monitor and manage a broad spectrum of top and emerging risks. Our top and emerging risk identification process consists of several forums for discussion with the Board, senior management and business thought leaders, and combines both bottom-up and top-down approaches in considering risk. Our assessment of top and emerging risks is used to develop action plans and stress tests related to our exposure to certain events.

In 2018, particular attention was given to the following:

Cyber Security, Information Security and Privacy Risk

Information security is integral to BMO’s business activities, brand and reputation. In the past year, cyber-attacks and privacy breaches have been significant concerns across all industries, including banking, making this a top risk for BMO. Given our pervasive use of the internet and our reliance on advanced digital technologies, we face common banking information security risks, including the threat of hacking, loss or exposure of customer or employee information, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption. We continue to increase our investments in defensive technology, talent and processes in order to prevent or detect and manage cyber security threats within BMO and at our service providers. These measures include benchmarking and review of best practices across the banking and cyber security industries, external review of incidents related to cyber security, evaluation of the effectiveness of our key controls and development of new controls, as needed, with ongoing investments in both technology and human resources. BMO performs assessments of our third-party service providers to monitor their alignment with standards, and we actively participate in thought leadership forums to learn about emerging threats. We also work with information security and industry groups to bolster our internal resources and technology capabilities in order to improve our ability to remain resilient in a rapidly evolving threat landscape.

Escalating Trade Conflicts

Notwithstanding the recent trade agreement between the United States, Canada and Mexico, support for protectionism and rising anti-globalization sentiment in the United States and other countries may slow global growth. In particular, a protracted and wide-ranging trade conflict between the United States and China could adversely affect global economic growth, and could be especially problematic for commodity-producing countries, such as Canada.

Although it is difficult to predict and mitigate the potential economic and financial consequences of trade-related events, we actively monitor global and North American trends and continually assess our portfolio and business strategies in the context of those trends. We stress test our portfolios, business plans and capital adequacy against severely adverse scenarios arising from shocks, and we establish contingency plans and mitigation strategies to address and offset the consequences of possible adverse political and/or economic developments. In addition, we have the advantage of an integrated North American strategy across diverse industries and geographies.

Our credit exposure by geographic region is provided in Tables 7, 8 and 11 to 13 on pages 132 to 137 and in Note 4 on page 157 of the consolidated financial statements.

Canadian Housing Market

While recent resale market activity suggests that the Canadian housing market is stabilizing, there are a range of economic and regulatory developments that could continue to weight on sales activity and home prices. These developments include rising interest rates and the prospect of future rate hikes by the Bank of Canada, regulatory changes in Ontario and British Columbia that are intended to prevent the Greater Toronto Area (GTA) and Greater Vancouver Area (GVA) housing markets from overheating, as well as stricter mortgage rules introduced by OSFI that took effect at the beginning of 2018. Lower levels of sales activity, particularly in the GTA and GVA, would impact mortgage origination volumes and, if property values were to decline, would reduce the value of collateral backing of our loans. It is not possible to accurately predict the full impact of these recent changes and any potential future changes, but robust economic conditions in these regions, including sustained economic growth, low unemployment and population growth, support our expectation of continued low delinquency rates for real estate loans. Our prudent lending practices, which include the personal adjudication of higher-value and higher loan-to-value transactions and the setting and close monitoring of regional, property type and customer segment concentration limits, support the soundness of our Canadian real estate lending portfolio. Further, our stress test analysis suggests that even significant price declines and recessionary economic conditions would result in manageable losses, in part due to insurance coverage and to the significant equity built up in seasoned loans.

Technology Disruption and Competition

The financial services industry continues to undergo rapid change, as technology enables new non-traditional entrants to compete in certain segments of banking, in some cases with less stringent regulatory requirements and oversight. New entrants may leverage new technologies, advanced data and analytical tools, lower costs to serve and/or faster processes in order to challenge traditional banks. These challenges could include new business models in retail payments, consumer and commercial lending and foreign exchange, as well as low-cost investment advisory services. Failure to keep pace with these new technologies and the competition they enable could impact our overall revenues and earnings if customers choose the services of these new market entrants.

While we closely monitor technology disruptors, we also continue to adapt by increasing our investment in technology and innovation in order to keep pace with evolving customer expectations. This includes improving our mobile and internet banking capabilities, building new branch formats, and refining our credit decisioning, analytical and modelling data and tools, as well as bringing new and enhanced customer solutions to market. We further mitigate this risk by offering our customers access to banking services across different channels, focusing on improving customer trust and loyalty, and leveraging current and future partnerships with fintech companies in order to deliver a valued customer experience at a competitive cost and through simplified processes. However, matching the pace of innovation exhibited by new and differently-situated competitors may require us and policy-makers to adapt at a faster pace.

BMO Financial Group 201st Annual Report 2018 79

MANAGEMENT’S DISCUSSION AND ANALYSIS

Geopolitical Risk

Despite an easing of tensions between the United States and North Korea, geopolitical risk remains elevated, as a result of strained relations among many countries, including between the United States and Russia, China and Iran, and ongoing disputes across the Middle East and North Africa. Heightened geopolitical risk can give rise to uncertainty in global investment, which may lead to market disruptions and a decrease in growth and trade. Our core banking portfolio has limited direct exposure outside North America; however, our core customers and our international strategy depend on continued growth and trade. To mitigate our exposure to geopolitical risk, we maintain a diversified portfolio which we continually monitor and test, in addition to contingency plans that we establish for possible adverse developments.

Other Factors That May Affect Future Results

General Economic Conditions and Fiscal and Monetary Policies in the Countries in which We Conduct Business

Our earnings are affected by general economic conditions and the fiscal, monetary and other economic policies in place in Canada, the United States and other jurisdictions in which we conduct business. These policies and conditions may have the effect of increasing or reducing competition, profitability and uncertainty in businesses and markets, which may affect our customers and counterparties, potentially contributing to a greater risk of default. Changes in fiscal and monetary policies are difficult to anticipate and predict. Fluctuations in interest rates can have an impact on our earnings, the value of our investments, the credit quality of lending to our customers and our counterparty exposure, and the capital markets that we access. In the current environment of ongoing late-cycle growth and low unemployment, there is a heightened risk that inflation may exceed expectations, prompting faster than expected increases in interest rates. This in turn would increase the risk of a material slowdown in growth or a recession in our Canadian and U.S. markets. Conversely, prolonged low interest rates could lead to lower overall profitability in our retail and commercial businesses.

Changes in the value of the Canadian dollar relative to the U.S. dollar could affect the results of our clients that have significant foreign earnings or input costs in CAD or USD. As BMO reports in Canadian dollars, the CAD/USD foreign exchange movements will impact our U.S. loan risk-weighted assets, and thus our capital ratio. The value of the Canadian dollar relative to USD will also affect the contribution of our U.S. operations to Canadian dollar profitability.

Hedging positions may be taken to manage interest rate exposures and partially offset the effects of CAD/USD exchange rate fluctuations on our financial results. Refer to the Foreign Exchange section on page 34, the Enterprise-Wide Capital Management section on page 69, and the Market Risk section on page 95 for a more complete discussion of our foreign exchange and interest rate risk exposures.

Regulatory Requirements

The financial services industry is highly regulated, and we have experienced changes and increased complexity in regulatory requirements, as governments and regulators around the world continue to pursue major reforms intended to strengthen the stability of the financial system and protect key markets and participants. As a result, there is the potential for higher capital requirements and additional regulatory compliance costs, which could lower our returns and affect our growth. These reforms could also affect the cost and availability of funding and the extent of our market-making activities. Regulatory reforms may also impact fees and other revenues for certain of our operating groups. In addition, differences in laws and regulations enacted by various national regulatory authorities may provide advantages to our international competitors that could affect our ability to compete and result in loss of market share. We monitor such developments, and other potential changes, such as reforms of the U.S. financial regulatory system or the potential impacts of a United Kingdom withdrawal from the European Union, so that BMO is well-positioned to respond and implement any necessary changes. We are currently working to restructure our European businesses in order to continue to service our European clients and counterparties while remaining compliant with new regulatory requirements, following the United Kingdom’s announced intention to leave the European Union, effective March 29, 2019 (Brexit). In addition to changes in our client facing elements, we are addressing aspects of Brexit that impact our staff, suppliers and access to market infrastructure.

Failure to comply with applicable legal and regulatory requirements could result in litigation, financial losses, regulatory sanctions, enforcement actions, an inability to execute our business strategies, a decline in investor and customer confidence, and damage to our reputation. Refer to the Legal and Regulatory Risk and Enterprise-Wide Capital Management sections on pages 112 and 69, respectively, for a more complete discussion of our exposure to legal and regulatory risk.

Tax Legislation and Interpretations

Legislative changes and changes in tax policy, including their interpretation by taxing authorities and the courts, may impact our earnings. Tax laws, as well as interpretations of tax laws and policy by taxing authorities, may change as a result of efforts by the G20 and the Organisation for Economic Co-operation and Development to broaden the tax base globally and improve tax-related reporting. Refer to the Critical Accounting Estimates section on page 119 for further discussion of income taxes and deferred tax assets.

Acquisitions

We conduct thorough due diligence before completing business or portfolio acquisitions. However, it is possible that we could make an acquisition that subsequently does not perform in line with our financial or strategic objectives or expectations. Our ability to successfully complete an acquisition may be subject to regulatory and shareholder approvals, and we may not be able to determine when, if or on what terms the necessary approvals will be granted. Changes in the competitive and economic environment, as well as other factors, may result in reductions in revenue, while higher than anticipated integration costs and failure to realize expected cost savings after an acquisition could also adversely affect our earnings. Integration costs may increase as a result of higher regulatory costs related to an acquisition, unanticipated costs that were not identified in the due diligence process or demands on management time that are more significant than anticipated, as well as unexpected delays in implementing certain plans that in turn lead to delays in achieving full integration. Successful post-acquisition performance depends on retaining the clients and key employees of acquired companies and on integrating key systems and processes without disruption, and there can be no assurance that we will always succeed in doing so.

80 BMO Financial Group 201st Annual Report 2018

Environmental Events

We face risks arising from environmental events, such as drought, floods, wildfires, earthquakes, and hurricanes and other storms. These events could potentially disrupt our operations, impact our customers and counterparties, and result in reduced earnings and higher losses. Factors contributing to increased environmental risks include the impacts of climate change and continued intensification of development in areas of greater environmental sensitivity. Our business continuity management provides us with the capability to restore, maintain and manage critical operations and processes in the event of a business disruption. In addition, we also support the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), and we are considering the integration of climate-related scenario analysis into our risk management and strategic processes. This includes evaluation of credit risk associated with assumptions around the global transition to a low carbon economy identified by the TCFD. The goal is to enhance our understanding of the evolving impact of risks associated with environmental events and climate change, together with possible mitigation strategies. Refer to the Environmental and Social Risk section on page 115 for a discussion of our support of the TCFD.

Critical Accounting Estimates and Accounting Standards

We prepare our consolidated financial statements in accordance with IFRS. Changes that the International Accounting Standards Board makes from time to time to these standards can be difficult to anticipate and may materially affect how we record and report our financial results. Significant accounting policies and future changes in accounting policies are discussed on page 121, as well as in Note 1 on page 148 of the consolidated financial statements.

The application of IFRS requires management to make significant judgments and estimates that affect the carrying amounts of certain assets and liabilities, certain amounts reported in net income and other related disclosures. In making these judgments and estimates, we rely on the best information available at the time. However, it is possible that circumstances may change, that new information may become available or that our models may prove to be imprecise.

Our financial results could be affected for the period during which any such new information or change in circumstances becomes apparent, and the extent of the impact could be significant. More information is included in the Critical Accounting Estimates section on page 117.

Benchmark Interest Rate Reform

The London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate, Canadian Dollar Offered Rate and other rates and indices deemed to be benchmarks have been the subject of recent national and international regulatory guidance and proposals for reform. For example, in July 2017, the Financial Conduct Authority in the United Kingdom announced that it will no longer compel banks to participate in LIBOR after 2021.

Transition efforts in connection with these reforms are complex, with significant risks and challenges. Such reforms, and any future initiatives to regulate, reform or change the manner of administration of benchmarks, could result in adverse consequences for the return on, value and market for securities and other instruments with returns that are linked to any such benchmark, including those issued by BMO or its subsidiaries. Discontinuance of, or changes to, benchmark rates as a result of these developments, along with uncertainty about the timing and manner of implementation of such changes or discontinuances, may require adjustments to agreements in which current benchmark rates are referenced by us, our clients and other market participants, as well as to our systems and processes.

Caution

The Risks That May Affect Future Results section and the remainder of this Enterprise-Wide Risk Management section contain forward-looking statements. Please see the Caution Regarding Forward Looking Statements.

Other factors beyond our control that may affect our future results are noted in the Caution Regarding Forward-Looking Statements on page 29. We caution that the preceding discussion of risks that may affect future results is not exhaustive.

Risk Management Overview

At BMO, we believe that risk management is every employee’s responsibility. We are guided by five key perspectives on risk that drive our approach to managing risk across the enterprise.

Our Approach to Risk Management

• Understand and manage

• Diversify. Limit tail risk

• Maintain strong capital and liquidity

• Optimize risk return

• Protect our reputation

Our integrated and disciplined approach to risk management is fundamental to the success of our business. All elements of our risk management framework function together in support of prudent and measured risk-taking, while striking an appropriate balance between risk and return. Our Enterprise Risk and Portfolio Management (ERPM) group develops our risk appetite, risk policies and limits, and provides independent review and oversight across the enterprise on risk-related issues in order to achieve prudent and measured risk-taking that is integrated with our business strategy.

BMO Financial Group 201st Annual Report 2018 81

MANAGEMENT’S DISCUSSION AND ANALYSIS

Framework and Risks

Culture and Conduct Framework

Our ethical culture influences how we conduct ourselves, enabling us to deliver positive outcomes for our customers and contribute to the orderly operation of financial markets. Misconduct is behaviour that falls short of legal, professional, internal conduct and ethical standards. Our management approach to culture and conduct is centred on the key themes of our people, customers and markets. We manage and mitigate the potential for misconduct through various risk management processes and procedures using their information and insights to develop an enterprise perspective.

Enterprise-Wide Risk Management Framework

Our enterprise-wide risk management framework assists the bank in managing its risk-taking activities and ensuring they remain within our risk appetite.

These risk framework elements are discussed in more detail in the sections that follow.

Risk Governance

Our enterprise-wide risk management framework is founded on a governance approach that includes a robust committee structure and a comprehensive set of corporate policies and limits, each of which is approved by the Board of Directors or its committees, as well as specific corporate standards and operating procedures. Our corporate policies outline frameworks and objectives for every significant risk type, so that risks to which the enterprise is exposed are appropriately identified, measured, managed, monitored, mitigated and reported in accordance with our risk appetite. Specific policies govern our key risks, such as credit and counterparty, market, liquidity and funding, model and operational risks. This enterprise-wide risk management framework is governed at all levels through a hierarchy of committees and individual responsibilities, as outlined in the diagram below.

Our risk management framework is reviewed on a regular basis by the Risk Review Committee of the Board of Directors in order to provide oversight and guide our risk-taking activities. In each of our operating groups, management, as the first line of defence, is responsible for governance activities and controls, and the implementation and operation of risk management processes and procedures that provide effective risk management. Enterprise Risk and Portfolio Management, as the primary second line of defence, oversees the implementation and operation of our risk management processes and procedures with a view to effectively aligning outcomes with our overall risk management framework. Individual governance committees establish and monitor further risk limits, consistent with and in furtherance of Board-approved limits.

The diagram below outlines our risk governance framework, including both the direct and administrative reporting lines.

82 BMO Financial Group 201st Annual Report 2018

In addition to the enterprise-level risk governance framework, appropriate risk governance frameworks, supported by our three lines of defence, are in place in all of our material businesses and entities.

Board of Directors is responsible for supervising the management of the business and affairs of BMO. The Board, either directly or through its committees, is responsible for oversight in the following areas: strategic planning, defining risk appetite, the identification and management of risk, capital management, fostering a culture of integrity, internal controls, succession planning and evaluation of senior management, communication, public disclosure and corporate governance.

Risk Review Committee of the Board of Directors (RRC) assists the Board in fulfilling its risk management oversight responsibilities. This includes overseeing the identification and management of BMO’s risks, including our risk culture, adherence by operating groups to risk management corporate policies and procedures, compliance with risk-related regulatory requirements and the evaluation of the Chief Risk Officer (CRO), including input into succession planning for the CRO. Our risk management framework is reviewed on a regular basis by the RRC in order to provide guidance for the governance of our risk-taking activities.

Audit and Conduct Review Committee of the Board of Directors assists the Board in fulfilling its oversight responsibilities for the integrity of BMO’s financial reporting; the effectiveness of BMO’s internal controls; the independent auditors’ qualifications, independence and performance; BMO’s compliance with legal and regulatory requirements; transactions involving related parties; conflicts of interest and confidential information; and standards of business conduct and ethics.

Chief Executive Officer (CEO) is directly accountable to the Board for all of BMO’s risk-taking activities. The CEO is supported by the CRO and the rest of Enterprise Risk and Portfolio Management.

Chief Risk Officer (CRO) reports directly to the CEO and is head of ERPM and chair of RMC. The CRO is responsible for providing independent review and oversight of enterprise-wide risks and leadership on risk issues, developing and maintaining a risk management framework and fostering a strong risk culture across the enterprise.

Risk Management Committee (RMC) is BMO management’s senior risk committee. RMC reviews and discusses significant risk issues and action plans that arise in executing the enterprise-wide strategy. RMC provides risk oversight and governance at the highest levels of management. This committee is chaired by the CRO and its members include the heads of our operating groups, the CEO and the Chief Financial Officer (CFO).

RMC Sub-Committees have oversight responsibility for the risk implications and balance sheet impacts of management strategies, governance practices, risk measurement, model risk management and contingency planning. RMC and its sub-committees provide oversight of the processes whereby the risks undertaken across the enterprise are identified, measured, managed, monitored, mitigated and reported in accordance with policy guidelines, and are held within limits and risk tolerances.

Enterprise Risk and Portfolio Management (ERPM), as the risk management second line of defence, provides comprehensive risk management oversight. It promotes consistency in risk management practices and standards across the enterprise. ERPM supports a disciplined approach to risk-taking in fulfilling its responsibilities for independent transactional approval and portfolio management, policy formulation, risk reporting, stress testing, modelling and risk education. This approach seeks to meet enterprise objectives and to verify that any accepted risks are consistent with BMO’s risk appetite.

Operating Groups are responsible for effectively managing risk by identifying, measuring, managing, monitoring, mitigating and reporting risk within their respective lines of business. They exercise business judgment and seek to ensure that effective policies, processes and internal controls are in place and that significant risk issues are reviewed with ERPM. Individual governance committees and ERPM establish and monitor further risk limits that are consistent with and subordinate to the Board-approved limits.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Three-Lines-of-Defence Operating Model

Our risk management framework is anchored in the three-lines-of-defence approach to managing risk, which is fundamental to our operating model, as described below:

• Our operating groups are the bank’s first line of defence. They are accountable for the risks arising from their businesses, activities and exposures. They are expected to pursue business opportunities within our established risk appetite and to identify, measure, manage, monitor, mitigate and report all risks in or arising from their businesses, activities and exposures. The first line discharges its responsibilities by using risk management and reporting methodologies and processes developed by the business and by the ERPM group and other Corporate Support areas, and may call on corporate functions or other service providers to help discharge these responsibilities. Businesses are responsible for establishing appropriate internal controls in accordance with our risk management framework and for monitoring the effectiveness of such controls. Such processes and controls help ensure businesses act within their delegated risk-taking authority and risk limits as set out in corporate policies and our Risk Appetite Framework.

• The second line of defence is comprised of the ERPM group and, in certain targeted areas, Corporate Support areas. The second line provides independent oversight, effective challenge and independent assessment of risks and risk management practices, including transaction, product and portfolio risk management decisions, processes and controls in the first line of defence. The second line establishes enterprise-wide risk management policies, infrastructure, processes, methodologies and practices that the first and second lines use to identify, assess, manage and monitor risks across the enterprise.

• Corporate Audit Division is the third line of defence. It provides an independent assessment of the effectiveness of internal controls across the enterprise, including controls that support our risk management and governance processes.

Risk Culture

At BMO, we believe that risk management is the responsibility of every employee within the organization. This key tenet shapes and influences our corporate culture and is evident in the actions and behaviours of our employees and leaders as they identify, interpret and discuss risks, and make decisions that seek to balance risks and opportunities and optimize risk-adjusted returns. Each member of our senior management plays a critical role in fostering a strong risk culture among all employees by effectively communicating this responsibility, by the example of their own actions and by establishing and enforcing compensation plans and other incentives that are designed to encourage and reward appropriate behaviours. Our risk culture is deeply embedded within our policies, business processes, risk management framework, risk appetite, limits and tolerances, capital management and compensation practices, and is evident in every aspect of the way we operate across the enterprise. We actively solicit feedback on the effectiveness of our risk culture, including through standardized and anonymous employee surveys.

Our risk culture is grounded in a “Being BMO” approach to risk management that encourages openness, constructive challenge and personal accountability. “Being BMO” values include integrity and a responsibility to make tomorrow better, and “Being BMO” behaviours include balancing risk and opportunity, taking ownership, following through on commitments, speaking up and being candid. Timely and transparent sharing of information is also essential in engaging stakeholders in key decisions and strategy discussions, thereby bringing added rigour and discipline to our decision-making. This not only leads to the timely identification, escalation and resolution of issues, but also encourages open communication, independent challenge and an understanding of the key risks faced by our organization, so that our employees are equipped and empowered to make decisions and take action in a coordinated and consistent manner, supported by a strong monitoring and control framework. Our governance and leadership forums, committee structures, learning curriculums and proactive communication also reinforce and support our risk culture.

Certain elements of our risk culture are embedded across the enterprise, and these include:

• Risk appetite – promotes a clear understanding of the most prevalent risks that our businesses face, shapes and informs business strategies to align them with our risk appetite, and provides a control and early warning framework through our key risk metrics, thereby leading to sound business decision-making and execution, supported by a strong monitoring framework.

• Communication and escalation channels – encourage engagement and sharing of information between ERPM and the operating groups, leading to greater transparency and open and effective communication. Our risk culture also encourages the escalation of concerns associated with potential or emerging risks to senior management, so that they can be evaluated and appropriately addressed.

• Compensation philosophy – pay is aligned with prudent risk-taking, so that compensation and other incentives reward the appropriate use of capital and respect for the rules and principles of our enterprise-wide risk management framework and do not encourage excessive risk-taking. Our risk managers have input into the design of incentive programs that may have an effect on risk-taking, and provide input into the performance assessment of employees who take material risks or who are responsible for losses or events that give rise to an unexpected risk of loss.

• Training and education – our programs are designed to foster a deep understanding of BMO’s capital and risk management frameworks across the enterprise, providing employees and management with the tools and awareness they need to fulfill their responsibilities for independent oversight, regardless of their role in the organization. Our education strategy has been developed in partnership with BMO’s Institute for Learning, our risk management professionals, external risk experts and teaching professionals.

• Rotation programs – two-way rotation allows employees to transfer between ERPM and the operating groups, effectively embedding our strong risk culture across the enterprise and ensuring that many of our risk management professionals have a practical grounding in our business activities.

84 BMO Financial Group 201st Annual Report 2018

Risk Appetite Framework

Our Risk Appetite Framework consists of our Risk Appetite Statement and key risk metrics, and is supported by corporate policies, standards and guidelines, including the related limits, concentration levels and controls defined therein. Our risk appetite defines the amount of risk that BMO is willing to assume given our guiding principles and capital capacity, thereby supporting sound business initiatives, appropriate returns and targeted growth. Our risk appetite is integrated into our strategic and capital planning processes and performance management system. On an annual basis, senior management recommends our Risk Appetite Statement and key risk metrics to the RMC and the Board of Directors for approval. Our Risk Appetite Statement is articulated and applied consistently across the enterprise, with key businesses and entities developing their own respective risk appetite statements within this framework. Among other things, our approach to risk management through our Risk Appetite Statement requires BMO to:

Understand and Manage Risk

• Take only those risks that are transparent, understood, measured, managed and monitored

• Incorporate risk measures and risk-adjusted returns into our performance management system, including an assessment of performance against our risk appetite and return objectives in compensation decisions

• Protect the assets of BMO and BMO’s clients by setting and maintaining prudent risk limits and strong operational risk controls

Protect our Reputation

• Be guided in everything we do by principles of honesty, integrity and respect, as well as high ethical standards

• Maintain effective policies, procedures, guidelines, standards and internal controls, and provide training and management that will guide the business practices and risk-taking activities of all employees so that they are able to optimize risk-adjusted returns while also adhering to all legal and regulatory obligations, thus protecting BMO’s reputation

Diversify. Limit Tail Risk

• Use economic capital, regulatory capital and stress testing methodologies to understand our risks and guide our risk-return assessments

• Limit exposure to low-frequency, high-severity events that could jeopardize BMO’s credit ratings, capital or liquidity position, or reputation

Maintain Strong Capital and Liquidity

• Maintain strong capital, liquidity and funding positions that meet or exceed regulatory requirements and the expectations of the market

• Maintain a robust recovery framework that enables an effective and efficient response in an extreme crisis

• Maintain an investment grade credit rating at a level that allows competitive access to funding

Optimize Risk Return

• Subject new products and initiatives to rigorous review and approval, and assess whether new acquisitions provide a good strategic, financial and cultural fit, and also have a high likelihood of creating value for our shareholders

• Set capital limits based on our risk appetite and strategy, and require our lines of business to optimize risk-adjusted returns within those limits

Risk Limits

Our risk limits reflect our Risk Appetite Framework, and inform our business strategies and decisions. In particular, we consider risk diversification, exposure to loss and risk-adjusted returns when setting limits. These limits are reviewed and approved by the Board of Directors and/or management committees and include:

• Credit and Counterparty Risk – limits on group and single-name exposures and material country, industry and portfolio/product segments

• Market Risk – limits on economic value and earnings exposures to stress scenarios and significant movements, as well as limits on value at risk and stress related to trading and underwriting activities

• Insurance Risk – limits on policy exposures and reinsurance arrangements

• Liquidity and Funding Risk – limits on minimum levels of liquid assets and maximum levels of asset pledging and wholesale funding, as well as limits related to liability diversification and credit and liquidity facility exposures

• Operational Risk – limits on specific operational risks and key risk metrics for measuring operational risks

• Model Risk – limits on model approval and modification exceptions, material deficiency extensions and scheduled review extensions

The Board of Directors, after considering recommendations from the RRC and the RMC, annually reviews and approves key risk limits and then delegates overall authority for these limits to the CEO. The CEO in turn delegates more specific authorities to the senior executives of the operating groups (first line of defence), who are responsible for the management of risk in their respective areas, and to the CRO (second line of defence). These delegated authorities allow risk officers to set risk tolerances, approve geographic and industry sector exposure limits within defined parameters, and establish underwriting and inventory limits for trading and investment banking activities. The criteria under which more specific authorities may be delegated across the organization, as well as the requirements relating to documentation, communication and monitoring of those specific delegated authorities, are set out in corporate policies and standards.

Risk Identification, Review and Approval

Risk identification is an essential step in recognizing the key inherent risks that we face, understanding the potential for loss and then acting to mitigate this potential. A Risk Taxonomy is maintained to comprehensively identify and manage key risks, supporting the implementation of the bank’s Risk Appetite Framework and assisting in identifying the primary risk categories for which economic capital is reported and stress capital consumption is estimated. Our enterprise-wide and targeted (industry/portfolio-specific or ad hoc) stress testing processes have been developed to assist in identifying and evaluating these risks. Risk review and approval processes are established based on the nature, size and complexity of the risks involved. Generally, this involves a formal review and approval by either an individual or a committee that is independent of the originator. Delegated authorities and approvals by category are outlined below.

• Portfolio Transactions – transactions are approved through risk assessment processes for all types of transactions at all levels of the enterprise, which include operating group recommendations and ERPM approval of credit risk, and transactional and position limits for market risk.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

• Structured Transactions – new structured products and transactions with significant legal and regulatory, accounting, tax or reputation risk are reviewed by the Reputation Risk Management Committee or the Trading Products Risk Committee, as appropriate, and are also reviewed through our operational risk management process if they involve structural or operational complexity that may give rise to operational risk.

• Investment Initiatives – documentation of risk assessments is formalized through our investment spending approval process, which is reviewed and approved by Corporate Support areas based on the initiative’s investment spend and inherent risk.

• New Products and Services – policies and procedures for the approval of new or modified products and services offered to our customers are the responsibility of the first line of defence, including appropriate senior business leaders, and are reviewed and approved by subject matter experts and senior managers in Corporate Support areas, as well as by other senior management committees, including the Operational Risk Committee and Reputation Risk Management Committee, as appropriate.

Risk Monitoring

Enterprise-level risk transparency and monitoring and associated reporting are critical components of our risk management framework and corporate culture that allow senior management, committees and the Board of Directors to exercise their business management, risk management and oversight responsibilities at the enterprise, operating group and key legal entity levels. Internal reporting includes a synthesis of the key risks that the enterprise currently faces, along with associated metrics. Our reporting highlights our most significant risks, including assessments of our top and emerging risks, to provide the Board of Directors, its committees and any other appropriate executive and senior management committees with timely, actionable and forward-looking risk reporting. This reporting includes supporting metrics and materials to facilitate assessment of these risks relative to our risk appetite and the relevant limits established within our Risk Appetite Framework.

On a regular basis, reporting on risk issues is also provided to stakeholders, including regulators, external rating agencies and our shareholders, as well as to others in the investment community.

Risk-Based Capital Assessment

Two measures of risk-based capital are used by BMO: economic capital and advanced-approach regulatory capital. Both are aggregate measures of the risk that we take on in pursuit of our financial objectives, and they enable us to evaluate returns on a risk-adjusted basis. Our operating model provides for the direct management of each type of risk, as well as the management of all material risks on an integrated basis. Measuring the economic profitability of transactions or portfolios involves a combination of both expected and unexpected losses to assess the extent and correlation of risk before authorizing new exposures. Both expected and unexpected loss measures for a transaction or a portfolio reflect current market conditions, the inherent risk in the position and, as appropriate, its credit quality. Risk-based capital methods and material models are reviewed at least annually and, if appropriate, are recalibrated or revalidated. Our risk-based capital models provide a forward-looking estimate of the difference between our maximum potential loss in economic (or market) value and our expected loss, measured over a specified time interval and using a defined confidence level.

Stress Testing

Stress testing is a key element of our risk and capital management frameworks. It is integrated into our enterprise and group risk appetite statements and embedded in our management processes. To evaluate our risks, we regularly test a range of scenarios, which vary in frequency, severity and complexity, in our portfolios and businesses and across the enterprise. In addition, we participate in regulatory stress tests in multiple jurisdictions. Governance of the stress testing framework resides with senior management, including the Enterprise Stress Testing Committee. This committee is comprised of business, risk and finance executives, and is accountable for reviewing and challenging enterprise-wide scenarios and stress test results. Stress testing and enterprise-wide scenarios associated with the Internal Capital Adequacy Assessment Process (ICAAP), including recommendations for actions that the enterprise could take in order to manage the impact of a stress event, are established by senior management and presented to the Board of Directors. Stress testing associated with the Comprehensive Capital Analysis and Review (CCAR) and the mid-year Dodd-Frank Act Stress Test (DFAST) – which are U.S. regulatory requirements for our subsidiary BMO Financial Corp. (BFC) – is similarly governed at the BFC level.

Quantitative models and qualitative approaches are utilized to assess the impact of changes in the macroeconomic environment on our income statement and balance sheet and the resilience of our capital over a forecast horizon. Models utilized for stress testing are approved and governed under the Model Risk Management framework, and are used to establish a better understanding of our risks and to test our capital adequacy.

Enterprise Stress Testing

Enterprise stress testing supports our ICAAP and target-setting through analysis of the potential effects of low-frequency, high-severity events on our balance sheet, earnings, and liquidity and capital positions. Scenario selection is a multi-step process that considers the enterprise’s material and idiosyncratic risks and the potential impact of new or emerging risks on our risk profile, as well as the macroeconomic environment. Scenarios may be defined by senior management or regulators. The economic impacts are determined by our Economics group. The Economics group does this by translating the scenarios into macroeconomic and market variables that include, but are not limited to, GDP growth, yield curve estimates, unemployment rates, real estate prices, stock index growth and changes in corporate profits. These macroeconomic variables drive our stress loss models and the qualitative assessments that determine our estimated stress impacts. The scenarios are used by our operating, risk and finance groups to assess a broad range of financial impacts that could arise under a specific stress and the ordinary course and extraordinary actions that would be anticipated in response to that stress.

Stress test results, including mitigating actions, are benchmarked and challenged by relevant business units and senior management, including the Enterprise Stress Testing Committee.

Targeted Portfolio and Ad Hoc Stress Testing

Our stress testing framework integrates stress testing at the line of business, portfolio, industry, geographic and product level and embeds it in strategy, business planning and decision-making. Targeted portfolio, industry and geographic analysis is conducted by risk management and by the lines of business to test risk appetite, limits, concentration and strategy. Ad hoc stress testing is conducted in response to changing economic or market conditions and to assess business strategies.

86 BMO Financial Group 201st Annual Report 2018

Risk Types

Our enterprise-wide risk management framework provides for the robust management of individual risk types that could have a material impact on our business. These risk types are all managed with a similar focus on the effective application of our risk management processes and procedures. These risk types are shown below, with risk types that lend themselves to management by way of quantitative analysis presented above those risks primarily managed through more qualitative techniques. Details on each of these risk types are provided starting on page 87.

We leverage our enterprise-wide risk management framework, including our policy framework and corresponding risk limits or risk tolerance guidance, to manage each of these risk types within our risk appetite through our first-line and second-line-of-defence business and risk management processes. As discussed below, management oversight of risk types is provided by management and Board committees, supported by a robust control framework.

Credit and Counterparty Risk

Credit and counterparty risk is the potential for loss due to the failure of a borrower, endorser, guarantor or counterparty to repay a loan or honour another predetermined financial obligation.

Credit and counterparty risk underlies every lending activity that BMO enters into, and also arises in the holding of investment securities, transactions related to trading and other capital markets products and activities related to securitization. Credit risk is the most significant measurable risk BMO faces. Proper management of credit risk is essential to our success, since failure to effectively manage credit risk could have an immediate and significant impact on our earnings, financial condition and reputation.

Credit and Counterparty Risk Governance

The objective of our credit risk management framework is to ensure that all material credit risks to which the enterprise is exposed are identified, measured, managed, monitored and reported. The RRC has oversight of the management of all material risks that we face, including the credit risk management framework. BMO’s credit risk management framework incorporates governing principles that are defined in a series of corporate policies and standards and are applied to more specific operating procedures. These are reviewed on a regular basis and modified when necessary to keep them current and consistent with BMO’s risk appetite. The structure, limits (both notional and capital-based), collateral requirements, monitoring, reporting and ongoing management of our credit exposures are all governed by these credit risk management principles.

Lending officers in the operating groups are responsible for recommending credit decisions based on the completion of appropriate due diligence, and they assume accountability for the risks. With limited exceptions, credit officers in ERPM approve all credit transactions and are accountable for providing an objective independent assessment of the lending recommendations and risks assumed by the lending officers. All of these skilled and experienced individuals in the first and second lines of defence are subject to a rigorous lending qualification process and operate in a disciplined environment with clear delegation of decision-making authority, including individually delegated lending limits, which are reviewed annually. The Board annually reviews our Credit Risk Management Policy and delegates to the CEO discretionary lending limits for further specific delegation to senior officers. Credit decision-making is conducted at the management level appropriate to the size and risk of each transaction, in accordance with comprehensive corporate policies, standards and procedures governing the conduct of activities in which credit risk arises. Corporate Audit Division reviews and tests management processes and controls and samples credit transactions in order to assess adherence to acceptable lending standards within the enterprise risk appetite, as well as compliance with all applicable governing policies, standards and procedures.

All credit risk exposures are subject to regular monitoring. Performing accounts are reviewed on a regular basis, with most commercial and corporate accounts reviewed no less frequently than annually. The frequency of review increases in accordance with the likelihood and size of potential credit losses, and deteriorating higher-risk situations are referred to specialized account management groups for closer attention, when appropriate. In addition, regular portfolio and sector reviews are carried out, including stress testing and scenario analysis based on current, emerging or prospective risks. Reporting is provided at least quarterly, and more frequently where appropriate, to RRC and senior management committees in order to keep them informed of credit risk developments in our portfolios, including changes in credit risk concentrations, watchlist accounts, impaired loans, provisions for credit losses, negative credit migration and significant emerging credit risk issues. This facilitates the RRC and senior management committees to effect any measures they may decide to take.

Counterparty credit risk (CCR) creates a bilateral risk of loss because the market value of a transaction can be positive or negative for either counterparty. CCR exposures are also subject to the credit oversight, limit framework and approval processes outlined above. However, given the nature of the risk, CCR exposures are also monitored through the market risk framework and many are collateralized. In order to reduce our exposure to CCR, we often use a regulated central counterparty (CCP) that intermediates between counterparties for contracts in financial markets. CCPs aim to mitigate risk through the use of margin requirements (both initial and variation) and a default management process, including a default fund and other resources. Our exposures to CCPs are subject to the same credit risk governance, monitoring and rating framework we apply to all other corporate accounts.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Credit and Counterparty Risk Management

Collateral Management

Collateral is used for credit risk mitigation purposes to minimize losses that would otherwise be incurred in the event of a default. Depending on the type of borrower or counterparty, the assets available and the structure and term of the credit obligations, collateral can take various forms. For corporate and commercial borrowers, collateral can take the form of pledges of the assets of a business, such as accounts receivable, inventory, machinery, real estate, or personal assets pledged in support of guarantees. For trading counterparties, we may enter into legally enforceable netting agreements for on-balance sheet credit exposures, when possible. In our securities financing transaction business (including repurchase agreements and securities lending), we take eligible financial collateral that we control and can readily liquidate.

Collateral for our derivatives trading counterparty exposures is primarily comprised of cash and high-quality liquid securities (U.S. and Canadian treasury securities, U.S. agency securities, Canadian provincial government securities and certain high-quality European sovereign securities) that are monitored and revalued on a daily basis. Collateral is obtained under the contractual terms of standardized industry documentation. With limited exceptions, we utilize the International Swaps and Derivatives Association Inc. Master Agreement, frequently with a Credit Support Annex, to document our collateralized trading relationships with our counterparties for over-the-counter (OTC) derivatives that are not centrally cleared. Credit Support Annexes entitle a party to demand collateral (or other credit support) when its OTC derivatives exposure to another party exceeds an agreed threshold. Collateral transferred can include an independent initial margin and/or variation margin. Credit Support Annexes contain, among other things, provisions setting out acceptable types of collateral and a method for their valuation (discounts are often applied to the market values), as well as thresholds, whether or not the collateral can be re-pledged by the recipient and how interest is to be calculated.

Many G20 jurisdictions are implementing new regulations that require certain counterparties with significant OTC derivatives exposures to post or collect prescribed types and amounts of collateral for uncleared OTC derivatives transactions. For additional discussion, see Legal and Regulatory Risk – Derivatives Reform on page 114.

To document our contractual securities financing relationships with our counterparties, we utilize master repurchase agreements for repurchase transactions and for securities lending transactions, we utilize master securities lending agreements.

On a periodic basis, collateral is subject to revaluation specific to asset type. For loans, the value of collateral is initially established at the time of origination, and the frequency of revaluation is dependent on the type of collateral. For commercial real estate collateral, a full external appraisal of the property is typically obtained at the time of loan origination, unless the exposure is below a specified threshold amount, in which case an internal evaluation and a site inspection are conducted. Internal evaluations may consider property tax assessments, purchase prices, real estate listings or realtor opinions. The case for an updated appraisal is reviewed annually, with consideration given to the borrower risk rating, existing tenants and lease contracts, as well as current market conditions.

When a commercial loan is determined to be impaired, a thorough review of collateral is conducted and updated external appraisals or valuations may be obtained. Quarterly reviews are then completed and collateral positions are reviewed and updated as deemed appropriate.

In Canada, for residential real estate that has a loan-to-value (LTV) ratio of less than 80%, an external property appraisal is routinely obtained at the time of loan origination. We may use an external service provided by Canada Mortgage and Housing Corporation or an automated valuation model provided by our appraisal management company to assist with determining either the current value of a property or the necessity of a full property appraisal.

For insured mortgages in Canada with a high LTV ratio (greater than 80%), we determine the value of the property through the default insurer.

Portfolio Management and Concentrations of Credit and Counterparty Risk

BMO’s credit risk governance policies require an acceptable level of diversification to help ensure we avoid undue concentrations of credit risk. Concentrations of credit risk may exist if a number of clients are engaged in similar activities, are located in the same geographic region or have similar economic characteristics such that their ability to meet contractual obligations could be similarly affected by changes in economic, political or other conditions. Limits may be specified for several portfolio dimensions, including industry, specialty segment (e.g., hedge funds and leveraged lending), country, product and single-name concentrations. The diversification of our credit exposure may be supplemented by the purchase or sale of credit protection through guarantees, insurance or credit default swaps.

Our credit assets consist of a well-diversified portfolio representing millions of clients, the majority of them consumers and small to medium-sized businesses. From an industry viewpoint, our most significant exposure at October 31, 2018 was to individual consumers, comprising $238,400 million ($223,962 million in 2017).

Wrong-way Risk

Wrong-way risk occurs when our exposure to a counterparty or the magnitude of our potential loss is highly correlated with the counterparty’s probability of default. There is specific wrong-way risk, which arises when the credit quality of the counterparty and the market risk factors affecting collateral or other risk mitigants display a high correlation, and general wrong-way risk, which arises when the credit quality of the counterparty, for non-specific reasons, is highly correlated with macroeconomic or other factors that affect the value of the mitigant. Our procedures require specific wrong-way risk be identified in transactions and accounted for in the assessment of risk. Stress testing of replacement risk is conducted monthly and can be used to identify existing or emerging concentrations of general wrong-way risk in our portfolios.

Credit and Counterparty Risk Measurement

We quantify credit risk at both the individual borrower or counterparty level and the portfolio level. In order to limit earnings volatility, manage expected credit losses and minimize unexpected losses, credit risk is assessed and measured using the following risk-based parameters:

Exposure at Default (EAD) represents an estimate of the outstanding amount of a credit exposure at the time a default may occur.

Loss Given Default (LGD) is a measure of our economic loss, such as the amount that may not be recovered in the event of a default, presented as a proportion of the exposure at default.

Probability of Default (PD) represents the likelihood that a borrower or counterparty will go into default over a one-year time horizon.

Expected Loss (EL) is a measure representing the loss that is expected to occur in the normal course of business in a given period of time. EL is calculated as a function of EAD, LGD and PD.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

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For inclusion in regulatory capital calculations, OSFI permits three approaches for the measurement of credit risk: Standardized, Foundation Internal Ratings Based and Advanced Internal Ratings Based (AIRB). We primarily use the AIRB approach to determine credit RWA in our portfolios, including portfolios of our subsidiary BMO Financial Corp. Exposures under AIRB capital treatment account for 94% of total EAD of Wholesale and Retail portfolios, and the remaining is under the Standardized Approach. Waivers and exemptions to existing AIRB models are subject to OSFI’s approval. The risk-weighted assets determined through this and other advanced approaches are currently subject to a Basel II standardized floor, as well as regulatory floor factor reductions. The Basel III Standardized Approach is currently being used for regulatory capital calculations related to the acquired Marshall & Ilsley Corporation and BMO Transportation Finance portfolios, and for certain other exposures that are considered to be immaterial. We continue to transition all material exposures in these portfolios to the AIRB Approach. For securitization exposures, we apply the Basel Hierarchy of Approaches, including the Supervisory Formula Approach (SFA) and External Credit Assessment (ECA), as well as an internal credit assessment under our standard credit risk management practices.

Our regulatory capital and economic capital frameworks both use EAD to assess credit and counterparty risk. Exposures are classified as follows:

• Drawn loans include loans, acceptances, deposits with regulated financial institutions, and certain securities. For off-balance sheet amounts and undrawn amounts, EAD includes an estimate of any further amounts that may be drawn at the time of default.

• Undrawn commitments cover all unutilized authorizations associated with the drawn loans noted above, including those which are unconditionally cancellable. EAD for undrawn commitments is model-generated, based on internal empirical data.

• OTC derivatives are those in our proprietary accounts that attract credit risk in addition to market risk. EAD for OTC derivatives is equal to the positive replacement cost, after considering netting, plus any potential credit exposure amount.

• Other off-balance sheet exposures include items such as guarantees, standby letters of credit and documentary credits. EAD for other off-balance sheet items is based on management’s best estimate.

• Repo-style transactions include repos, reverse repos and securities lending transactions, which represent both asset and liability exposures. EAD for repo-style transactions is the calculated exposure, net of collateral.

• Capital is calculated based on exposures that, where applicable, have been redistributed to a more favourable PD band, LGD or a different Basel asset class as a result of applying credit risk mitigation and considering credit risk mitigants, including collateral and netting.

Total non-trading exposures at default by industry sector, as at October 31, 2018 and 2017, based on the Basel III classifications are as follows:

(Canadian $ in millions)	Drawn				Commitments (undrawn)				OTC derivatives				Other off-balance sheet items				Repo-style transactions				Total (1)
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Financial institutions		102,552		89,681		21,741		19,457		1,649		1,474		5,016		4,137		177,094		139,187		308,052		253,936
Governments		44,552		36,829		2,118		2,243		1		–		667		682		8,401		10,626		55,739		50,380
Manufacturing		22,580		19,737		13,490		12,258		10		9		1,396		1,360		–		–		37,476		33,364
Real estate		31,534		26,991		8,170		6,472		1		–		820		829		–		–		40,525		34,292
Retail trade		19,961		18,242		3,617		3,410		–		–		559		523		–		–		24,137		22,175
Service industries		39,067		34,723		12,666		11,207		1		1		2,389		2,831		–		–		54,123		48,762
Wholesale trade		14,659		11,440		4,531		4,675		2		1		436		481		–		–		19,628		16,597
Oil and gas		9,131		8,185		10,410		7,706		–		–		1,804		1,496		–		–		21,345		17,387
Individual		190,688		180,612		47,586		43,223		–		–		126		127		–		–		238,400		223,962
Others (2)		35,617		35,523		18,197		15,709		88		3		6,474		6,617		–		–		60,376		57,852
Total exposure at default		510,341		461,963		142,526		126,360		1,752		1,488		19,687		19,083		185,495		149,813		859,801		758,707

(1) Credit exposure excluding equity, securitization, trading book and other assets such as non-significant investments, goodwill, deferred tax asset and intangibles.

(2) Includes industries having a total exposure of less than 2%.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Risk Rating Systems

BMO’s risk rating systems are designed to assess and measure the risk of any exposure.

Credit risk-based parameters are reviewed, validated and monitored regularly. The monitoring is on a quarterly basis for both the wholesale and retail models. Please refer to pages 111 to 112 for a discussion of our model risk mitigation processes.

Retail (Consumer and Small Business)

The retail portfolios are comprised of a diversified group of individual customer accounts and include residential mortgages, personal loans, credit cards, auto loans and small business loans. These loans are managed in pools of homogeneous risk exposures for risk rating purposes. Decision support systems are developed using established statistical techniques and expert systems for underwriting and monitoring purposes. Adjudication models, behavioural scorecards, decision trees and expert knowledge are combined to generate optimal credit decisions in a centralized and automated environment.

The retail risk rating system assesses risk based on individual loan characteristics. BMO has a range of internally developed PD, LGD and EAD models for each of the major retail portfolios. The major product lines within each of the retail risk areas are modelled separately, so that the risk-based parameters capture the distinct nature of each product. The models, in general, are designed based on internal data recorded over a period of more than seven years, and adjustments are made at the parameter level to account for any uncertainty. The retail parameters are tested and calibrated on an annual basis, if required, to incorporate additional data points in the parameter estimation process, ensuring that the most recent experience is incorporated. Our largest retail portfolios are the Canadian mortgage, Canadian home equity line of credit and Canadian retail credit card portfolio.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 89

MANAGEMENT’S DISCUSSION AND ANALYSIS

PD is the probability that an entity and/or credit facility will default within the next 12 months and is expressed as a percentage between 0% and 100%. The rating philosophy aligns each exposure to a homogenous PD pool with a current view of its default risk over the next 12 months and incorporates a future outlook beyond the 12-month period by calibrating the PD estimates to reflect long-run historical experience.

LGD is the amount of economic loss that BMO anticipates it may incur on a credit facility or pool as a result of default. BMO uses the economic LGD calculation, which discounts future recovery payments to the time of default, including collection costs. For capital purposes, the estimates are calibrated to reflect a downturn scenario.

EAD is the portion of a credit facility that is anticipated to be outstanding upon the occurrence of default. It is defined as the balance at default divided by the credit limit at the beginning of the year. The credit conversion factor (CCF), the undrawn factor, is the ratio of the additional amount drawn during the period from the beginning of the year to default over the undrawn amount at the beginning of the year. For non-revolving products, such as mortgages, EAD is equal to 100% of the current outstanding balance and has no undrawn component. For capital purposes, EAD and CCF estimates are calibrated to reflect a downturn scenario.

Retail Credit Probability of Default Bands by Risk Rating

Risk profile	Probability of default band
Exceptionally low	£ 0.05%
Very low	> 0.05% to 0.20%
Low	> 0.20% to 0.75%
Medium	> 0.75% to 7.00%
High	> 7.00% to 99.99%
Default	100%

Wholesale (Corporate, Commercial, Bank and Sovereign)

Within our wholesale portfolios, we utilize an enterprise-wide risk rating framework that is applied to all our sovereign, bank, corporate and commercial counterparties. One key element of this framework is the assignment of appropriate borrower or counterparty risk ratings (BRRs). BMO has a range of internally designed general and sector-specific BRR models, as well as portfolio-level LGD and EAD models for each of the corporate, commercial, bank and sovereign portfolios.

The BRR models capture the key financial and non-financial characteristics of the borrowers and generate a borrower-level rating that reflects the ranking ordering of the default risk. The models are primarily designed by using internal data, supplemented with judgment as necessary, for low default portfolios. BRRs are assessed and assigned at the time of loan origination, and reassessed when borrowers request changes to credit facilities or when events trigger a review, such as an external rating change or covenant breach. BRRs are reviewed no less frequently than annually, and more frequent reviews are conducted for borrowers with less acceptable risk ratings. The assigned ratings are mapped to a PD over a one-year time horizon. As a borrower migrates between risk ratings, the PD associated with the borrower changes.

BMO employs a master scale with 14 BRRs above default, and PDs are assigned to each rating within an asset class to reflect the long-run average of one-year default rates. PD estimates are updated annually and recalibrated, as required, to ensure alignment with long-run default rates over the economic cycle, supplemented by external benchmarking, as necessary.

An LGD estimate is a measure of the potential economic loss that could be incurred for a facility if the borrower were to default during a period of economic distress. The LGD model captures the priority of claim, collateral, product and sector characteristics of the credit facility extended to a borrower, and generates a facility-level LGD estimate.

An EAD estimate is the portion of a credit facility that is anticipated to be outstanding upon the occurrence of default. The model captures the facility type, sector and facility utilization rate characteristics of the credit facility extended to a borrower and generates a facility-level EAD estimate. The EAD credit conversion factor is calculated for eligible facilities by comparing usage amounts at time of default and one year prior to default. The authorization and drawn amounts, one year prior to default, are used to split each facility into its respective drawn and undrawn portions, where applicable.

LGD and EAD models have been developed for each asset class using internal data from a period of more than seven years that includes at least one full economic cycle, and results are benchmarked using external data, when necessary. For capital purposes, the models are calibrated to reflect a downturn scenario. The LGD and EAD estimates are updated annually and recalibrated as required by comparing the estimates to observed historical experience.

As demonstrated in the table below, our internal risk rating system corresponds in a logical manner to those of external rating agencies.

Wholesale Borrower Risk Rating Scale

BMO rating	Moody’s Investors Service implied equivalent	Standard & Poor’s implied equivalent
Acceptable
I-1 to I-3	Aaa to Aa3	AAA to AA-
I-4 to I-5	A1 to Baa1	A+ to BBB+
I-6 to I-7	Baa2 to Baa3	BBB to BBB-
S-1 to S-2	Ba1 to Ba2	BB+ to BB
S-3 to S-4	Ba3 to B1	BB- to B+
Watchlist
P-1 to P-3	B2 to Ca	B to CC
Default / Impaired
T1, D-1 to D-4	C	C to D

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

90 BMO Financial Group 201st Annual Report 2018

Credit Quality Information

Portfolio Review

Total enterprise-wide credit risk exposures were $860 billion at October 31, 2018, comprised of $445 billion in Canada, $347 billion in the United States and $68 billion in other jurisdictions. This represents an increase of $101 billion or 13% from the prior year. BMO’s loan book continues to be well-diversified by industry and geographic region. Gross loans and acceptances increased $27 billion or 7% from the prior year to $404 billion at October 31, 2018. The geographic mix of our Canadian and U.S. portfolios represented 65.1% and 32.5% of total loans, respectively, compared with 66.3% and 30.6% in 2017. Our loan portfolio is well-diversified, with the consumer loan portfolio representing 47.3% of the total portfolio, a decrease from 49.2% in 2017, and business and government loans representing 52.7% of the total portfolio, up from 50.8% in 2017.  

Loan Maturities and Interest Rate Sensitivity

The following table presents gross loans and acceptances by contractual maturity and by country of ultimate risk:

(Canadian $ in millions)	1 year or less				Over 1 year to 5 years				Over 5 years				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Canada
Consumer		54,375		55,568		109,991		106,023		4,199		4,349		168,565		165,940
Commercial and corporate (excluding real estate)		57,530		49,693		16,438		14,699		1,750		1,367		75,718		65,759
Commercial real estate		7,397		6,226		10,143		8,997		1,275		1,453		18,815		16,676
United States		33,688		33,382		71,928		61,394		25,955		20,947		131,571		115,723
Other countries		8,628		11,184		624		920		294		684		9,546		12,788
Total		161,618		156,053		209,124		192,033		33,473		28,800		404,215		376,886

The following table presents net loans and acceptances by interest rate sensitivity:

(Canadian $ in millions)	2018		2017
Fixed rate		193,661		190,254
Floating rate		190,330		168,253
Non-interest sensitive (1)		18,585		16,546
Total		402,576		375,053

(1) Non-interest sensitive is comprised of customers’ liability under acceptances.

Further details of our loan book, including detailed breakdowns by industry and geographic region, can be found in Tables 7 to 15 of the Supplemental Information section on pages 132 to 138. Details of our credit exposures are presented in Note 4 on page 157 of the consolidated financial statements.

Real Estate Secured Lending

Residential mortgage and home equity line of credit (HELOC) exposures continue to be of interest in the current environment. BMO regularly performs stress testing on its residential mortgage and HELOC portfolios to evaluate the potential effects of high-impact events. These stress tests incorporate scenarios ranging from moderately to severely adverse. The credit losses forecast in these tests vary with the severity of the scenario and are considered to be manageable.

Provision for Credit Losses (PCL)

Total PCL of $662 million in 2018 decreased 11% from $746 million in 2017. Detailed discussions of our PCL, including historical trends in PCL, are provided on page 40, in Table 15 on page 138 and in Note 4 on page 157 of the consolidated financial statements.

Gross Impaired Loans (GIL)

Total GIL of $1,936 million in 2018 decreased 13% from $2,220 million in 2017, with the largest decrease in impaired loans in service industries and the oil and gas sector. GIL as a percentage of gross loans and acceptances also decreased to 0.48%, compared with 0.59% in 2017.

Factors contributing to the change in GIL are outlined in the table below. Loans classified as impaired during the year decreased to $2,078 million from $2,193 million in 2017, driven by lower impaired loan formations in the transportation and services industries. On a geographic basis, Canada accounted for the majority of impaired loan formations, comprising 55.7% of total formations in 2018, compared with 44.6% in 2017. Detailed breakdowns of impaired loans by geographic region and industry can be found in Table 11 of the Supplemental Information section on page 134 and in Note 4 on page 157 of the consolidated financial statements.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 91

MANAGEMENT’S DISCUSSION AND ANALYSIS

Changes in Gross Impaired Loans and Acceptances (1)

(Canadian $ in millions, except as noted) For the year ended October 31	2018			2017			2016
GIL, beginning of year		2,220			2,383			2,004
Classified as impaired during the year		2,078			2,193			2,512
Transferred to not impaired during the year		(708	)		(607	)		(577	)
Net repayments		(1,051	)		(1,017	)		(875	)
Amounts written off		(618	)		(618	)		(694	)
Recoveries of loans and advances previously written off		–			–			–
Disposals of loans		(11	)		(46	)		(34	)
Foreign exchange and other movements		26			(68	)		47
GIL, end of year		1,936			2,220			2,383
GIL as a % of gross loans and acceptances		0.48			0.59			0.64

(1) GIL excludes purchased credit impaired loans.

Allowance for Credit Losses

BMO employs a disciplined approach to provisioning and loan loss evaluation across all loan portfolios, with the prompt identification of problem loans being a key risk management objective.

BMO maintains an allowance for credit losses (ACL) at a level that we consider appropriate to absorb credit-related losses on our loans and other credit instruments. As at October 31, 2018, our ACL was $1,870 million, a decrease of $126 million from the prior year. The decrease was due to a $70 million reduction in ACL related to the adoption of IFRS 9, a $38 million net recovery in the allowance for performing loans and the impact of the weaker U.S. dollar. The ACL is comprised of an allowance for impaired loans of $397 million and an allowance for performing loans of $1,473 million, which also includes an allowance for impaired loans of $27 million and an allowance for performing loans of $204 million related to undrawn commitments and letters of credit that are considered other credit instruments and recorded in other liabilities. The allowance for impaired loans decreased $23 million from $420 million in the prior year. Our coverage ratio remains adequate, with ACL on impaired loans as a percentage of GIL of 19.1%, compared with 17.7% in 2017.

Further details on the continuity in ACL by each product type can be found in Tables 12 and 13 of the Supplemental Information section on page 136 and 137 and in Note 4 on page 157 of the consolidated financial statements.

92 BMO Financial Group 201st Annual Report 2018

European Exposures

Some European countries have experienced credit concerns in recent years, and exposure to this region has been a particular focus. BMO’s geographic exposures are subject to a country risk management framework that incorporates economic and political assessments and management of exposures within limits based on product, entity and country of ultimate risk. Our exposure to European countries, as at October 31, 2018, including Greece, Ireland, Italy, Portugal and Spain (GIIPS), is set out in the tables that follow.

The table below outlines total net portfolio exposures for funded lending, securities (inclusive of credit default swap (CDS) activity), repo-style transactions and derivatives. Funded lending is detailed by counterparty type, as well as by total commitments compared with the funded amount, in the table on page 94.

European Exposure by Country and Counterparty (1)

(Canadian $ in millions) As at October 31, 2018	Funded lending (2)		Securities (3)(4)								Repo-style transactions and derivatives (5)(6)								Total net exposure
Country	Total		Bank		Corporate		Sovereign		Total		Bank		Corporate		Sovereign		Total
GIIPS
Greece		–		–		–		–		–		–		–		–		–		–
Ireland (7)		5		–		44		–		44		–		138		–		138		187
Italy		15		–		–		–		–		1		–		–		1		16
Portugal		–		–		–		–		–		–		–		–		–		–
Spain		301		–		–		–		–		26		–		–		26		327
Total – GIIPS		321		–		44		–		44		27		138		–		165		530
Eurozone (excluding GIIPS)
France		136		6		1		165		172		33		24		11		68		376
Germany		461		229		41		4,755		5,025		6		5		–		11		5,497
Netherlands		298		503		3		–		506		18		50		–		68		872
Other (8)		186		–		2		175		177		4		74		19		97		460
Total – Eurozone (excluding GIIPS)		1,081		738		47		5,095		5,880		61		153		30		244		7,205
Rest of Europe
Norway		323		313		1		–		314		1		3		–		4		641
Sweden		28		204		3		298		505		5		–		–		5		538
Switzerland		244		–		–		–		–		7		44		49		100		344
United Kingdom		942		31		642		3,934		4,607		93		114		26		233		5,782
Other (8)		29		125		–		–		125		6		–		1		7		161
Total – Rest of Europe		1,566		673		646		4,232		5,551		112		161		76		349		7,466
Total – All of Europe (9)		2,968		1,411		737		9,327		11,475		200		452		106		758		15,201
As at October 31, 2017	Funded lending (2)		Securities (3)								Repo-style transactions and derivatives (5)(6)								Total net exposure
Country	Total		Bank		Corporate		Sovereign		Total		Bank		Corporate		Sovereign		Total
Total – GIIPS		151		–		1		–		1		19		46		–		65		217
Total – Eurozone (excluding GIIPS)		1,120		247		133		1,188		1,568		84		85		28		197		2,885
Total – Rest of Europe		2,081		479		77		572		1,128		243		63		13		319		3,528
Total – All of Europe (9)		3,352		726		211		1,760		2,697		346		194		41		581		6,630

(1) BMO has the following indirect exposures to Europe as at October 31, 2018:

– Collateral of €229 million to support trading activity in securities (€33 million from GIIPS) and €93 million of cash collateral held.

– Guarantees of $1.5 billion ($86 million to GIIPS).

(2) Funded lending includes loans.

(3) Securities include cash products, insurance investments and traded credit.

(4) BMO’s total net notional CDS exposure (embedded as part of the securities exposure in this table) to Europe was $162 million, with no net single-name* CDS exposure to GIIPS countries as at October 31, 2018 (*includes a net position of $110 million (bought protection) on a CDS Index, of which 18% is comprised of GIIPS domiciled entities).

(5) Repo-style transactions are primarily with bank counterparties for which BMO holds collateral ($26.0 billion for Europe as at October 31, 2018).

(6) Derivatives amounts are marked-to-market, incorporating transaction netting where master netting agreements with counterparties have been entered into, and collateral offsets for counterparties where a Credit Support Annex is in effect.

(7) Does not include Irish subsidiary reserves we are required to maintain with the Irish Central Bank of $23 million as at October 31, 2018.

(8) Other Eurozone exposure includes 6 countries with less than $300 million net exposure. Other European exposure is distributed across 3 countries as at October 31, 2018.

(9) Of our total net direct exposure to Europe, approximately 55% was to counterparties in countries with a rating of Aaa/AAA from at least one of Moody’s and S&P.

BMO Financial Group 201st Annual Report 2018 93

MANAGEMENT’S DISCUSSION AND ANALYSIS

European Lending Exposure by Country and Counterparty (9)

	Lending (2)
(Canadian $ in millions) Country	Funded lending as at October 31, 2018						As at October 31, 2018				As at October 31, 2017
	Bank		Corporate		Sovereign		Commitments		Funded		Commitments		Funded
GIIPS
Greece		–		–		–		–		–		–		–
Ireland (7)		–		5		–		5		5		103		6
Italy		13		2		–		15		15		27		27
Portugal		–		–		–		–		–		–		–
Spain		295		6		–		318		301		149		118
Total – GIIPS		308		13		–		338		321		279		151
Eurozone (excluding GIIPS)
France		136		–		–		186		136		152		107
Germany		301		160		–		522		461		488		358
Netherlands		148		150		–		443		298		756		554
Other (8)		100		86		–		313		186		247		101
Total – Eurozone (excluding GIIPS)		685		396		–		1,464		1,081		1,643		1,120
Rest of Europe
Norway		39		284		–		687		323		287		153
Sweden		28		–		–		87		28		195		49
Switzerland		27		217		–		303		244		156		99
United Kingdom		19		923		–		1,638		942		2,285		1,746
Other (8)		4		25		–		548		29		66		34
Total – Rest of Europe		117		1,449		–		3,263		1,566		2,989		2,081
Total – All of Europe (9)		1,110		1,858		–		5,065		2,968		4,911		3,352

Refer to footnotes in the table on page 93.

Derivative Transactions

The following table presents the notional amounts of our over-the-counter (OTC) derivative contracts, comprised of those which are centrally cleared and settled through a designated clearing house or central counterparty (CCP) and those which are non-centrally cleared. CCPs are established under the supervision of central banks or other similar regulatory authorities and, as financial market infrastructure, must satisfy certain financial resilience requirements. Generally speaking, to centrally clear, BMO acquires a membership in the CCP and, in addition to providing collateral to protect the CCP against risk related to BMO, we are exposed to risk as a member for our contribution to a default fund, and we may be called on to make additional contributions, or to provide other support in the event another member defaults. As part of BMO’s preparations, we are closely monitoring the implications of the United Kingdom’s exit from the European Union (Brexit) and the potential impact on CCPs in both jurisdictions.

The notional amounts of our derivatives represent the amount to which a rate or price is applied in order to calculate the amount of cash that must be exchanged under the contract. Notional amounts do not represent assets or liabilities and therefore are not recorded in our Consolidated Balance Sheet. The fair values of OTC derivative contracts are recorded in our Consolidated Balance Sheet.

Over-the-Counter Derivatives (Notional amounts)

(Canadian $ in millions)	Non-centrally cleared				Centrally cleared				Total
As at October 31	2018		2017		2018		2017		2018		2017
Interest Rate Contracts
Swaps		453,976		479,177		3,378,021		2,723,188		3,831,997		3,202,365
Forward rate agreements		10,031		1,442		401,542		193,700		411,573		195,142
Purchased options		35,023		29,107		–		–		35,023		29,107
Written options		48,721		37,247		–		–		48,721		37,247
Total interest rate contracts		547,751		546,973		3,779,563		2,916,888		4,327,314		3,463,861
Foreign Exchange Contracts
Cross-currency swaps		92,916		85,586		–		–		92,916		85,586
Cross-currency interest rate swaps		455,232		434,210		–		–		455,232		434,210
Forward foreign exchange contracts		438,754		370,762		33,569		31,946		472,323		402,708
Purchased options		21,093		23,812		375		–		21,468		23,812
Written options		23,622		29,023		396		78		24,018		29,101
Total foreign exchange contracts		1,031,617		943,393		34,340		32,024		1,065,957		975,417
Commodity Contracts
Swaps		24,366		18,713		–		–		24,366		18,713
Purchased options		6,182		7,080		–		–		6,182		7,080
Written options		4,233		4,905		–		–		4,233		4,905
Total commodity contracts		34,781		30,698		–		–		34,781		30,698
Equity Contracts		53,107		63,528		–		–		53,107		63,528
Credit Default Swaps
Purchased		1,448		1,640		1,599		1,018		3,047		2,658
Written		23		114		420		334		443		448
Total credit default swaps		1,471		1,754		2,019		1,352		3,490		3,106
Total		1,668,727		1,586,346		3,815,922		2,950,264		5,484,649		4,536,610

94 BMO Financial Group 201st Annual Report 2018

Market Risk

Market risk is the potential for adverse changes in the value of BMO’s assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, and credit spreads, and includes the risk of credit migration and default in our trading book.

Market risk arises from BMO’s trading and underwriting activities, as well as its structural banking activities. The magnitude and importance of these activities to the enterprise, along with the potential volatility of market variables, call for diligent governance and a robust market risk management framework that ensures effective identification, measurement, reporting and control of market risk exposures.

Trading and Underwriting Market Risk Governance

BMO’s market risk-taking activities are subject to a comprehensive governance framework. The RRC provides oversight of the management of market risk on behalf of the Board of Directors and approves limits governing market risk exposures that are consistent with our risk appetite. The RMC regularly reviews and discusses significant market risk exposures and positions, and provides ongoing senior management oversight of BMO’s risk-taking activities. Both of these committees are kept apprised of specific market risk exposures and other factors that could expose BMO to unusual, unexpected or unquantified risks associated with market exposures, as well as other current and emerging market risks. In addition, all businesses and individuals authorized to conduct trading and underwriting activities on behalf of BMO are required to work within BMO’s risk governance framework and, as part of their first-line-of-defence responsibilities, they must adhere to all relevant corporate policies, standards and procedures and maintain and manage market risk exposures within specified limits and risk tolerances. In support of BMO’s risk governance framework, our market risk management framework is comprised of the processes, infrastructure and supporting documentation which, together, ensure that the bank’s market risk exposures are appropriately identified, accurately measured, and independently monitored and controlled on an ongoing basis.

Trading and Underwriting Market Risk

Our trading and underwriting businesses give rise to market risk associated with buying and selling financial products in the course of servicing customer requirements, market making and related financing activities, and from assisting clients to raise funds by way of securities issuance.

Identification and Measurement of Trading and Underwriting Market Risk

As the first step in the management of market risk, thorough assessment processes are in place to identify market risk exposures associated with both new products and the evolving risk profile of existing products, including on- and off-balance sheet positions, trading and non-trading positions and market risk exposures arising from the domestic and foreign operations of our operating groups.

Reflecting the multi-dimensional nature of market risk, various metrics and techniques are then employed to measure identified market risk exposures. These metrics primarily include Value at Risk, Stressed Value at Risk, and regulatory and economic capital attribution, as well as stress testing. Other techniques include the analysis of the sensitivity of our trading and underwriting portfolios to various market risk factors and the review of position concentrations, notional values and trading losses.

Value at Risk (VaR) measures the maximum loss likely to be experienced in the trading and underwriting portfolios, measured at a 99% confidence level over a one-day holding period. VaR is calculated for specific classes of risk in BMO’s trading and underwriting activities related to interest rates, foreign exchange rates, credit spreads, equity and commodity prices and their implied volatilities.

Stressed Value at Risk (SVaR) measures the maximum loss likely to be experienced in the trading and underwriting portfolios, measured at a 99% confidence level over a one-day holding period, with model inputs calibrated to historical data from a period of significant financial stress. SVaR is calculated for specific classes of risk in BMO’s trading and underwriting activities related to interest rates, foreign exchange rates, credit spreads, equity and commodity prices and their implied volatilities.

Incremental Risk Charge (IRC) complements the VaR and SVaR metrics and represents an estimate of the default and migration risks of non-securitization products held in the trading book with exposure to interest rate risk, measured over a one-year horizon at a 99.9% confidence level.

A consistent set of VaR and SVaR models is used for both management and regulatory purposes across all BMO Financial Group legal entities in which trading and/or underwriting activities are conducted.

We use a variety of methods to verify the integrity of our risk models, including the application of back-testing against hypothetical losses and approval by an independent model validation team. This testing is aligned with defined regulatory expectations, and its results confirm the reliability of our models. The volatility data and correlations that underpin our models are updated frequently, so that risk measures reflect current conditions.

Probabilistic stress testing and scenario analysis are used daily to determine the potential impact of plausible but severe market changes on our portfolios. In addition, historical event stresses are tested on a weekly basis, including tests of scenarios such as the stock market crash of 1987 and the collapse of Lehman Brothers in 2008. Targeted analyses of risks and portfolios, along with other ad hoc analyses, are also conducted to examine our sensitivity to hypothetical, low-frequency, high-severity scenarios. Scenarios are amended, added or removed to better reflect changes in underlying market conditions and the results are reported to the lines of business, the RMC and the RRC on a regular basis.

VaR, SVaR, IRC and stress testing should not be viewed as definitive predictors of the maximum amount of losses that could occur in any one day, as their results are based on models and estimates and are subject to confidence levels, and the estimates could be exceeded under unforeseen market conditions. Back-testing assumes there are no changes in the previous day’s closing positions and then isolates the effects of each day’s price movements against those closing positions. The bank’s VaR model is back-tested daily, and the one-day 99% confidence level VaR at the local and consolidated BMO levels is compared with the estimated daily profit and loss (P&L) that would be recorded if the portfolio composition remained unchanged. If this P&L result is negative and its absolute value is greater than the previous day’s VaR, a back-testing exception occurs. Each exception is investigated, explained and documented, and the back-testing results are reviewed by senior management and reported to our regulators.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 95

MANAGEMENT’S DISCUSSION AND ANALYSIS

Although it is a valuable indicator of risk, as with any model-driven metric, VaR has limitations. Among these limitations is the assumption that all positions can be liquidated within the assumed one-day holding period, which may not be the case under illiquid market conditions. Generally, market liquidity horizons are reviewed for suitability and updated where appropriate for relevant risk metrics. Further limitations of the VaR metric include the assumption that historical data can be used as a proxy to forecast future market events, and the fact that VaR calculations are based upon portfolio positions at the close of business and do not reflect the impact of intra-day trading activity.

Monitoring and Control of Trading and Underwriting Market Risk

A comprehensive set of limits is applied to these metrics, and these limits are subject to regular monitoring and reporting, with any breach of the limits escalated to the appropriate level of management. Risk profiles of our trading and underwriting activities are maintained within our risk appetite and supporting limits, and are monitored and reported to traders, management, senior executives and Board committees. Other significant controls include the independent valuation of financial assets and liabilities, as well as compliance with our Model Risk Management Framework to mitigate model risk.

Trading Market Risk Measures

Trading VaR and SVaR

Average Total Trading VaR increased year-over-year, driven by increased equity exposures from client facilitation activities, increased credit exposure from the acquisition of KGS-Alpha, and a general increase in the volatility of historical market data used in the calculation. Changes in total trading SVaR are also attributable to an increase in client facilitation activities, as well as the acquisition and a related increase in certain types of inventory with price behaviour that was particularly volatile during the historical period used to compute SVaR.

Total Trading Value at Risk (VaR) Summary (1)(2)

As at or for the year ended October 31 (pre-tax Canadian $ equivalent in millions)	2018										2017
	Year-end			Average			High		Low		Year-end			Average			High		Low
Commodity VaR		0.7			0.9			13.6		0.3		0.9			0.9			1.7		0.4
Equity VaR		4.4			4.4			7.8		2.9		3.3			3.1			8.5		2.2
Foreign exchange VaR		0.5			0.6			2.2		0.1		0.3			0.8			3.1		0.1
Interest rate VaR		6.1			5.9			8.7		3.6		5.0			6.1			11.4		3.9
Credit VaR		7.4			2.6			7.4		1.5		1.9			2.3			4.1		1.5
Diversification		(8.3	)		(6.8	)		nm		nm		(5.9	)		(7.0	)		nm		nm
Total Trading VaR		10.8			7.6			17.5		4.7		5.5			6.2			10.0		4.3
Total Trading SVaR		56.3			26.8			56.3		16.6		24.6			20.5			34.6		13.4

(1) One-day measure using a 99% confidence interval. Benefits are presented in brackets and losses are presented as positive numbers.

(2) Stressed VaR is produced weekly and at month end.

nm – not meaningful

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

96 BMO Financial Group 201st Annual Report 2018

Trading Net Revenue

The charts below present daily net revenues plotted against Total Trading VaR, along with a representation of daily net revenue distribution. In 2018, we incurred net trading losses on one day totalling $0.8 million. The loss occurred on November 22, 2017, and did not exceed VaR.

BMO Financial Group 201st Annual Report 2018 97

MANAGEMENT’S DISCUSSION AND ANALYSIS

Structural (Non-Trading) Market Risk

Structural market risk is comprised of interest rate risk arising from our banking activities (loans and deposits) and foreign exchange risk arising from our foreign currency operations and exposures.

Structural Market Risk Governance

BMO’s Corporate Treasury group is responsible for the ongoing management of structural market risk across the enterprise, with independent oversight provided by the Market Risk group. In addition to Board-approved limits on earnings at risk and economic value sensitivities due to changes in interest rates, more granular management limits are in place to guide the daily management of this risk.

The RRC has oversight of the management of structural market risk, annually approves the structural market risk plan and limits, and regularly reviews structural market risk positions. The RMC and the Balance Sheet and Capital Management Committee (BSCMC) regularly review structural market risk positions and provide senior management oversight.

Structural Market Risk Measurement

Interest Rate Risk

Structural interest rate risk arises when changes in interest rates affect the market value, cash flows and earnings of assets and liabilities related to our banking activities. The objective of structural interest rate risk management is to maintain high-quality earnings and maximize sustainable product spread, while managing the risk to the economic value of our assets arising from changes in interest rates.

Structural interest rate risk is primarily comprised of interest rate mismatch risk and product embedded option risk.

Interest rate mismatch risk arises when there are differences in the scheduled maturities, repricing dates or reference rates of assets, liabilities and derivatives. The net interest rate mismatch, representing residual assets funded by common shareholders’ equity, is managed to a target profile through interest rate swaps and securities.

Product embedded option risk arises when product features allow customers to alter cash flows, such as scheduled maturity or repricing dates, usually in response to changes in market conditions. Product embedded options include loan prepayments, deposit redemption privileges and committed rates on unadvanced mortgages. Product embedded options and associated customer behaviours are captured in risk modelling, and hedging programs may be used to manage this risk to low levels.

Structural interest rate risk is measured using simulations, earnings sensitivity and economic value sensitivity analysis, stress testing and gap analysis, in addition to other treasury risk metrics.

Earnings Sensitivity is a measure of the impact of potential changes in interest rates on the projected 12-month pre-tax net income of a portfolio of assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements.

Economic Value Sensitivity is a measure of the impact of potential changes in interest rates on the market value of a portfolio of assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements.

The models used to measure structural interest rate risk use projected changes in interest rates and predict how customers would likely react to these changes. For customer loans and deposits with scheduled maturity and repricing dates (such as mortgages and term deposits), our models measure the extent to which customers are likely to use embedded options to alter those scheduled terms. For customer loans and deposits without scheduled maturity and repricing dates (such as credit card loans and chequing accounts), we measure our exposure using models that adjust for elasticity in product pricing and reflect historical and forecasted trends in balances. The results of these structural market risk models, by their nature, have inherent uncertainty, as they reflect potential anticipated pricing and customer behaviours, which may differ from actual experience. These models have been developed using statistical analysis and are independently validated and periodically updated through regular model performance assessment, back-testing processes and ongoing dialogue with the lines of business. Models developed to predict customer behaviour are also used in support of product pricing. All models are subject to our Model Risk Management Framework, which is described in more detail on page 111.

Structural interest rate earnings and economic value sensitivity to an immediate parallel increase or decrease of 100 basis points in the yield curve is disclosed in the following table.

There were no significant changes in our structural market risk management framework during the year.

Structural economic value exposure to rising interest rates primarily reflects a lower market value for fixed rate loans. Structural economic value sensitivity to falling interest rates primarily reflects the impact of a higher market value for fixed rate loans and minimum modelled client deposit rates. Structural economic value exposure to rising interest rates increased relative to October 31, 2017, primarily owing to modelled deposit pricing being more rate-sensitive at higher interest rate levels following the increase in market rates during the year. The structural economic value benefit to falling interest rates relative to October 31, 2017, increased owing to the greater extent to which interest rates can now fall. Structural earnings sensitivity quantifies the potential impact of interest rate changes on structural balance sheet pre-tax net income over the next 12 months. Structural earnings exposure to falling interest rates primarily reflects the risk of fixed and floating rate loans repricing at lower rates and the more limited ability to reduce deposit pricing as rates fall. Canadian and U.S. long-term and short-term rates increased during the year. The structural earnings exposures to falling interest rates decreased relative to October 31, 2017, primarily owing to the increased extent to which certain deposits can reprice lower following the increase in market rates during the year. The structural earnings benefit to rising interest rates primarily reflects the benefit of widening deposit spreads as interest rates rise and was relatively unchanged year-over-year.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

98 BMO Financial Group 201st Annual Report 2018

Structural Interest Rate Sensitivity (1)

	As at October 31, 2018						As at October 31, 2017
(Pre-tax Canadian $ equivalent in millions)	Economic value sensitivity			Earnings sensitivity over the next 12 months			Economic value sensitivity			Earnings sensitivity over the next 12 months
100 basis point increase		(1,079.2	)		136.5			(957.8	)		136.9
100 basis point decrease		626.5			(304.1	)		78.6			(433.4	)

(1) Losses are presented in brackets and benefits are presented as positive numbers.

Insurance Market Risk

Insurance market risk includes interest rate and equity market risk arising from BMO’s insurance business activities. A 100 basis point increase in interest rates at October 31, 2018 would result in an increase in earnings before tax of $37 million ($52 million at October 31, 2017). A 100 basis point decrease in interest rates at October 31, 2018 would result in a decrease in earnings before tax of $37 million ($50 million at October 31, 2017). On an unhedged basis, a 10% decrease in equity market values at October 31, 2018 would result in a decrease in earnings before tax of $44 million ($40 million at October 31, 2017). A 10% increase in equity market values at October 31, 2018 would result in an increase in earnings before tax of $42 million ($40 million at October 31, 2017). During the quarter, a hedging program was put in place that will limit the decrease in earnings before tax due to decreases in equity market values to a maximum of $34 million in a quarter. The impact on earnings from insurance market risk is reflected in insurance claims, commissions and changes in policy benefit liabilities on the Consolidated Statement of Income and the corresponding change in the fair value of our policy benefit liabilities is reflected in Other Liabilities on the Consolidated Balance Sheet. Insurance market risk impacts are not reflected in the table above.

Foreign Exchange Risk

Structural foreign exchange risk arises primarily from translation risk related to the net investment in our U.S. operations and from transaction risk associated with our U.S.-dollar-denominated net income.

Translation risk represents the impact that changes in foreign exchange rates could have on BMO’s reported shareholders’ equity and capital ratios. BMO may enter into arrangements to offset the impact of foreign exchange movements on its capital ratios, and did so during the 2018 fiscal year. Please see the Enterprise-Wide Capital Management section on page 69 for further discussion.

Transaction risk represents the impact that fluctuations in the Canadian/U.S. dollar exchange rate could have on the Canadian dollar equivalent of BMO’s U.S.-dollar-denominated financial results. Exchange rate fluctuations will affect future results measured in Canadian dollars and the impact on those results is a function of the periods during which revenues, expenses and provisions for credit losses arise. Hedging positions may be taken to partially offset the pre-tax effects of Canadian/U.S. dollar exchange rate fluctuations on financial results, although no hedges were executed in the year. If future results are consistent with results in 2018, each one cent increase (decrease) in the Canadian/U.S. dollar exchange rate would be expected to increase (decrease) the Canadian dollar equivalent of our U.S. segment net income before income taxes for the year by $14 million, in the absence of hedging transactions. Refer to the Foreign Exchange section on page 34 for a more complete discussion of the effects of changes in exchange rates on the bank’s results.

Linkages between Balance Sheet Items and Market Risk Disclosures

The table below presents items reported in our Consolidated Balance Sheet that are subject to market risk, comprised of balances that are subject to either traded risk or non-traded risk measurement techniques.

	As at October 31, 2018								As at October 31, 2017
			Subject to market risk								Subject to market risk						Main risk factors for non-traded risk balances
(Canadian $ in millions)	Consolidated Balance Sheet		Traded risk (1)		Non-traded risk (2)		Not subject to market risk		Consolidated Balance Sheet		Traded risk (1)		Non-traded risk (2)		Not subject to market risk
Assets Subject to Market Risk
Cash and cash equivalents		42,142		–		42,142		–		32,599		–		32,599		–	Interest rate
Interest bearing deposits with banks		8,305		250		8,055		–		6,490		346		6,144		–	Interest rate
Securities		180,935		99,561		81,374		–		163,198		90,449		72,749		–	Interest rate, credit spread, equity
Securities borrowed or purchased under resale agreements		85,051		–		85,051		–		75,047		–		75,047		–	Interest rate
Loans (net of allowance for credit losses)		383,991		–		383,991		–		358,507		–		358,507		–	Interest rate, foreign exchange
Derivative instruments		26,204		24,401		1,803		–		28,951		27,359		1,592		–	Interest rate, foreign exchange
Customers’ liability under acceptances		18,585		–		18,585		–		16,546		–		16,546		–	Interest rate
Other assets		28,835		–		13,829		15,006		28,242		–		12,927		15,315	Interest rate
Total Assets		774,048		124,212		634,830		15,006		709,580		118,154		576,111		15,315
Liabilities Subject to Market Risk
Deposits		522,051		15,309		506,742		–		479,792		13,674		466,118		–	Interest rate, foreign exchange
Derivative instruments		24,411		21,380		3,031		–		27,804		26,122		1,682		–	Interest rate, foreign exchange
Acceptances		18,585		–		18,585		–		16,546		–		16,546		–	Interest rate
Securities sold but not yet purchased		28,804		28,804		–		–		25,163		25,163		–		–
Securities lent or sold under repurchase agreements		66,684		–		66,684		–		55,119		–		55,119		–	Interest rate
Other liabilities		61,004		–		60,881		123		55,773		–		55,415		358	Interest rate
Subordinated debt		6,782		–		6,782		–		5,029		–		5,029		–	Interest rate
Total Liabilities		728,321		65,493		662,705		123		665,226		64,959		599,909		358

(1) Primarily comprised of balance sheet items that are subject to the trading and underwriting risk management framework and recorded at fair value through profit or loss.

(2) Primarily comprised of balance sheet items that are subject to the structural balance sheet and insurance risk management framework.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 99

MANAGEMENT’S DISCUSSION AND ANALYSIS

Insurance Risk

Insurance risk is the potential for loss as a result of actual experience differing from that assumed when an insurance product was designed and priced. It generally entails the inherent unpredictability that can arise from assuming long-term policy liabilities or from the uncertainty of future events. Insurance provides protection against the financial consequences of insured risks by transferring those risks to the insurer (under specific terms and conditions) in exchange for premiums. Insurance risk is inherent in all of our insurance products, including annuities and life, accident and sickness, and creditor insurance, as well as in our reinsurance business.

Insurance risk consists of:

• Claims risk – the risk that the actual magnitude or frequency of claims will differ from those assumed in the pricing or underwriting process, including mortality risk, morbidity risk, longevity risk and catastrophe risk;

• Policyholder behaviour risk – the risk that the behaviour of policyholders in regard to premium payments, withdrawals or loans, policy lapses and surrenders, and other voluntary terminations will differ from the behaviour assumed in the pricing process; and

• Expense risk – the risk that actual expenses arising from acquiring and administering policies and processing claims will exceed the expenses assumed in the pricing process.

BMO’s risk governance practices provide effective independent oversight and control of risk within BMO Insurance. BMO’s Insurance Risk Management Framework addresses the identification, assessment, management and reporting of risks. The framework includes: the risk appetite statement and key risk metrics; insurance risk policies and processes, including limits; capital requirements; stress testing; risk reports; Own Risk and Solvency Assessment; and ongoing monitoring of experience. Senior management within the various lines of business uses this framework as the first line of defence, and has the primary responsibility for managing insurance risk. Second-line-of-defence oversight is provided by the CRO, BMO Insurance, who reports to the Head of Market Risk and CRO, BMO Capital Markets. Internal risk committees, the boards of directors of the BMO Insurance subsidiaries and senior management provide senior governance and review. In particular, the Risk Committee, BMO Insurance, oversees and reports on risk management activities on a quarterly basis to the insurance companies’ boards of directors. In addition, the Audit and Conduct Review Committee of the Board acts as the Audit and Conduct Review Committee for BMO Life Insurance Company.

A robust product approval process is a cornerstone of our BMO Insurance risk management framework, as it identifies, assesses and mitigates risks associated with new insurance products or changes to existing products. This process, along with guidelines and practices for underwriting and claims management, promotes the effective identification, measurement and management of insurance risk. Reinsurance transactions that transfer insurance risk from BMO Insurance to independent reinsurance companies are also used to mitigate our exposure to insurance risk by diversifying risk and limiting claims. Our reinsurance business, in turn, assumes property catastrophe and other reinsurance risks from independent reinsurers in various jurisdictions worldwide in order to diversify our geographic reinsurance exposures in accordance with our BMO Insurance risk management framework.

Liquidity and Funding Risk

Liquidity and funding risk is the potential for loss if BMO is unable to meet financial commitments in a timely manner at reasonable prices as they become due. Financial commitments include liabilities to depositors and suppliers, and lending, investment and pledging commitments.

Managing liquidity and funding risk is essential to maintaining a safe and sound enterprise, depositor confidence and earnings stability. It is BMO’s policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, even in times of stress.

Liquidity and Funding Risk Governance

The Corporate Treasury group and the operating groups, as the first line of defence, are responsible for the ongoing management of liquidity and funding risk across the enterprise. The Corporate Treasury group is responsible for identifying, assessing, managing, monitoring, mitigating and reporting on liquidity and funding risks. The Corporate Treasury group develops and recommends the Liquidity and Funding Risk Management Framework and the related risk appetite and limits, monitors compliance with the relevant corporate policies and assesses the impact of market events on liquidity and funding requirements on an ongoing basis.

Enterprise Risk and Portfolio Management, as the second line of defence, provides oversight, independent risk assessment and effective challenge of liquidity and funding management, frameworks, policies, limits, monitoring and reporting across the enterprise. The Risk Management Committee (RMC) and Balance Sheet and Capital Management Committee (BSCMC) provide senior management oversight and also review and discuss significant liquidity and funding policies, issues and developments that arise in the pursuit of our strategic priorities. The Risk Review Committee (RRC) provides oversight of the management of liquidity and funding risk, annually approves applicable policies, limits and the contingency plan, and regularly reviews liquidity and funding positions.

Liquidity and Funding Risk Management

BMO’s Liquidity and Funding Risk Management Framework is defined and authorized under Board-approved corporate policies and management-approved standards. These policies and standards outline key management principles, liquidity and funding metrics and related limits, as well as roles and responsibilities for the management of liquidity and funding risk across the enterprise.

BMO has a robust limit structure in place in order to manage liquidity and funding risk. Limits define the enterprise-level risk appetite for our key Net Liquidity Position (NLP) measure, regulatory liquidity ratios, secured and unsecured funding appetite, for both trading and structural activities, and enterprise collateral pledging. Limits also establish the tolerance for concentrations of maturities, requirements for counterparty liability diversification, business pledging activity, and the size and type of uncommitted and committed credit and liquidity facilities that may be outstanding. Operating within these limits helps to confirm that liquidity and funding risk is appropriately managed. An enterprise-wide contingency plan designed to facilitate effective management in the event of a disruption is also in place. Early warning indicators identified in the contingency plan are regularly monitored in order to detect any signs of growing liquidity or funding risk in the market or risks specific to BMO.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

100 BMO Financial Group 201st Annual Report 2018

BMO legal entities include regulated and foreign subsidiaries and branches, and as a result, movements of funds between entities in the corporate group are subject to, among other things, the liquidity, funding and capital adequacy requirements of these entities. As such, liquidity and funding positions are managed on both a consolidated and key legal entity basis. Liquidity and funding risk management policies and limits, which are informed by the legal and regulatory requirements that apply to each entity, are in place for key legal entities, and positions are regularly reviewed at the key legal entity level to confirm compliance with applicable requirements.

BMO employs funds transfer pricing and liquidity transfer pricing practices to help ensure that appropriate economic signals for the pricing of products for customers are provided to the lines of business and to assess the performance of each business. These practices capture both the cost of funding assets and the value of deposits under normal operating conditions, as well as the cost of holding supplemental liquid assets to meet contingent liquidity requirements.

Liquidity and Funding Risk Measurement

A key component of liquidity risk management is the measurement of liquidity risk under stress. BMO uses the NLP as a key measure of liquidity risk. The NLP represents the amount by which liquid assets exceed potential funding needs under a severe combined enterprise-specific and systemic stress scenario. Potential funding needs may arise from obligations to repay retail, commercial and wholesale deposits that are withdrawn or not renewed or to fund drawdowns on available credit and liquidity lines, obligations to pledge collateral due to ratings downgrades or market volatility, and the continuing need to fund new assets or strategic investments. Potential funding needs are quantified by applying factors to various business activities based on management’s view of the relative level of liquidity risk related to each activity. These factors vary by depositor classification (e.g., retail, small business, non-financial corporate or wholesale counterparties) and deposit type (e.g., insured, uninsured, operational or non-operational deposits), as well as by commitment type (e.g., uncommitted or committed credit or liquidity facilities by counterparty type). The stress scenario also considers the time horizon over which liquid assets can be monetized and management’s assessment of the liquidity value of those assets under conditions of market stress. These funding needs are assessed under severe systemic and enterprise-specific stress scenarios and a combination thereof.

Stress testing results are evaluated against BMO’s stated risk tolerance and are considered in management decisions on setting limits and internal liquidity transfer pricing, and they also help to inform and shape the design of business plans and contingency plans. The Liquidity and Funding Risk Management Framework is integrated with enterprise-wide stress testing.

In addition to the NLP, we regularly monitor positions in relation to the limits and liquidity ratios noted in the Liquidity and Funding Risk Management section above. These include regulatory metrics such as the Liquidity Coverage Ratio (LCR) and Net Cumulative Cash Flow.

Unencumbered Liquid Assets

Unencumbered liquid assets include high-quality assets that are marketable, can be pledged as security for borrowings, and can be converted to cash in a time frame that meets our liquidity and funding requirements. Liquid assets are primarily held in our trading businesses, as well as in supplemental liquidity pools that are maintained for contingent liquidity risk management purposes. The liquidity value recognized for different asset classes under our management framework reflects management’s assessment of the liquidity value of those assets under a severe stress scenario. Liquid assets held in the trading businesses include cash on deposit with central banks, short-term deposits with other financial institutions, highly-rated debt and equity securities and short-term reverse repurchase agreements. Supplemental liquidity pool assets are predominantly comprised of cash on deposit with central banks and securities and short-term reverse repurchase agreements of highly-rated Canadian federal and provincial government debt and U.S. federal government and agency debt. Substantially all supplemental liquidity pool assets meet the definition of high-quality liquid assets under Basel III. Approximately 75% of the supplemental liquidity pool is held at the parent bank level in Canadian-dollar- and U.S.-dollar-denominated assets, with the majority of the remaining supplemental liquidity pool held at BMO Harris Bank in U.S.-dollar-denominated assets. The size of the supplemental liquidity pool is integrated with our measurement of liquidity risk. To meet local regulatory requirements, certain of our legal entities maintain their own minimum liquidity positions. There may be legal and regulatory restrictions on our ability to use liquid assets held at one legal entity to support the liquidity requirements of another legal entity.

In the ordinary course of business, BMO may encumber a portion of cash and securities holdings as collateral in support of trading activities and participation in clearing and payment systems in Canada and abroad. In addition, BMO may receive liquid assets as collateral and may re-pledge these assets in exchange for cash or as collateral in support of trading activities. Net unencumbered liquid assets, defined as on-balance sheet assets, such as BMO-owned cash and securities and securities borrowed or purchased under resale agreements, plus other off-balance sheet eligible collateral received, less collateral encumbered, totalled $242.6 billion at October 31, 2018, compared with $213.8 billion at October 31, 2017. The increase in unencumbered liquid assets was primarily due to higher cash and securities balances and the impact of the stronger U.S. dollar. Net unencumbered liquid assets are primarily held at the parent bank level, at our U.S. bank entity BMO Harris Bank, and in our broker/dealer operations. In addition to liquid assets, BMO has access to the Bank of Canada’s lending assistance programs, the Federal Reserve Bank discount window in the United States and European Central Bank standby liquidity facilities. We do not rely on central bank facilities as a source of available liquidity when assessing the soundness of BMO’s liquidity position.

In addition to cash and securities holdings, BMO may also pledge other assets, including mortgages and loans, to raise long-term secured funding. As part of the Liquidity and Funding Risk Management Framework, a Pledging of Assets Corporate Policy sets out the framework and pledging limits for financial and non-financial assets.

BMO’s total encumbered assets and unencumbered liquid assets are summarized in the table below. See Note 24 on page 201 of the consolidated financial statements for further information on pledged assets.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 101

MANAGEMENT’S DISCUSSION AND ANALYSIS

Liquid Assets

	As at October 31, 2018										As at October 31, 2017
(Canadian $ in millions)	Carrying value/on- balance sheet assets (1)		Other cash and securities received		Total gross assets (2)		Encumbered assets		Net unencumbered assets (3)		Net unencumbered assets (3)
Cash and cash equivalents		42,142		–		42,142		1,655		40,487		31,164
Deposits with other banks		8,305		–		8,305		–		8,305		6,490
Securities and securities borrowed or purchased under resale agreements
Sovereigns / Central banks / Multilateral development banks		146,514		26,530		173,044		94,886		78,158		59,414
NHA mortgage-backed securities and U.S. agency mortgage-backed securities and collateralized mortgage obligations		31,966		314		32,280		12,513		19,767		18,719
Corporate and other debt		23,671		10,773		34,444		6,472		27,972		22,414
Corporate equity		63,835		21,416		85,251		42,446		42,805		52,616
Total securities and securities borrowed or purchased under resale agreements		265,986		59,033		325,019		156,317		168,702		153,163
NHA mortgage-backed securities (reported as loans at amortized cost) (4)		27,865		–		27,865		2,747		25,118		22,940
Total liquid assets		344,298		59,033		403,331		160,719		242,612		213,757
Other eligible assets at central banks (not included above) (5)		64,029		–		64,029		660		63,369		64,776
Undrawn credit lines granted by central banks		–		–		–		–		–		–
Total liquid assets and other sources		408,327		59,033		467,360		161,379		305,981		278,533

(1) The carrying values outlined in this table are consistent with the carrying values reported in BMO’s balance sheet as at October 31, 2018.

(2) Gross assets include on-balance sheet and off-balance sheet assets.

(3) Net unencumbered liquid assets are defined as on-balance sheet assets, such as BMO-owned cash and securities and securities borrowed or purchased under resale agreements, plus other off-balance sheet eligible collateral received, less encumbered assets.

(4) Under IFRS, National Housing Authority (NHA) mortgage-backed securities that include mortgages owned by BMO as the underlying collateral are classified as loans. Unencumbered NHA mortgage-backed securities have liquidity value and are included as liquid assets under BMO’s Liquidity and Funding Management Framework. This amount is shown as a separate line item, NHA mortgage-backed securities.

(5) Represents loans currently lodged at central banks that could potentially be used to access central bank funding. Loans available for pledging as collateral do not include other sources of additional liquidity that may be realized from the bank’s loan portfolio, including incremental securitization, covered bond issuances and Federal Home Loan Bank (FHLB) advances. In July 2018, the Bank of Canada announced that it was increasing the haircuts applied to non-mortgage loans that could be used to access its Standing Liquidity Facility effective August 2018, reducing the amount of funds the bank could access from the Bank of Canada in a period of stress. The impact of this change is reflected as at October 31, 2018. This change does not materially impact the bank.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

102 BMO Financial Group 201st Annual Report 2018

Asset Encumbrance

	Total gross assets (1)		Encumbered (2)				Net unencumbered
(Canadian $ in millions) As at October 31, 2018			Pledged as collateral		Other encumbered		Other unencumbered (3)		Available as collateral (4)
Cash and deposits with other banks		50,447		–		1,655		–		48,792
Securities (5)		352,884		127,211		31,853		10,580		183,240
Loans and acceptances		356,126		73,553		660		218,544		63,369
Other assets
Derivative instruments		26,204		–		–		26,204		–
Customers’ liability under acceptances		18,585		–		–		18,585		–
Premises and equipment		1,986		–		–		1,986		–
Goodwill		6,373		–		–		6,373		–
Intangible assets		2,272		–		–		2,272		–
Current tax assets		1,515		–		–		1,515		–
Deferred tax asset		2,037		–		–		2,037		–
Other assets		14,652		2,509		–		12,143		–
Total other assets		73,624		2,509		–		71,115		–
Total assets		833,081		203,273		34,168		300,239		295,401
	Total gross assets (1)		Encumbered (2)				Net unencumbered
(Canadian $ in millions) As at October 31, 2017			Pledged as collateral		Other encumbered		Other unencumbered (3)		Available as collateral (4)
Cash and deposits with other banks		39,089		–		1,435		3		37,651
Securities (5)		313,955		109,835		28,017		9,692		166,411
Loans and acceptances		333,066		63,438		393		204,459		64,776
Other assets
Derivative instruments		28,951		–		–		28,951		–
Customers’ liability under acceptances		16,546		–		–		16,546		–
Premises and equipment		2,033		–		–		2,033		–
Goodwill		6,244		–		–		6,244		–
Intangible assets		2,159		–		–		2,159		–
Current tax assets		1,371		–		–		1,371		–
Deferred tax asset		2,865		–		–		2,865		–
Other assets		13,570		3,739		–		9,831		–
Total other assets		73,739		3,739		–		70,000		–
Total assets		759,849		177,012		29,845		284,154		268,838

(1) Gross assets include on-balance sheet and off-balance sheet assets.

(2) Pledged as collateral refers to the portion of on-balance sheet assets and other cash and securities that is pledged through repurchase agreements, securities lent, derivative contracts, minimum required deposits at central banks, and requirements associated with participation in clearing houses and payment systems. Other encumbered assets include assets that are restricted for legal or other reasons, such as restricted cash and short sales.

(3) Other unencumbered assets include select liquid asset holdings that management believes are not readily available to support BMO’s liquidity requirements. These include cash and securities of $10.6 billion as at October 31, 2018, which include securities held at BMO’s insurance subsidiary, significant equity investments, and certain investments held at our merchant banking business. Other unencumbered assets also include mortgages and loans that may be securitized to access secured funding.

(4) Loans included as available as collateral represent loans currently lodged at central banks that could potentially be used to access central bank funding. Loans available for pledging as collateral do not include other sources of additional liquidity that may be realized from the bank’s loan portfolio, such as incremental securitization, covered bond issuances and FHLB advances.

(5) Includes securities, securities borrowed or purchased under resale agreements and NHA mortgage-backed securities (reported as loans at amortized cost).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

BMO’s Liquidity Coverage Ratio (LCR) is summarized in the table on the following page. The average daily LCR for the quarter ended October 31, 2018, was 145%. The LCR is calculated on a daily basis as the ratio of the stock of High-Quality Liquid Assets (HQLA) to total net stressed cash outflows over the next 30 calendar days. The average LCR was down from 152% last year. HQLA and net cash outflows both increased; however, the ratio between them changed year-over-year. While banks are required to maintain an LCR greater than 100% in normal conditions, banks are also expected to be able to utilize HQLA during a period of stress, which may result in an LCR of less than 100% during such a period. BMO’s HQLA are primarily comprised of cash, highly-rated debt issued or backed by governments, highly-rated covered bonds and non-financial corporate debt, and non-financial equities that are part of a major stock index. Net cash flows include outflows from deposits, secured and unsecured wholesale funding, commitments and potential collateral requirements, offset by permitted inflows from loans, securities lending activities and other non-HQLA debt maturing over a 30-day horizon. OSFI-prescribed weights are applied to cash flows and HQLA to arrive at the weighted values and the LCR. The LCR is only one measure of a bank’s liquidity position and does not fully capture all of the bank’s liquid assets or the funding alternatives that may be available during a period of stress. BMO’s total liquid assets are shown in the Liquid Assets table on page 102.

BMO Financial Group 201st Annual Report 2018 103

MANAGEMENT’S DISCUSSION AND ANALYSIS

Liquidity Coverage Ratio

(Canadian $ in billions, except as noted)	For the quarter ended October 31, 2018
	Total unweighted value (average) (1) (2)		Total weighted value (average) (2) (3)
High-Quality Liquid Assets
Total high-quality liquid assets (HQLA)		*		155.0
Cash Outflows
Retail deposits and deposits from small business customers, of which:		167.3		10.3
Stable deposits		91.3		2.7
Less stable deposits		76.0		7.6
Unsecured wholesale funding, of which:		152.2		84.1
Operational deposits (all counterparties) and deposits in networks of cooperative banks		60.3		15.0
Non-operational deposits (all counterparties)		60.8		38.0
Unsecured debt		31.1		31.1
Secured wholesale funding		*		19.2
Additional requirements, of which:		134.8		29.6
Outflows related to derivatives exposures and other collateral requirements		8.0		4.4
Outflows related to loss of funding on debt products		2.7		2.7
Credit and liquidity facilities		124.1		22.5
Other contractual funding obligations		0.8		–
Other contingent funding obligations		385.1		6.6
Total cash outflows		*		149.8
Cash Inflows
Secured lending (e.g. reverse repos)		136.5		21.0
Inflows from fully performing exposures		8.8		5.2
Other cash inflows		16.7		16.7
Total cash inflows		162.0		42.9
			Total adjusted value (4)
Total HQLA				155.0
Total net cash outflows				106.9
Liquidity Coverage Ratio (%)				145
For the quarter ended October 31, 2017			Total adjusted value (4)
Total HQLA				130.3
Total net cash outflows				85.8
Liquidity Coverage Ratio (%)				152

* Disclosure is not required under the LCR disclosure standard.

(1) Unweighted values are calculated at market value (for HQLA) or as outstanding balances maturing or callable within 30 days (for inflows and outflows).

(2) Values are calculated based on the simple average of the daily LCR over 63 business days in the fourth quarter of 2018.

(3) Weighted values are calculated after the application of the weights prescribed under the OSFI Liquidity Adequacy Requirements (LAR) Guideline for HQLA and cash inflows and outflows.

(4) Adjusted values are calculated based on total weighted values after applicable caps, as defined by the LAR Guideline.

Funding Strategy

Our funding philosophy requires that secured and unsecured wholesale funding used to support loans and less liquid assets must have a term (typically maturing in two to ten years) that will support the effective term to maturity of these assets. Wholesale secured and unsecured funding for liquid trading assets is largely shorter term (maturing in one year or less), is aligned with the liquidity of the assets being funded, and is subject to limits on aggregate maturities that are permitted across different time periods. Supplemental liquidity pools are funded largely with wholesale term funding.

BMO maintains a large and stable base of customer deposits that, in combination with our strong capital base, is a source of strength. It supports the maintenance of a sound liquidity position and reduces our reliance on wholesale funding. Customer deposits totalled $329.2 billion at October 31, 2018, up from $303.1 billion in 2017, due to strong deposit growth and the impact of the stronger U.S. dollar. BMO also receives non-marketable deposits from corporate and institutional customers in support of certain trading activities. These deposits totalled $29.5 billion as at October 31, 2018, unchanged from October 31, 2017.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

104 BMO Financial Group 201st Annual Report 2018

Total wholesale funding outstanding, largely consisting of negotiable marketable securities, was $203.3 billion at October 31, 2018, with $63.2 billion sourced as secured funding and $140.1 billion sourced as unsecured funding. Wholesale funding outstanding increased $22.8 billion, or $20.5 billion excluding the impact of the stronger U.S. dollar. The mix and maturities of BMO’s wholesale term funding are outlined in the table below. Additional information on deposit maturities can be found on page 107. BMO maintains a sizeable portfolio of unencumbered liquid assets, totalling $242.6 billion as at October 31, 2018 and $213.8 billion as at October 31, 2017, that can be monetized to meet potential funding requirements, as described in the Unencumbered Liquid Assets section on page 101.

In April 2018, the Government of Canada published the final regulations on Canada’s Bank Recapitalization (Bail-In) Regime, which became effective on September 23, 2018. Bail-in debt includes senior unsecured debt issued directly by the bank on or after September 23, 2018 that has an original term greater than 400 days and is marketable, subject to certain exceptions. BMO is required to meet minimum TLAC ratio requirements by November 1, 2021. We do not expect a material impact to our funding plan as a result of Canada’s Bail-In Regime and TLAC requirements. For more information on Canada’s Bail-In Regime and TLAC requirements, please see Regulatory Developments under Capital Management on page 71.

Diversification of our wholesale funding sources is an important part of our overall liquidity management strategy. BMO’s wholesale funding activities are well-diversified by jurisdiction, currency, investor segment, instrument, and maturity profile. BMO maintains ready access to long-term wholesale funding through various borrowing programs, including a European Note Issuance Program, Canadian, Australian and U.S. Medium-Term Note programs, Canadian and U.S. mortgage securitizations, Canadian credit card, auto and home equity line of credit (HELOC) securitizations, covered bonds, and Canadian and U.S. senior unsecured deposits.

BMO’s wholesale funding plan seeks to ensure sufficient funding capacity is available to execute our business strategies. The funding plan considers expected maturities, as well as asset and liability growth projected for our businesses in our forecasting and planning processes, and assesses funding needs in relation to the funding sources available. The funding plan is reviewed annually by the BSCMC and RMC and approved by the RRC, and is regularly updated to reflect actual results and incorporate updated forecast information.

Wholesale Funding Maturities (1)

	As at October 31, 2018																As at October 31, 2017
(Canadian $ in millions)	Less than 1 month		1 to 3 months		3 to 6 months		6 to 12 months		Subtotal less than 1 year		1 to 2 years		Over 2 years		Total		Total
Deposits from banks		4,706		185		71		8		4,970		–		7		4,977		3,962
Certificates of deposit and commercial paper		13,727		23,434		17,794		11,059		66,014		2,304		–		68,318		60,640
Bearer deposit notes		227		270		79		–		576		–		–		576		2,815
Asset-backed commercial paper (ABCP)		1,051		1,691		640		204		3,586		–		–		3,586		3,722
Senior unsecured medium-term notes		–		1,317		1,400		4,816		7,533		12,836		35,384		55,753		48,089
Senior unsecured structured notes (2)		–		–		–		–		–		18		3,675		3,693		3,002
Covered bonds and securitizations
Mortgage and HELOC securitizations		–		1,018		473		1,122		2,613		3,154		12,436		18,203		17,935
Covered bonds		–		2,235		–		1,490		3,725		5,816		15,722		25,263		23,225
Other asset-backed securitizations (3)		1,058		–		–		168		1,226		1,452		4,252		6,930		5,160
Subordinated debt		–		–		–		–		–		–		6,841		6,841		5,028
Other (4)		–		4,971		–		–		4,971		–		4,214		9,185		6,935
Total		20,769		35,121		20,457		18,867		95,214		25,580		82,531		203,325		180,513
Of which:
Secured		2,109		9,915		1,113		2,984		16,121		10,422		36,624		63,167		56,977
Unsecured		18,660		25,206		19,344		15,883		79,093		15,158		45,907		140,158		123,536
Total (5)		20,769		35,121		20,457		18,867		95,214		25,580		82,531		203,325		180,513

(1) Wholesale unsecured funding primarily includes funding raised through the issuance of marketable, negotiable instruments. Wholesale funding excludes repo transactions and bankers’ acceptances, which are disclosed in the contractual maturity table on page 107, and also excludes ABCP issued by certain ABCP conduits that is not consolidated for financial reporting purposes.

(2) Primarily issued to institutional investors.

(3) Includes credit card and auto securitizations.

(4) Refers to FHLB advances.

(5) Total wholesale funding consists of Canadian-dollar-denominated funding of $49.2 billion and U.S.-dollar-denominated and other foreign-currency-denominated funding of $154.1 billion as at October 31, 2018.

BMO Financial Group 201st Annual Report 2018 105

MANAGEMENT’S DISCUSSION AND ANALYSIS

Regulatory Developments

The Net Stable Funding Ratio (NSFR) is a regulatory liquidity metric that assesses the stability of a bank’s funding profile in relation to the liquidity value of the bank’s assets. In February 2018, OSFI announced a revised target NSFR implementation date of January 2020 for Canadian deposit-taking institutions, given the progress made to date on implementation at the international level.

Credit Ratings

The credit ratings assigned to BMO’s short-term and senior long-term debt securities by external rating agencies are important in the raising of both capital and funding to support our business operations. Maintaining strong credit ratings allows us to access the capital markets at competitive pricing levels. Should our credit ratings experience a downgrade, our cost of funding would likely increase and our access to funding and capital through the capital markets could be reduced. A material downgrade of our ratings could also have other consequences, including those set out in Note 8 starting on page 167 of the consolidated financial statements.

The credit ratings assigned to BMO’s senior debt by rating agencies are indicative of high-grade, high-quality issues. Moody’s, Standard & Poor’s (S&P), Fitch and DBRS have a stable outlook on BMO.

On April 19, 2018, following the finalization of the Bail-In Regime in Canada, DBRS changed the trend to Stable from Negative on the long-term issuer ratings, senior debt ratings and deposit ratings of Bank of Montreal; ratings of legacy subordinated debt were downgraded by one notch for all Canadian domestic systemically important banks.

On July 16, 2018, Moody’s took various actions on its ratings of Canadian banks following the introduction of a bank resolution framework. The actions included an upgrade to the ratings for BMO’s senior unsecured debt and junior subordinated bank debt (NVCC). The outlook was changed to Stable from Negative.

On August 14, 2018, S&P upgraded its stand-alone credit profile on BMO to ‘a’ from ‘a-‘, to reflect improvements in its assessment of BMO’s risk position. S&P affirmed its ‘A+/A-1’ long-term and short-term issuer credit ratings on BMO and its operating subsidiaries, and the outlook remains Stable. At the same time, S&P raised its ratings on BMO’s subordinated debt and additional Tier 1 instruments by one notch, reflecting improvements in the bank’s stand-alone creditworthiness.

All of the rating agencies have also assigned provisional ratings to senior unsecured debt subject to the Bail-In Regime. Moody’s, S&P, Fitch and DBRS have assigned provisional ratings of A2, A-, AA- and AA (low) respectively.

As at October 31, 2018
Rating agency	Short-term debt	Senior debt (1)	Long-term deposits / Legacy senior debt (2)	Subordinated debt (NVCC)	Outlook
Moody’s	P-1	A2	Aa2	Baa1	Stable
S&P	A-1	A-	A+	BBB+	Stable
Fitch	F1+	AA-	AA-	A+	Stable
DBRS	R-1 (high)	AA (low)	AA	A (low)	Stable

(1) Subject to conversion under the Bank Recapitalization (Bail-In) Regime. Defined as “Junior Senior Unsecured” by Moody’s, “Bail-In Eligible Senior Debt” by S&P, “Senior Unsecured” by Fitch, and “Bail-Inable Senior Debt” by DBRS.

(2) Long-term deposits / Legacy senior debt includes senior debt issued prior to September 23, 2018, and senior debt issued on or after September 23, 2018, that is excluded from the Bank Recapitalization (Bail-In) Regime. Defined as “Senior Unsecured” by Moody’s and S&P, “Senior Preferred” by Fitch, and “Legacy Senior” by DBRS.

We are required to deliver collateral to certain counterparties in the event of a downgrade to our current credit rating. The incremental collateral required is based on mark-to-market exposure, collateral valuations and collateral threshold arrangements, as applicable. As at October 31, 2018, we would be required to provide additional collateral to counterparties totalling $112 million, $361 million and $502 million under a one-notch, two-notch and three-notch downgrade, respectively.

106 BMO Financial Group 201st Annual Report 2018

Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments

The tables below show the remaining contractual maturity of on-balance sheet assets and liabilities and off-balance sheet commitments. The contractual maturity of financial assets and liabilities is an input to, but is not necessarily consistent with, the expected maturity of assets and liabilities that is used in the management of liquidity and funding risk. We forecast asset and liability cash flows, both under normal market conditions and under a number of stress scenarios, to manage liquidity and funding risk. Stress scenarios include assumptions for loan repayments, deposit withdrawals, and credit commitment and liquidity facility drawdowns by counterparty and product type. Stress scenarios also consider the time horizon over which liquid assets can be monetized and the related haircuts and potential collateral requirements that may result from both market volatility and credit rating downgrades, among other assumptions.

																				2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		41,162		–		–		–		–		–		–		–		980			42,142
Interest bearing deposits with banks		4,964		1,717		1,037		457		112		18		–		–		–			8,305
Securities		4,522		4,283		5,049		7,749		4,943		11,854		32,480		56,004		54,051			180,935
Securities borrowed or purchased under resale agreements		67,804		12,732		2,490		1,781		191		53		–		–		–			85,051
Loans
Residential mortgages		1,782		1,848		4,343		6,306		4,769		24,522		64,636		11,414		–			119,620
Consumer instalment and other personal		607		440		1,026		1,143		943		5,414		19,910		9,812		23,930			63,225
Credit cards		–		–		–		–		–		–		–		–		8,329			8,329
Business and government		13,088		5,921		7,126		6,779		6,218		19,543		75,099		12,247		48,435			194,456
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,639	)		(1,639	)
Total loans and acceptances, net of allowance		15,477		8,209		12,495		14,228		11,930		49,479		159,645		33,473		79,055			383,991
Other Assets
Derivative instruments		2,040		3,385		1,645		1,012		807		3,407		6,074		7,834		–			26,204
Customers’ liability under acceptances		16,529		1,988		65		3		–		–		–		–		–			18,585
Other		1,740		506		189		26		6		17		20		4,824		21,507			28,835
Total other assets		20,309		5,879		1,899		1,041		813		3,424		6,094		12,658		21,507			73,624
Total Assets		154,238		32,820		22,970		25,256		17,989		64,828		198,219		102,135		155,593			774,048

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		16,966		6,032		1,200		227		106		–		–		–		3,376		27,907
Business and government		23,524		32,231		22,713		15,893		8,629		22,418		48,684		12,932		126,276		313,300
Individuals		2,582		6,455		7,953		7,619		10,536		11,736		16,327		2,582		115,054		180,844
Total deposits		43,072		44,718		31,866		23,739		19,271		34,154		65,011		15,514		244,706		522,051
Other liabilities
Derivative instruments		1,499		2,456		1,616		913		639		3,831		6,335		7,122		–		24,411
Acceptances		16,529		1,988		65		3		–		–		–		–		–		18,585
Securities sold but not yet purchased		28,804		–		–		–		–		–		–		–		–		28,804
Securities lent or sold under repurchase agreements		63,496		2,249		8		931		–		–		–		–		–		66,684
Current tax liabilities		–		–		–		–		–		–		–		–		50		50
Deferred tax liabilities		–		–		–		–		–		–		–		–		74		74
Securitization and structured entities’ liabilities		1,044		1,084		475		512		588		4,912		13,398		3,038		–		25,051
Other		8,548		5,568		44		34		184		789		4,455		1,905		14,302		35,829
Total other liabilities		119,920		13,345		2,208		2,393		1,411		9,532		24,188		12,065		14,426		199,488
Subordinated debt		–		–		–		–		–		–		–		6,782		–		6,782
Total Equity		–		–		–		–		–		–		–		–		45,727		45,727
Total Liabilities and Equity		162,992		58,063		34,074		26,132		20,682		43,686		89,199		34,361		304,859		774,048

(1) Deposits payable on demand and payable after notice have been included under no maturity.

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,472		3,610		6,892		9,620		11,345		21,056		84,295		3,144		–		141,434
Backstop liquidity facilities		–		–		–		–		–		–		5,627		–		–		5,627
Operating leases		34		70		99		101		100		358		770		1,210		–		2,742
Securities lending		4,939		–		–		–		–		–		–		–		–		4,939
Purchase obligations		56		388		153		155		158		615		186		82		–		1,793

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

BMO Financial Group 201st Annual Report 2018 107

MANAGEMENT’S DISCUSSION AND ANALYSIS

																				2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		31,641		–		–		–		–		–		–		–		958			32,599
Interest bearing deposits with banks		3,784		1,579		626		319		182		–		–		–		–			6,490
Securities		3,620		2,917		5,933		5,845		3,625		7,675		22,842		52,615		58,126			163,198
Securities borrowed or purchased under resale agreements		57,919		13,236		2,353		1,241		249		49		–		–		–			75,047
Loans
Residential mortgages		1,045		1,551		4,531		7,687		6,201		19,866		65,547		8,830		–			115,258
Consumer instalment and other personal		517		371		1,084		1,374		1,285		4,211		20,845		8,590		23,667			61,944
Credit cards		–		–		–		–		–		–		–		–		8,071			8,071
Business and government		13,379		7,352		6,454		6,169		5,059		17,948		63,614		11,380		43,712			175,067
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,833	)		(1,833	)
Total loans and acceptances, net of allowance		14,941		9,274		12,069		15,230		12,545		42,025		150,006		28,800		73,617			358,507
Other Assets
Derivative instruments		1,701		3,748		1,580		1,229		1,306		3,272		7,426		8,689		–			28,951
Customers’ liability under acceptances		14,179		2,263		104		–		–		–		–		–		–			16,546
Other		1,340		475		129		17		11		11		131		4,431		21,697			28,242
Total other assets		17,220		6,486		1,813		1,246		1,317		3,283		7,557		13,120		21,697			73,739
Total Assets		129,125		33,492		22,794		23,881		17,918		53,032		180,405		94,535		154,398			709,580

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		12,462		9,321		2,633		496		25		–		–		–		3,268		28,205
Business and government		23,917		25,224		19,112		12,897		10,806		16,522		42,707		15,712		116,379		283,276
Individuals		3,835		5,081		5,569		5,662		7,999		9,098		15,811		2,075		113,181		168,311
Total deposits		40,214		39,626		27,314		19,055		18,830		25,620		58,518		17,787		232,828		479,792
Other liabilities
Derivative instruments		1,876		3,227		1,512		1,510		1,206		3,477		6,885		8,111		–		27,804
Acceptances		14,179		2,263		104		–		–		–		–		–		–		16,546
Securities sold but not yet purchased		25,163		–		–		–		–		–		–		–		–		25,163
Securities lent or sold under repurchase agreements		53,165		1,644		290		20		–		–		–		–		–		55,119
Current tax liabilities		–		–		–		–		–		–		–		–		125		125
Deferred tax liabilities		–		–		–		–		–		–		–		–		233		233
Securitization and structured entities’ liabilities		10		709		1,523		556		845		3,931		11,812		3,668		–		23,054
Other		12,616		2,536		517		43		239		752		154		2,361		13,143		32,361
Total other liabilities		107,009		10,379		3,946		2,129		2,290		8,160		18,851		14,140		13,501		180,405
Subordinated debt		–		–		–		–		–		–		–		5,029		–		5,029
Total Equity		–		–		–		–		–		–		–		–		44,354		44,354
Total Liabilities and Equity		147,223		50,005		31,260		21,184		21,120		33,780		77,369		36,956		290,683		709,580

(1) Deposits payable on demand and payable after notice have been included under no maturity.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,377		2,302		4,755		8,312		14,560		21,985		71,481		2,283		–		127,055
Backstop liquidity facilities		–		–		–		–		–		–		5,044		–		–		5,044
Operating leases		31		62		91		89		87		329		712		1,032		–		2,433
Securities lending		5,336		–		–		–		–		–		–		–		–		5,336
Purchase obligations		42		83		128		124		129		519		577		157		–		1,759

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

108 BMO Financial Group 201st Annual Report 2018

Operational Risk

Operational risk is the potential for loss resulting from inadequate or failed internal processes or systems, human interactions or external events, but excludes business risk, credit risk, liquidity and funding risk, market risk, strategic and reputation risk.

Operational risk is inherent in all of our business and banking activities and can lead to significant impacts on our business and financial results, including financial loss, restatements and damage to our reputation. Like other financial services organizations that operate in multiple jurisdictions, BMO is exposed to a variety of operational risks arising from the potential for failures of our internal processes, employees and systems, as well as from external threats. Potential losses may result from process and control failures, theft and fraud, unauthorized transactions by employees, regulatory non-compliance, business disruption, information security breaches, cyber security threats and exposure to risks related to outsourcing and damage to physical assets. Given the large volume of transactions we process on a daily basis, and the complexity and speed of our business, there is a possibility that certain operational or human errors may be repeated or compounded before they are discovered and rectified.

Operational risk is not only inherent in our business and banking activities, it is also inherent in the processes and controls we use to manage our risks. There is the possibility that errors will occur, as well as the possibility of a failure in our internal processes or systems, which could lead to financial loss and reputational harm. Shortcomings or failures of our internal processes, employees or systems, or of services and products provided by third parties, including any of our financial, accounting or other data processing systems, could lead to financial loss or restatements and damage our reputation.

The nature of our business also exposes us to the risk of theft and fraud when we enter into credit transactions with customers or counterparties. In extending credit, we rely on the accuracy and completeness of any information provided by, and any other representations made by customers and counterparties. While we conduct appropriate due diligence on such customer information and, where practicable and economically feasible, engage valuation experts and other experts or sources of information to assist with assessing the value of collateral and other customer risks, our financial results may be adversely impacted if the information provided by customers or counterparties is materially misleading and this is not discovered during the due diligence process.

We utilize various risk management frameworks to manage and mitigate all of these risks, including internal controls, limits and governance processes. However, despite the contingency plans we have in place to maintain our ability to serve our clients and minimize disruptions and adverse impacts, and the contingency plans our third-party service providers have in place, our ability to conduct business may be adversely affected by a disruption to the infrastructure that supports both our operations and the communities in which we do business, including but not limited to disruption caused by public health emergencies or terrorist acts.

We regularly review our top and emerging risks, and assess our preparedness to proactively manage the risks that we face or could face in the future. For more information on these and other factors that may affect future results, please refer to the discussion on page 80.

Consistent with the management of risk across the enterprise, we employ a three-lines-of-defence approach in managing operational risk. Operational risk is managed by the operating groups and corporate functions as the first line of defence. This is overseen by ERPM Operational Risk Management (ORM), along with Corporate Support areas for specialized risks, as the second line of defence, governed by a robust committee structure and supported by a comprehensive Operational Risk Management Framework (ORMF). The Corporate Audit Division, as the third line of defence, assesses our adherence to internal controls and limits, and identifies opportunities to strengthen our processes.

Operational Risk Governance

The Operational Risk Committee (ORC), a sub-committee of the RMC, is the primary governance committee exercising oversight of all operational risk management matters. As part of its governance responsibilities, the ORC provides effective challenge to the policies, standards, operating guidelines, methodologies and tools that comprise the governing principles of the ORMF. The documentation that gives effect to these governing principles is reviewed on a regular basis to ensure it incorporates sound practices and is consistent with our risk appetite. Regular analysis and reporting of our enterprise operational risk profile to the various committees (ORC, RMC and RRC) are important elements of our risk governance framework. Enterprise reporting provides an integrated view of top and emerging risks, trends in loss data, capital consumption, key risk indicators and operating group profiles. We continue to invest in our reporting platforms and support timely and comprehensive reporting capabilities in order to enhance risk transparency and facilitate the proactive management of operational risk exposures.

Operational Risk Management

The operating groups, as the first line of defence, are accountable for the day-to-day management of operational risk, with the CROs of businesses providing governance and oversight for their respective business units, and Corporate Support areas providing additional governance and oversight in certain targeted areas. Independent risk management oversight is provided by the ORM team, which is responsible for operational risk strategy, tools and policies, and for second-line oversight, effective challenge and governance. ORM establishes and maintains the ORMF, which defines the processes to be used by the first line of defence to identify, measure, manage, mitigate, monitor and report on key operational risk exposures, losses and near-miss operational risk events with significant potential impact. In addition, the ORMF defines the processes by which ORM, as the second line of defence, develops, supports, monitors, assesses and communicates with the first line in its management of operational risk. Operational Risk Officers (OROs) within ORM independently assess group operational risk profiles, identify material exposures and potential weaknesses in processes and controls, and recommend appropriate mitigation strategies and actions. Executing our ORMF strategy also involves continuing to strengthen our risk culture by promoting greater awareness and understanding of operational risk across all three lines of defence, learning from loss events and near-misses and providing other training and communication, as well as day-to-day execution and oversight of the ORMF. We also continue to strengthen our second-line-of-defence support and oversight.

The following are the key programs, methodologies and processes set out in the ORMF that assist us in the ongoing review of our operational risk profile:

• Risk Control Self-Assessment (RCSA) is an established process used by our operating groups to identify the key risks associated with their businesses and the controls required for risk mitigation. The RCSA process provides a forward-looking view of the impact of the business environment and internal controls on operating group risk profiles, enabling the proactive prevention, mitigation and management of risk.

BMO Financial Group 201st Annual Report 2018 109

MANAGEMENT’S DISCUSSION AND ANALYSIS

• ORM provides an independent enterprise-level view of operational risk relative to our risk appetite, so that key risks can be appropriately identified, documented, managed and mitigated.

• Process Risk Assessments (PRAs) and ORM reviews take a deeper view by identifying key risks and controls in our critical business processes, which may span multiple business and functional units. PRAs and ORM reviews enable a greater understanding of our key processes, issues and risk mitigation activities, which facilitates more effective oversight and appropriate risk management.

• BMO’s initiative assessment and approval process is used to assess, document and approve qualifying initiatives when a new business, service or product is developed or existing services and products are enhanced. The process seeks to ensure that due diligence, approval, monitoring and reporting requirements are appropriately addressed at all levels of the organization.

• Key risk indicators (KRIs) provide an early indication of any adverse changes in risk exposure. Operating groups and corporate functions identify specific metrics related to their material operational risks. KRIs are used in monitoring operational risk profiles and their overall relation to our risk appetite, are subject to review and challenge by ORM, and are linked to thresholds that trigger management intervention.

• Internal loss data serves as an important means of assessing our operational risk exposure and identifying opportunities for future risk prevention. In these assessments, internal loss data is analyzed and benchmarked against available external data. Material trends are regularly reported to the ORC, RMC and RRC so that preventative or corrective action can be taken where appropriate. BMO is a member of the Operational Risk Data Exchange Association, the American Bankers Association and other national and international associations of banks that share loss data information anonymously to assist in risk identification, assessment and modelling.

• BMO’s operational risk management training programs seek to ensure that our employees are qualified and equipped to execute the ORMF consistently, effectively and efficiently.

• Effective business continuity management prepares us to maintain, manage and recover critical operations and processes in the event of a business disruption, thereby minimizing any adverse effects on our customers and other stakeholders.

• BMO’s Corporate Risk & Insurance team provides a second level of mitigation for certain operational risk exposures. We purchase insurance when required by law, regulation or contractual agreement, and when it is economically attractive and practicable to mitigate our risks, in order to provide adequate protection against unexpected material loss.

A primary objective of the ORMF, and our implementation and oversight of this framework and its provisions, is to ensure that our operational risk profile is consistent with our risk appetite and supported by adequate capital.

Cyber Security Risk

Information security is integral to BMO’s business activities, brand and reputation. Given our reliance on the internet and our pervasive use of advanced digital technologies to process data, we face common banking information security risks, including the threat of potential data loss, hacking, loss or exposure of customer or employee information, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption. We have increased our investments in defensive technology, talent and processes in order to prevent or detect and manage cyber security threats within BMO operations and at our service providers. These measures include benchmarking and review of best practices across peer companies and other industries, third party assessments of our controls, evaluation of the effectiveness of our key controls and development of new controls, as needed, with ongoing investments in both technology and human resources. We also work with information security and software suppliers to bolster our internal resources and technology capabilities in order to improve our ability to remain resilient in a rapidly evolving threat landscape.

Anti-Money Laundering

Compliance with all Anti-Money Laundering, Anti-Terrorist Financing (AML/ATF) and Sanctions Measures is an essential part of safeguarding BMO, our customers and the communities in which we operate. BMO is committed to managing AML/ATF and sanctions risks prudently, and complying with all legal and regulatory requirements. Risks related to non-compliance with these requirements can include enforcement actions, legal actions and damage to our reputation. Our AML/ATF and sanctions program promotes effective governance and oversight across all BMO businesses, so that we are able to take appropriate measures to prevent money laundering, terrorist financing and sanctioned activity. This program is designed to be dynamic and adaptable to the evolving nature of AML/ATF and sanctions risks, and is carried out by employees who use analytics, technology and their professional expertise in order to deter, detect and report suspicious activity.

Operational Risk Capital and Stress Testing

BMO currently uses the Advanced Measurement Approach (AMA), a risk-sensitive capital model, to determine both economic capital and, in conjunction with the Standardized Approach in certain areas, regulatory capital requirements for managing operational risk. The AMA Capital Model employs a loss distribution approach along with the four elements required to support the measurement of our operational risk exposure. Internal and external loss data are used as inputs for the AMA Capital Model and, based on shared attributes, are grouped into cells that include operating group, business activity and event type. Minimum enterprise operational risk capital is determined at a specific upper confidence limit of the enterprise total loss distribution. Business environment and internal control factors are used for post-modelling adjustments, and these are subject to regular review in order to identify and understand risk drivers and to confirm consistency in application across the enterprise. Scenarios are used to verify the distributions and correlations used to model capital, to provide management with a better understanding of low-frequency, high-severity events and to assess enterprise preparedness for events which could create risks that exceed our risk appetite. Scenario analyses are also conducted as part of our stress testing program, which measures the potential impact of plausible operational, economic, market and credit events on our operations and capital position, and allows us to manage tail risk exposure and confirm the adequacy of our operational risk capital. We are monitoring regulatory capital developments on the replacement of AMA with a new Standardized Measurement Approach.

110 BMO Financial Group 201st Annual Report 2018

Model Risk

Model risk is the potential for adverse consequences following from decisions that are based on incorrect or misused model results. These adverse consequences can include financial loss, poor business decision-making or damage to reputation.

Models are quantitative tools that apply statistical, economic and other quantitative techniques and assumptions to process input data and generate quantitative estimates. BMO uses models ranging from very simple models that produce straightforward estimates to highly sophisticated models that value complex transactions or generate a broad range of forward-looking estimates.

The results from these models are used to inform business, risk and capital management decision-making and to assist in making daily lending, trading, underwriting, funding, investment and operational decisions. For example, BMO uses models as a core risk management tool to measure exposure to specific risks through stress testing, to value and price transactions, to evaluate credit, market and operational risk regulatory capital requirements and to assess risks on an integrated basis using economic capital.

Quantitative tools provide important insights and are effective when used within a framework that identifies key assumptions and limitations, while controlling and mitigating model risk. In addition to applying judgment to evaluate the reliability of model results, BMO mitigates model risk by maintaining strong controls over the development, validation, implementation and use of models across all model categories. BMO also takes steps to ensure that qualitative model overlays and non-statistical approaches to evaluating risks are intuitive, experience-based, well-documented and subject to effective challenge by those with sufficient expertise and knowledge in order to provide reasonable results.

Model Risk Management

Risk is inherent in models because model results are estimates that rely on data and statistical techniques to simulate reality or provide forecasts of future outcomes. Model risk also arises from the potential for misuse of models. Model risk is governed at BMO by the enterprise-wide Model Risk Management Framework, which covers the model life cycle.

This framework sets out an end-to-end approach for model risk governance across the model life cycle and helps to ensure that model risk remains within the limits of BMO’s enterprise-wide risk appetite. The framework includes BMO’s Model Risk Corporate Policy, Model Risk Corporate Standard and Model Risk Guidelines, which outline explicit principles for managing model risk, detail model risk management processes, and define the roles and responsibilities of all stakeholders across the model life cycle. Model owners, developers and users are the first line of defence, the Model Validation group and the Model Governance group are the second line of defence, and the Corporate Audit Division is the third line of defence.

The Model Governance group is responsible for the development and maintenance of the Model Risk Management Framework, oversight of the effectiveness of our model processes, our model inventory, and the overall aggregation and assessment of model risk. The Model Risk Management Committee (MRMC), a sub-committee of the RMC, is a cross-functional group representing all key stakeholders across the enterprise. The MRMC meets regularly to help direct the bank’s use of models, to oversee the development, implementation and maintenance of the Model Risk Management Framework, to provide effective challenge and to discuss governance of the enterprise’s models.

Model Development and Validation

Models are developed, implemented and used to meet specific business objectives, in addition to complying with certain regulatory requirements and meeting risk management objectives. Model owners, in consultation with model developers and other stakeholders, determine the design, objectives, intended purpose and desired functionality of the models, and have overall responsibility for ensuring that each model complies with BMO’s framework and approved terms of use. Model developers act as agents of the model owners by proposing model solutions, identifying data availability and limitations, and developing and implementing models that address their intended purposes. Developers do so by engaging model owners and other key stakeholders in the development and implementation processes, and by evaluating and documenting a model’s characteristics, outputs, strengths and weaknesses, limitations and assumptions, and alternatives. Our independent Model Validation group reviews the development documentation, results and analysis generated by the model developers to evaluate whether a proposed model is conceptually and statistically sound, achieves its objectives and is fit for its intended purpose without giving rise to material model risk. They provide observations as guidance for model owners, users and developers that may lead to remediation or mitigation of model issues. Approval from the Model Valuation group is required before a model can be used, unless an exception is obtained in accordance with the framework. Where a methodology or quantitative tool is not considered to be materially reliant on advanced statistical techniques or does not otherwise meet the definition of a model, the tool will not be subject to the framework, but nevertheless, the developers and users of such methodology or tool are expected to provide appropriate documentation and arrange for effective independent review and challenge by knowledgeable BMO employees and managers.

BMO Financial Group 201st Annual Report 2018 111

MANAGEMENT’S DISCUSSION AND ANALYSIS

Model Use and Monitoring

Model owners and users are accountable for the appropriate use of models in business decision-making, which includes having an understanding of the assumptions and limitations of the models, and for the proper care and maintenance of models over the model life cycle. The development and validation processes provide guidance to ensure that models can be used effectively within an appropriate range of use, that any model limitations are identified and that appropriate risk mitigants are implemented. When in use, models are subject to ongoing monitoring, including outcomes analysis, periodic reviews and revaluation as appropriate. Ongoing monitoring and outcomes analysis are part of the evaluation process, which confirms the continuing validity and adequate performance of each model over time. These techniques and other controls are applied to mitigate potential issues and to help ensure that the models continue to perform acceptably.

Outcomes Analysis and Back-Testing

Once models are validated, approved and in use, they are subject to regular revalidation and ongoing monitoring and outcomes analysis. As a key component of outcomes analysis, back-testing compares model results against actual observed outcomes. Variances between model forecasts and actual observed outcomes are measured against defined risk materiality thresholds. To ensure that variances remain within the defined tolerance range, actions such as model review and parameter recalibration are taken. Performance is assessed by analyzing model overrides and tests conducted during model development. This analysis serves to confirm the validity of a model’s performance over time, which helps to ensure that appropriate controls are in place in order to address identified issues and enhances a model’s overall performance.

All models used within BMO are subject to validation and ongoing monitoring, and are used in accordance with our framework. The Framework applies to a wide variety of models, ranging from market, credit and operational risk models to stress testing, pricing and valuation and anti-money laundering models. We highlight a few key applications of this framework below:

Credit Risk – The Model Risk Guidelines include clear requirements for the back-testing of all credit risk rating models. The process for back-testing the probability of default (PD) model computations includes comparing PD estimates generated by credit risk models to the actual or realized default rates across borrower ratings. This process also includes examining statistical evidence to confirm that default rates accurately capture sampling variability over time. The PD credit risk models are subject to quarterly performance monitoring. This comprehensive monitoring involves prescribed tests and analyses that assess discriminatory power, calibration and population stability. Overall model performance assessment is based on all individual testing results, as well as other qualitative considerations, such as user feedback, performance trends and mitigants that are in place. The comprehensive validation of a risk rating system involves various prescribed tests and analyses that assess discriminatory power, calibration and dynamic properties, with support from migration analysis. Additional tests or analyses are used to validate borrower risk rating grades and probability of default results. This ongoing validation is conducted annually to confirm that the models are performing as intended and continue to be fit for use, and the conclusions are reported to senior management.

Judgment is applied in determining which of the various factors, such as data limitations, might affect the overall relevance of a given validation approach or interpretation of statistical analysis. Similar back-testing is applied to the loss given default and exposure at default model computations.

Trading and Underwriting Market Risk – All internal models used in determining regulatory capital and economic capital for trading and underwriting market risk have their Value at Risk (VaR) results back-tested regularly. The results of the bank’s internal VaR model are back-tested daily, and the one-day 99% confidence level VaR at the local and consolidated BMO levels is compared to the realized theoretical profit and loss (P&L) calculation, which is the daily change in portfolio value that would occur if the portfolio composition remained unchanged. If the theoretical P&L result is negative and its absolute value is greater than the previous day’s VaR, a back-testing exception occurs. Each exception is investigated, explained and documented, and the back-testing results are reviewed by Market Risk, senior management and the Board, and are reported to our regulators. This process is used to monitor the quality and accuracy of the internal VaR model results and assist in refining overall risk measurement procedures.

Structural Market Risk – Back-testing of our structural market risk models is performed monthly and reported on quarterly. For products with a scheduled term, such as mortgages and term deposits, the model forecasts of prepayments or redemptions are compared to the actual outcomes observed. For products without a scheduled term, such as credit card loans or chequing accounts, the modelled balance run-off profiles are compared to actual balance trends.

Legal and Regulatory Risk

Legal and regulatory risk is the potential for loss or harm resulting from a failure to comply with laws or satisfy contractual obligations or regulatory requirements. This includes the risks of failure to: comply with the law (in letter or in spirit) or maintain standards of care; implement legislative or regulatory requirements; enforce or comply with contractual terms; assert non-contractual rights; effectively manage disputes; or act in a manner so as to maintain our reputation.

BMO’s success relies in part on our ability to manage our exposure to legal and regulatory risk prudently. The financial services industry is highly regulated, and we anticipate intense ongoing scrutiny from our supervisors and strict enforcement of legal and regulatory requirements as governments and regulators around the world continue with reforms intended to strengthen the stability of the financial system. Banks globally continue to be subject to fines and penalties for a number of regulatory and conduct issues. As rulemaking and supervisory expectations evolve, we monitor developments to enable BMO to respond to and implement any required changes.

Under the direction of BMO’s General Counsel, our Legal and Compliance Group maintains enterprise-wide frameworks that identify, measure, manage, monitor and report on legal and regulatory issues. We identify applicable laws and regulations and potential risks, recommend mitigation strategies and actions, conduct internal investigations and oversee litigation and enforcement actions. We are subject to litigation arising in the ordinary course of business, and the unfavourable resolution of any such litigation could have a material adverse effect on our financial results and damage our reputation. We are required to disclose material litigation to which we are party. Our disclosure controls and procedures are designed to

112 BMO Financial Group 201st Annual Report 2018

provide reasonable assurance that all relevant information is gathered and reported to senior management on a timely basis so that appropriate decisions can be made regarding public disclosure. In assessing the materiality of litigation, factors considered include a case-by-case assessment of specific facts and circumstances, our past experience and the opinions of legal experts. We are currently party to litigation involving certain of our insurance products, which has been the subject of recent media attention. The court will be asked to consider new regulations recently published by the Saskatchewan government confirming that such insurance products may not be used for the purpose sought by the plaintiff. We have concluded that this litigation is not material. Another area of focus is the oversight of fiduciary risk related to any of BMO’s businesses that provide products or services giving rise to fiduciary duties, as well as policies and practices that address the responsibilities of a business to a customer (including service requirements and expectations, customer suitability determinations, and disclosure obligations and communications).

Safeguarding our customers, employees, information and assets from exposure to criminal risk is an important priority. Criminal risk is the potential for loss or harm resulting from a failure to comply with criminal laws and includes acts by employees against BMO, acts by external parties against BMO and acts by external parties using BMO to engage in unlawful conduct, such as fraud, theft, money laundering, violence, cyber-crime, bribery and corruption. BMO has a robust Criminal Risk Framework designed to prevent, detect, respond to and report on exposure to criminal risk using a three-lines-of-defence approach, as well as through enhanced centralized management and oversight. BMO has conducted a review of a previously announced cyber incident where fraudsters claimed to be in possession of personal and financial information of a limited number of customers. We are committed to protecting customer information and privacy, and we have worked directly with impacted customers to protect their accounts. Three related class actions have been filed against BMO on behalf of customers who allege their personal information was disclosed as a result of the cyber incident. At this time, only one of the three lawsuits is proceeding, with a certification motion scheduled for 2019. For additional information regarding BMO’s operational risk management practices, including with respect to cyber security, please see Operational Risk in the Enterprise-Wide Risk Management section on page 109.

As governments globally seek to curb corruption and counter its negative effects on political stability, sustainable economic development, international trade and investment and other areas, BMO’s Anti-Corruption Office, through its global program, has articulated a set of key principles and activities necessary for the effective oversight of compliance with anti-corruption legislation in jurisdictions where BMO operates. These include guidance on both identifying and avoiding corrupt practices and rigorously investigating allegations of corrupt activity.

Governments and regulators around the world continue to focus on anti-money laundering and related concerns, raising their expectations concerning the quality and efficacy of anti-money laundering programs and penalizing institutions that fail to meet these expectations. Under the direction of the Chief Anti-Money Laundering Officer, BMO’s Anti-Money Laundering Office is responsible for the governance, oversight and assessment of principles and procedures designed to help ensure compliance with legal and regulatory requirements and internal risk parameters related to anti-money laundering, anti-terrorist financing and sanctions measures. For additional discussion regarding BMO’s operational risk management practices with respect to anti-money laundering, please see the Anti-Money Laundering section on page 110.

All of these frameworks reflect the three-lines-of-defence operating model described previously. The operating groups and Corporate Support areas manage day-to-day risks by complying with corporate policies and standards, while Legal and Compliance units specifically aligned with each of the operating groups provide advice and independent legal and regulatory risk management oversight.

Heightened regulatory and supervisory scrutiny has a significant impact on the way we conduct business. Working with the operating groups and other Corporate Support areas, Legal and Compliance assesses and analyzes the implications of regulatory changes. We devote substantial resources to the implementation of systems and processes required to comply with new regulations while also helping us meet the needs and demands of our customers. Failure to comply with applicable legal and regulatory requirements may result in litigation, financial losses, regulatory sanctions, enforcement actions, an inability to execute our business strategies, a decline in investor and customer confidence, and damage to our reputation.

Our ethical culture influences how we conduct ourselves, enabling us to deliver positive outcomes for our customers and contribute to the orderly operation of financial markets. Misconduct is behaviour that falls short of legal, professional, internal conduct and ethical standards. Our management approach to culture and conduct is centred on the key themes of our people, customers and markets. We manage and mitigate the potential for misconduct through various risk management processes and procedures using their information and insights to develop an enterprise perspective.

We continue to respond to other global regulatory developments, including capital and liquidity requirements under the Basel Committee on Banking Supervision (BCBS) global standards (Basel III), which we expect will put upward pressure on the amount of capital we are required to hold over time. Other global regulatory developments include over-the-counter (OTC) derivatives reform, consumer protection measures and specific financial reforms, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which are discussed in further detail below. For additional discussion of the regulatory developments relating to capital management and liquidity and funding risk, please refer to the Enterprise-Wide Capital Management section starting on page 69 and the Liquidity and Funding Risk section starting on page 100. For additional discussion of the impact of certain potential changes in fiscal policy and tax legislation on our results, please see Critical Accounting Estimates – Income Taxes and Deferred Tax Assets on page 119, Tax Legislation and Interpretations on page 80 and General Economic Conditions and Fiscal and Monetary Policies in the Countries in Which We Conduct Business on page 80.

Bank Resolution and Bail-In – In June 2016, legislation required to implement a Bank Recapitalization (Bail-In) Regime was passed by the Canadian government in order to enhance Canada’s bank resolution capabilities, in line with international efforts in this area. Final regulations implementing the Bail-In Regime took effect in September 2018. The related total loss-absorbing capacity (TLAC) requirements take effect in November 2021. For additional discussion of the Bail-In Regime and TLAC requirements, please refer to the Enterprise-Wide Capital Management section starting on page 69 and the Liquidity and Funding Risk section starting on page 100.

Housing Market Reforms – In October 2017, OSFI published the final version of Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures. The revised Guideline came into effect on January 1, 2018. The revisions reinforce OSFI’s expectation that banks and other federally regulated mortgage lenders remain vigilant in their mortgage underwriting practices, with a focus on the minimum qualifying rate for uninsured mortgages, expectations related to loan-to-value (LTV) frameworks and limits, and restrictions on transactions designed to circumvent those LTV limits.

BMO Financial Group 201st Annual Report 2018 113

MANAGEMENT’S DISCUSSION AND ANALYSIS

Federal Financial Sector Legislation – In October 2018, in connection with its previously tabled budget, the government of Canada introduced legislation: amending the Bank Act to strengthen the financial consumer protection framework, with enhancements in the areas of corporate governance, responsible business conduct, disclosure and customer redress; amending the Financial Consumer Agency of Canada Act to strengthen the mandate and powers of the Financial Consumer Agency of Canada; and enacting the Pay Equity Act to redress systemic gender-based discrimination by requiring federal public and private sector employers to establish and maintain a pay equity plan within set time frames. Implementing regulations are still required, regarding earlier amendments to the Bank Act, which would allow banks to undertake broader financial technology activities.

U.S. Regulatory Reform – In May 2018, the U.S. Congress passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP), which made reforms to Dodd-Frank, including raising the threshold for heightened prudential standards, and changes to certain exemptions to restrictions on proprietary trading and the ownership and sponsorship of private investment funds by banks and their affiliates. The bank continues to monitor EGRRCP rulemaking activities by applicable agencies.

Other Regulatory Initiatives Impacting Financial Services in Canada – Federal and provincial regulators continue to focus on issues relating to consumer protection, including with respect to seniors and retail investors, OTC derivatives and advisor conduct. Recent amendments to federal privacy legislation set out privacy breach reporting requirements. For additional discussion regarding privacy, please see the Risks That May Affect Future Results – Top and Emerging Risks That May Affect Future Results – Cyber Security, Information Security and Privacy Risk section in the Enterprise-Wide Risk Management section on page 79.

Derivatives Reform – G20 jurisdictions continue to implement new regulations as part of the OTC derivatives regulatory reform program. Margin requirements for non-centrally cleared derivatives have been adopted in a number of jurisdictions, including Canada, the European Union, Hong Kong, Singapore and the United States. Margin rules will require the exchange of variation margin and initial margin, both of which are designed to secure performance on non-centrally cleared derivatives transactions between covered entities. BMO has been subject to variation margin rules since March 1, 2017, and will be subject to initial margin rules beginning September 1, 2019. In a number of jurisdictions, OTC derivatives transactions must now be reported to designated trade repositories, and clearing, execution and business conduct regulations continue to be implemented. BMO is preparing for the impact of these rules and requirements.

United Kingdom and European Union Regulatory Reform – The political and legislative processes continue with respect to the United Kingdom’s (U.K.’s) withdrawal from the European Union (EU). The General Data Protection Regulation came into effect in the EU in May 2018, establishing guidelines for the collection, processing and management of personal information of individuals within the EU. Effective December 2019, the U.K.’s Prudential Regulation Authority and Financial Conduct Authority will extend the senior managers and certification regime to all regulated firms. The London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate and other rates and indices are the subject of national, international and other regulatory guidance and proposals for reform. For additional discussion regarding the impact of the United Kingdom’s withdrawal from the EU and benchmark reform, please see Risks That May Affect Future Results – Other Factors That May Affect Future Results – Regulatory Requirements and Benchmark Interest Rate Reform, respectively, in the Enterprise-Wide Risk Management section on pages 80 and 81.

The General Counsel and the Chief Compliance Officer regularly report to the Audit and Conduct Review Committee (ACRC) of the Board and senior management on the effectiveness of our Enterprise Compliance Program. The Program uses a risk-based approach to identify, assess and manage compliance with applicable legal and regulatory requirements. The Program directs operating groups and Corporate Support areas to maintain compliance policies, procedures and controls that meet these requirements. Under the direction of the Chief Compliance Officer, we identify and report on gaps and deficiencies, and track remedial action plans. The Chief Anti-Money Laundering Officer also regularly reports to the ACRC.

All BMO employees must complete annual legal and regulatory training on topics such as anti-corruption, anti-money laundering and privacy policies, standards and procedures. This is done in conjunction with our Code of Conduct training, which tests employees’ knowledge and understanding of the behaviour required of employees of BMO.

Business Risk

Business risk arises from the specific business activities of an enterprise and the effects these could have on its earnings.

Business risk encompasses the potential causes of earnings volatility that are distinct from credit, market or operational risk factors. The management of business risk identifies and addresses factors related to the risk that volumes will decrease or margins will shrink without the enterprise having the ability to compensate for these developments by cutting costs.

BMO faces many risks that are similar to those faced by non-financial firms, principally that our profitability, and hence value, may be eroded by changes in the business environment or by failures of strategy or execution. Sources of these risks include, but are not limited to, changing client expectations, heightened competition, technology driver changes, adverse business developments and relatively ineffective responses to industry changes. For example, client retention can be influenced by a number of factors, including service levels, prices for products and services, delivery platforms, ease of access to products and services, the quality of the customer experience, our reputation and the actions of our competitors.

Within BMO, each operating group is responsible for controlling its respective business risk by assessing, managing and mitigating the risks arising from changes in business volumes and cost structures, among other factors.

114 BMO Financial Group 201st Annual Report 2018

Strategic Risk

Strategic risk is the potential for loss due to changes in the external business environment and/or failure to respond appropriately to these changes as a result of inaction, ineffective strategies or poor implementation of strategies.

Strategic risk arises from external risks inherent in the business environment within which BMO operates, as well as from the potential for loss if BMO is unable to address those external risks effectively. While external strategic risks – including economic, geopolitical, regulatory, technological, social and competitive risks – cannot be controlled, the likelihood and magnitude of their impact can be limited through an effective strategic management framework, and certain of these risks, including economic, geopolitical and regulatory risks, can be assessed through stress testing.

BMO’s Office of Strategic Management (OSM) oversees our strategic planning process and works with the lines of business, along with ERPM, Finance and Corporate Support areas, to identify, monitor and mitigate strategic risk across the enterprise. Our rigorous strategic management framework encourages a consistent approach in developing strategies and incorporates information linked to financial commitments.

The OSM works with the lines of business and key corporate stakeholders during the strategy development process to promote consistency and adherence to strategic management standards, including a consideration of the results of stress testing as an input into strategic decision-making. The potential impacts of changes in the business environment, such as broad industry trends and the actions of competitors, are considered as part of this process and inform strategic decisions within each of our lines of business. Enterprise and group strategies are reviewed with the Executive Committee and the Board of Directors annually in interactive sessions that challenge assumptions and strategies in the context of both the current and the potential future business environment.

Our ability to execute on the strategic plans developed by management influences our financial performance. If these strategic plans do not meet with success or if there is a change in the strategic plans, our earnings could grow at a slower pace or decline. Performance objectives established through the strategic management process are monitored regularly and reported on quarterly, using both leading and lagging indicators of performance, so that strategies can be reviewed and adjusted where necessary. Regular strategic and financial updates are also monitored closely in order to identify any significant emerging risk issues.

Environmental and Social Risk

Environmental and social risk is the potential for loss or damage resulting from environmental or social concerns related to BMO or its customers. Environmental and social risk is often associated with credit, operational and reputation risk.

Environmental and social risk involves a broad spectrum of issues, such as climate change, biodiversity, ecosystem health, pollution, waste and the unsustainable use of water and other resources, as well as risks to the livelihoods, health, human rights and cultural heritage of communities.

Our Sustainability Principles are the guidelines we follow as a responsibly managed bank that considers environmental, social and governance (ESG) issues as we pursue sustainable growth. These principles contribute to a deeper sense of responsibility that informs all aspects of our business strategy.

BMO’s Sustainability Council, chaired by BMO’s General Counsel, is comprised of senior leaders from business and Corporate Support areas across our organization, and provides oversight and leadership for our sustainability strategy.

The Sustainability Office is responsible for coordinating the development and maintenance of an enterprise-wide strategy that meets BMO’s overarching environmental and social responsibilities. The Sustainability Office works in partnership with the lines of business and Corporate Support areas to manage environmental and social risk within our business, and works with external stakeholders to better understand the consequences and impacts of our operations and financing decisions.

BMO’s Procurement and Corporate Real Estate groups are responsible for establishing environmental management processes. Within Corporate Real Estate, the Environmental Sustainability group is responsible for establishing and maintaining an operational environmental management system that is aligned with the framework set out in ISO 14001, and for setting objectives and targets that are related to aligning the bank’s operations with its Environmental Policy.

As part of our enterprise risk management framework and credit risk management framework, we evaluate the environmental and social risk associated with credit and counterparty transactions and exposures. We have developed and implemented specific financing guidelines to address environmental and social risks for specific lines of business. To limit our potential exposure to clients’ environmental risks, we apply enhanced due diligence to transactions with clients operating in environmentally sensitive industry sectors, and we avoid doing business with borrowers that have poor environmental and social risk management track records. BMO has been a signatory to the Equator Principles since 2005 and applies its credit risk management framework to identify, assess and manage the environmental and social risk of transactions within its scope. We also apply environmental and social screening procedures to categorize and assess projects based on the magnitude of their potential impacts and risks. These principles have been integrated into our credit risk management framework.

We are a long-standing signatory to and participant in the Carbon Disclosure Project – a global initiative that gathers and publishes corporate disclosure on greenhouse gas emissions and climate change. We also support the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), and we continue to investigate and assess climate-related risks and improve our climate-related disclosures.

BMO is a signatory to the United Nations Principles for Responsible Investment, a framework that encourages sustainable investing through the integration of ESG considerations into investment, decision-making and ownership practices. We are a partner in the Carbon Pricing Leadership Coalition, a voluntary initiative that supports the effective implementation of carbon pricing around the world.

We consider the impact our decisions have on our stakeholders. Our Board-approved Code of Conduct reflects our commitment to manage our business responsibly. We expect our suppliers to be aware of, understand and respect the principles of our Supplier Code of Conduct, which outlines our standards for integrity, fair dealing and sustainability. We publicly report under the United Kingdom Modern Slavery Act 2015, and our Supplier Code of Conduct reflects this legislation.

BMO Financial Group 201st Annual Report 2018 115

MANAGEMENT’S DISCUSSION AND ANALYSIS

To keep informed of emerging issues, we participate in global forums with our peers, maintain an open dialogue with our internal and external stakeholders, and monitor and evaluate policy and legislative changes in the jurisdictions in which we operate. We publicly report on our environmental and social performance and targets in our annual Environmental, Social and Governance (ESG) Report and Public Accountability Statement (PAS), and on our website at https://www.bmo.com/home/about/banking/corporate-responsibility/our-approach/reporting#esg_pas. Selected environmental and social indicators in the ESG Report and PAS are assured by a third party.

Reputation Risk

Reputation risk is the potential for loss or harm to the BMO brand. It can arise even if other risks are managed effectively.

BMO’s reputation is built on our commitment to high standards of business conduct and ethics, and is one of our most valuable assets. By protecting and maintaining our reputation, we safeguard our brand, increase shareholder value, reduce our cost of capital, improve employee engagement, and maintain customer loyalty and trust.

We manage risks to our reputation by considering the potential reputational impact of all business activities, including strategy development and implementation, transactions and initiatives, events or incidents impacting BMO, as well as day-to-day decision-making and conduct. We consider our reputation in everything that we do.

BMO’s Code of Conduct is the foundation of our ethical culture and it provides employees with guidance on the behaviour that is expected of them, so that they can make the right choice in decisions that affect our customers and stakeholders. Continual reinforcement of the principles set out in the Code of Conduct minimizes risks to our reputation that may result from poor decisions or behaviour.

Our corporate governance practices and enterprise risk management framework have various controls in place that support the management of risks to our reputation. We seek to identify activities or events that could impact our reputation, including events with large-scale impact through the media or otherwise. Where we identify a potential risk to our reputation, we take steps to assess and manage that risk. Instances of significant or heightened exposure to reputation risk are escalated to BMO’s Reputation Risk Management Committee for review. As misconduct can impact our reputation, the Chief Ethics and Conduct Officer is responsible for enterprise-wide reporting on our corporate culture and our employees’ conduct, and reports on cases of misconduct to BMO’s Reputation Risk Management Committee, as appropriate.

116 BMO Financial Group 201st Annual Report 2018

Accounting Matters and Disclosure and Internal Control

Critical Accounting Estimates

The most significant assets and liabilities for which we must make estimates include: allowance for credit losses; financial instruments measured at fair value; pension and other employee future benefits; impairment of securities; provisions for income taxes and deferred tax asset; goodwill, intangible assets; insurance-related liabilities; and provisions, including legal provisions. We make judgments in assessing whether substantially all risks and rewards have been transferred in respect of transfers of financial assets and whether we control structured entities (SEs). These judgments are discussed in Notes 6 and 7, respectively, on pages 164 and 165 of the consolidated financial statements. Note 17 on page 184 of the consolidated financial statements discusses the judgments made in determining the fair value of financial instruments. If actual results were to differ from our estimates, the impact would be recorded in future periods. We have established detailed policies and control procedures that are intended to ensure the judgments we make in estimating these amounts are well controlled, independently reviewed and consistently applied from period to period. We believe that our estimates of the value of BMO’s assets and liabilities are appropriate.

For a more detailed discussion of the use of estimates, please see Note 1 on page 148 of the consolidated financial statements.

Allowance for Credit Losses

The allowance for credit losses (ACL) consists of allowances for impaired loans, which represent estimated losses related to impaired loans in the portfolio provided for but not yet written off, and allowances for performing loans, which is our best estimate of impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the allowance for performing loans is based on the requirements of IFRS, considering the guideline issued by OSFI. Under the IFRS 9 expected credit loss (ECL) methodology, an allowance is recorded for expected credit losses on financial assets regardless of whether there has been actual impairment. ECL is calculated on a probability-weighted basis, based on the economic scenarios described below, and is calculated for each exposure in the portfolio as a function of the probability of default (PD), exposure at default (EAD) and loss given default (LGD), with the timing of the loss also considered. Where there has been a significant increase in credit risk, lifetime ECL is recorded; otherwise up to 12 months of ECL is recorded. Significant increase in credit risk is based on the change in PD between the reporting date and origination. We may apply experienced credit judgment to reflect factors not captured in the results produced by the ECL models. We have controls and processes in place to govern the ECL process including judgments and assumptions used in the determination of the allowance for performing loans. These judgments and assumptions will change over time, and the impact of the change will be recorded in future periods.

In establishing our allowance for performing loans, we attach probability weightings to three economic scenarios, which are representative of our view of forecast economic conditions – a base case scenario, which in our view represents the most probable outcome, and is described below, as well as benign and adverse scenarios, all developed by our Economics group. The adverse scenario is also described below given the focus on such a scenario at this point of the economic cycle. The allowance for performing loans is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario. Many of the factors have a high degree of interdependency, although there is no single factor to which loan impairment allowances as a whole are sensitive.

Our base case economic forecast depicts a Canadian economy that grows by a moderate 1.7% on average over the forecast period, similar to long-run potential growth, reducing the unemployment rate slightly to 5.6% in 2020. The U.S. economy grows moderately faster than Canada, averaging 2.1% over the forecast period, due to the near-term fiscal stimulus. If we assumed a 100% base case economic forecast and included the impact of loan migration by restaging with other assumptions held constant, including the application of experienced credit judgment, the allowance for performing loans would be approximately $1,250 million as at October 31, 2018, compared with the reported allowance for performing loans of $1,473 million.

Our adverse case economic forecast depicts a typical recession in Canada and the United States occurring in the first year of our forecast horizon that involves the economy contracting approximately 3% over five quarters and the unemployment rate rising more than 3 percentage points to 9.5% in Canada and 7.0% in the U.S. This is followed by a slow recovery initially, then more moderate growth towards the end of the projection period. If we assumed a 100% adverse economic forecast and included the impact of loan migration by restaging with other assumptions held constant, including the application of experienced credit judgment, the allowance for performing loans would be approximately $2,650 million as at October 31, 2018, compared with the reported allowance for performing loans of $1,473 million. Actual results in a recession will differ, as our portfolio will change through time due to migration, growth, risk mitigation actions and other factors. In addition, our allowance will reflect the three economic scenarios used in assessing the allowance, with weightings attached to adverse and benign scenarios often unequally weighted, and those weightings will change through time.

BMO Financial Group 201st Annual Report 2018 117

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following table shows the key economic variables we use to estimate our allowance for performing loans during the forecast period. The values shown represent the end of period national average values for the first 12 months and then the national average for the remaining horizon. While the values disclosed below are national variables, in our underlying models we use regional variables where considered appropriate.

	Benign scenario				Base case scenario				Adverse scenario
As at October 31, 2018	First 12 months		Remaining horizon (1)		First 12 months		Remaining horizon (1)		First 12 months		Remaining horizon (1)
Real gross domestic product growth rates (2)
Canada		3.1%		2.4%		1.8%		1.6%		(3.2)%		0.8%
United States		2.9%		1.9%		2.4%		1.6%		(2.9)%		0.9%
Corporate BBB 10-year spread
Canada		2.0%		2.1%		2.3%		2.3%		4.7%		3.9%
United States		1.8%		2.0%		2.2%		2.3%		4.3%		3.5%
Unemployment rates
Canada		5.4%		5.2%		5.6%		5.6%		9.3%		9.3%
United States		3.2%		3.1%		3.6%		3.7%		6.7%		6.8%
Housing price index
Canada (3)		2.4%		2.6%		1.4%		1.8%		(12.8)%		(3.2)%
United States (4)		5.1%		4.3%		3.6%		3.0%		(7.3)%		(1.2)%

(1) The remaining forecast period is two years.

(2) Real gross domestic product is based on year-over-year growth.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the United States, we use the National Case-Shiller House Price Index.

The ECL approach requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under our current probability-weighted scenarios, if all our performing loans were in Stage 1, our models would generate an allowance for performing loans of approximately $1,000 million, compared with the reported allowance for performing loans of $1,473 million.

Our provision for credit losses in 2018 was $662 million, comprised of $700 million on impaired loans and a recovery of $38 million on performing loans. Our total allowance for performing and impaired loans at October 31, 2018, was $1,870 million. Additional information on the process and methodology for determining the allowance for credit losses can be found in the discussion of Credit and Counterparty Risk on page 87, as well as in Note 4 on page 157 of the consolidated financial statements.

Financial Instruments Measured at Fair Value

BMO records trading securities, fair value through profit and loss securities, fair value through other comprehensive income securities and derivatives and certain other assets and liabilities are designated under the fair value option at fair value. Fair value represents our estimate of the amount we would receive, or would be required to pay in the case of a liability, in an orderly transaction between willing parties at the measurement date. We employ a fair value hierarchy to categorize the inputs we use in valuation techniques to measure fair value. The extent of our use of quoted market prices (Level 1), internal models with observable market information (Level 2) and internal models without observable market information (Level 3) in the valuation of securities, derivative assets and liabilities, and liabilities recorded at fair value as at October 31, 2018, as well as a sensitivity analysis of our Level 3 financial instruments, is disclosed in Note 17 on page 184 of the consolidated financial statements.

Our valuation models use general assumptions and market data, and therefore do not reflect the specific risks and other factors that could affect a particular instrument’s fair value. Valuation Product Control (VPC), a group independent of the trading lines of business, ensures that the fair values at which financial instruments are recorded are materially accurate by:

• Developing and maintaining valuation policies and procedures in accordance with regulatory requirements and IFRS;

• Establishing official rate sources for valuation of all portfolios; and

• Providing independent review of portfolios for which prices supplied by traders are used for valuation.

For instruments that are valued using models, VPC identifies situations in which valuation adjustments must be made to the model estimates in order to arrive at fair value. As a result, we incorporate certain adjustments when using internal models to establish fair values. These fair value adjustments take into account the estimated impact of credit risk, liquidity risk and other items, including closeout costs. For example, the credit risk valuation adjustment for derivative financial instruments incorporates credit risk into our determination of fair values by taking into account factors such as the counterparty’s credit rating, the duration of the instrument and changes in credit spreads. We also incorporate an estimate of the implicit funding costs borne by BMO for over-the-counter derivative positions (the funding valuation adjustment).

The methodologies used for calculating these adjustments are reviewed on an ongoing basis to ensure that they remain appropriate. Significant changes in methodologies are made only when we believe that a change will result in better estimates of fair value.

The Valuation Steering Committee is BMO’s senior management valuation committee. It meets at least monthly to address the more challenging material valuation issues related to BMO’s portfolios, approves valuation adjustments and methodology changes, and acts as a key forum for the discussion of positions categorized as Level 3 for financial reporting purposes and their inherent uncertainty.

Valuation Adjustments

(Canadian $ in millions) As at October 31	2018		2017
Credit risk		55		63
Funding risk		19		15
Liquidity risk		79		33
Total		153		111

Valuation adjustments increased in 2018, primarily due to the increased size of the trading book.

118 BMO Financial Group 201st Annual Report 2018

Pension and Other Employee Future Benefits

Our pension and other employee future benefits expense is calculated by independent actuaries using assumptions determined by management. If actual experience were to differ from the assumptions used, the difference would be recognized in other comprehensive income.

Pension and other employee future benefits expense and the related obligations are sensitive to changes in discount rates. We determine discount rates at each year end for all our plans using high-quality corporate bonds with terms matching the plans’ specific cash flows.

Additional information regarding our accounting for pension and other employee future benefits, including a sensitivity analysis for key assumptions, is included in Note 21 on page 194 of the consolidated financial statements.

Impairment of Securities

We have investments in associates and joint ventures, which are classified as other securities. We review other securities at each quarter-end reporting period to identify and evaluate instruments that show indications of possible impairment.

For these equity securities, a significant or prolonged decline in the fair value of a security below its cost is objective evidence of impairment.

Debt securities measured at amortized cost or fair value through other comprehensive income (FVOCI) are assessed for impairment using the expected credit loss model. For securities determined to have low credit risk, the allowance for credit losses is measured at a 12-month expected credit loss.

Additional information regarding our accounting for debt securities measured at amortized cost or FVOCI and other securities, allowance for credit losses and the determination of fair value is included in Note 3 on page 153 and Note 17 on page 184 of the consolidated financial statements.

Income Taxes and Deferred Tax Assets

Our approach to tax is governed by our tax risk management framework, which is implemented through internal controls and processes. We actively seek to identify, evaluate, monitor and manage any tax risks that may arise to ensure our financial exposure is well understood and is within a level consistent with our objectives for the management of tax risk, as set out in our tax risk management framework. Our intention is to comply fully with tax laws. We consider all applicable laws in connection with our commercial activities, and where tax laws change in our business or for our customers, we adapt and change. We do not knowingly do business with customers we believe are transacting with us to evade taxes. We are committed to maintaining productive relationships and cooperating with taxing authorities in all tax matters. We seek to resolve disputes in a collaborative manner; however, where our interpretation of tax law differs from that of taxing authorities, we are prepared to defend our position.

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in our Consolidated Statement of Income or our Consolidated Statement of Changes in Equity. In determining the provision for income taxes, we interpret tax legislation, case law and administrative positions in numerous jurisdictions, and, based on our judgment, record our estimate of the amount required to settle tax obligations. We also make assumptions about the expected timing of the reversal of deferred tax assets and liabilities. If our interpretations and assumptions differ from those of taxing authorities or if the timing of reversals is not as expected, our provision for income taxes could increase or decrease in future periods. The amount of any such increase or decrease cannot be reasonably estimated.

Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available in future periods against which deductible temporary differences may be utilized. We are required to assess whether it is probable that our deferred income tax assets will be realized. The factors used to assess the probability of realization are our past experience of income and capital gains, our forecast of future net income before taxes, and the remaining expiration period of tax loss carryforwards. Changes in our assessment of these factors could increase or decrease our provision for income taxes in future periods.

If income tax rates increase or decrease in future periods in a jurisdiction, our provision for income taxes for future periods will increase or decrease accordingly. Furthermore, our deferred tax assets and liabilities will increase or decrease as income tax rates increase or decrease, respectively, and will result in an income tax impact. For example, the reduction in the U.S. federal tax rate from 35% to 21% as a result of the enactment of the U.S. Tax Cuts and Jobs Act (Act) resulted in a $425 million one-time non-cash tax charge to our net income in 2018 and a corresponding reduction in our net deferred tax assets. In addition, U.S. tax reform increased our annual net income by approximately US$100 million. Since its enactment, we have been monitoring the release of guidance to assist in interpreting the Act. Guidance on tax base broadening measures is expected to be released later in 2018, or early in 2019. We will reflect the impact, if any, in the period in which the applicable guidance is released.

In fiscal 2018, we were reassessed by the Canada Revenue Agency (CRA) for additional income taxes and interest in an amount of approximately $169 million in respect of certain 2013 Canadian corporate dividends. In prior fiscal years, we were reassessed for additional income taxes and interest of approximately $116 million and $76 million, respectively, for certain 2012 and 2011 Canadian corporate dividends. In its reassessments, the CRA denied dividend deductions on the basis that the dividends were received as part of a “dividend rental arrangement”. The tax rules raised by the CRA in its reassessments were prospectively addressed in the 2015 and 2018 Canadian federal budgets. In the future, it is possible that we may be reassessed for significant additional income taxes for similar activities in 2014 and subsequent years. We remain of the view that our tax filing positions were appropriate and intend to challenge any reassessment. If our challenge is unsuccessful, the additional expense would negatively impact our net income.

Additional information regarding our accounting for income taxes is included in Note 22 on page 198 of the consolidated financial statements.

BMO Financial Group 201st Annual Report 2018 119

MANAGEMENT’S DISCUSSION AND ANALYSIS

Goodwill and Intangible Assets

Goodwill is assessed for impairment at least annually. This assessment includes a comparison of the carrying value and the recoverable amount of each of our cash-generating units (CGUs) in order to verify that the recoverable amount of the CGU is greater than its carrying value. If the carrying value were to exceed the recoverable amount of the CGU, an impairment calculation would be performed. The recoverable amount of a CGU is the higher of its fair value less costs to sell and its value in use.

Fair value less costs to sell was used to perform the impairment test in all periods. In determining fair value less costs to sell, we employ a discounted cash flow model, consistent with that used when we acquire businesses. This model is dependent on assumptions related to revenue growth, discount rates, synergies achieved on acquisition and the availability of comparable acquisition data. Changes in any of these assumptions would affect the determination of fair value for each of our CGUs in a different manner. Management must exercise judgment and make assumptions in determining fair value, and differences in judgments and assumptions could affect the determination of fair value and any resulting impairment write-down. At October 31, 2018, the estimated fair value of each of our CGUs was greater than its carrying value.

Intangible assets with definite lives are amortized to income on either a straight-line or an accelerated basis over a period not exceeding 15 years, depending on the nature of the asset. We test intangible assets with definite lives for impairment when circumstances indicate the carrying value may not be recoverable.

Intangible assets with indefinite lives are tested annually for impairment. If an intangible asset is determined to be impaired, we write it down to its recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

Additional information regarding the composition of goodwill and intangible assets is included in Note 11 on page 176 of the consolidated financial statements.

Insurance-Related Liabilities

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy obligation liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions. The most significant potential impact on the valuation of these liabilities would be the result of a change in the assumption for future investment yields.

Additional information on insurance-related liabilities is provided in Note 14 on page 179 of the consolidated financial statements, and information on insurance risk is provided on page 100.

Provisions

BMO and its subsidiaries are involved in various legal actions in the ordinary course of business.

Provisions are recorded at the best estimate of the amount required to settle any obligation related to these legal actions as at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Factors considered in making the estimate include a case-by-case assessment of specific facts and circumstances, our past experience and the opinions of legal experts. Management and internal and external experts are involved in estimating any amounts that may be required. The actual costs of resolving these claims may be substantially higher or lower than the amounts of the provisions.

Additional information regarding provisions is provided in Note 24 on page 201 of the consolidated financial statements.

Transfers of Financial Assets and Consolidation of Structured Entities

We sell Canadian mortgage loans to third-party Canadian securitization programs, including the Canada Mortgage Bond Program, and directly to third-party investors under the National Housing Act Mortgage-Backed Securities program. We assess whether substantially all of the risks and rewards of the loans have been transferred in order to determine if they qualify for derecognition. Since we continue to be exposed to substantially all of the prepayment, interest rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans, and we recognize the related cash proceeds as secured financing in our Consolidated Balance Sheet. Additional information concerning the transfer of financial assets is included on page 76, as well as in Note 6 on page 164 of the consolidated financial statements.

In the normal course of business, BMO enters into arrangements with SEs. We are required to consolidate an SE if we determine that we control the SE. We control an SE when we have power over the entity, exposure or rights to variable returns from our investment and the ability to exercise power to affect the amount of our returns.

Additional information concerning BMO’s interests in SEs is included on page 77, as well as in Note 7 on page 165 of the consolidated financial statements.

Caution

This Critical Accounting Estimates section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

120 BMO Financial Group 201st Annual Report 2018

Changes in Accounting Policies in 2018

Effective November 1, 2017, we prospectively adopted IFRS 9 Financial Instruments (IFRS 9), which addresses impairment, classification and measurement, and hedge accounting. The impact on shareholders’ equity at November 1, 2017 was an increase of $70 million ($44 million after-tax) related to the impairment requirements of the standard. Prior periods have not been restated.

Impairment

IFRS 9 introduces a new single expected credit loss (ECL) impairment model for all financial assets and certain off-balance sheet loan commitments and guarantees. The ECL model results in an allowance for credit losses being recorded on financial assets, regardless of whether there has been an actual loss event. This differs from our previous approach, where the allowance recorded on performing loans is designed to capture only losses that have been incurred whether or not they have been specifically identified.

Classification and Measurement

IFRS 9 requires that we classify debt instruments based on our business model for managing the assets and the contractual cash flow characteristics of the asset. Equity instruments are measured at fair value through profit or loss unless we elect to measure at fair value through other comprehensive income.

Hedge Accounting

IFRS 9 introduces a new hedge accounting model that expands the scope of hedged items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. The new model no longer specifies quantitative measures for effectiveness testing and does not permit hedge de-designation. Consistent with a policy choice allowed in IFRS 9, we have elected to continue to apply the existing hedge accounting rules.

Notes 1 and 28 on pages 148 and 207, respectively, of the consolidated financial statements, provide further details on the impact of the new standard.

Future Changes in Accounting Policies

BMO monitors the potential changes to IFRS proposed by the International Accounting Standards Board (IASB) and analyzes the effects that any such changes to the standards may have on BMO’s financial reporting and accounting policies. New standards and amendments to existing standards that will be effective for BMO in future reporting periods are described in Note 1 on page 148 of the consolidated financial statements.

Transactions with Related Parties

In the ordinary course of business, we provide banking services to our key management personnel on the same terms that we offer these services to our preferred customers. Key management personnel are defined as those persons having authority and responsibility for planning, directing and/or controlling the activities of an entity, being the directors and the most senior executives of the bank. We provide banking services to our joint ventures and equity-accounted investees on the same terms offered to our customers for these services. We also offer employees a subsidy on annual credit card fees.

Details of our investments in joint arrangements and associates and the compensation of key management personnel are disclosed in Note 27 on page 206 of the consolidated financial statements.

BMO Financial Group 201st Annual Report 2018 121

MANAGEMENT’S DISCUSSION AND ANALYSIS

Shareholders’ Auditors’ Services and Fees

Review of Shareholders’ Auditors

The Audit and Conduct Review Committee (ACRC) is responsible for the appointment, compensation and oversight of the shareholders’ auditors and conducts an annual assessment of the performance and effectiveness of the shareholders’ auditors, considering factors such as: (i) the quality of the services provided by the engagement team of the shareholders’ auditors during the audit period; (ii) the relevant qualifications, experience and geographical reach to serve BMO Financial Group; (iii) the quality of communications received from the shareholders’ auditors; and (iv) the independence, objectivity and professional skepticism of the shareholders’ auditors.

The ACRC believes that it has a robust review process in place to monitor audit quality and oversee the work of the shareholders’ auditors, including the lead audit partner, which includes:

• annually reviewing the audit plan in two separate meetings, including a consideration of the impact of business risks on the audit plan and an assessment of the reasonableness of the audit fee;

• reviewing the qualifications of the senior engagement team members;

• monitoring the execution of the audit plan of the shareholders’ auditors, with emphasis on the more complex and risky areas of the audit;

• reviewing and evaluating the audit findings, including in camera sessions;

• evaluating audit quality and performance, including recent Canadian Public Accountability Board (CPAB) and Public Company Accounting Oversight Board (PCAOB) inspection reports on the shareholders’ auditors and their peer firms;

• at a minimum, holding quarterly meetings with the chair of the ACRC and the lead audit partner to discuss audit-related issues independently of management; and

• performing a comprehensive review of the shareholders’ auditors every five years, and performing an annual review between these comprehensive reviews, following the guidelines set out by the Chartered Professional Accountants of Canada (CPA of Canada) and the CPAB.

In 2018, an annual review of the shareholders’ auditors was completed. Input was sought from ACRC members and management on areas such as communication effectiveness, industry insights and audit performance. In 2015, the ACRC completed a periodic comprehensive review of the shareholders’ auditors. The comprehensive review was based on the recommendations of the CPA of Canada and the CPAB. These reviews focused on: (i) the independence, objectivity and professional skepticism of the shareholders’ auditors; (ii) the quality of the engagement team; and (iii) the quality of communications and interactions with the shareholders’ auditors. As a result of these reviews, the ACRC was satisfied with the performance of the shareholders’ auditors.

Independence of the shareholders’ auditors is overseen by the ACRC in accordance with our Auditor Independence Standard. The ACRC also ensures that the lead audit partner rotates out of that role after five consecutive years and does not return to that role for a further five years.

Pre-Approval Policies and Procedures

As part of BMO Financial Group’s corporate governance practices, the ACRC oversees the application of our policy limiting the services provided by the shareholders’ auditors that are not related to their role as auditors. The ACRC pre-approves the types of services (permitted services) that can be provided by the shareholders’ auditors, as well as the annual audit plan, which includes fees for specific types of services. For permitted services that are not included in the pre-approved annual audit plan, approval to proceed with the engagement is obtained and the services to be provided are presented to the ACRC for ratification at its next meeting. All services must comply with our Auditor Independence Standard, as well as professional standards and securities regulations governing auditor independence.

Shareholders’ Auditors’ Fees

Aggregate fees paid to the shareholders’ auditors during the fiscal years ended October 31, 2018 and 2017 were as follows:

(Canadian $ in millions) Fees (1)	2018		2017
Audit fees		18.2		19.1
Audit-related fees (2)		2.2		2.5
All other fees (3)		2.1		2.1
Total		22.5		23.7

(1)	The classification of fees is based on applicable Canadian securities laws and U.S. Securities and Exchange Commission definitions.
(2)	Audit-related fees for 2018 and 2017 relate to fees paid for accounting advice, specified procedures on our Proxy Circular and other specified procedures.
(3)	All other fees for 2018 and 2017 relate primarily to fees paid for reviews of compliance with regulatory requirements for financial information and reports on internal controls over services provided by various BMO Financial Group businesses. They also include the costs of translation services.

122 BMO Financial Group 201st Annual Report 2018

Management’s Annual Report on Disclosure Controls and Procedures

and Internal Control over Financial Reporting

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), on a timely basis so that appropriate decisions can be made regarding public disclosure.

As at October 31, 2018, under the supervision of the CEO and the CFO, Bank of Montreal’s management evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings, and in the United States by Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based on this evaluation, the CEO and the CFO have concluded that our disclosure controls and procedures were effective, as at October 31, 2018.

Internal Control over Financial Reporting

Internal control over financial reporting is a process designed under the supervision of the bank’s CEO and CFO, in order to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with IFRS. Management is responsible for establishing and maintaining adequate internal control over financial reporting for Bank of Montreal.

Bank of Montreal’s internal control over financial reporting includes 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 Bank of Montreal;

(ii) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with IFRS and that receipts and expenditures of Bank of Montreal are being made only in accordance with authorizations by management and directors of Bank of Montreal; and

(iii) are designed to provide reasonable assurance that any unauthorized acquisition, use or disposition of Bank of Montreal’s assets which could have a material effect on the consolidated financial statements is prevented or detected in a timely manner.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, 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 related policies and procedures may deteriorate.

Bank of Montreal’s management, under the supervision of the CEO and the CFO, has evaluated the effectiveness of internal control over financial reporting using the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in May 2013 (2013 COSO Framework). Based on this evaluation, management has concluded that internal control over financial reporting was effective as at October 31, 2018.

At the request of Bank of Montreal’s Audit and Conduct Review Committee, KPMG LLP (the shareholders’ auditors), an independent registered public accounting firm, has conducted an audit of the effectiveness of our internal control over financial reporting. The audit report states in its conclusion that, in KPMG’s opinion, Bank of Montreal maintained, in all material respects, effective internal control over financial reporting as at October 31, 2018, in accordance with the criteria established in the 2013 COSO Framework. This audit report appears on page 141.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the year ended October 31, 2018 that have materially affected, or are reasonably likely to materially affect, the adequacy and effectiveness of our internal control over financial reporting.

BMO Financial Group 201st Annual Report 2018 123

MANAGEMENT’S DISCUSSION AND ANALYSIS

Enhanced Disclosure Task Force

On October 29, 2012, the Enhanced Disclosure Task Force (EDTF) of the Financial Stability Board published its first report, Enhancing the Risk Disclosures of Banks. We support the recommendations issued by the EDTF for the provision of high-quality, transparent risk disclosures.

Disclosures related to the EDTF recommendations are detailed below.

General
1	Present all risk-related information in the Annual Report, Supplementary Financial Information and Supplementary Regulatory Capital Disclosure, and provide an index for easy navigation.
	Annual Report: Risk-related information is presented in the Enterprise-Wide Risk Management section on pages 78 to 116.
	Supplementary Financial Information: A general index is provided, as well as a detailed Pillar 3 index (pages 34 to 35), in our Supplementary Financial Information.
2	Define the bank’s risk terminology and risk measures and present key parameters used.
	Annual Report: Specific risk definitions and key parameters underpinning BMO’s risk reporting are provided on pages 87 to 116. A glossary of financial terms (including risk terminology) can be found on pages 210 to 211.
3	Discuss top and emerging risks for the bank.
	Annual Report: BMO’s top and emerging risks are discussed on pages 79 to 81.
4	Outline plans to meet new key regulatory ratios once the applicable rules are finalized.
	Annual Report: We outline BMO’s plans to meet new regulatory ratios on pages 71 and 106.
Risk Governance
5	Summarize the bank’s risk management organization, processes, and key functions.
	Annual Report: BMO’s risk management organization, processes and key functions are summarized on pages 82 to 87.
6	Describe the bank’s risk culture.
	Annual Report: BMO’s risk culture is described on page 84.
7	Describe key risks that arise from the bank’s business model and activities.
	Annual Report: A diagram of BMO’s risk exposure by operating segment is provided on page 74 and descriptions of key risks arising from the bank’s business models and activities are provided on pages 82 to 83 and 85 to 87.
8	Describe the use of stress testing within the bank’s risk governance and capital frameworks.
	Annual Report: BMO’s stress testing process is described on page 86.
Capital Adequacy and Risk-Weighted Assets (RWA)
9	Provide minimum Pillar 1 capital requirements.
	Annual Report: Pillar 1 capital requirements are described on pages 69 to 73.
	Supplementary Financial Information: Regulatory capital is disclosed on pages 36 and 38.
10	Summarize information contained in the composition of capital templates adopted by the Basel Committee.
	Annual Report: An abridged version of the regulatory capital template is provided on page 72.
	Supplementary Financial Information: Pillar 3 disclosure is provided on pages 36 to 37 and 40. A Main Features template can be found on BMO’s website at www.bmo.com under Investor Relations and Regulatory Filings.
11	Present a flow statement of movements in regulatory capital, including changes in Common Equity Tier 1, Additional Tier 1, and Tier 2 capital.
	Supplementary Financial Information: Regulatory capital flow statement is provided on page 39.
12	Discuss capital planning within a more general discussion of management’s strategic planning.
	Annual Report: BMO’s capital planning process is discussed under Capital Management Framework on page 69.
13	Provide granular information to explain how RWA relate to business activities.
	Annual Report: A diagram of BMO’s risk exposure, including RWA by operating group, is provided on page 74.
	Supplementary Financial Information: RWA by operating group is provided on page 39.
14	Present a table showing the capital requirements for each method used for calculating RWA.
	Annual Report: Regulatory capital requirement, as a percentage of RWA, is outlined on pages 70 and 71. Information about significant models used to determine RWA is provided on pages 88 to 91.
	Supplementary Financial Information: A table showing RWA by model approach and by risk type is provided on page 40.
15	Tabulate credit risk in the banking book for Basel asset classes.
	Supplementary Financial Information: Wholesale and retail credit exposures by internal rating grades are provided on pages 45 and 51.
16	Present a flow statement that reconciles movements in RWA by credit risk and market risk.
	Supplementary Financial Information: RWA flow statements are provided on page 46.
17	Describe the bank’s Basel validation and back-testing process.
	Annual Report: BMO’s Basel validation and back-testing process for credit and market risk is described on pages 111 to 112.
	Supplementary Financial Information: A table showing estimated and actual loss parameters is provided on page 57. The results of IRB back-testing of probability of default per portfolio is provided on page 58.

124 BMO Financial Group 201st Annual Report 2018

Liquidity
18	Describe how the bank manages its potential liquidity needs and the liquidity reserve held to meet those needs.
	Annual Report: BMO’s potential liquidity needs and the liquidity reserve held to meet those needs are described on pages 100 to 105.
Funding
19	Summarize encumbered and unencumbered assets in a table by balance sheet category.
	Annual Report: An Asset Encumbrance table is provided on page 103.
	Supplementary Financial Information: The Asset Encumbrance table by currency is provided on page 33.
20	Tabulate consolidated total assets, liabilities and off-balance sheet commitments by remaining contractual maturity.
	Annual Report: A Contractual Maturities table is provided on pages 107 to 108.
21	Discuss the bank’s sources of funding and describe the bank’s funding strategy.
	Annual Report: BMO’s sources of funding and funding strategy are described on pages 104 to 105. A table showing the composition and maturity of wholesale funding is provided on page 105.
Market Risk
22	Provide a breakdown of balance sheet positions into trading and non-trading market risk measures.
	Annual Report: A table linking balance sheet items to market risk measures is provided on page 99.
23	Provide qualitative and quantitative breakdowns of significant trading and non-trading market risk measures.
	Annual Report: Trading market risk exposures are described and quantified on pages 95 to 97. Structural (non-trading) market risk exposures are described and quantified on pages 98 to 99.
24	Describe significant market risk measurement model validation procedures and back-testing and how these are used to enhance the parameters of the model.
	Annual Report: Market risk measurement model validation procedures and back-testing for trading market risk and structural (non-trading) market risk are described on pages 111 to 112.
25	Describe the primary risk management techniques employed by the bank to measure and assess the risk of loss beyond reported risk measures.
	Annual Report: The use of stress testing, scenario analysis and stressed VaR for market risk management is described on pages 95 to 97.
Credit Risk
26	Provide information about the bank’s credit risk profile.
	Annual Report: Information about BMO’s credit risk profile is provided on pages 87 to 94 and in Note 4 on pages 158 to 164 of the consolidated financial statements. Supplementary Financial Information: Tables detailing credit risk information are provided on pages 18 to 29 and 41 to 56.
27	Describe the bank’s policies related to impaired loans and renegotiated loans.
	Annual Report: Impaired loan and renegotiated loan policies are described in Note 4 on pages 158 and 163, respectively of the consolidated financial statements.
28	Provide reconciliations of impaired loans and the allowance for credit losses.
	Annual Report: Continuity schedules for gross impaired loans acceptances, and allowance for credit losses are provided on pages 91 to 92 and Note 4 on pages 161 to 162 of the consolidated financial statements, respectively.
29	Provide a quantitative and qualitative analysis of the bank’s counterparty credit risk that arises from its derivative transactions.
	Annual Report: Quantitative disclosures on collateralization agreements for over-the-counter (OTC) derivatives are provided on page 94 and qualitative disclosures are provided on page 88. Supplementary Financial Information: Quantitative disclosures for derivative instruments are provided on page 30 and pages 49 to 53.
30	Provide a discussion of credit risk mitigation.
	Annual Report: A discussion of BMO’s credit and counterparty risk management is provided on pages 87 to 88. Collateral management discussions are provided on page 88 and in Note 8 on pages 168, 170 and 173 and in Note 24 on page 202 of the consolidated financial statements. Supplementary Financial Information: Information on credit risk mitigation techniques is provided on page 43 and on collateral for counter-party credit risk is provided on page 52.
Other Risks
31	Describe other risks and discuss how each is identified, governed, measured and managed.
	Annual Report: Diagrams illustrating the risk governance process that supports BMO’s risk culture and the risk types are provided on pages 82 and 87. Other risks are discussed on pages 109 to 116.
32	Discuss publicly known risk events related to other risks, where material or potentially material loss events have occurred.
	Annual Report: Other risks are discussed on pages 109 to 116.

BMO Financial Group 201st Annual Report 2018 125

SUPPLEMENTAL INFORMATION

Supplemental Information

Certain comparative figures have been reclassified to conform to the current year’s presentation and for changes in accounting policies. Refer to Note 1 of the consolidated financial statements. In addition, since November 1, 2011, BMO’s financial statements have been reported in accordance with IFRS. Results for years prior to 2011 have not been restated and are presented in accordance with Canadian GAAP as defined at that time (CGAAP). As a result of these changes, certain growth rates and compound annual growth rates (CAGR) may not be meaningful.

Adjusted results in this section are non-GAAP measures. Refer to the Non-GAAP Measures section on page 27.

Table 1: Shareholder Value and Other Statistical Information

As at or for the year ended October 31	2018		2017		2016		2015			2014		2013		2012		2011		2010		2009
Market Price per Common Share ($)
High		109.00		104.15		87.92		84.39			85.71		73.90		61.29		63.94		65.71		54.75
Low		93.60		83.58		68.65		64.01			67.04		56.74		53.15		55.02		49.78		24.05
Close		98.43		98.83		85.36		76.04			81.73		72.62		59.02		58.89		60.23		50.06
Common Share Dividends
Dividends declared per share ($)		3.78		3.56		3.40		3.24			3.08		2.94		2.82		2.80		2.80		2.80
Dividend payout ratio (%)		46.2		44.8		49.0		49.2			47.8		47.5		46.0		57.1		58.6		90.6
Dividend yield (%)		3.8		3.6		4.0		4.3			3.8		4.0		4.8		4.8		4.6		5.6
Dividends declared ($ millions)		2,424		2,312		2,191		2,087			1,991		1,904		1,820		1,690		1,571		1,530
Total Shareholder Return (%)
Five-year average annual return		10.5		15.5		12.5		9.5			15.5		17.0		4.2		1.9		5.9		1.8
Three-year average annual return		13.3		10.9		9.9		13.5			16.7		11.5		10.8		17.4		4.5		(5.3	)
One-year return		3.3		20.2		17.0		(3.0	)		17.1		28.8		5.2		2.4		26.4		25.1
Common Share Information
Number outstanding (in thousands)
End of year		639,330		647,816		645,761		642,583			649,050		644,130		650,730		639,000		566,468		551,716
Average basic		642,930		649,650		644,049		644,916			645,860		648,476		644,407		591,403		559,822		540,294
Average diluted		644,913		651,961		646,126		647,141			648,475		649,806		648,615		607,068		563,125		542,313
Book value per share ($)		64.73		61.92		59.56		56.31			48.18		43.22		39.41		36.76		34.09		31.95
Total market value of shares ($ billions)		62.9		64.0		55.1		48.9			53.0		46.8		38.4		37.6		34.1		27.6
Price-to-earnings multiple		12.1		12.5		12.3		11.6			12.8		11.8		9.7		12.2		12.7		16.3
Price-to-adjusted earnings multiple		11.0		12.1		11.4		10.9			12.4		11.7		9.9		11.5		12.5		12.5
Market-to-book value multiple		1.52		1.60		1.43		1.35			1.70		1.66		1.47		1.49		1.77		1.57
Balances ($ millions)
Total assets		774,048		709,580		687,935		641,881			588,659		537,044		524,684		500,575		411,640		388,458
Average assets		754,295		722,626		707,122		664,391			593,928		555,431		543,931		469,934		398,474		438,548
Average net loans and acceptances		386,959		370,899		356,528		318,823			290,621		263,596		246,129		215,414		171,554		182,097
Return on Equity and Assets
Return on equity (%)		13.2		13.3		12.1		12.5			14.0		14.9		15.9		15.1		14.9		9.9
Adjusted return on equity (%) (1)		14.6		13.7		13.1		13.3			14.4		15.0		15.5		16.0		15.0		12.9
Return on tangible common equity (%)		16.2		16.3		15.3		15.8			17.3		17.9		19.4		17.6		16.6		11.3
Adjusted return on tangible common equity (%) (1)		17.5		16.5		16.1		16.4			17.4		17.7		18.5		18.2		16.6		14.5
Return on average assets (%)		0.72		0.74		0.65		0.66			0.72		0.74		0.75		0.65		0.71		0.41
Adjusted return on average assets (%) (1)		0.79		0.76		0.71		0.70			0.74		0.75		0.73		0.68		0.71		0.52
Return on average risk-weighted assets (%)		1.97		1.99		1.71		1.84			1.85		1.93		1.96		1.70		1.74		0.97
Adjusted return on average risk-weighted assets (%) (1)		2.16		2.05		1.85		1.96			1.91		1.94		1.92		1.79		1.76		1.25
Average equity to average total assets (%)		0.05		0.05		0.05		0.05			0.05		0.05		0.05		0.04		0.05		0.04
Other Statistical Information
Employees (2)
Canada		29,982		29,647		29,643		30,669			30,587		30,303		30,797		31,351		29,821		29,118
United States		13,943		14,071		14,147		14,316			14,845		14,694		14,963		15,184		7,445		6,732
Other		1,529		1,482		1,444		1,368			1,346		634		512		440		363		323
Total		45,454		45,200		45,234		46,353			46,778		45,631		46,272		46,975		37,629		36,173
Bank branches
Canada		908		926		942		939			934		933		930		920		910		900
United States		571		573		576		592			615		626		638		688		321		290
Other		4		4		4		4			4		4		3		3		3		5
Total		1,483		1,503		1,522		1,535			1,553		1,563		1,571		1,611		1,234		1,195
Automated banking machines
Canada		3,387		3,315		3,285		3,442			3,016		2,900		2,596		2,235		2,076		2,030
United States		1,441		1,416		1,314		1,319			1,322		1,325		1,375		1,366		905		636
Total		4,828		4,731		4,599		4,761			4,338		4,225		3,971		3,601		2,981		2,666

2010 and prior based on CGAAP.

2011 has not been restated to reflect the new IFRS standards adopted in 2014. The adoption of new IFRS standards in 2015 and 2018 only impacted our results prospectively.

(1) The impact of adjusting items (net of tax) was an increase/(decrease) to net income as follows: 2011 – $161 million; 2010 – $32 million; 2009 – $509 million. Details on the adjusting items can be found in the 2011 to 2009 Management’s Discussion and Analysis.

(2) Reflects full-time equivalent number of employees, comprising full-time and part-time employees and adjustments for overtime hours.

126 BMO Financial Group 201st Annual Report 2018

Table 2: Summary Income Statement and Growth Statistics

($ millions, except as noted) For the year ended October 31	2018		2017		2016		2015		2014		5-year CAGR		10-year CAGR
Income Statement – Reported Results
Net interest income		10,313		10,007		9,872		8,763		8,292		4.0		7.4
Non-interest revenue		12,724		12,253		11,215		10,626		9,931		8.8		9.3
Revenue		23,037		22,260		21,087		19,389		18,223		6.5		8.4
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (1)		1,352		1,538		1,543		1,254		1,505		12.0		33.3
Revenue, net of CCPB		21,685		20,722		19,544		18,135		16,718		6.2		7.8
Provision for credit losses		662		746		771		544		527		nm		nm
Non-interest expense		13,613		13,330		13,041		12,250		10,955		5.8		7.0
Income before provision for income taxes		7,410		6,646		5,732		5,341		5,236		7.1		14.1
Provision for income taxes		1,960		1,296		1,101		936		903		13.2		nm
Net income		5,450		5,350		4,631		4,405		4,333		5.4		10.3
Attributable to bank shareholders		5,450		5,348		4,622		4,370		4,277		5.7		10.7
Attributable to non-controlling interest in subsidiaries		–		2		9		35		56		nm		nm
Net income		5,450		5,350		4,631		4,405		4,333		5.4		10.7
Income Statement – Adjusted Results
Net interest income		10,313		10,007		9,872		8,764		8,292		5.7		7.4
Non-interest revenue		12,724		12,253		11,299		10,627		9,931		8.9		8.6
Revenue		23,037		22,260		21,171		19,391		18,223		7.4		8.0
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (1)		1,352		1,538		1,543		1,254		1,505		12.0		33.3
Revenue, net of CCPB		21,685		20,722		19,628		18,137		16,718		7.1		7.4
Provision for credit losses		662		822		771		544		527		nm		nm
Non-interest expense		13,480		13,035		12,588		11,887		10,795		6.6		7.0
Income before provision for income taxes		7,543		6,865		6,269		5,706		5,396		7.5		10.9
Provision for income taxes		1,564		1,357		1,249		1,025		943		17.7		nm
Adjusted net income		5,979		5,508		5,020		4,681		4,453		7.2		9.1
Attributable to bank shareholders		5,979		5,506		5,011		4,646		4,397		7.2		9.1
Attributable to non-controlling interest in subsidiaries		–		2		9		35		56		nm		nm
Adjusted net income		5,979		5,508		5,020		4,681		4,453		7.2		9.1
Earnings per Share (EPS) ($)
Basic		8.19		7.95		6.94		6.59		6.44		5.8		8.0
Diluted		8.17		7.92		6.92		6.57		6.41		5.8		8.1
Adjusted diluted		8.99		8.16		7.52		7.00		6.59		7.7		8.4
Year-over-Year Growth-Based Statistical Information (%)
Net income growth		1.9		15.5		5.1		1.7		3.3		na		na
Adjusted net income growth		8.6		9.7		7.2		5.1		5.4		na		na
Diluted EPS growth		3.1		14.5		5.3		2.5		3.9		na		na
Adjusted diluted EPS growth		10.1		8.5		7.4		6.2		6.1		na		na

Five-year and ten-year CAGR based on CGAAP in 2008 and IFRS in 2013 and 2018.

The adoption of new IFRS standards in 2015 and 2018 only impacted our results prospectively.

(1) Beginning in 2015, insurance claims, commissions and changes in policy benefit liabilities (CCPB) are reported separately. They were previously reported as a reduction in insurance revenue in non-interest revenue. Prior years’ amounts and ratios have been reclassified.

nm – not meaningful

na – not applicable

BMO Financial Group 201st Annual Report 2018 127

SUPPLEMENTAL INFORMATION

Table 3: Revenue and Revenue Growth

($ millions, except as noted) For the year ended October 31	2018		2017		2016		2015		2014			5-year CAGR			10-year CAGR
Net Interest Income		10,313		10,007		9,872		8,763		8,292			4.0			7.4
Year-over-year growth (%)		3.0		1.4		12.7		5.7		(2.3	)		na			na
Adjusted Net Interest Income		10,313		10,007		9,872		8,764		8,292			5.7			7.4
Year-over-year growth (%)		3.0		1.4		12.6		5.7		5.9			na			na
Net Interest Margin (1)
Average earning assets		682,945		646,799		622,732		579,471		528,786			7.1			7.6
Net interest margin (%)		1.51		1.55		1.59		1.51		1.57			na			na
Adjusted net interest margin (%)		1.51		1.55		1.59		1.51		1.57			na			na
Canadian dollar net interest margin (%)		1.75		1.64		1.66		1.67		1.81			na			na
U.S. dollar and other currencies net interest margin (%)		1.28		1.46		1.76		1.64		1.56			na			na
Non-Interest Revenue
Securities commissions and fees		1,029		969		924		901		894			4.6			(0.7	)
Deposit and payment service charges		1,144		1,123		1,076		1,005		1,002			4.6			4.2
Trading revenues		1,830		1,352		1,192		987		949			16.6			12.9
Lending fees		997		917		859		737		680			10.6			8.8
Card fees		564		479		526		532		462			4.1			6.8
Investment management and custodial fees		1,742		1,622		1,556		1,552		1,286			11.7			17.8
Mutual fund revenues		1,473		1,411		1,364		1,377		1,065			12.2			9.6
Underwriting and advisory fees		936		1,036		820		706		744			7.5			10.2
Securities gains, other than trading		239		171		84		171		162			(3.5	)		nm
Foreign exchange, other than trading		182		191		162		172		179			1.1			8.5
Insurance revenue (2)		1,879		2,070		2,023		1,762		2,008			9.2			19.6
Investments in associates and joint ventures		167		386		140		207		169			(2.6	)		nm
Other revenues		542		526		489		517		331			9.1			10.0
Total Non-Interest Revenue		12,724		12,253		11,215		10,626		9,931			8.8			9.3
Year-over-year non-interest revenue growth (%)		3.9		9.2		5.5		7.0		19.0			na			na
Non-interest revenue as a % of total revenue		55.2		55.0		53.2		54.8		54.5			na			na
Adjusted Non-Interest Revenue		12,724		12,253		11,299		10,627		9,931			8.9			8.6
Year-over-year adjusted non-interest revenue growth (%)		3.9		8.4		6.3		7.0		19.5			na			na
Adjusted non-interest revenue as a % of total adjusted revenue		55.2		55.0		53.4		54.8		54.5			na			na
Total Revenue		23,037		22,260		21,087		19,389		18,223			6.5			8.4
Year-over-year total revenue growth (%)		3.5		5.6		8.8		6.4		8.3			na			na
Total Revenue, net of CCPB (2)		21,685		20,722		19,544		18,135		16,718			6.2			7.8
Year-over-year total revenue growth, net of CCPB (%)		4.6		6.0		7.8		8.5		4.1			na			na
Total Adjusted Revenue		23,037		22,260		21,171		19,391		18,223			7.4			8.0
Year-over-year total adjusted revenue growth (%)		3.5		5.1		9.2		6.4		12.9			na			na
Total Adjusted Revenue, net of CCPB (2)		21,685		20,722		19,628		18,137		16,718			7.1			7.4
Year-over-year total adjusted revenue growth, net of CCPB (%)		4.6		5.6		8.2		8.5		8.7			na			na

Five-year and ten-year CAGR based on CGAAP in 2008 and IFRS in 2013 and 2018.

The adoption of new IFRS standards in 2015 and 2018 only impacted our results prospectively.

(1) Net interest margin is calculated based on average earning assets.

(2) Beginning in 2015, insurance claims, commissions and changes in policy benefit liabilities (CCPB) are reported separately. They were previously reported as a reduction in insurance revenue in non-interest revenue. Prior years’ amounts and ratios have been reclassified.

na – not applicable

nm – not meaningful

128 BMO Financial Group 201st Annual Report 2018

Table 4: Non-Interest Expense, Expense-to-Revenue Ratio and Government Levies and Taxes

($ millions, except as noted) For the year ended October 31	2018		2017		2016		2015		2014		5-year CAGR			10-year CAGR
Non-Interest Expense
Employee compensation
Salaries		4,174		3,995		4,082		3,910		3,388		5.1			6.9
Performance-based compensation		2,510		2,386		2,278		2,102		1,946		8.3			6.8
Employee benefits		775		1,086		1,022		1,069		908		(2.9	)		3.9
Total employee compensation		7,459		7,467		7,382		7,081		6,242		5.0			6.5
Premises and equipment
Rental of real estate		526		494		486		462		415		4.8			6.5
Premises, furniture and fixtures		345		282		337		287		261		(1.8	)		3.1
Property taxes		38		39		42		39		39		0.2			2.7
Computers and equipment		1,844		1,676		1,528		1,349		1,193		13.0			10.5
Total premises and equipment		2,753		2,491		2,393		2,137		1,908		8.5			8.3
Other expenses
Amortization of intangible assets		503		485		444		411		382		7.8			10.6
Communications		282		286		294		314		289		(0.7	)		3.4
Business, capital and sundry taxes		38		38		42		45		39		(0.4	)		(1.1	)
Professional fees		564		563		523		595		622		1.4			3.9
Travel and business development		673		693		646		605		542		5.6			7.5
Other		1,341		1,307		1,317		1,062		931		9.1			9.4
Total other expenses		3,401		3,372		3,266		3,032		2,805		5.6			7.3
Total Non-Interest Expense		13,613		13,330		13,041		12,250		10,955		5.8			7.0
Year-over-year total non-interest expense growth (%)		2.1		2.2		6.5		11.8		6.8		na			na
Total Adjusted Non-Interest Expense		13,480		13,035		12,588		11,887		10,795		6.6			7.0
Year-over-year total adjusted non-interest expense growth (%)		3.4		3.6		5.9		10.1		3.7		na			na
Non-interest expense-to-revenue ratio (Efficiency ratio) (%)		59.1		59.9		61.8		63.2		60.1		na			na
Adjusted non-interest expense-to-revenue ratio (Adjusted Efficiency ratio) (%)		58.5		58.6		59.5		61.3		59.2		na			na
Efficiency ratio, net of CCPB (%)		62.8		64.3		66.7		67.5		65.5		na			na
Adjusted efficiency ratio, net of CCPB (%)		62.2		62.9		64.1		65.5		64.6		na			na
Government Levies and Taxes (1)
Government levies other than income taxes
Payroll levies		328		322		324		312		252		5.7			7.2
Property taxes		38		39		42		39		39		0.2			2.7
Provincial capital taxes		29		29		30		33		27		(1.0	)		(1.0	)
Business taxes		8		8		9		10		9		(1.0	)		(2.8	)
Harmonized sales tax, GST, VAT and other sales taxes		350		330		318		288		273		6.0			11.7
Sundry taxes		1		1		3		2		2		nm			nm
Total government levies other than income taxes		754		729		726		684		602		5.1			7.8
Provision for income taxes		1,960		1,296		1,101		936		903		13.2			nm
Total Government Levies and Taxes		2,714		2,025		1,827		1,620		1,505		10.5			25.4
Total government levies and taxes as a % of income before total government levies and taxes		33.2		27.5		28.3		26.9		25.8		na			na
Effective income tax rate (%)		26.5		19.5		19.2		17.5		17.2		na			na
Adjusted effective income tax rate (%)		20.7		19.8		19.9		18.0		17.5		na			na

Five-year and ten-year CAGR based on CGAAP in 2008 and IFRS in 2013 and 2018.

The adoption of new IFRS standards in 2015 and 2018 only impacted our results prospectively.

(1) Government levies are included in various non-interest expense categories.

na – not applicable

nm – not meaningful

BMO Financial Group 201st Annual Report 2018 129

SUPPLEMENTAL INFORMATION

Table 5: Average Assets, Liabilities and Interest Rates

					2018						2017						2016
($ millions, except as noted) For the year ended October 31	Average balances		Average interest rate (%)		Interest income/ expense		Average balances		Average interest rate (%)		Interest income/ expense		Average balances		Average interest rate (%)		Interest income/ expense
Assets
Canadian Dollar
Deposits with other banks and other interest bearing assets		2,374		1.83		43		1,643		0.51		8		2,095		1.00		20
Securities		79,187		1.27		1,007		84,985		0.98		836		84,099		1.09		914
Securities borrowed or purchased under resale agreements		36,325		1.56		566		32,528		0.95		309		34,906		0.75		261
Loans
Residential mortgages		106,610		2.79		2,973		104,529		2.61		2,729		99,280		2.63		2,615
Non-residential mortgages		5,873		3.28		193		6,114		3.23		197		6,281		3.37		212
Personal and credit cards		58,612		5.15		3,021		57,675		4.77		2,752		56,211		4.71		2,645
Business and government		56,427		3.98		2,248		52,668		3.48		1,831		49,057		3.60		1,767
Total loans		227,522		3.71		8,435		220,986		3.40		7,509		210,829		3.43		7,239
Total Canadian dollar		345,408		2.91		10,051		340,142		2.55		8,662		331,929		2.54		8,434
U.S. Dollar and Other Currencies
Deposits with other banks and other interest bearing assets		46,607		1.40		654		39,660		0.86		340		42,921		0.48		205
Securities		91,198		1.68		1,528		74,991		1.29		965		57,820		1.17		676
Securities borrowed or purchased under resale agreements		55,647		1.81		1,010		54,766		0.93		508		54,210		0.59		319
Loans
Residential mortgages		11,218		3.60		404		8,548		3.55		304		8,630		3.52		304
Non-residential mortgages		6,652		4.48		298		5,159		3.88		200		4,672		3.72		174
Personal and credit cards		10,799		4.41		476		11,513		3.90		449		15,771		3.32		524
Business and government		113,772		4.42		5,030		110,166		3.87		4,261		104,853		3.58		3,752
Total loans		142,441		4.36		6,208		135,386		3.85		5,214		133,926		3.55		4,754
Total U.S. dollar and other currencies		335,893		2.80		9,400		304,803		2.31		7,027		288,877		2.06		5,954
Other non-interest bearing assets		72,994						77,681						86,316
Total All Currencies
Total assets and interest income		754,295		2.58		19,451		722,626		2.17		15,689		707,122		2.03		14,388
Liabilities
Canadian Dollar
Deposits
Banks		3,607		0.59		21		6,267		0.44		27		7,998		0.30		24
Business and government		103,986		1.61		1,673		103,109		1.20		1,237		97,969		1.24		1,218
Individuals		111,081		0.80		891		108,200		0.70		754		101,402		0.75		757
Total deposits		218,674		1.18		2,585		217,576		0.93		2,018		207,369		0.96		1,999
Securities sold but not yet purchased and securities lent or sold under repurchase agreements (1)		40,640		2.00		811		34,300		1.58		544		37,017		1.44		532
Subordinated debt and other interest bearing liabilities		25,359		2.48		628		25,334		2.02		512		27,127		2.08		563
Total Canadian dollar		284,673		1.41		4,024		277,210		1.11		3,074		271,513		1.14		3,094
U.S. Dollar and Other Currencies
Deposits
Banks		26,282		1.93		506		24,416		1.10		269		25,485		0.58		148
Business and government		191,739		1.37		2,622		181,732		0.78		1,417		178,609		0.42		758
Individuals		61,651		0.59		367		57,245		0.33		190		54,081		0.24		131
Total deposits		279,672		1.25		3,495		263,393		0.71		1,876		258,175		0.40		1,037
Securities sold but not yet purchased and securities lent or sold under repurchase agreements (1)		63,940		1.94		1,240		59,154		0.96		570		50,791		0.57		288
Subordinated debt and other interest bearing liabilities		16,798		2.26		379		10,776		1.51		162		8,842		1.10		97
Total U.S. dollar and other currencies		360,410		1.42		5,114		333,323		0.78		2,608		317,808		0.45		1,422
Other non-interest bearing liabilities		65,223						69,049						77,546
Total All Currencies
Total liabilities and interest expense		710,306		1.29		9,138		679,582		0.84		5,682		666,867		0.68		4,516
Shareholders’ equity		43,989						43,044						40,255
Total Liabilities, Interest Expense and Shareholders’ Equity		754,295		1.21		9,138		722,626		0.79		5,682		707,122		0.64		4,516
Net interest margin
– based on earning assets				1.51						1.55						1.59
– based on total assets				1.37						1.38						1.40
Net interest income						10,313						10,007						9,872

(1) For the years ended October 31, 2018, 2017 and 2016, the maximum amount of securities lent or sold under repurchase agreements at any month end amounted to $85,489 million, $72,826 million and $67,169 million, respectively.

130 BMO Financial Group 201st Annual Report 2018

Table 6: Volume/Rate Analysis of Changes in Net Interest Income

							2018/2017									2017/2016
	Increase (decrease) due to change in									Increase (decrease) due to change in
($ millions) For the year ended October 31	Average balance			Average rate			Total			Average balance			Average rate			Total
Assets
Canadian Dollar
Deposits with other banks and other interest bearing assets		4			31			35			(4	)		(8	)		(12	)
Securities		(57	)		228			171			9			(87	)		(78	)
Securities borrowed or purchased under resale agreements		36			221			257			(17	)		65			48
Loans
Residential mortgages		54			190			244			138			(24	)		114
Non-residential mortgages		(8	)		4			(4	)		(6	)		(9	)		(15	)
Personal and credit cards		45			224			269			69			38			107
Business and government		130			287			417			131			(67	)		64
Total loans		221			705			926			332			(62	)		270
Change in Canadian dollar interest income		204			1,185			1,389			320			(92	)		228
U.S. Dollar and Other Currencies
Deposits with other banks and other interest bearing assets		59			255			314			(15	)		150			135
Securities		209			354			563			201			88			289
Securities borrowed or purchased under resale agreements		8			494			502			3			186			189
Loans
Residential mortgages		95			5			100			(3	)		3			–
Non-residential mortgages		58			40			98			18			8			26
Personal and credit cards		(28	)		55			27			(142	)		67			(75	)
Business and government		140			629			769			190			319			509
Total loans		265			729			994			63			397			460
Change in U.S. dollar and other currencies interest income		541			1,832			2,373			252			821			1,073
Total All Currencies
Change in total interest income (a)		745			3,017			3,762			572			729			1,301
Liabilities
Canadian Dollar
Deposits
Banks		(12	)		6			(6	)		(5	)		8			3
Business and government		11			425			436			64			(45	)		19
Individuals		20			117			137			51			(54	)		(3	)
Total deposits		19			548			567			110			(91	)		19
Securities sold but not yet purchased and securities lent or sold under repurchase agreements		100			167			267			(39	)		51			12
Subordinated debt and other interest bearing liabilities		1			115			116			(37	)		(14	)		(51	)
Change in Canadian dollar interest expense		120			830			950			34			(54	)		(20	)
U.S. Dollar and Other Currencies
Deposits
Banks		20			217			237			(6	)		127			121
Business and government		78			1,127			1,205			13			646			659
Individuals		15			162			177			8			51			59
Total deposits		113			1,506			1,619			15			824			839
Securities sold but not yet purchased and securities lent or sold under repurchase agreements		46			624			670			47			235			282
Subordinated debt and other interest bearing liabilities		91			126			217			21			44			65
Change in U.S. dollar and other currencies interest expense		250			2,256			2,506			83			1,103			1,186
Total All Currencies
Change in total interest expense (b)		370			3,086			3,456			117			1,049			1,166
Change in total net interest income (a – b)		375			(69	)		306			455			(320	)		135

BMO Financial Group 201st Annual Report 2018 131

SUPPLEMENTAL INFORMATION

Table 7: Net Loans and Acceptances – Segmented Information (1) (2)

($ millions)	Canada															United States															Other countries
As at October 31	2018			2017			2016			2015			2014			2018			2017			2016			2015			2014			2018			2017		2016		2015		2014
Consumer
Residential mortgages		107,956			106,647			103,558			96,975			92,972			11,645			8,587			8,686			8,905			7,980			–			–		–		–		–
Credit cards		7,788			7,550			7,541			7,427			7,476			541			521			560			553			496			–			–		–		–		–
Consumer instalment and other personal loans		52,706			51,637			50,368			49,181			48,955			9,918			9,798			13,974			16,098			15,088			458			373		215		206		1
Total consumer		168,450			165,834			161,467			153,583			149,403			22,104			18,906			23,220			25,556			23,564			458			373		215		206		1
Total business and government		94,459			84,046			78,884			69,044			63,460			109,286			96,079			98,236			75,336			56,366			9,088			11,255		10,037		10,611		10,844
Total loans and acceptances, net of allowance for credit losses on impaired loans		262,909			249,880			240,351			222,627			212,863			131,390			114,985			121,456			100,892			79,930			9,546			11,628		10,252		10,817		10,845
Allowance for credit losses on performing loans (3)		(689	)		(799	)		(833	)		(816	)		(766	)		(574	)		(641	)		(687	)		(682	)		(595	)		(6	)		–		–		–		–
Total net loans and acceptances		262,220			249,081			239,518			221,811			212,097			130,816			114,344			120,769			100,210			79,335			9,540			11,628		10,252		10,817		10,845
Table 8: Net Impaired Loans and Acceptances – Segmented Information (2) (4)
($ millions, except as noted)	Canada															United States															Other countries
As at October 31	2018			2017			2016			2015			2014			2018			2017			2016			2015			2014			2018			2017		2016		2015		2014
Consumer
Residential mortgages		185			206			195			204			208			171			161			175			173			303			–			–		–		–		–
Consumer instalment and other personal loans		126			127			121			117			136			252			293			345			316			309			–			–		–		–		–
Total consumer		311			333			316			321			344			423			454			520			489			612			–			–		–		–		–
Business and government		235			248			298			220			247			597			762			843			613			507			–			30		1		4		4
Total impaired loans and acceptances, net of allowance for credit losses on impaired loans		546			581			614			541			591			1,020			1,216			1,363			1,102			1,119			–			30		1		4		4
Condition Ratios(1)
NIL as a % of net loans and acceptances		0.21			0.23			0.26			0.24			0.28			0.78			1.06			1.13			1.10			1.41			–			0.26		0.01		0.04		0.04
NIL as a % of net loans and acceptances
Consumer		0.18			0.20			0.20			0.21			0.23			1.91			2.40			2.24			1.91			2.60			–			–		–		–		–
Business and government		0.25			0.30			0.38			0.32			0.39			0.55			0.79			0.86			0.81			0.90			–			0.27		0.01		0.04		0.04

(1) Aggregate Net Loans and Acceptances balances are net of allowance for credit losses on performing loans and impaired loans (excluding those related to off-balance sheet instruments and undrawn commitments). The Consumer and Business and government Net Loans and Acceptances balances are stated net of allowance for credit losses on impaired loans only (excluding those related to off-balance sheet instruments and undrawn commitments).

(2) Segmented credit information by geographic area is based upon the country of ultimate risk.

(3) Prior periods have not been restated to reflect the adoption of IFRS 9 in 2018. The adoption of IFRS 9 has been applied prospectively.

(4) Net Impaired Loans balances are net of allowance for credit losses on impaired loans, excluding off-balance sheet instruments and undrawn commitments.

132 BMO Financial Group 201st Annual Report 2018

			Total
2018			2017			2016			2015			2014
	119,601			115,234			112,244			105,880			100,952
	8,329			8,071			8,101			7,980			7,972
	63,082			61,808			64,557			65,485			64,044
	191,012			185,113			184,902			179,345			172,968
	212,833			191,380			187,157			154,991			130,670
	403,845			376,493			372,059			334,336			303,638
	(1,269	)		(1,440	)		(1,520	)		(1,498	)		(1,361	)
	402,576			375,053			370,539			332,838			302,277
			Total
2018			2017			2016			2015			2014
	356			367			370			377			511
	378			420			466			433			445
	734			787			836			810			956
	832			1,040			1,142			837			758
	1,566			1,827			1,978			1,647			1,714
	0.39			0.49			0.53			0.50			0.57
	0.38			0.43			0.45			0.45			0.55
	0.39			0.54			0.61			0.54			0.58

Table 9: Net Loans and Acceptances –
Segmented Information (1) (2)

($ millions) As at October 31	2018		2017		2016		2015		2014
Net Loans and Acceptances by Province
Atlantic provinces		13,925		13,686		13,736		13,364		13,067
Quebec		40,177		38,802		38,263		36,493		35,651
Ontario		111,107		104,566		97,991		88,850		84,117
Prairie provinces		48,634		46,853		46,411		43,519		42,006
British Columbia and territories		48,377		45,174		43,117		39,585		37,256
Total net loans and acceptances in Canada		262,220		249,081		239,518		221,811		212,097
Net Business and Government Loans by Industry
Commercial real estate		31,028		26,479		24,126		20,509		17,528
Construction (non-real estate)		3,916		3,916		3,563		3,544		3,101
Retail trade		20,403		18,496		16,430		13,538		12,035
Wholesale trade		14,814		11,612		12,157		10,172		7,964
Agriculture		12,321		11,114		10,951		9,891		9,155
Communications		729		625		905		815		831
Financing products		4,439		5,060		6,093		6,454		3,950
Manufacturing		22,839		19,824		18,587		16,064		13,427
Mining		1,916		1,344		1,867		1,309		1,085
Oil and gas		9,168		8,167		7,930		6,667		5,943
Transportation		10,973		10,496		10,695		3,735		2,532
Utilities		3,911		2,776		2,697		1,984		1,670
Forest products		840		835		889		859		587
Service industries		38,348		33,705		32,659		26,778		21,030
Financial		32,463		32,265		32,076		27,430		22,590
Government		1,436		1,470		1,326		1,488		1,690
Other		3,289		3,196		4,206		3,754		5,552
		212,833		191,380		187,157		154,991		130,670

Table 10: Net Impaired Loans and Acceptances –
Segmented Information (3)

($ millions) As at October 31	2018		2017		2016		2015		2014
Net Impaired Business and Government Loans
Commercial real estate		45		45		60		87		159
Construction (non-real estate)		18		39		45		83		84
Retail trade		50		36		13		55		38
Wholesale trade		42		97		51		47		35
Agriculture		193		238		221		129		103
Communications		–		–		1		13		59
Financing products		–		–		–		–		–
Manufacturing		77		70		106		102		100
Mining		1		1		2		3		2
Oil and gas		57		145		408		100		1
Transportation		90		156		88		30		7
Utilities		2		4		12		14		–
Forest products		–		2		7		9		13
Service industries		191		181		82		107		145
Financial		66		2		39		48		9
Government		–		3		6		–		2
Other		–		21		1		10		1
		832		1,040		1,142		837		758

(1) Aggregated Net Loans and Acceptances are net of allowance for credit losses on performing loans and impaired loans (excluding those related to off-balance sheet instruments and undrawn commitments). The Consumer and Business and government Net Loans and Acceptances balances are stated net of allowance for credit losses on impaired loans only (excluding those related to off-balance sheet instruments and undrawn commitments).

(2) Segmented credit information by geographic area is based upon the country of ultimate risk.

(3) Net Impaired Loans balances are net of allowance for credit losses on impaired loans, excluding off-balance sheet instruments and undrawn commitments.

BMO Financial Group 201st Annual Report 2018 133

SUPPLEMENTAL INFORMATION

Table 11: Changes in Gross Impaired Loans – Segmented Information (1) (2)

($ millions, except as noted)	Canada															United States															Other countries
As at October 31	2018			2017			2016			2015			2014			2018			2017			2016			2015			2014			2018			2017			2016			2015			2014
Gross impaired loans and acceptances (GIL), beginning of year
Consumer		439			407			404			438			385			508			585			557			678			702			–			–			–			–			–
Business and government		354			380			282			344			406			869			1,009			757			623			1,081			50			2			4			5			7
Total GIL, beginning of year		793			787			686			782			791			1,377			1,594			1,314			1,301			1,783			50			2			4			5			7
Additions to impaired loans and acceptances
Consumer		836			697			631			617			643			274			360			473			526			529			–			–			–			–			–
Business and government		321			281			453			231			285			647			799			953			542			685			–			56			2			5			–
Total additions		1,157			978			1,084			848			928			921			1,159			1,426			1,068			1,214			–			56			2			5			–
Reductions to impaired loans and acceptances (3)
Consumer		(628	)		(479	)		(446	)		(474	)		(428	)		(212	)		(301	)		(282	)		(432	)		(321	)		–			–			–			–			–
Business and government		(282	)		(259	)		(251	)		(168	)		(229	)		(573	)		(692	)		(456	)		(248	)		(858	)		(49	)		(7	)		(4	)		(5	)		(2	)
Total reductions due to net repayments and other		(910	)		(738	)		(697	)		(642	)		(657	)		(785	)		(993	)		(738	)		(680	)		(1,179	)		(49	)		(7	)		(4	)		(5	)		(2	)
Write-offs (4)
Consumer		(221	)		(186	)		(182	)		(177	)		(162	)		(100	)		(136	)		(163	)		(215	)		(232	)		–			–			–			–			–
Business and government		(84	)		(48	)		(104	)		(125	)		(118	)		(212	)		(247	)		(245	)		(160	)		(285	)		(1	)		(1	)		–			(1	)		–
Total write-offs		(305	)		(234	)		(286	)		(302	)		(280	)		(312	)		(383	)		(408	)		(375	)		(517	)		(1	)		(1	)		–			(1	)		–
Gross impaired loans and acceptances, end of year
Consumer		426			439			407			404			438			470			508			585			557			678			–			–			–			–			–
Business and government		309			354			380			282			344			731			869			1,009			757			623			–			50			2			4			5
Total GIL, end of year		735			793			787			686			782			1,201			1,377			1,594			1,314			1,301			–			50			2			4			5
Condition Ratios
GIL as a % of Gross Loans
Consumer		0.25			0.26			0.25			0.26			0.29			2.12			2.69			2.52			2.18			2.87			–			–			–			–			–
Business and government		0.33			0.42			0.48			0.41			0.54			0.67			0.90			1.03			1.01			1.10			–			0.44			0.02			0.04			0.05
Total Loans and Acceptances		0.28			0.32			0.33			0.31			0.37			0.91			1.20			1.31			1.31			1.62			–			0.43			0.02			0.04			0.05

(1) GIL excludes Purchased Credit Impaired Loans.

(2) Segmented credit information by geographic area is based upon the country of ultimate risk.

(3) Includes amounts returning to performing status, sales, repayments, the impact of foreign exchange, and offsets for consumer write-offs that are not recognized as formations.

(4) Excludes certain loans that are written off directly and not classified as new formations.

134 BMO Financial Group 201st Annual Report 2018

Total
2018			2017			2016			2015			2014
	947			992			961			1,116			1,087
	1,273			1,391			1,043			972			1,494
	2,220			2,383			2,004			2,088			2,581
	1,110			1,057			1,104			1,143			1,172
	968			1,136			1,408			778			970
	2,078			2,193			2,512			1,921			2,142
	(840	)		(780	)		(728	)		(906	)		(749	)
	(904	)		(958	)		(711	)		(421	)		(1,089	)
	(1,744	)		(1,738	)		(1,439	)		(1,327	)		(1,838	)
	(321	)		(322	)		(345	)		(392	)		(394	)
	(297	)		(296	)		(349	)		(286	)		(403	)
	(618	)		(618	)		(694	)		(678	)		(797	)
	896			947			992			961			1,116
	1,040			1,273			1,391			1,043			972
	1,936			2,220			2,383			2,004			2,088
	0.47			0.51			0.54			0.54			0.64
	0.49			0.66			0.74			0.67			0.74
	0.48			0.59			0.64			0.60			0.69

BMO Financial Group 201st Annual Report 2018 135

SUPPLEMENTAL INFORMATION

Table 12: Changes in Allowance for Credit Losses –

Segmented Information (1) (2)

($ millions, except as noted)	Canada															United States															Other countries
As at October 31	2018			2017			2016			2015			2014			2018			2017			2016			2015			2014			2018			2017			2016		2015			2014
Allowance for credit losses (ACL), beginning of year
Consumer		705			595			614			615			602			301			254			393			333			278			–			–			–		–			–
Business and government		317			471			388			371			433			566			793			657			646			653			29			1			–		1			4
Total ACL, beginning of year		1,022			1,066			1,002			986			1,035			867			1,047			1,050			979			931			29			1			–		1			4
Provision for credit losses (3)
Consumer		416			394			373			366			406			(9	)		74			(33	)		112			202			–			–			–		–			–
Business and government		28			37			174			131			93			243			220			257			(78	)		(172	)		(21	)		21			–		(1	)		(2	)
Total provision for credit losses		444			431			547			497			499			234			294			224			34			30			(21	)		21			–		(1	)		(2	)
Recoveries
Consumer		127			134			102			111			99			75			81			87			151			102			–			–			–		–			–
Business and government		5			10			14			13			15			51			40			140			181			408			3			–			–		–			–
Total recoveries		132			144			116			124			114			126			121			227			332			510			3			–			–		–			–
Write-offs
Consumer		(515	)		(501	)		(481	)		(475	)		(470	)		(125	)		(157	)		(173	)		(222	)		(242	)		–			–			–		–			–
Business and government		(84	)		(48	)		(104	)		(125	)		(118	)		(212	)		(247	)		(245	)		(160	)		(285	)		(1	)		(1	)		–		(1	)		–
Total write-offs		(599	)		(549	)		(585	)		(600	)		(588	)		(337	)		(404	)		(418	)		(382	)		(527	)		(1	)		(1	)		–		(1	)		–
Other, including foreign exchange rate changes
Consumer		(8	)		(10	)		(13	)		(3	)		(22	)		(12	)		(23	)		(20	)		19			(7	)		–			–			–		–			–
Business and government		(11	)		(27	)		(1	)		(2	)		(52	)		–			(114	)		(16	)		68			42			2			(1	)		1		1			(1	)
Total Other, including foreign exchange rate changes		(19	)		(37	)		(14	)		(5	)		(74	)		(12	)		(137	)		(36	)		87			35			2			(1	)		1		1			(1	)
ACL, end of year
Consumer		725			612			595			614			615			230			229			254			393			333			–			–			–		–			–
Business and government		255			443			471			388			371			648			692			793			657			646			12			20			1		–			1
Total ACL, end of year		980			1,055			1,066			1,002			986			878			921			1,047			1,050			979			12			20			1		–			1
Net write-offs as a % of average loans and acceptances (4)		un			un			un			un			un			un			un			un			un			un			un			un			un		un			un

Table 13: Allocation of Allowance for Credit Losses –

Segmented Information (1) (5)

($ millions, except as noted)	Canada										United States										Other countries
As at October 31	2018		2017		2016		2015		2014		2018		2017		2016		2015		2014		2018		2017		2016		2015		2014
Consumer
Residential mortgages		9		12		15		17		20		10		12		18		21		41		–		–		–		–		–
Consumer instalment and other personal loans		106		94		76		66		74		37		42		47		47		25		–		–		–		–		–
Total consumer		115		106		91		83		94		47		54		65		68		66		–		–		–		–		–
Business and government		74		106		82		62		97		134		107		166		144		116		–		20		1		–		1
Total allowance for credit losses on impaired loans		189		212		173		145		191		181		161		231		212		182		–		20		1		–		1
Allowance for credit losses on performing loans (3)		689		799		833		816		766		574		641		687		682		595		6		–		–		–		–
Allowance for credit losses		878		1,011		1,006		961		957		755		802		918		894		777		6		20		1		–		1
Coverage Ratios
Allowance for credit losses on impaired loans as a % of gross impaired loans and acceptances
Total		25.7		26.7		22.0		21.1		24.4		15.1		11.7		14.5		16.1		14.0		–		40.0		50.0		–		20.0
Consumer		27.0		24.1		22.4		20.5		21.5		10.0		10.6		11.1		12.2		9.7		–		–		–		–		–
Business and government		23.9		29.9		21.6		22.0		28.2		18.3		12.3		16.5		19.0		18.6		–		40.0		50.0		–		20.0

(1) Segmented credit information by geographic area is based upon country of ultimate risk.

(2) Prior periods have not been restated to reflect the adoption of IFRS 9 in 2018. The adoption of IFRS 9 in 2018 has been applied prospectively.

(3) Excludes provision for credit losses on other assets.

(4) Aggregate Net Loans and Acceptances balances are net of allowance for credit losses on performing and impaired loans (excluding those related to off-balance sheet instruments).

(5) Amounts exclude allowance for credit losses included in Other Liabilities.

un – unavailable

136 BMO Financial Group 201st Annual Report 2018

Total
2018			2017			2016			2015			2014
	1,006			849			1,007			948			880
	912			1,265			1,045			1,018			1,090
	1,918			2,114			2,052			1,966			1,970
	407			468			340			478			608
	250			278			431			52			(81	)
	657			746			771			530			527
	202			215			189			262			201
	59			50			154			194			423
	261			265			343			456			624
	(640	)		(658	)		(654	)		(697	)		(712	)
	(297	)		(296	)		(349	)		(286	)		(403	)
	(937	)		(954	)		(1,003	)		(983	)		(1,115	)
	(20	)		(33	)		(33	)		16			(29	)
	(9	)		(142	)		(16	)		67			(11	)
	(29	)		(175	)		(49	)		83			(40	)
	955			841			849			1,007			948
	915			1,155			1,265			1,045			1,018
	1,870			1,996			2,114			2,052			1,966
	0.17			0.19			0.19			0.17			0.17

Total
2018		2017		2016		2015		2014
	19		24		33		38		61
	143		136		123		113		99
	162		160		156		151		160
	208		233		249		206		214
	370		393		405		357		374
	1,269		1,440		1,520		1,498		1,361
	1,639		1,833		1,925		1,855		1,735
	19.1		17.7		17.0		17.8		17.9
	18.1		16.9		15.7		15.7		14.3
	20.0		18.3		17.9		19.8		22.0

BMO Financial Group 201st Annual Report 2018 137

SUPPLEMENTAL INFORMATION

Table 14: Allowance for Credit Losses on Impaired Loans – Segmented Information

($ millions) As at October 31	2018		2017		2016		2015		2014
Business and Government Allowance for Credit Losses on Impaired Loans by Industry
Commercial real estate		8		15		13		17		13
Construction (non-real estate)		16		14		4		8		16
Retail trade		17		14		12		23		8
Wholesale trade		23		17		31		19		10
Agriculture		16		11		19		6		8
Communications		–		–		1		9		–
Financing products		–		–		–		–		–
Manufacturing		20		51		36		38		33
Mining		–		–		1		1		10
Oil and gas		17		42		45		2		–
Transportation		31		13		9		5		2
Utilities		–		2		3		–		–
Forest products		1		1		1		2		9
Service industries		46		51		50		33		100
Financial		1		2		10		3		2
Government		–		–		–		–		–
Other		12		–		14		40		3
Total business and government (1)		208		233		249		206		214

Table 15: Provision for Credit Losses – Segmented Information

($ millions) For the year ended October 31	2018			2017			2016			2015			2014
Consumer
Residential mortgages		19			11			24			11			77
Cards		216			232			232			216			238
Consumer instalment and other personal loans		231			232			246			225			251
Total consumer		466			475			502			452			566
Business and Government
Commercial real estate		(2	)		(4	)		(16	)		(37	)		(141	)
Construction (non-real estate)		–			25			15			–			7
Retail trade		10			29			13			8			1
Wholesale trade		18			24			11			19			29
Agriculture		37			31			56			3			15
Communications		–			(1	)		2			13			–
Financing products		–			–			–			–			–
Manufacturing		20			28			29			67			44
Mining		–			–			20			2			7
Oil and gas		(25	)		9			105			25			–
Transportation		74			108			56			(4	)		10
Utilities		(2	)		–			3			–			–
Forest products		(1	)		–			(1	)		–			(1	)
Service industries		87			102			21			(29	)		80
Financial		(4	)		(3	)		(7	)		8			(34	)
Government		–			–			–			(2	)		(3	)
Other		22			(1	)		(38	)		5			(53	)
Total business and government		234			347			269			78			(39	)
Total provision for credit losses on impaired loans		700			822			771			530			527
Provision for credit losses on performing loans (2)		(38	)		(76	)		–			–			–
		662			746			771			530			527
Performance Ratios (%)
PCL-to-average net loans and acceptances		0.17			0.20			0.22			0.17			0.18
PCL-to-segmented average net loans and acceptances
Consumer		0.25			0.26			0.28			0.26			0.33
Business and government		0.12			0.18			0.15			0.05			(0.03	)
PCL on impaired loans-to-average net loans and acceptances		0.18			0.22			0.22			0.17			0.18

(1) Amounts exclude allowance for credit losses included in Other Liabilities.

(2) Prior periods have not been restated to reflect the adoption of IFRS 9 in 2018. The adoption of IFRS 9 in 2018 has been applied prospectively.

138 BMO Financial Group 201st Annual Report 2018

Table 16: Average Deposits

	2018				2017				2016
($ millions, except as noted)	Average balance		Average rate paid (%)		Average balance		Average rate paid (%)		Average balance		Average rate paid (%)
Deposits Booked in Canada
Demand deposits – interest bearing		20,874		0.86		21,253		0.44		19,493		0.33
Demand deposits – non-interest bearing		45,967		–		41,985		–		37,296		–
Payable after notice		81,941		0.84		79,963		0.49		75,701		0.43
Payable on a fixed date		150,583		1.97		147,097		1.50		136,821		1.38
Total deposits booked in Canada		299,365		1.28		290,298		0.93		269,311		0.85
Deposits Booked in the United States and Other Countries
Banks located in the United States and other countries (1)		24,596		1.92		23,520		1.10		24,798		0.58
Governments and institutions in the United States and other countries		10,014		1.49		9,196		0.76		6,867		0.36
Other demand deposits		13,858		0.30		14,327		0.04		17,346		0.02
Other deposits payable after notice or on a fixed date		150,513		1.05		143,628		0.61		147,221		0.39
Total deposits booked in the United States and other countries		198,981		1.13		190,671		0.63		196,232		0.38
Total average deposits		498,346		1.22		480,969		0.81		465,543		0.65

As at October 31, 2018, 2017 and 2016: deposits by foreign depositors in our Canadian bank offices amounted to $48,592 million, $44,722 million and $52,834 million, respectively; total deposits payable after notice included $34,754 million, $33,561 million and $30,122 million, respectively, of chequing accounts that would have been classified as demand deposits under U.S. reporting requirements; and total deposits payable on a fixed date included $28,927 million, $30,648 million and $35,460 million, respectively, of federal funds purchased, commercial paper issued and other deposit liabilities. These amounts would have been classified as short-term borrowings for U.S. reporting purposes.

(1) Includes regulated and central banks.

BMO Financial Group 201st Annual Report 2018 139

GLOSSARY OF FINANCIAL TERMS

Glossary of Financial Terms

Adjusted Earnings and Measures present results adjusted to exclude the impact of certain items, as set out in the Non-GAAP Measures section. Management considers both reported and adjusted results to be useful in assessing underlying ongoing business performance.

Page 27

Allowance for Credit Losses represents an amount deemed appropriate by management to absorb credit-related losses on loans and acceptances and other credit instruments, in accordance with applicable accounting standards. Allowance on Performing Loans is maintained to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Allowance on Impaired Loans is maintained to reduce the carrying value of individually identified impaired loans to the expected recoverable amount.

Pages 92, 117

Assets under Administration and under Management refers to assets administered or managed by a financial institution that are beneficially owned by clients and therefore not reported on the balance sheet of the administering or managing financial institution.

Asset-Backed Commercial Paper (ABCP) is a short-term investment. The commercial paper is backed by physical assets such as trade receivables, and is generally used for short-term financing needs.

Pages 76, 105

Average Earning Assets represents the daily or monthly average balance of deposits with other banks and loans and securities, over a one-year period.

Bail-In Debt is senior unsecured debt subject to the Canadian Bail-In Regime. Bail-in debt includes senior unsecured debt issued directly by the bank on or after September 23, 2018, which has an original term greater than 400 days and is marketable, subject to certain exceptions. Some or all of this debt may be statutorily converted into common shares of the bank under the Bail-In Regime if the bank enters resolution.

Pages 70, 71, 105, 106, 113

Bankers’ Acceptances (BAs) are bills of exchange or negotiable instruments drawn by a borrower for payment at maturity and accepted by a bank. BAs constitute a guarantee of payment by the bank and can be traded in the money market. The bank earns a “stamping fee” for providing this guarantee.

Basis Point is one one-hundredth of a percentage point.

Business Risk arises from the specific business activities of an enterprise and the effects these could have on its earnings.

Page 114

Common Equity Tier 1 (CET1) capital is comprised of common shareholders’ equity less deductions for goodwill, intangible assets, pension assets, certain deferred tax assets and certain other items.

Pages 72, 191

Common Equity Tier 1 Ratio reflects CET1 capital divided by CET1 capital risk-weighted assets.

Pages 33, 69, 70, 71, 191

Common Shareholders’ Equity is the most permanent form of capital. For regulatory capital purposes, common shareholders’ equity is comprised of common shareholders’ equity, net of capital deductions.

Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics and innovation. T&O manages, maintains and provides governance of information technology, cyber security and operations services.

Page 60

Credit and Counterparty Risk is the potential for loss due to the failure of a borrower, endorser, guarantor or counterparty to repay a loan or honour another predetermined financial obligation.

Pages 87, 164

Derivatives are contracts with a value that is derived from movements in interest or foreign exchange rates, equity or commodity prices or other indices. Derivatives allow for the transfer, modification or reduction of current or expected risks from changes in rates and prices.

Dividend Payout Ratio represents common share dividends as a percentage of net income available to common shareholders. It is computed by dividing dividends per share by basic earnings per share.

Earnings Per Share (EPS) is calculated by dividing net income attributable to bank shareholders, after deducting preferred share dividends, by the average number of common shares outstanding. Diluted EPS, which is our basis for measuring performance, adjusts for possible conversions of financial instruments into common shares if those conversions would reduce EPS. Adjusted EPS is calculated in the same manner using adjusted net income.

Pages 32, 200

Earnings Sensitivity is a measure of the impact of potential changes in interest rates on the projected 12-month pre-tax net income of a portfolio of assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements.

Page 98

Economic Capital is an expression of the enterprise’s capital demand requirement relative to the bank’s view of the economic risks in its underlying business activities. It represents management’s estimation of the likely magnitude of economic loss that could occur should severely adverse situations arise, and allows returns to be measured on a consistent basis across such risks. Economic capital is calculated for various types of risk, including credit, market (trading and non-trading), operational and business, based on a one-year time horizon using a defined confidence level.

Pages 74, 85

Economic Value Sensitivity is a measure of the impact of potential changes in interest rates on the market value of a portfolio of assets, liabilities and off-balance sheet positions in response to prescribed parallel interest rate movements.

Page 98

Efficiency Ratio (or Expense-to-Revenue Ratio) is a measure of productivity. It is calculated as non-interest expense divided by total revenue, expressed as a percentage. The adjusted efficiency ratio is calculated in the same manner, utilizing adjusted revenue and adjusted non-interest expense.

Page 41

Environmental and Social Risk is the potential for loss or damage resulting from environmental or social concerns related to BMO or its customers. Environmental and social risk is often associated with credit, operational and reputation risk.

Page 115

Fair Value is the amount of consideration that would be agreed upon in an arm’s-length transaction between knowledgeable, willing parties who are under no compulsion to act.

Forwards and Futures are contractual agreements to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a specified price and date in the future. Forwards are customized contracts transacted in the over-the-counter market. Futures are transacted in standardized amounts on regulated exchanges and are subject to daily cash margining.

Page 167

Hedging is a risk management technique used to neutralize, manage or offset interest rate, foreign currency, equity, commodity or credit exposures arising from normal banking activities.

Impaired Loans are loans for which there is no longer reasonable assurance of the timely collection of principal or interest.

Incremental Risk Charge (IRC) complements the VaR and SVaR metrics and represents an estimate of the default and migration risks of non-securitization products held in the trading book with exposure to interest rate risk, measured over a one-year horizon at a 99.9% confidence level.

Page 95

Innovative Tier 1 Capital is a form of Tier 1 capital issued by structured entities that can be included in calculating a bank’s Tier 1 Capital Ratio, Total Capital Ratio and Leverage Ratio.

Insurance Risk is the potential for loss as a result of actual experience differing from that assumed when an insurance product was designed and priced. It generally entails the inherent unpredictability that can arise from assuming long-term policy liabilities or from the uncertainty of future events. Insurance provides protection against the financial consequences of insured risks by transferring those risks to the insurer (under specific terms and conditions) in exchange for premiums. Insurance risk is inherent in all of our insurance products, including annuities and life, accident and sickness, and creditor insurance, as well as in our reinsurance business.

Page 100

Legal and Regulatory Risk is the potential for loss or harm resulting from a failure to comply with laws or satisfy contractual obligations or regulatory requirements. This includes the risks of failure to: comply with the law (in letter or in spirit) or maintain standards of care; implement legislative or regulatory requirements; enforce or comply with contractual terms; assert non-contractual rights; effectively manage disputes; or act in a manner so as to maintain our reputation.

Page 112

Leverage Ratio reflects Tier 1 capital divided by the sum of on-balance sheet items and specified off-balance sheet items, net of specified adjustments.

Page 70

Liquidity and Funding Risk is the potential for loss if BMO is unable to meet financial commitments in a timely manner at reasonable prices as they become due. Financial commitments include liabilities to depositors and suppliers, and lending, investment and pledging commitments.

Page 100

Market Risk is the potential for adverse changes in the value of BMO’s assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, and credit spreads, and includes the risk of credit migration and default in our trading book.

Pages 95, 164

Mark-to-Market represents the valuation of financial instruments at market rates as of the balance sheet date, where required by accounting rules.

210 BMO Financial Group 201st Annual Report 2018

Model Risk is the potential for adverse consequences following from decisions that are based on incorrect or misused model results. These adverse consequences can include financial loss, poor business decision-making or damage to reputation.

Page 111

Net Interest Income is comprised of earnings on assets, such as loans and securities, including interest and certain dividend income, less interest expense paid on liabilities, such as deposits.

Page 37

Net Interest Margin is the ratio of net interest income to average earning assets, expressed as a percentage or in basis points. Net interest margin is sometimes computed using total assets.

Page 37

Net Non-Interest Revenue is non-interest revenue, net of insurance claims, commissions and changes in policy benefit liabilities.

Notional Amount refers to the principal amount used to calculate interest and other payments under derivative contracts. The principal amount does not change hands under the terms of a derivative contract, except in the case of cross-currency swaps.

Off-Balance Sheet Financial Instruments consist of a variety of financial arrangements offered to clients, which include credit derivatives, written put options, backstop liquidity facilities, standby letters of credit, performance guarantees, credit enhancements, commitments to extend credit, securities lending, documentary and commercial letters of credit, and other indemnifications.

Office of the Superintendent of Financial Institutions Canada (OSFI) is the government agency responsible for regulating banks, insurance companies, trust companies, loan companies and pension plans in Canada.

Operating Leverage is the difference between revenue and expense growth rates. Adjusted operating leverage is the difference between adjusted revenue and adjusted expense growth rates.

Page 41

Operational Risk is the potential for loss resulting from inadequate or failed internal processes or systems, human interactions or external events, but excludes business risk, credit risk, liquidity and funding risk, market risk, strategic and reputation risk.

Page 109

Options are contractual agreements that convey to the purchaser the right but not the obligation to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a fixed future date or at any time within a fixed future period.

Page 167

Provision for Credit Losses (PCL) is a charge to income that represents an amount deemed adequate by management to fully provide for impairment in a portfolio of loans and acceptances and other credit instruments, given the composition of the portfolio, the probability of default, the economic environment and the allowance for credit losses already established. The PCL can be comprised of both a provision for credit losses on impaired loans and a provision for credit losses on performing loans.

Pages 40, 65, 91

Reputation Risk is the potential for loss or harm to the BMO brand. It can arise even if other risks are managed effectively.

Page 116

Return on Equity or Return on Common Shareholders’ Equity (ROE) is calculated as net income, less non-controlling interest in subsidiaries and preferred dividends, as a percentage of average common shareholders’ equity. Common shareholders’ equity is comprised of common share capital, contributed surplus, accumulated other comprehensive income (loss) and retained earnings. Adjusted ROE is calculated using adjusted net income rather than net income.

Pages 33, 65

Return on Tangible Common Equity (ROTCE) is calculated as net income available to common shareholders adjusted for the amortization of acquisition-related intangible assets as a percentage of average tangible common equity. Adjusted ROTCE is calculated using adjusted net income rather than net income.

Pages 33, 65

Risk-Weighted Assets (RWA) are defined as on- and off-balance sheet exposures that are risk-weighted based on guidelines established by OSFI. The term is used for capital management and regulatory reporting purposes.

Page 70

Securities Borrowed or Purchased under Resale Agreements are low-cost, low-risk instruments, often supported by the pledge of cash collateral, which arise from transactions that involve the borrowing or purchasing of securities.

Securities Lent or Sold under Repurchase Agreements are low-cost, low-risk liabilities, often supported by cash collateral, which arise from transactions that involve the lending or selling of securities.

Securitization is the practice of selling pools of contractual debts, such as residential mortgages, auto loans and credit card debt obligations, to third parties or trusts, which then typically issue a series of asset-backed securities to investors to fund the purchase of the contractual debts.

Page 76

Strategic Risk is the potential for loss due to changes in the external business environment and/or failure to respond appropriately to these changes as a result of inaction, ineffective strategies or poor implementation of strategies.

Page 115

Stressed Value at Risk (SVaR) measures the maximum loss likely to be experienced in the trading and underwriting portfolios, measured at a 99% confidence level over a one-day holding period, with model inputs calibrated to historical data from a period of significant financial stress. SVaR is calculated for specific classes of risk in BMO’s trading and underwriting activities related to interest rates, foreign exchange rates, credit spreads, equity and commodity prices and their implied volatilities.

Page 95

Structured Entities (SEs) include entities for which voting or similar rights are not the dominant factor in determining control of the entity. We are required to consolidate an SE if we control the entity by having power over the entity, exposure to variable returns as a result of our involvement and the ability to exercise power to affect the amount of our returns.

Pages 77, 165

Structural (Non-Trading) Market Risk is comprised of interest rate risk arising from banking activities (loans and deposits) and foreign exchange risk arising from our foreign currency operations and exposures.

Page 98

Swaps are contractual agreements between two parties to exchange a series of cash flows. The various swap agreements that we enter into are as follows:

•  Commodity swaps – counterparties generally exchange fixed-rate and floating-rate payments based on a notional value of a single commodity.

•  Credit default swaps – one counterparty pays the other a fee in exchange for an agreement by the other counterparty to make a payment if a credit event occurs, such as bankruptcy or failure to pay.

•  Cross-currency interest rate swaps – fixed-rate and floating-rate interest payments and principal amounts are exchanged in different currencies.

•  Cross-currency swaps – fixed-rate interest payments and principal amounts are exchanged in different currencies.

•  Equity swaps – counterparties exchange the return on an equity security or a group of equity securities for a return based on a fixed or floating interest rate or the return on another equity security or group of equity securities.

•  Interest rate swaps – counterparties generally exchange fixed-rate and floating-rate interest payments based on a notional value in a single currency.

•  Total return swaps – one counterparty agrees to pay or receive from the other cash amounts based on changes in the value of a reference asset or group of assets, including any returns such as interest earned on these assets, in exchange for amounts that are based on prevailing market funding rates.

Page 167

Tangible Common Equity is calculated as common shareholders’ equity less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities.

Page 33

Taxable Equivalent Basis (teb): Revenues of operating groups are presented in our MD&A on a taxable equivalent basis (teb). Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources.

Pages 36, 204

Tier 1 Capital is comprised of CET1 and Additional Tier 1 (AT1) Capital. AT1 capital consists of preferred shares and innovative hybrid instruments subject to phase-out, less certain regulatory deductions.

Pages 70, 191

Tier 1 Capital Ratio reflects Tier 1 capital divided by Tier 1 capital risk-weighted assets.

Pages 70, 191

Total Loss Absorbing Capacity (TLAC) is comprised of total capital and senior unsecured debt subject to the Canadian Bail-In Regime. The largest Canadian banks are required to meet minimum TLAC RWA-based and leverage-based ratios effective November 1, 2021, as calculated under OSFI’s TLAC Guideline.

Pages 71, 113

Total Capital includes Tier 1 and Tier 2 capital. Tier 2 capital is comprised of subordinated debentures and may include certain loan loss allowances less certain regulatory deductions.

Pages 70, 191

Total Capital Ratio reflects Total capital divided by Total capital risk-weighted assets.

Pages 70, 191

Total Shareholder Return: The three-year and five-year average annual total shareholder return (TSR) represents the average annual total return earned on an investment in BMO common shares made at the beginning of a three-year and five-year period, respectively. The return includes the change in share price and assumes dividends received were reinvested in additional common shares. The one-year TSR also assumes that dividends were reinvested in shares.

Page 32

Trading and Underwriting Market Risk gives rise to market risk associated with buying and selling financial products in the course of servicing customer requirements, market making and related financing activities, and from assisting clients to raise funds by way of securities issuance.

Page 95

Trading-Related Revenues include net interest income and non-interest revenue earned from on-balance sheet and off-balance sheet positions undertaken for trading purposes. The management of these positions typically includes marking them to market on a daily basis. Trading-related revenues include income (expense) and gains (losses) from both on-balance sheet instruments and interest rate, foreign exchange (including spot positions), equity, commodity and credit contracts.

Page 38

Value at Risk (VaR) measures the maximum loss likely to be experienced in the trading and underwriting portfolios, measured at a 99% confidence level over a one-day holding period. VaR is calculated for specific classes of risk in BMO’s trading and underwriting activities related to interest rates, foreign exchange rates, credit spreads, equity and commodity prices and their implied volatilities.

Pages 95, 96

BMO Financial Group 201st Annual Report 2018 211

EX-99.3

Statement of Management’s Responsibility

for Financial Information

Management of Bank of Montreal (the “bank”) is responsible for the preparation and presentation of the annual consolidated financial statements, Management’s Discussion and Analysis (“MD&A”) and all other information in the Annual Report.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and meet the applicable requirements of the Canadian Securities Administrators (“CSA”) and the Securities and Exchange Commission (“SEC”) in the United States. The consolidated financial statements also comply with the provisions of the Bank Act (Canada) and related regulations, including interpretations of IFRS by our regulator, the Office of the Superintendent of Financial Institutions Canada. The MD&A has been prepared in accordance with the requirements of securities regulators, including National Instrument 51-102 Continuous Disclosure Obligations of the CSA.

The consolidated financial statements and information in the MD&A necessarily include amounts based on informed judgments and estimates of the expected effects of current events and transactions with appropriate consideration to materiality. In addition, in preparing the financial information we must interpret the requirements described above, make determinations as to the relevancy of information to be included, and make estimates and assumptions that affect reported information. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from our present assessment of this information because events and circumstances in the future may not occur as expected.

The financial information presented in the bank’s Annual Report is consistent with that in the consolidated financial statements.

In meeting our responsibility for the reliability and timeliness of financial information, we maintain and rely on a comprehensive system of internal controls, including organizational and procedural controls, disclosure controls and procedures, and internal control over financial reporting. Our system of internal controls includes written communication of our policies and procedures governing corporate conduct and risk management; comprehensive business planning; effective segregation of duties; delegation of authority and personal accountability; escalation of relevant information for decisions regarding public disclosure; careful selection and training of personnel; and accounting policies that we regularly update. Our internal controls are designed to provide reasonable assurance that transactions are authorized, assets are safeguarded and proper records are maintained and that we are in compliance with all regulatory requirements. The system of internal controls is further supported by a compliance function, which is designed to ensure that we and our employees comply with securities legislation and conflict of interest rules, and by an internal audit staff, which conducts periodic audits of all aspects of our operations.

As of October 31, 2018, we, as the bank’s Chief Executive Officer and Chief Financial Officer, have determined that the bank’s internal control over financial reporting is effective. We have certified Bank of Montreal’s annual filings with the CSA and with the SEC pursuant to National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings and the Securities Exchange Act of 1934.

In order to provide their audit opinions on our consolidated financial statements and on the bank’s internal control over financial reporting, the Shareholders’ Auditors audit our system of internal controls over financial reporting and conduct work to the extent that they consider appropriate. Their audit opinion on the bank’s internal control over financial reporting as of October 31, 2018 is set forth on page 142.

The Board of Directors, based on recommendations from its Audit and Conduct Review Committee, reviews and approves the financial information contained in the Annual Report, including the MD&A. The Board of Directors and its relevant committees oversee management’s responsibilities for the preparation and presentation of financial information, maintenance of appropriate internal controls, compliance with legal and regulatory requirements, management and control of major risk areas, and assessment of significant and related party transactions.

The Audit and Conduct Review Committee, which is comprised entirely of independent directors, is also responsible for selecting the Shareholders’ Auditors and reviewing the qualifications, independence and performance of both the Shareholders’ Auditors and internal audit. The Shareholders’ Auditors and the bank’s Chief Auditor have full and free access to the Board of Directors, its Audit and Conduct Review Committee and other relevant committees to discuss audit, financial reporting and related matters.

The Office of the Superintendent of Financial Institutions Canada conducts examinations and inquiries into the affairs of the bank as deemed necessary to ensure that the provisions of the Bank Act, with respect to the safety of the depositors, are being duly observed and that the bank is in sound financial condition.

Darryl White	Thomas E. Flynn	Toronto, Canada
Chief Executive Officer	Chief Financial Officer	December 4, 2018

140 BMO Financial Group 201st Annual Report 2018

Independent Auditors’ Report of Registered Public

Accounting Firm

To the Shareholders of Bank of Montreal

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Bank of Montreal (the “Bank”), which comprise the consolidated balance sheets as at October 31, 2018 and October 31, 2017, the 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, 2018, and notes, comprising a summary of significant accounting policies and other explanatory information (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 the Bank as at October 31, 2018 and October 31, 2017, and its consolidated financial performance and its consolidated cash flows for each of the years in the three-year period ended October 31, 2018 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Change in Accounting Principle

Without qualifying our opinion on the consolidated financial statements, we draw attention to Note 1 to the consolidated financial statements, which indicates that the Bank has changed its method of accounting for financial instruments in 2018 due to the adoption of International Financial Reporting Standard 9 Financial Instruments.

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), the Bank’s internal control over financial reporting as of October 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated December 4, 2018 expressed an unqualified (unmodified) opinion on the effectiveness of the Bank’s internal control over financial reporting.

Basis for Opinion

A – Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

B – Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to error or fraud. Those standards also require that we comply with ethical requirements, including independence. We are required to be independent with respect to the Bank in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We are a public accounting firm registered with the PCAOB.

An audit includes performing procedures to assess the risks of material misstatements of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included obtaining and examining, on a test basis, audit evidence regarding the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Bank’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances.

An audit also includes evaluating the appropriateness of accounting policies and principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.

Chartered Professional Accountants, Licensed Public Accountants

We have served as the Bank’s auditor since 2004 and as joint auditor for the prior 11 years

December 4, 2018

Toronto, Canada

BMO Financial Group 201st Annual Report 2018 141

Report of Independent Registered Public Accounting Firm

The Shareholders of Bank of Montreal

Opinion on Internal Control over Financial Reporting

We have audited Bank of Montreal (the “Bank”)’s internal control over financial reporting as of October 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Bank maintained, in all material respects, effective internal control over financial reporting as of October 31, 2018, based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Report on the Consolidated Financial Statements

We also have audited, in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Bank as at October 31, 2018, and 2017, 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, 2018, and the related notes, comprising a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”) and our report dated December 4, 2018 expressed an unmodified (unqualified) opinion on those consolidated financial statements.

Basis for Opinion

The Bank’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 Disclosure Controls and Procedures and Internal Control Over Financial Reporting, on page 123 of the Management’s Discussion and Analysis (“MD&A”). Our responsibility is to express an opinion on the Bank’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 the Bank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB and in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada.

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 of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included 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.

Chartered Professional Accountants, Licensed Public Accountants

December 4, 2018

Toronto, Canada

142 BMO Financial Group 201st Annual Report 2018

Consolidated Statement of Income

For the Year Ended October 31 (Canadian $ in millions, except as noted)	2018		2017		2016
Interest, Dividend and Fee Income
Loans	$	16,275	$	13,564	$	12,575
Securities (Note 3) (1)		2,535		1,801		1,590
Deposits with banks		641		324		223
		19,451		15,689		14,388
Interest Expense
Deposits		6,080		3,894		3,036
Subordinated debt		226		155		170
Other liabilities		2,832		1,633		1,310
		9,138		5,682		4,516
Net Interest Income		10,313		10,007		9,872
Non-Interest Revenue
Securities commissions and fees		1,029		969		924
Deposit and payment service charges		1,144		1,123		1,076
Trading revenues		1,830		1,352		1,192
Lending fees		997		917		859
Card fees		564		479		526
Investment management and custodial fees		1,742		1,622		1,556
Mutual fund revenues		1,473		1,411		1,364
Underwriting and advisory fees		936		1,036		820
Securities gains, other than trading (Note 3)		239		171		84
Foreign exchange gains, other than trading		182		191		162
Insurance revenue		1,879		2,070		2,023
Investments in associates and joint ventures		167		386		140
Other		542		526		489
		12,724		12,253		11,215
Total Revenue		23,037		22,260		21,087
Provision for Credit Losses (Notes 1 and 4)		662		746		771
Insurance Claims, Commissions and Changes in Policy Benefit Liabilities (Note 14)		1,352		1,538		1,543
Non-Interest Expense
Employee compensation (Notes 20 and 21)		7,459		7,467		7,382
Premises and equipment (Note 9)		2,753		2,491		2,393
Amortization of intangible assets (Note 11)		503		485		444
Travel and business development		673		693		646
Communications		282		286		294
Professional fees		564		563		523
Other		1,379		1,345		1,359
		13,613		13,330		13,041
Income Before Provision for Income Taxes		7,410		6,646		5,732
Provision for income taxes (Note 22)		1,960		1,296		1,101
Net Income	$	5,450	$	5,350	$	4,631
Attributable to:
Bank shareholders		5,450		5,348		4,622
Non-controlling interest in subsidiaries		–		2		9
Net Income	$	5,450	$	5,350	$	4,631
Earnings Per Share (Canadian $)(Note 23)
Basic	$	8.19	$	7.95	$	6.94
Diluted		8.17		7.92		6.92
Dividends per common share		3.78		3.56		3.40

(1) Includes interest income on securities measured at fair value through other comprehensive income and amortized cost, calculated using the effective interest rate method, of $1,284 million for the year ended October 31, 2018.

The accompanying notes are an integral part of these consolidated financial statements.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Darryl White	Jan Babiak
Chief Executive Officer	Chair, Audit and Conduct Review Committee

BMO Financial Group 201st Annual Report 2018 143

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income

For the Year Ended October 31 (Canadian $ in millions)	2018			2017			2016
Net Income	$	5,450		$	5,350		$	4,631
Other Comprehensive (Loss), net of taxes (Note 22)
Items that may subsequently be reclassified to net income
Net change in unrealized gains (losses) on fair value through OCI securities (1)
Unrealized (losses) on fair value through OCI debt securities arising during the year (2)		(251	)		na			na
Unrealized gains on available-for-sale securities arising during the year (3)		na			95			151
Reclassification to earnings of (gains) in the year (4)		(65	)		(87	)		(28	)
		(316	)		8			123
Net change in unrealized (losses) on cash flow hedges
(Losses) on derivatives designated as cash flow hedges arising during the year (5)		(1,228	)		(839	)		(26	)
Reclassification to earnings of losses on derivatives designated as cash flow hedges (6)		336			61			10
		(892	)		(778	)		(16	)
Net gains (losses) on translation of net foreign operations
Unrealized gains (losses) on translation of net foreign operations		417			(885	)		213
Unrealized gains (losses) on hedges of net foreign operations (7)		(155	)		23			41
		262			(862	)		254
Items that will not be reclassified to net income
Gains (losses) on remeasurement of pension and other employee future benefit plans (8)		261			420			(422	)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1) (9)		(24	)		(148	)		(153	)
		237			272			(575	)
Other Comprehensive (Loss), net of taxes (Note 22)		(709	)		(1,360	)		(214	)
Total Comprehensive Income	$	4,741		$	3,990		$	4,417
Attributable to:
Bank shareholders		4,741			3,988			4,408
Non-controlling interest in subsidiaries		–			2			9
Total Comprehensive Income	$	4,741		$	3,990		$	4,417

(1) Fiscal 2017 and prior years represent available-for-sale securities (Note 1).

(2) Net of income tax recovery of $69 million, na and na for the year ended, respectively.

(3) Net of income tax (provision) of na, $(21) million and $(64) million for the year ended, respectively.

(4) Net of income tax provision of $23 million, $36 million and $11 million for the year ended, respectively.

(5) Net of income tax (provision) recovery of $432 million, $322 million and $(4) million for the year ended, respectively.

(6) Net of income tax (recovery) of $(121) million, $(21) million and $(6) million for the year ended, respectively.

(7) Net of income tax (provision) recovery of $56 million, $(8) million and $(10) million for the year ended, respectively.

(8) Net of income tax (provision) recovery of $(111) million, $(157) million and $156 million for the year ended, respectively.

(9) Net of income tax recovery of $6 million, $53 million and $55 million for the year ended, respectively.

na – not applicable due to IFRS 9 adoption.

The accompanying notes are an integral part of these consolidated financial statements.

144 BMO Financial Group 201st Annual Report 2018

Consolidated Balance Sheet

As at October 31 (Canadian $ in millions)	2018			2017
Assets
Cash and Cash Equivalents (Note 2)	$	42,142		$	32,599
Interest Bearing Deposits with Banks (Note 2)		8,305			6,490
Securities (Note 3)		180,935			163,198
Securities Borrowed or Purchased Under Resale Agreements (Note 4)		85,051			75,047
Loans (Notes 4 and 6)
Residential mortgages		119,620			115,258
Consumer instalment and other personal		63,225			61,944
Credit cards		8,329			8,071
Business and government		194,456			175,067
		385,630			360,340
Allowance for credit losses (Notes 1 and 4)		(1,639	)		(1,833	)
		383,991			358,507
Other Assets
Derivative instruments (Note 8)		26,204			28,951
Customers’ liability under acceptances (Note 12)		18,585			16,546
Premises and equipment (Note 9)		1,986			2,033
Goodwill (Note 11)		6,373			6,244
Intangible assets (Note 11)		2,272			2,159
Current tax assets		1,515			1,371
Deferred tax assets (Note 22)		2,037			2,865
Other (Note 12)		14,652			13,570
		73,624			73,739
Total Assets	$	774,048		$	709,580
Liabilities and Equity
Deposits (Note 13)	$	522,051		$	479,792
Other Liabilities
Derivative instruments (Note 8)		24,411			27,804
Acceptances (Note 14)		18,585			16,546
Securities sold but not yet purchased (Note 14)		28,804			25,163
Securities lent or sold under repurchase agreements (Note 14)		66,684			55,119
Securitization and structured entities’ liabilities (Notes 6 and 7)		25,051			23,054
Current tax liabilities		50			125
Deferred tax liabilities (Note 22)		74			233
Other (Note 14)		35,829			32,361
		199,488			180,405
Subordinated Debt (Note 15)		6,782			5,029
Equity
Preferred shares (Note 16)		4,340			4,240
Common shares (Note 16)		12,929			13,032
Contributed surplus		300			307
Retained earnings		25,856			23,709
Accumulated other comprehensive income		2,302			3,066
Total Equity		45,727			44,354
Total Liabilities and Equity	$	774,048		$	709,580

The accompanying notes are an integral part of these consolidated financial statements.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

BMO Financial Group 201st Annual Report 2018 145

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Changes in Equity

For the Year Ended October 31 (Canadian $ in millions)	2018			2017			2016
Preferred Shares (Note 16)
Balance at beginning of year	$	4,240		$	3,840		$	3,240
Issued during the year		400			900			600
Redeemed during the year		(300	)		(500	)		–
Balance at End of Year		4,340			4,240			3,840
Common Shares (Note 16)
Balance at beginning of year		13,032			12,539			12,313
Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan (Note 16)		–			448			90
Issued under the Stock Option Plan (Note 16)		99			146			136
Repurchased for cancellation (Note 16)		(202	)		(101	)		–
Balance at End of Year		12,929			13,032			12,539
Contributed Surplus
Balance at beginning of year		307			294			299
Stock option expense, net of options exercised (Note 20)		(12	)		6			(14	)
Other		5			7			9
Balance at End of Year		300			307			294
Retained Earnings
Balance at beginning of year		23,709			21,205			18,930
Impact from adopting IFRS 9 (Note 28)		99			na			na
Net income attributable to bank shareholders		5,450			5,348			4,622
Dividends – Preferred shares (Note 16)		(184	)		(184	)		(150	)
– Common shares (Note 16)		(2,424	)		(2,312	)		(2,191	)
Share issue expense		(5	)		(9	)		(6	)
Common shares repurchased for cancellation (Note 16)		(789	)		(339	)		–
Balance at End of Year		25,856			23,709			21,205
Accumulated Other Comprehensive Income (Loss) on Fair Value through OCI Securities, net of taxes (1)
Balance at beginning of year		56			48			(75	)
Impact from adopting IFRS 9 (Note 28)		(55	)		na			na
Unrealized gains (losses) on fair value through OCI debt securities arising during the year		(251	)		na			na
Unrealized gains on available-for-sale securities arising during the year		na			95			151
Reclassification to earnings of (gains) in the year		(65	)		(87	)		(28	)
Balance at End of Year		(315	)		56			48
Accumulated Other Comprehensive Income (Loss) on Cash Flow Hedges, net of taxes
Balance at beginning of year		(182	)		596			612
(Losses) on derivatives designated as cash flow hedges arising during the year		(1,228	)		(839	)		(26	)
Reclassification to earnings of losses on derivatives designated as cash flow hedges in the year		336			61			10
Balance at End of Year		(1,074	)		(182	)		596
Accumulated Other Comprehensive Income on Translation of Net Foreign Operations, net of taxes
Balance at beginning of year		3,465			4,327			4,073
Unrealized gains (losses) on translation of net foreign operations		417			(885	)		213
Unrealized gains (losses) on hedges of net foreign operations		(155	)		23			41
Balance at End of Year		3,727			3,465			4,327
Accumulated Other Comprehensive Income (Loss) on Pension and Other Employee Future Benefit Plans, net of taxes
Balance at beginning of year		(92	)		(512	)		(90	)
Gains (losses) on remeasurement of pension and other employee future benefit plans		261			420			(422	)
Balance at End of Year		169			(92	)		(512	)
Accumulated Other Comprehensive Loss on Own Credit Risk on Financial Liabilities Designated at Fair Value, net of taxes
Balance at beginning of year		(181	)		(33	)		120
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1)		(24	)		(148	)		(153	)
Balance at End of Year		(205	)		(181	)		(33	)
Total Accumulated Other Comprehensive Income		2,302			3,066			4,426
Total Shareholders’ Equity	$	45,727		$	44,354		$	42,304
Non-controlling Interest in Subsidiaries
Balance at beginning of year		–			24			491
Net income attributable to non-controlling interest		–			2			9
Dividends to non-controlling interest		–			–			(10	)
Redemption/purchase of non-controlling interest		–			(25	)		(450	)
Other		–			(1	)		(16	)
Balance at End of Year		–			–			24
Total Equity	$	45,727		$	44,354		$	42,328

(1) Fiscal 2017 and prior years represent available-for-sale securities (Note 1).

na – not applicable due to IFRS 9 adoption.

The accompanying notes are an integral part of these consolidated financial statements.

146 BMO Financial Group 201st Annual Report 2018

Consolidated Statement of Cash Flows

For the Year Ended October 31 (Canadian $ in millions)	2018			2017			2016
Cash Flows from Operating Activities
Net Income	$	5,450		$	5,350		$	4,631
Adjustments to determine net cash flows provided by (used in) operating activities
Provision on securities, other than trading (Note 3)		14			7			17
Net (gain) on securities, other than trading (Note 3)		(253	)		(178	)		(101	)
Net (increase) in trading securities		(2,650	)		(16,237	)		(11,403	)
Provision for credit losses (Note 4)		662			746			771
Change in derivative instruments – (Increase) decrease in derivative asset		5,287			15,544			(306	)
– (Decrease) in derivative liability		(6,699	)		(14,923	)		(5,598	)
Amortization of premises and equipment (Note 9)		400			391			384
Amortization of other assets		224			227			219
Amortization of intangible assets (Note 11)		503			485			444
Net decrease in deferred income tax asset		834			156			108
Net increase (decrease) in deferred income tax liability		2			(12	)		(7	)
Net (increase) in current income tax asset		(232	)		(497	)		(345	)
Net increase (decrease) in current income tax liability		(87	)		52			(18	)
Change in accrued interest – (Increase) in interest receivable		(366	)		(130	)		(81	)
– Increase in interest payable		337			15			64
Changes in other items and accruals, net		956			(3,416	)		1,199
Net increase in deposits		35,261			15,409			23,385
Net (increase) in loans		(23,089	)		(6,823	)		(23,169	)
Net increase in securities sold but not yet purchased		2,004			336			3,739
Net increase (decrease) in securities lent or sold under repurchase agreements		452			16,535			(82	)
Net (increase) decrease in securities borrowed or purchased under resale agreements		(2,958	)		(10,891	)		2,793
Net increase in securitization and structured entities’ liabilities		1,860			762			628
Net Cash Provided by (Used in) Operating Activities		17,912			2,908			(2,728	)
Cash Flows from Financing Activities
Net increase (decrease) in liabilities of subsidiaries		2,203			(87	)		3,100
Proceeds from issuance of covered bonds (Note 13)		2,706			5,845			8,945
Redemption of covered bonds (Note 13)		(567	)		(2,602	)		(2,101	)
Proceeds from issuance of subordinated debt (Note 15)		2,685			850			2,250
Repayment of subordinated debt (Note 15)		(900	)		(100	)		(2,200	)
Proceeds from issuance of preferred shares (Note 16)		400			900			600
Redemption of preferred shares (Note 16)		(300	)		(500	)		–
Redemption of capital trust securities		–			–			(450	)
Share issue expense		(5	)		(9	)		(6	)
Proceeds from issuance of common shares (Note 16)		88			149			137
Common shares repurchased for cancellation (Note 16)		(991	)		(440	)		–
Cash dividends paid		(2,582	)		(2,010	)		(2,219	)
Cash dividends paid to non-controlling interest		–			–			(10	)
Net Cash Provided by Financing Activities		2,737			1,996			8,046
Cash Flows from Investing Activities
Net (increase) decrease in interest bearing deposits with banks		(1,648	)		(2,245	)		3,007
Purchases of securities, other than trading		(46,749	)		(30,424	)		(28,860	)
Maturities of securities, other than trading		14,754			5,930			6,985
Proceeds from sales of securities, other than trading		23,561			24,400			16,294
Purchase of non-controlling interest		–			(25	)		–
Premises and equipment – net (purchases)		(330	)		(301	)		(224	)
Purchased and developed software – net (purchases)		(556	)		(490	)		(387	)
Acquisitions (Note 10)		(365	)		–			(12,147	)
Net Cash (Used in) Investing Activities		(11,333	)		(3,155	)		(15,332	)
Effect of Exchange Rate Changes on Cash and Cash Equivalents		227			(803	)		1,372
Net increase (decrease) in Cash and Cash Equivalents		9,543			946			(8,642	)
Cash and Cash Equivalents at Beginning of Year		32,599			31,653			40,295
Cash and Cash Equivalents at End of Year (Note 2)	$	42,142		$	32,599		$	31,653
Supplemental Disclosure of Cash Flow Information
Net cash provided by operating activities includes:
Interest paid in the year	$	8,790		$	5,826		$	4,561
Income taxes paid in the year	$	1,261		$	1,338		$	1,201
Interest received in the year	$	18,867		$	15,553		$	14,273
Dividends received in the year	$	1,277		$	1,607		$	1,336

The accompanying notes are an integral part of these consolidated financial statements.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

BMO Financial Group 201st Annual Report 2018 147

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation

Bank of Montreal (“the bank”) is a chartered bank under the Bank Act (Canada) and is a public company incorporated in Canada. We are a highly diversified financial services company, providing a broad range of personal and commercial banking, wealth management and investment banking products and services. The bank’s head office is at 129 rue Saint-Jacques, Montreal, Quebec. Its executive offices are at 100 King Street West, 1 First Canadian Place, Toronto, Ontario. Our common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange.

We have prepared these consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). We also comply with interpretations of IFRS by our regulator, the Office of the Superintendent of Financial Institutions Canada (“OSFI”).

Our consolidated financial statements have been prepared on a historic cost basis, except for the revaluation of the following items: assets and liabilities held for trading; financial assets and liabilities measured or designated at fair value through profit or loss (“FVTPL”); financial assets measured or designated at fair value through other comprehensive income (“FVOCI”); financial assets and financial liabilities designated as hedged items in qualifying fair value hedge relationships; cash-settled share-based payment liabilities; defined benefit pension and other employee future benefit liabilities; and insurance-related liabilities.

These consolidated financial statements were authorized for issue by the Board of Directors on December 4, 2018.

Basis of Consolidation

These consolidated financial statements are inclusive of the financial statements of our subsidiaries as at October 31, 2018. We conduct business through a variety of corporate structures, including subsidiaries, structured entities (“SEs”), associates and joint ventures. Subsidiaries are those entities where we exercise control through our ownership of the majority of the voting shares. We also hold interests in SEs, which we consolidate when we control the SEs. These are more fully described in Note 7. All of the assets, liabilities, revenues and expenses of our subsidiaries and consolidated SEs are included in our consolidated financial statements. All intercompany transactions and balances are eliminated on consolidation.

We hold investments in associates, where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method. The equity method is also applied to our investments in joint ventures. Joint ventures are those entities where we exercise joint control through an agreement with other shareholders. Under the equity method of accounting, investments are initially recorded at cost, and the carrying amount is increased or decreased to recognize our share of investee net income or loss, including other comprehensive income or loss. Our equity accounted investments are recorded as other securities and our share of the net income or loss is recorded in investments in associates and joint ventures, in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income. Additional information regarding accounting for other securities is included in Note 3.

Non-controlling interest in subsidiaries is presented in our Consolidated Balance Sheet as a separate component of equity that is distinct from our shareholders’ equity. The net income attributable to non-controlling interest in subsidiaries is presented separately in our Consolidated Statement of Income.

Specific Accounting Policies

To facilitate a better understanding of our consolidated financial statements, we have disclosed our significant accounting policies throughout the following notes with the related financial disclosures by major caption:

Note	Topic	Page
1	Basis of Presentation		148
2	Cash and Interest Bearing Deposits with Banks		153
3	Securities		153
4	Loans and Allowance for Credit Losses		157
5	Risk Management		164
6	Transfer of Assets		164
7	Structured Entities		165
8	Derivative Instruments		167
9	Premises and Equipment		175
10	Acquisitions		176
11	Goodwill and Intangible Assets		176
12	Other Assets		178
13	Deposits		178
14	Other Liabilities		179
15	Subordinated Debt		181

Note	Topic	Page
16	Equity		182
17	Fair Value of Financial Instruments and Trading-Related Revenue		184
18	Offsetting of Financial Assets and Financial Liabilities		190
19	Capital Management		191
20	Employee Compensation – Share-Based Compensation		192
21	Employee Compensation – Pension and Other Employee Future Benefits		194
22	Income Taxes		198
23	Earnings Per Share		200
24	Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities		201
25	Operating and Geographic Segmentation		203
26	Significant Subsidiaries		206
27	Related Party Transactions		206
28	Transition to IFRS 9		207

Translation of Foreign Currencies

We conduct business in a variety of foreign currencies and present our consolidated financial statements in Canadian dollars, which is our functional currency. Monetary assets and liabilities, as well as non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies, are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities not measured at fair value are translated into Canadian dollars at historical rates. Revenues and expenses denominated in foreign currencies are translated using the average exchange rate for the year.

Unrealized gains and losses arising from translating our net investment in foreign operations into Canadian dollars, net of related hedging activities and applicable income taxes, are included in our Consolidated Statement of Comprehensive Income within net gain (loss) on translation of net foreign operations. When we dispose of a foreign operation such that control, significant influence or joint control is lost, the cumulative amount of the translation gain (loss) and any applicable hedging activities and related income taxes is reclassified to our Consolidated Statement of Income as part of the gain or loss on disposition.

148 BMO Financial Group 201st Annual Report 2018

Foreign currency translation gains and losses on equity securities measured at FVOCI that are denominated in foreign currencies are included in accumulated other comprehensive income on FVOCI equity securities, net of taxes, in our Consolidated Statement of Changes in Equity. All other foreign currency translation gains and losses are included in foreign exchange, other than trading, in our Consolidated Statement of Income as they arise.

From time to time, we enter into foreign exchange hedge contracts to reduce our exposure to changes in the value of foreign currencies. Realized and unrealized gains and losses that arise on the mark-to-market of foreign exchange contracts related to economic hedges are included in non-interest revenue in our Consolidated Statement of Income. Changes in the fair value of derivative contracts that qualify as accounting hedges are recorded in our Consolidated Statement of Comprehensive Income within net change in unrealized gains (losses) on derivatives designated as cash flow hedges, with the spot/forward differential (the difference between the foreign currency exchange rate at the inception of the contract and the rate at the end of the contract) recorded in interest income (expense) over the term of the hedge.

Revenue

Dividend Income

Dividend income is recognized when the right to receive payment is established. This is the ex-dividend date for listed equity securities.

Fee Income

Securities commissions and fees are earned in Wealth Management and Capital Markets on brokerage transactions executed for customers, generally as a fixed fee per share traded, where the commissions and related clearing expense are recognized on trade date. There are also fees based on a percentage of the customer’s portfolio holdings that entitle clients to investment advice and a certain number of trades which are recorded over the period to which they relate.

Deposit and payment service charges are primarily earned in Personal and Commercial Banking and include monthly account maintenance fees and other activity-based fees earned on deposit and cash management services. Fees are recognized over time or at a point in time, i.e. over the period that account maintenance and cash management services are provided, or when an income-generating activity is performed.

Card fees arise in Personal and Commercial Banking and primarily include interchange income, late fees and annual fees. Card fees are recorded when the related services are provided, except for annual fees, which are recorded evenly throughout the year. Interchange income is calculated as a percentage of the transaction amount and/or a fixed price per transaction as established by the payment network and is recognized when the card transaction is settled. Reward costs for certain of our cards are recorded as a reduction in card fees.

Investment management and custodial fees are earned in Wealth Management and are based primarily on the balance of assets under management or assets under administration, as at the period end, for investment management, custodial, estate and trustee services provided. Fees are recorded over the period the services are performed.

Mutual fund revenues arise in Wealth Management and are earned on fund management services which are primarily calculated and recorded based on a percentage of the fund’s net asset value. The fees are recorded over the period the services are performed.

Underwriting and advisory fees are earned in Capital Markets and arise from securities offerings in which we act as an underwriter or agent, structuring and administering loan syndications and fees earned from providing merger-and-acquisition services and structuring advice. Underwriting and advisory fees are generally recognized when the services or milestones are completed.

Leases

We are lessors in both financing leases and operating leases. Leases are classified as financing leases if they transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. Otherwise they are classified as operating leases, as we retain substantially all the risks and rewards of asset ownership.

As lessor in a financing lease, a loan is recognized equal to the investment in the lease, which is calculated as the present value of the minimum payments to be received from the lessee, discounted at the interest rate implicit in the lease, plus any unguaranteed residual value we expect to recover at the end of the lease. Finance lease income is recognized in interest, dividend and fee income, loans, in our Consolidated Statement of Income.

Assets under operating leases are recorded in other assets in our Consolidated Balance Sheet. Rental income is recognized on a straight-line basis over the term of the lease in non-interest revenue, other, in our Consolidated Statement of Income. Depreciation on these assets is recognized on a straight-line basis over the life of the lease in non-interest expense, other, in our Consolidated Statement of Income.

Assets Held-for-Sale

Non-current non-financial assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell and are presented within other assets in our Consolidated Balance Sheet. Subsequent to its initial classification, a non-current asset is no longer depreciated or amortized, and any subsequent write-down in fair value less costs to sell is recognized in non-interest revenue, other, in our Consolidated Statement of Income.

Changes in Accounting Policies

Financial Instruments

Effective November 1, 2017 we adopted IFRS 9 Financial Instruments (“IFRS 9”), which replaces IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 addresses impairment, classification and measurement, and hedge accounting. The impact to shareholders’ equity at November 1, 2017 was an increase of $70 million ($44 million after-tax) related to the impairment requirements of the standard. Prior periods have not been restated. Refer to Note 28, Transition to IFRS 9, for the impact on the opening balance sheet at November 1, 2017 and for accounting policies under IAS 39, which were applicable in prior periods.

BMO Financial Group 201st Annual Report 2018 149

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment

IFRS 9 introduces a new expected credit loss (“ECL”) impairment model for all financial assets and certain off-balance sheet loan commitments and guarantees. The new ECL model results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual impairment. This differs from our previous approach where the allowance recorded on performing loans was designed to capture only incurred losses whether or not they have been specifically identified.

The ECL model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and will vary by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria such as 30-day past due and watchlist status. The allowance for assets in Stage 2 will be higher than for those in Stage 1 as a result of the longer time horizon associated with this stage. Stage 3 requires the recognition of lifetime losses for all credit impaired assets.

IFRS 9 requires consideration of past events, current market conditions and reasonable supportable information about future economic conditions, in determining whether there has been a significant increase in credit risk and in calculating the amount of expected losses. The standard also requires future economic conditions be based on an unbiased, probability-weighted assessment of possible future outcomes.

In considering the lifetime of an instrument, IFRS 9 generally requires the use of the contractual period, including pre-payment, extension and other options. For revolving instruments, such as credit cards, that may not have a defined contractual period, lifetime is based on historical behaviour.

Classification and Measurement

Debt instruments, including loans, are classified based on both our business model for managing the assets and the contractual cash flow characteristics of the assets. Debt instruments are measured at fair value through profit or loss (“FVTPL”) unless certain conditions are met that permit measurement at either fair value through other comprehensive income (“FVOCI”) or amortized cost.

FVOCI is permitted where debt instruments are held with the objective of selling the assets or collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs. Changes in fair value are recorded in other comprehensive income; gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

Amortized cost is permitted where debt instruments are held with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. Gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

For both FVOCI and amortized cost instruments, premiums, discounts and transaction costs are amortized over the term of the instrument on an effective yield basis as an adjustment to interest income.

Equity instruments are measured at FVTPL unless we elect to measure at FVOCI, in which case gains and losses are never recognized in income.

As permitted by IFRS 9, in fiscal 2015, we have early adopted the provisions relating to the recognition of changes in own credit risk for financial liabilities designated at FVTPL.

Additional information regarding changes in own credit risk is included in Notes 13 and 14.

Hedge Accounting

IFRS 9 introduced a new hedge accounting model that expands the scope of hedged items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. The new model no longer specifies quantitative measures for effectiveness testing and does not permit hedge de-designation. IFRS 9 includes a policy choice that allows us to continue to apply the existing hedge accounting rules, which we have elected to use. However, as required by the standard, we adopted the new hedge accounting disclosures. Refer to Note 8.

Use of Estimates and Judgments

The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the carrying amounts of certain assets and liabilities, certain amounts reported in net income and other related disclosures.

The most significant assets and liabilities for which we must make estimates include allowance for credit losses; financial instruments measured at fair value; pension and other employee future benefits; impairment of securities; income taxes and deferred taxes; goodwill and intangible assets; insurance-related liabilities; and provisions. We make judgments in assessing whether substantially all risks and rewards have been transferred in respect of transfers of financial assets and whether we control SEs, as discussed in Notes 6 and 7, respectively. If actual results were to differ from the estimates, the impact would be recorded in future periods.

We have established detailed policies and control procedures that are intended to ensure these judgments are well controlled, independently reviewed and consistently applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate.

Allowance for Credit Losses

The expected credit loss model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability of default since origination, and certain other criteria, such as 30-day past due and watchlist status. The assessment of a significant increase in credit risk requires experienced credit judgment.

In determining whether there has been a significant increase in credit risk and in calculating the amount of expected credit losses, we must rely on estimates and exercise judgment regarding matters for which the ultimate outcome is unknown. These judgments include changes in circumstances that may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or decrease in the allowance for credit losses.

The calculation of expected credit losses includes the explicit incorporation of forecasts of future economic conditions. We have developed models incorporating specific macroeconomic variables that are relevant to each portfolio. Key economic variables for our retail portfolios include primary operating markets of Canada, the United States and regional markets where considered significant. Forecasts are developed internally by our

150 BMO Financial Group 201st Annual Report 2018

Economics group, considering external data and our view of future economic conditions. We exercise experienced credit judgment to incorporate multiple economic forecasts which are probability-weighted in the determination of the final expected credit loss. The allowance is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario.

Additional information regarding the allowance for credit losses is included in Notes 4 and 28.

Financial Instruments Measured at Fair Value

Fair value measurement techniques are used to value various financial assets and financial liabilities and are used in performing impairment testing on certain non-financial assets. Detailed discussions of our fair value measurement techniques are included in Note 17.

Pension and Other Employee Future Benefits

Our pension and other employee future benefits expense is calculated by our independent actuaries using assumptions determined by management. If actual experience were to differ from the assumptions used, we would recognize this difference in other comprehensive income.

Pension and other employee future benefits expense, plan assets and defined benefit obligations are also sensitive to changes in discount rates. We determine discount rates for all of our plans using high-quality AA rated corporate bond yields with terms matching the plans’ specific cash flows.

Additional information regarding our accounting for pension and other employee future benefits is included in Note 21.

Impairment of Securities

We review other securities at each quarter-end reporting period to identify and evaluate investments that show indications of possible impairment. For these equity securities, a significant or prolonged decline in the fair value of a security below its cost is objective evidence of impairment.

Debt securities measured at amortized cost or FVOCI are assessed for impairment using the expected credit loss model. For securities determined to have low credit risk, the allowance for credit losses is measured at a 12 month expected credit loss.

Additional information regarding our accounting for debt securities measured at amortized cost or FVOCI and other securities, allowance for credit losses and the determination of fair value is included in Notes 3 and 17.

Income Taxes and Deferred Tax Assets

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in either our Consolidated Statement of Income or Consolidated Statement of Changes in Equity. In determining the provision for income taxes, we interpret tax legislation, case law and administrative positions in numerous jurisdictions and, based on our judgment, record our estimate of the amount required to settle tax obligations. We also make assumptions about the expected timing of the reversal of deferred tax assets and liabilities. If our interpretations differ from those of taxing authorities or if the timing of reversals is not as expected, our provision for income taxes could increase or decrease in future periods. The amount of any such increase or decrease cannot be reasonably estimated.

Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available in future periods against which deductible temporary differences may be utilized. We are required to assess whether it is probable that our deferred income tax assets will be realized prior to expiration and, based on all the available evidence, determine if any portion of our deferred income tax assets should not be recognized. The factors used to assess the probability of realization are our past experience of income and capital gains, our forecast of future net income before taxes, and the period remaining before the expiration of tax loss carryforwards. Changes in our assessment of these factors could increase or decrease our provision for income taxes in future periods.

Additional information regarding our accounting for income taxes is included in Note 22.

Goodwill and Intangible Assets

For the purpose of impairment testing, goodwill is allocated to our groups of cash-generating units (“CGUs”), which represent the lowest level within the bank at which goodwill is monitored for internal management purposes. Impairment testing is performed at least annually, by comparing the carrying values and the recoverable amounts of the CGUs to which goodwill has been allocated to determine whether the recoverable amount of each group is greater than its carrying value. If the carrying value of the group were to exceed its recoverable amount, an impairment calculation would be performed. The recoverable amount of a CGU is the higher of its fair value less costs to sell and the value in use.

In determining fair value less costs to sell, we employ a discounted cash flow model consistent with those used when we acquire businesses. This model is dependent on assumptions related to revenue growth, discount rates, synergies achieved on acquisition and the availability of comparable acquisition data. Changes in any of these assumptions would affect the determination of fair value for each of the business units in a different manner. Management must exercise judgment and make assumptions in determining fair value less costs to sell, and differences in judgment and assumptions could affect the determination of fair value and any resulting impairment write-down.

Intangible assets with a definite life are amortized to income on either a straight-line or an accelerated basis over a period not exceeding 15 years, depending on the nature of the asset. We test definite-life intangible assets for impairment when circumstances indicate the carrying value may not be recoverable. Indefinite-life intangible assets are tested annually for impairment. If any intangible assets are determined to be impaired, we write them down to their recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

Additional information regarding goodwill and intangible assets is included in Note 11.

Insurance-Related Liabilities

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy benefit liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions. The most significant impact on the valuation of a liability would result from a change in the assumption for future investment yields.

Additional information regarding insurance-related liabilities is included in Note 14.

BMO Financial Group 201st Annual Report 2018 151

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Provisions

The bank and its subsidiaries are involved in various legal actions in the ordinary course of business.

Provisions are recorded at the best estimate of the amounts required to settle any obligations related to these legal actions as at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. Factors considered in making the assessment include: a case-by-case assessment of specific facts and circumstances, our past experience and the opinions of legal experts. Management and external experts are involved in estimating any provisions. The actual costs of resolving these claims may be substantially higher or lower than the amounts of the provisions.

Additional information regarding provisions is included in Note 24.

Transfer of Financial Assets and Consolidation of Structured Entities

We enter into transactions in which we transfer assets, typically mortgage loans and credit cards, to a structured entity or third party to obtain alternate sources of funding. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition. Since we continue to be exposed to substantially all of the repayment, interest rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financings in our Consolidated Balance Sheet.

For securitization vehicles sponsored by the bank, the vehicles typically have limited decision-making authority. The structure of these vehicles limits the activities they can undertake, the types of assets they can hold and how activities are funded. We control and consolidate these vehicles when we have the key decision-making powers necessary to obtain the majority of the benefits of their activities.

For certain investments in limited partnerships, we exercise judgment in determining whether we control an entity. Based on an assessment of our interests and rights, we have determined that we do not control certain entities, even though we may have an ownership interest greater than 50%. This may be the case when we are not the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity. Additionally, we have determined that we control certain entities despite having an ownership interest less than 50%. This may be the case when we are the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity.

Transferred assets are discussed in greater detail in Note 6 and structured entities are discussed in greater detail in Notes 7 and 20.

Future Changes in IFRS

Revenue

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”), which replaces the existing standards for revenue recognition. The new standard establishes a framework for the recognition and measurement of revenues generated from contracts with customers, providing a principles-based approach for revenue recognition, and introduces the concept of recognizing revenue for performance obligations as they are satisfied. Revenues outside of the scope of IFRS 15 include interest and dividend income, trading revenues, securities gains/losses, insurance revenues, investments in associates and joint ventures and lease income. The standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenues and cash flows arising from transactions with our customers.

In April 2016, the IASB issued clarifications to IFRS 15, which provided additional clarity on revenue recognition related to identifying performance obligations, application guidance on principal versus agent and licences of intellectual property.

The primary impact of IFRS 15 will be the reclassification of amounts within the Consolidated Statement of Income. Loyalty rewards and cash promotion costs on cards currently recorded in non-interest expense will be presented as a reduction in non-interest revenue. Reimbursement of certain expenses incurred on behalf of customers currently recorded as a reduction in non-interest expense will be recorded in non-interest revenue. In addition, there will be minimal impacts to net income as a result of no longer discounting our loyalty rewards costs and the amortization of costs to obtain card customers, which are currently expensed as incurred.

On transition to IFRS 15 on November 1, 2018, we can either restate prior periods as if we had always applied IFRS 15 or alternatively, we can recognize the cumulative effect of any changes resulting from our adoption of IFRS 15 in opening retained earnings with no comparison for prior years. We have elected to restate prior periods.

The impact of adopting IFRS 15 in 2018 and 2017 would have been a decrease in non-interest revenue of $132 million and $153 million, a decrease in non-interest expense of $136 million and $138 million, and an increase in net income of $3 million and a decrease in net income of $11 million, in our Consolidated Statement of Income, respectively. The impact in our Consolidated Balance Sheet as at October 31, 2018 and 2017 is not significant.

Share-based Payment

In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment (“IFRS 2”) in relation to the classification and measurement of share-based payment transactions. The amendments will not have a significant impact on our consolidated financial statements. The amendments are effective for our fiscal year beginning November 1, 2018.

Leases

In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”), which provides guidance for leases whereby lessees will recognize a liability for the present value of future lease liabilities and record a corresponding asset on the balance sheet for most leases. There are minimal changes to lessor accounting. IFRS 16 is effective for our fiscal year beginning November 1, 2019.

In order to meet the requirements of IFRS 16, we have established an enterprise-wide project and are currently assessing the impact of the standard on our future financial results. The main impact identified to date is the requirement to record real estate leases on balance sheet. Currently, most of our real estate leases are classified as operating leases, whereby we record lease expense over the term of the lease with no asset or liability recorded on the balance sheet other than any related leasehold improvements. Under IFRS 16, we will recognize a right-of-use asset and a lease liability on the balance sheet. There will be no significant impact on our lessor businesses.

When we adopt IFRS 16, we can either recognize the cumulative effect of any changes resulting from our adoption of IFRS 16 in opening retained earnings with no comparison for prior years or alternatively, we can restate prior periods as if we had always applied IFRS 16. We are assessing our transition approach as part of our project.

152 BMO Financial Group 201st Annual Report 2018

Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (“IFRS 17”), which provides a comprehensive approach to accounting for all types of insurance contracts and will replace the existing IFRS 4 Insurance Contracts. In November 2018, the IASB tentatively decided to defer the effective date of IFRS 17 by one year, which would change the anticipated effective date for the bank to November 1, 2022. We will continue to closely monitor the ongoing discussions at the IASB. We are currently assessing the impact of the standard on our future financial results.

Conceptual Framework

In March 2018, the IASB issued the revised Conceptual Framework (“Framework”), which sets out the fundamental concepts for financial reporting to ensure consistency in standard-setting decisions and that similar transactions are treated in a similar way, so as to provide useful information to users of financial statements. The revised Framework, which is effective for our fiscal year beginning November 1, 2020, will inform future standard-setting decisions but does not impact existing IFRS. We do not expect the Framework to have a significant impact on our accounting policies.

Note 2: Cash and Interest Bearing Deposits with Banks

(Canadian $ in millions)	2018		2017
Cash and deposits with banks (1)		40,738		30,002
Cheques and other items in transit, net		1,404		2,597
Total cash and cash equivalents		42,142		32,599

(1) Includes deposits with the Bank of Canada, the U.S. Federal Reserve and other central banks.

Cheques and Other Items in Transit, Net

Cheques and other items in transit are recorded at cost and represent the net position of the uncleared cheques and other items in transit between us and other banks.

Cash Restrictions

Certain of our foreign operations are required to maintain reserves or minimum balances with central banks in their respective countries of operation, totalling $1,655 million as at October 31, 2018 ($1,435 million in 2017).

Interest Bearing Deposits with Banks

Deposits with banks are recorded at amortized cost and include acceptances we have purchased that were issued by other banks. Interest income earned on these deposits is recorded on an accrual basis.

Note 3: Securities

Securities are divided into six types, each with a different purpose and accounting treatment. The types of securities we hold are as follows:

Trading securities are securities purchased for resale over a short period of time. Trading securities are recorded at fair value through profit or loss. Transaction costs and changes in fair value are recorded in our Consolidated Statement of Income in trading revenues.

Fair value through profit or loss securities are measured at fair value with changes in fair value and related transaction costs recorded in our Consolidated Statement of Income in securities gains and losses, other than trading, except as noted below. This category includes the following:

Securities Designated at FVTPL

In order to qualify for this designation, the security must have reliably measurable fair values and the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the gains and losses on a different basis. Securities must be designated on initial recognition, and the designation is irrevocable. If these securities were not designated at FVTPL, they would be accounted for as either FVOCI or amortized cost.

We designate certain securities held by our insurance subsidiaries that support our insurance liabilities at fair value through profit or loss since the actuarial calculation of insurance liabilities is based on the fair value of the investments supporting them. This designation aligns the accounting result with the way the portfolio is managed on a fair value basis. The change in fair value of the securities is recorded in non-interest revenue, insurance revenue and the change in fair value of the liabilities is recorded in insurance claims, commissions and changes in policy benefit liabilities. The fair value of these investments as at October 31, 2018 of $8,783 million ($8,465 million as at October 31, 2017) is recorded in securities in our Consolidated Balance Sheet. The impact of recording these investments at fair value through profit or loss was a decrease of $372 million in non-interest revenue, insurance revenue, for the year ended October 31, 2018 (increase of $39 million for the year ended October 31, 2017).

Securities Mandatorily Measured at FVTPL

Securities managed on a fair value basis, but not held for trading, or debt securities whose cash flows do not represent solely payments of principal and interest and equity securities not held for trading are classified as FVTPL.

Debt securities measured at amortized cost are debt securities purchased with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities are initially recorded at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method. Impairment losses (recoveries) are recorded in our Consolidated Statement of Income in securities gains, other than trading. Interest income earned and amortization of premiums, discounts and transaction costs are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

BMO Financial Group 201st Annual Report 2018 153

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt securities measured at FVOCI are debt securities purchased with the objective of both collecting contractual cash flows and selling the securities. The securities’ cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs.

Debt securities measured at FVOCI are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in our Consolidated Statement of Comprehensive Income until the security is sold or impaired. Gains and losses on disposal and impairment losses (recoveries) are recorded in our Consolidated Statement of Income in non-interest revenue, securities gains, other than trading. Interest income earned is recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities using the effective interest method.

Equity securities measured at FVOCI are equity securities where we have elected to record changes in the fair value of the instrument in other comprehensive income as opposed to fair value through profit or loss. Gains or losses recorded on these instruments will never be recognized in profit or loss. Equity securities measured at FVOCI are not subject to an impairment assessment.

Other securities are investments in associates and joint ventures where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method of accounting. Our share of the net income or loss is recorded in investments in associates and joint ventures in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income.

We account for all of our securities transactions using settlement date accounting in our Consolidated Balance Sheet. Changes in fair value between the trade date and settlement date are recorded in net income, except for those related to securities measured at FVOCI, which are recorded in other comprehensive income.

Impairment Review

Debt securities classified as amortized cost or FVOCI are assessed for impairment using the ECL model, with the exception of securities determined to have low credit risk where the allowance for credit losses is measured at a 12 month expected credit loss. A financial asset is considered to have low credit risk if the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations.

Classification of Securities

Our securities are classified as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 as follows:

(Canadian $ in millions)	2018		2017
Trading		99,697		99,069
FVTPL (1)		11,611		na
FVOCI - Debt and Equity (2)		62,440		na
Available-for-sale		na		54,075
Amortized cost (3)		6,485		na
Held-to-maturity		na		9,094
Other		702		960
		180,935		163,198

(1) Comprised of $2,828 million mandatorily measured at fair value and $8,783 million designated at fair value.

(2) Includes allowances for credit losses on FVOCI debt securities of $2 million (na at October 31, 2017).

(3) Net of allowances for credit losses of $1 million (na at October 31, 2017).

na – not applicable due to IFRS 9 adoption.

Fair Value Measurement

For traded securities, quoted market value is considered to be fair value. Quoted market value is based on bid prices. For securities where market quotes are not available, we use estimation techniques to determine fair value. A discussion of fair value measurement is included in Note 17.

154 BMO Financial Group 201st Annual Report 2018

Classified under IFRS 9

(Canadian $ in millions, except as noted)	Term to maturity										2018
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,103		2,195		2,038		1,077		907		10,320
Canadian provincial and municipal governments		1,293		2,029		1,235		1,355		2,790		8,702
U.S. federal government		2,684		2,835		1,260		1,895		843		9,517
U.S. states, municipalities and agencies		756		135		29		114		182		1,216
Other governments		485		557		330		40		–		1,412
NHA MBS, U.S. agency MBS and CMO (1)		382		497		477		346		7,482		9,184
Corporate debt		2,635		1,821		1,295		1,413		2,034		9,198
Loans		14		82		55		48		–		199
Corporate equity		–		–		–		–		49,949		49,949
Total trading securities		12,352		10,151		6,719		6,288		64,187		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		–		4		2		97		431
Canadian provincial and municipal governments		–		23		5		22		896		946
U.S. federal government		69		–		–		–		–		69
NHA MBS, U.S. agency MBS and CMO (1)		–		3		4		–		–		7
Corporate debt		616		56		125		692		5,331		6,820
Corporate equity		–		–		–		–		3,338		3,338
Total FVTPL securities		1,013		82		138		716		9,662		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		6,600		4,036		1,711		537		–		12,884
Fair value		6,592		4,006		1,688		519		–		12,805
Yield (%)		1.52		1.58		2.09		2.14		–		1.64
Canadian provincial and municipal governments
Amortized cost		3,200		1,229		1,742		713		12		6,896
Fair value		3,204		1,227		1,726		693		12		6,862
Yield (%)		1.36		1.81		2.67		2.59		3.58		1.90
U.S. federal government
Amortized cost		462		1,604		7,116		8,221		–		17,403
Fair value		454		1,595		6,858		7,916		–		16,823
Yield (%)		2.39		2.61		1.98		2.35		–		2.22
U.S. states, municipalities and agencies
Amortized cost		356		684		542		1,177		935		3,694
Fair value		355		678		540		1,158		924		3,655
Yield (%)		1.69		2.07		2.59		2.59		2.66		2.42
Other governments
Amortized cost		1,193		1,187		2,135		303		–		4,818
Fair value		1,192		1,183		2,113		302		–		4,790
Yield (%)		1.82		2.21		2.74		2.87		–		2.39
NHA MBS (1)
Amortized cost		306		62		2,014		–		–		2,382
Fair value		310		62		1,998		–		–		2,370
Yield (%)		1.95		1.32		2.00		–		–		1.98
U.S. agency MBS and CMO (1)
Amortized cost		–		13		109		1,819		9,870		11,811
Fair value		–		13		106		1,761		9,437		11,317
Yield (%)		–		2.31		2.50		2.51		2.29		2.33
Corporate debt
Amortized cost		672		1,992		569		509		41		3,783
Fair value		671		1,980		566		498		41		3,756
Yield (%)		1.45		2.86		2.87		3.24		4.02		2.67
Corporate equity
Amortized cost		–		–		–		–		62		62
Fair value		–		–		–		–		62		62
Yield (%)		–		–		–		–		–		–
Total cost or amortized cost		12,789		10,807		15,938		13,279		10,920		63,733
Total fair value		12,778		10,744		15,595		12,847		10,476		62,440
Yield (%)		1.55		2.09		2.23		2.44		2.32		2.13
Amortized Cost Securities
Issued or guaranteed by:
Canadian provincial and municipal governments
Amortized cost		230		280		143		179		–		832
Fair value		230		282		145		184		–		841
Other governments
Amortized cost		–		3		7		–		–		10
Fair value		–		3		7		–		–		10
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		171		452		–		1,884		3,045		5,552
Fair value		171		454		–		1,808		2,913		5,346
Corporate debt
Amortized cost		1		10		10		5		65		91
Fair value		1		10		10		5		65		91
Total cost or amortized cost		402		745		160		2,068		3,110		6,485
Total fair value		402		749		162		1,997		2,978		6,288
Other Securities
Carrying value		–		–		–		–		702		702
Total carrying value or amortized cost of securities		26,556		21,785		22,955		22,351		88,581		182,228
Total value of securities		26,545		21,722		22,612		21,919		88,137		180,935
Total by Currency (in Canadian $ equivalent)
Canadian dollar		18,091		12,284		9,782		5,475		37,135		82,767
U.S. dollar		7,799		9,423		12,718		16,404		49,922		96,266
Other currencies		655		15		112		40		1,080		1,902
Total securities		26,545		21,722		22,612		21,919		88,137		180,935

BMO Financial Group 201st Annual Report 2018 155

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Classified under IAS 39

(Canadian $ in millions, except as noted)	Term to maturity										2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,862		1,527		2,021		1,313		1,104		10,827
Canadian provincial and municipal governments		812		1,343		714		1,991		2,467		7,327
U.S. federal government		1,332		1,758		2,000		1,906		2,477		9,473
U.S. states, municipalities and agencies		642		222		86		100		1,081		2,131
Other governments		85		438		266		34		–		823
NHA MBS, U.S. agency MBS and CMO (1)		147		571		203		8		2		931
Corporate debt		1,298		1,375		795		1,281		7,014		11,763
Loans		–		28		7		118		–		153
Corporate equity		–		–		–		–		55,641		55,641
Total trading securities		9,178		7,262		6,092		6,751		69,786		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		5,585		1,764		1,266		597		–		9,212
Fair value		5,578		1,749		1,262		591		–		9,180
Yield (%)		0.66		1.48		1.46		1.57		–		0.99
Canadian provincial and municipal governments
Amortized cost		1,157		265		1,293		860		38		3,613
Fair value		1,156		266		1,310		855		40		3,627
Yield (%)		0.85		1.45		2.24		2.32		3.27		1.77
U.S. federal government
Amortized cost		15		–		3,128		11,338		–		14,481
Fair value		17		–		3,115		11,137		–		14,269
Yield (%)		0.88		–		1.81		1.80		–		1.80
U.S. states, municipalities and agencies
Amortized cost		370		563		463		1,329		1,333		4,058
Fair value		370		566		467		1,357		1,336		4,096
Yield (%)		1.63		1.78		2.26		2.40		1.71		2.00
Other governments
Amortized cost		1,592		1,231		725		19		–		3,567
Fair value		1,593		1,225		722		18		–		3,558
Yield (%)		1.44		1.34		1.52		2.72		–		1.43
NHA MBS (1)
Amortized cost		255		1,143		1,059		–		–		2,457
Fair value		262		1,141		1,052		–		–		2,455
Yield (%)		2.05		1.83		1.56		–		–		1.74
U.S. agency MBS and CMO – U.S. (1)
Amortized cost		1		20		62		658		10,161		10,902
Fair value		1		19		62		659		10,020		10,761
Yield (%)		1.83		3.12		2.25		2.31		1.97		1.99
Corporate debt
Amortized cost		995		2,082		737		607		93		4,514
Fair value		997		2,080		734		619		95		4,525
Yield (%)		0.75		2.08		2.48		3.08		3.64		2.02
Corporate equity
Amortized cost		–		–		–		–		1,499		1,499
Fair value		–		–		–		–		1,604		1,604
Yield (%)		–		–		–		–		2.37		2.37
Total cost or amortized cost		9,970		7,068		8,733		15,408		13,124		54,303
Total fair value		9,974		7,046		8,724		15,236		13,095		54,075
Yield (%)		0.89		1.72		1.85		1.95		2.00		1.72
Held-to-Maturity Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		1,855		–		–		–		–		1,855
Fair value		1,857		–		–		–		–		1,857
Canadian provincial and municipal governments
Amortized cost		735		510		–		322		–		1,567
Fair value		737		512		–		341		–		1,590
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		191		485		364		999		3,633		5,672
Fair value		191		486		366		997		3,609		5,649
Total cost or amortized cost		2,781		995		364		1,321		3,633		9,094
Total fair value		2,785		998		366		1,338		3,609		9,096
Other Securities
Carrying value		7		21		13		38		881		960
Total carrying value or amortized cost of securities		21,936		15,346		15,202		23,518		87,424		163,426
Total value of securities		21,940		15,324		15,193		23,346		87,395		163,198
Total by Currency (in Canadian $ equivalent)
Canadian dollar		16,959		8,546		7,222		6,235		41,261		80,223
U.S. dollar		3,948		6,662		7,916		17,087		44,384		79,997
Other currencies		1,033		116		55		24		1,750		2,978
Total securities		21,940		15,324		15,193		23,346		87,395		163,198

(1) These amounts are supported by insured mortgages or issued by U.S. agencies and government-sponsored enterprises. NHA refers to the National Housing Act, MBS refers to mortgage-backed securities and CMO refers to collateralized mortgage obligations.

Yields in the tables above are calculated using the cost of the security and the contractual interest rate associated with each security, adjusted for any amortization of premiums and discounts. Tax effects are not taken into consideration. The term to maturity included in the table above is based on the contractual maturity date of the security. Actual maturities could differ, as issuers may have the right to call or prepay obligations. Equity securities with no maturity date are included in the over 10 years category.

156 BMO Financial Group 201st Annual Report 2018

Unrealized Gains and Losses

The following table summarizes the unrealized gains and losses on FVOCI securities as at October 31, 2018 under IFRS 9 and the unrealized gains and losses on available-for-sale securities as at October 31, 2017 under IAS 39.

(Canadian $ in millions)							2018								2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Issued or guaranteed by:
Canadian federal government		12,884		1		80		12,805		9,212		6		38		9,180
Canadian provincial and municipal governments		6,896		8		42		6,862		3,613		29		15		3,627
U.S. federal government		17,403		4		584		16,823		14,481		12		224		14,269
U.S. states, municipalities and agencies		3,694		16		55		3,655		4,058		43		5		4,096
Other governments		4,818		2		30		4,790		3,567		3		12		3,558
NHA MBS		2,382		6		18		2,370		2,457		9		11		2,455
U.S. agency MBS and CMO		11,811		2		496		11,317		10,902		6		147		10,761
Corporate debt		3,783		6		33		3,756		4,514		23		12		4,525
Corporate equity		62		–		–		62		1,499		121		16		1,604
Total		63,733		45		1,338		62,440		54,303		252		480		54,075

Unrealized gains (losses) may be offset by related (losses) gains on hedge contracts.

Interest, Dividend and Fee Income

Interest, dividend and fee income has been included in our consolidated financial statements as follows, excluding other securities and trading securities. Related income for trading securities is included in Note 17 Trading-Related Revenue.

(Canadian $ in millions)	2018		2017		2016
FVTPL		16		na		na
FVOCI		1,118		na		na
Amortized cost		172		na		na
Available-for-sale securities		na		662		509
Held-to-maturity securities		na		150		143
Total		1,306		812		652

na – not applicable due to IFRS 9 adoption.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Non-Interest Revenue

Net gains and losses from securities, excluding net realized and unrealized gains on trading securities, have been included in our Consolidated Statement of Income as follows:

(Canadian $ in millions)	2018			2017			2016
Non-Interest Revenue
FVTPL securities		106			na			na
FVOCI securities (1)
Gross realized gains		363			228			59
Gross realized (losses)		(216	)		(99	)		(16	)
Unrealized gains on investments reclassified from available-for-sale to other		na			–			7
Other securities, net realized and unrealized gains		–			49			51
Impairment write-downs		(14	)		(7	)		(17	)
Securities gains, other than trading (2)		239			171			84

(1) Realized gains (losses) are net of unrealized gains (losses) on related hedge contracts. Fiscal 2017 and prior years represent available-for-sale securities (Note 1).

(2) The following amounts of income related to our insurance operations were included in non-interest revenue, insurance revenue, in our Consolidated Statement of Income: Interest, dividend and fee income of $354 million for the year ended October 31, 2018 ($325 million in 2017); and securities gains, other than trading, of $1 million for the year ended October 31, 2018 ($nil in 2017).

Unrealized gains and losses on trading securities are included in trading-related revenue in Note 17.

na – not applicable due to IFRS 9 adoption.

Note 4: Loans and Allowance for Credit Losses

Loans are initially measured at fair value plus directly attributable costs, and are subsequently measured at amortized cost using the effective interest method. The effective interest method allocates interest income over the expected term of the loan by applying the effective interest rate to the carrying amount of the loan. The effective interest rate is defined as the rate that exactly discounts estimated future cash receipts through the expected term of the loan to the net carrying amount of the loan. Under the effective interest method, the amount recognized in interest, dividend and fee income, loans, varies over the term of the loan based on the principal outstanding. The treatment of interest income for impaired loans is described below.

Securities Borrowed or Purchased Under Resale Agreements

Securities borrowed or purchased under resale agreements represent the amounts we will receive as a result of our commitment to return or resell securities that we have borrowed or purchased, back to the original lender or seller, on a specified date at a specified price. We account for these instruments as if they were loans.

Lending Fees

Lending fees arise in Personal and Commercial Banking and Capital Markets. The accounting treatment for lending fees varies depending on the transaction. Some loan origination, restructuring and renegotiation fees are recorded as interest income over the term of the loan, while other lending fees are taken into income at the time of loan origination. Commitment fees are calculated as a percentage of the facility balance at the end

BMO Financial Group 201st Annual Report 2018 157

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of the period. The fees are recorded as interest income over the term of the loan, unless we believe the loan commitment will not be used. In the latter case, commitment fees are recorded as lending fees earned over the commitment period. Loan syndication fees are payable and included in lending fees at the time the syndication is completed, unless the yield on any loans we retain is less than that of other comparable lenders involved in the financing. In the latter case, an appropriate portion of the syndication fee is recorded as interest income over the term of the loan.

Impaired Loans

We classify a loan as impaired when one or more loss events have occurred, such as bankruptcy, default or delinquency. Generally, consumer loans in both Canada and the U.S. are classified as impaired when payment is contractually 90 days past due, or one year past due for residential mortgages if guaranteed by the Government of Canada. Credit card loans are immediately written off when principal or interest payments are 180 days past due, and are not reported as impaired. In Canada, consumer instalment loans, other personal loans and some small business loans are normally written off when they are one year past due. In the U.S., all consumer loans are generally written off when they are 180 days past due, except for non-real estate term loans, which are generally written off when they are 120 days past due. For the purpose of measuring the amount to be written off, the determination of the recoverable amount includes an estimate of future recoveries.

Corporate and commercial loans are classified as impaired when we determine there is no longer reasonable assurance that principal or interest will be collected in their entirety on a timely basis. Generally, we consider corporate and commercial loans to be impaired when payments are 90 days past due. Corporate and commercial loans are written off following a review on an individual loan basis that confirms all recovery attempts have been exhausted.

A loan will be reclassified to performing status when we determine that there is reasonable assurance of full and timely repayment of interest and principal in accordance with the terms and conditions of the loan, and that none of the criteria for classification of the loan as impaired continue to apply.

Loans are in default when the borrower is unlikely to pay its credit obligations in full without recourse by the bank, such as realizing security, or when the borrower’s payments are past due more than 90 days (180 days for credit card loans). Overdrafts are considered to be past due once the customer has breached an advised limit or been advised of a limit smaller than currently outstanding or, in the case of retail overdrafts, has not brought the overdraft down to a $nil balance within a specified time period.

Our average gross impaired loans were $2,115 million for the year ended October 31, 2018 ($2,248 million in 2017). Our average impaired loans, net of the specific allowance, were $1,706 million for the year ended October 31, 2018 ($1,838 million in 2017).

Once a loan is identified as impaired, we continue to recognize interest income based on the original effective interest rate on the loan amount net of its related allowance. In the periods following the recognition of impairment, adjustments to the allowance for these loans reflecting the time value of money are recognized and presented as interest income. Interest income on impaired loans of $67 million was recognized for the year ended October 31, 2018 ($75 million in 2017 and $74 million in 2016).

During the year ended October 31, 2018, we recorded a net gain of $4 million before tax ($28 million in 2017 and $5 million in 2016) on the sale of impaired and written-off loans.

Allowance for Credit Losses (“ACL”)

The allowance for credit losses recorded in our Consolidated Balance Sheet is maintained at a level that we consider adequate to absorb credit-related losses on our loans and other credit instruments. The allowance for credit losses amounted to $1,870 million as at October 31, 2018, of which $1,639 million was recorded in loans and $231 million was recorded in other liabilities in our Consolidated Balance Sheet.

Allowance on Performing Loans

We maintain an allowance in order to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the allowance on performing loans is based on the requirements of IFRS, considering guidelines issued by OSFI.

Under the IFRS 9 ECL methodology, an allowance is recorded for expected credit losses on financial assets regardless of whether there has been an actual impairment. We recognize a loss allowance at an amount equal to 12 month expected credit losses, if the credit risk at the reporting date has not increased significantly since initial recognition (Stage 1). We will record expected credit losses over the remaining life of performing financial assets which are considered to have experienced a significant increase in credit risk (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria, such as 30-day past due and watchlist status.

For each exposure, ECL is a function of the probability of default (“PD”), exposure at default (“EAD”) and loss given default (“LGD”), with the timing of the loss also considered, and is estimated by incorporating forward-looking economic information and through the use of experienced credit judgment to reflect factors not captured in ECL models.

PD represents the likelihood that a loan will not be repaid and will go into default in either a 12 month horizon for Stage 1 or a lifetime horizon for Stage 2. The PD for each individual instrument is modelled based on historical data and is estimated based on current market conditions and reasonable and supportable information about future economic conditions.

EAD is modelled on historical data and represents an estimate of the outstanding amount of credit exposure at the time a default may occur. For off-balance sheet and undrawn amounts, EAD includes an estimate of any further amounts to be drawn at the time of default.

LGD is the amount that may not be recovered in the event of default and is modelled based on historical data and reasonable and supportable information about future economic conditions, where appropriate. LGD takes into consideration the amount and quality of any collateral held.

We consider past events, current market conditions and reasonable forward-looking supportable information about future economic conditions in calculating the amount of expected losses. In assessing information about possible future economic conditions, we utilize multiple economic scenarios including our base case, which represents, in our view, the most probable outcome, as well as benign and adverse forecasts, all of which are developed by our Economics group. Key economic variables used in the determination of the allowance for credit losses reflect the geographic diversity of our portfolios, where appropriate.

In considering the lifetime of a loan, the contractual period of the loan, including prepayment, extension and other options, is generally used. For revolving instruments, such as credit cards, which may not have a defined contractual period, the lifetime is based on historical behaviour.

158 BMO Financial Group 201st Annual Report 2018

Our ECL methodology also requires the use of experienced credit judgment to incorporate the estimated impact of factors that are not captured in the modelled ECL results.

Allowance on Impaired Loans

We maintain an allowance on individually identified impaired loans (Stage 3) of $370 million on our gross impaired loans of $1,936 million, to reduce their carrying value to an expected recoverable amount of $1,566 million as at October 31, 2018 ($1,827 million as at October 31, 2017). We review our loans on an ongoing basis to assess whether any loans should be classified as impaired and whether an allowance or write-off should be recorded (excluding credit card loans, which are classified as impaired and written off when principal or interest payments are 180 days past due). The review of individually significant problem loans is conducted at least quarterly by the account managers, each of whom assesses the ultimate collectability and estimated recoveries for a specific loan based on all events and conditions that are relevant to the loan. This assessment is then reviewed and approved by an independent credit officer.

Individually Significant Impaired Loans

To determine the amount we expect to recover from an individually significant impaired loan, we use the value of the estimated future cash flows discounted at the loan’s original effective interest rate. The determination of estimated future cash flows of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real estate properties, accounts receivable, guarantees, inventory or other capital assets.

Individually Insignificant Impaired Loans

Residential mortgages, consumer instalment and other personal loans are individually insignificant and may be individually assessed or collectively assessed for losses at the time of impairment, taking into account historical loss experience and expectations of future economic conditions.

Collectively assessed loans are grouped together by similar risk characteristics, such as type of instrument, geographic location, industry, type of collateral and term to maturity.

BMO Financial Group 201st Annual Report 2018 159

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loans Credit Risk Exposure

The following table sets out our credit risk exposure for all loans carried at amortized cost or FVTPL as at October 31, 2018. Stage 1 represents those performing loans carried with a 12 month expected credit loss, Stage 2 represents those performing loans carried with a lifetime expected credit loss, and Stage 3 represents those loans with a lifetime credit loss that are credit impaired.

(Canadian $ in millions)							2018
	Stage 1		Stage 2		Stage 3		Total
Loans: Residential mortgages
Exceptionally low		–		–		–		–
Very low		76,314		125		–		76,439
Low		18,975		2,479		–		21,454
Medium		12,621		3,765		–		16,386
High		90		445		–		535
Not rated		4,250		181		–		4,431
Impaired		–		–		375		375
Allowance for credit losses		20		37		19		76
Carrying amount		112,230		6,958		356		119,544
Loans: Consumer instalment and other personal
Exceptionally low		20,236		20		–		20,256
Very low		13,364		222		–		13,586
Low		12,581		364		–		12,945
Medium		7,707		4,153		–		11,860
High		127		1,657		–		1,784
Not rated		2,105		168		–		2,273
Impaired		–		–		521		521
Allowance for credit losses		83		312		143		538
Carrying amount		56,037		6,272		378		62,687
Loans: Credit cards
Exceptionally low		2,403		4		–		2,407
Very low		1,140		11		–		1,151
Low		943		107		–		1,050
Medium		1,742		874		–		2,616
High		108		428		–		536
Not rated		568		1		–		569
Impaired		–		–		–		–
Allowance for credit losses		39		191		–		230
Carrying amount		6,865		1,234		–		8,099
Loans: Business and government (1)
Acceptable
Investment grade		109,774		2,148		–		111,922
Sub-investment grade		88,348		7,308		–		95,656
Watchlist		–		4,423		–		4,423
Impaired		–		–		1,040		1,040
Allowance for credit losses		232		355		208		795
Carrying amount		197,890		13,524		832		212,246
Commitments and financial guarantee contracts
Acceptable
Investment grade		116,108		1,722		–		117,830
Sub-investment grade		44,895		3,426		–		48,321
Watchlist		–		1,650		–		1,650
Impaired		–		–		242		242
Allowance for credit losses		108		96		27		231
Carrying amount		160,895		6,702		215		167,812

(1) Includes customers’ liability under acceptances.

160 BMO Financial Group 201st Annual Report 2018

The following table shows the continuity in the loss allowance by each product type as at October 31, 2018.

(Canadian $ in millions)
For the twelve months ended	Stage 1			Stage 2			Stage 3			Total
Loans: Residential mortgages
Balance as at November 1, 2017		16			34			49			99
Transfer to Stage 1		34			(31	)		(3	)		–
Transfer to Stage 2		(1	)		7			(6	)		–
Transfer to Stage 3		–			(9	)		9			–
Net remeasurement of loss allowance		(37	)		42			19			24
Loan originations		10			–			–			10
Derecognitions and maturities		(2	)		(6	)		–			(8	)
Total provision for credit losses (“PCL”) (1)		4			3			19			26
Write-offs		–			–			(20	)		(20	)
Recoveries of previous write-offs		–			–			7			7
Foreign exchange and other		–			1			(11	)		(10	)
Balance as at October 31, 2018		20			38			44			102
Loans: Consumer instalment and other personal
Balance as at November 1, 2017		76			357			137			570
Transfer to Stage 1		214			(200	)		(14	)		–
Transfer to Stage 2		(22	)		105			(83	)		–
Transfer to Stage 3		(4	)		(162	)		166			–
Net remeasurement of loss allowance		(196	)		272			162			238
Loan originations		39			–			–			39
Derecognitions and maturities		(18	)		(50	)		–			(68	)
Total PCL (1)		13			(35	)		231			209
Write-offs		–			–			(301	)		(301	)
Recoveries of previous write-offs		–			–			92			92
Foreign exchange and other		1			4			(15	)		(10	)
Balance as at October 31, 2018		90			326			144			560
Loans: Credit cards
Balance as at November 1, 2017		83			254			–			337
Transfer to Stage 1		177			(177	)		–			–
Transfer to Stage 2		(37	)		37			–			–
Transfer to Stage 3		(1	)		(195	)		196			–
Net remeasurement of loss allowance		(164	)		342			20			198
Loan originations		19			–			–			19
Derecognitions and maturities		(3	)		(42	)		–			(45	)
Total PCL (1)		(9	)		(35	)		216			172
Write-offs		–			–			(319	)		(319	)
Recoveries of previous write-offs		–			–			103			103
Balance as at October 31, 2018		74			219			–			293
Loans: Business and government
Balance as at November 1, 2017		268			410			234			912
Transfer to Stage 1		136			(128	)		(8	)		–
Transfer to Stage 2		(31	)		66			(35	)		–
Transfer to Stage 3		(1	)		(61	)		62			–
Net remeasurement of loss allowance		(155	)		203			215			263
Loan originations		163			–			–			163
Derecognitions and maturities		(80	)		(86	)		–			(166	)
Model changes		(7	)		(3	)		–			(10	)
Total PCL (1)		25			(9	)		234			250
Write-offs		–			–			(297	)		(297	)
Recoveries of previous write-offs		–			–			59			59
Foreign exchange and other		5			7			(21	)		(9	)
Balance as at October 31, 2018		298			408			209			915
Total as at October 31, 2018		482			991			397			1,870
Comprised of: Loans		374			895			370			1,639
Other credit instruments (2)		108			96			27			231

(1) Excludes provision for credit losses on other assets of $5 million.

(2) Recorded in other liabilities on the Consolidated Balance Sheet.

BMO Financial Group 201st Annual Report 2018 161

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table shows the continuity of our allowance for credit losses under IAS 39 as at October 31, 2017:

(Canadian $ in millions)	Residential mortgages						Credit card, consumer instalment and other personal loans						Business and   government loans						Total
	2017			2016			2017			2016			2017			2016			2017			2016
Impairment allowances (specific ACL), beginning of year		59			69			123			113			250			210			432			392
Amounts written off		(27	)		(38	)		(631	)		(616	)		(296	)		(349	)		(954	)		(1,003	)
Recoveries of amounts written off in previous years		16			16			199			173			50			154			265			343
Charge to income statement (specific PCL)		11			24			464			478			347			269			822			771
Foreign exchange and other movements		(10	)		(12	)		(18	)		(25	)		(117	)		(34	)		(145	)		(71	)
Specific ACL, end of year		49			59			137			123			234			250			420			432
Collective ACL, beginning of year		71			111			596			714			1,015			835			1,682			1,660
Charge (recovery) to income statement (collective PCL)		(1	)		(42	)		(6	)		(120	)		(69	)		162			(76	)		–
Foreign exchange and other movements		(1	)		2			(4	)		2			(25	)		18			(30	)		22
Collective ACL, end of year		69			71			586			596			921			1,015			1,576			1,682
Total ACL		118			130			723			719			1,155			1,265			1,996			2,114
Comprised of: Loans		93			104			722			719			1,018			1,102			1,833			1,925
Other credit instruments (1)		25			26			1			–			137			163			163			189

(1) The total specific and collective allowances related to other credit instruments are included in other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Significant changes in the gross balances, including originations, maturities and repayments in the normal course of operations, impact the allowance for credit losses.

Loans and allowance for credit losses by geographic region as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	2018								2017
	Gross amount		Allowance on impaired loans (2)		Allowance on performing loans (3)		Net amount		Gross amount		Specific allowance (2)		Collective allowance (3)		Net amount
By geographic region: (1)
Canada		244,837		189		689		243,959		233,672		212		799		232,661
United States		131,247		181		574		130,492		115,029		161		641		114,227
Other countries		9,546		–		6		9,540		11,639		20		–		11,619
Total		385,630		370		1,269		383,991		360,340		393		1,440		358,507

(1) Geographic region is based upon the country of ultimate risk.

(2) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

(3) Excludes allowance for credit losses on performing loans of $204 million for other credit instruments, which is included in other liabilities ($136 million in 2017).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Impaired loans, including the related allowances, as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	Gross impaired amount (1)				Allowance on impaired loans (3)		Specific allowance (3)		Net		Net impaired amount
	2018		2017		2018		2017		2018		2017
Residential mortgages		375		391		19		24		356		367
Consumer instalment and other personal loans		521		556		143		136		378		420
Business and government loans		1,040		1,273		208		233		832		1,040
Total		1,936		2,220		370		393		1,566		1,827
By geographic region: (2)
Canada		735		793		189		212		546		581
United States		1,201		1,377		181		161		1,020		1,216
Other countries		–		50		–		20		–		30
Total		1,936		2,220		370		393		1,566		1,827

(1) Excludes purchased credit impaired loans.

(2) Geographic region is based upon the country of ultimate risk.

(3) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

Fully secured loans with amounts past due between 90 and 180 days that we have not classified as impaired totalled $49 million and $62 million as at October 31, 2018 and 2017, respectively.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

162 BMO Financial Group 201st Annual Report 2018

Loans Past Due Not Impaired

Loans that are past due but not classified as impaired are loans where our customers have failed to make payments when contractually due, but for which we expect the full amount of principal and interest payments to be collected, or which are held at fair value. The following table presents loans that are past due but not classified as impaired as at October 31, 2018 and 2017.

(Canadian $ in millions)	1 to 29 days				30 to 89 days				90 days or more				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Residential mortgages (1)		660		649		513		438		21		19		1,194		1,106
Credit card, consumer instalment and other personal loans		1,431		1,480		415		466		88		94		1,934		2,040
Business and government loans		611		589		268		297		55		72		934		958
Total		2,702		2,718		1,196		1,201		164		185		4,062		4,104

(1) The percentage of loans 90 days or more past due but not impaired that were guaranteed by the Government of Canada is 66% for 2018 and 67% for 2017.

ECL Sensitivity and Key Economic Variables

The allowance for performing loans is sensitive to changes in both economic forecasts and the probability-weight assigned to each forecast scenario. Many of the factors have a high degree of interdependency although there is no single factor to which loan impairment allowances as a whole are sensitive.

If we assumed a 100% base case economic forecast and included the impact of loan migration by restaging, with other assumptions held constant including the application of experienced credit judgment, the allowance for performing loans would be approximately $1,250 million as at October 31, 2018 compared to the reported allowance for performing loans of $1,473 million.

If we assumed a 100% adverse economic forecast and included the impact of loan migration by restaging, with other assumptions held constant including the application of experienced credit judgment, the allowance for performing loans would be approximately $2,650 million as at October 31, 2018, compared to the reported allowance for performing loans of $1,473 million.

Actual results in a recession will differ as our portfolio will change through time due to migration, growth, risk mitigation actions and other factors. In addition, our allowance will reflect the three economic scenarios used in assessing the allowance with weightings attached to adverse and benign scenarios often unequally weighted and the weightings will change through time.

The following table shows the key economic variables we use to estimate our allowance on performing loans during the forecast period. The values shown represent the end of period national average values for the first 12 months and then the national average for the remaining horizon. While the values disclosed below are national variables, in our underlying models we use regional variables where considered appropriate.

	Benign scenario					Base scenario					Adverse scenario
As at October 31, 2018	First 12 months		Remaining horizon (1)			First 12 months		Remaining horizon (1)			First 12 months			Remaining horizon (1)
Real gross domestic product (2)
Canada		3.1%		2.4	%		1.8%		1.6	%		(3.2	)%		0.8	%
U.S.		2.9%		1.9	%		2.4%		1.6	%		(2.9	)%		0.9	%
Corporate BBB 10-year spread
Canada		2.0%		2.1	%		2.3%		2.3	%		4.7	%		3.9	%
U.S.		1.8%		2.0	%		2.2%		2.3	%		4.3	%		3.5	%
Unemployment rates
Canada		5.4%		5.2	%		5.6%		5.6	%		9.3	%		9.3	%
U.S.		3.2%		3.1	%		3.6%		3.7	%		6.7	%		6.8	%
Housing Price Index
Canada (3)		2.4%		2.6	%		1.4%		1.8	%		(12.8	)%		(3.2	)%
U.S. (4)		5.1%		4.3	%		3.6%		3.0	%		(7.3	)%		(1.2	)%

(1) The remaining forecast period is two years.

(2) Real gross domestic product is based on year over year growth.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the U.S., we use the National Case-Shiller House Price Index.

The ECL approach requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under our current probability-weighted scenarios, if all our performing loans were in Stage 1, our models would generate an allowance for performing loans of approximately $1,000 million compared to the reported allowance for performing loans of $1,473 million.

Renegotiated Loans

From time to time we modify the contractual terms of a loan due to the poor financial condition of the borrower. We assess renegotiated loans for impairment consistent with our existing policies for impairment. When renegotiation leads to significant concessions being granted, and the concessions are for economic or legal reasons related to the borrower’s financial difficulty that we would not otherwise consider, the loan is classified as impaired. We consider one or a combination of the following to be significant concessions: (1) a reduction of the stated interest rate, (2) an extension of the maturity date or dates at a stated interest rate lower than the current market rate for a new loan with similar terms, or (3) forgiveness of principal or accrued interest.

Renegotiated loans are permitted to remain in performing status if the modifications are not considered to be significant, or are returned to performing status when none of the criteria for classification as impaired continue to apply.

The carrying value of our renegotiated loans was $1,129 million as at October 31, 2018 ($1,064 million in 2017). Renegotiated loans of $541 million were classified as performing during the year ended October 31, 2018 ($509 million in 2017). Renegotiated loans of $53 million were written off in the year ended October 31, 2018 ($36 million in 2017).

Foreclosed Assets

Property or other assets that we receive from borrowers to satisfy their loan commitments are classified as either held for use or held for sale according to management’s intention and are recorded at their carrying amount.

BMO Financial Group 201st Annual Report 2018 163

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended October 31, 2018, we foreclosed on impaired loans and received $117 million of real estate properties that we classified as held for sale ($62 million in 2017).

As at October 31, 2018, real estate properties held for sale totalled $58 million ($55 million in 2017). These properties are disposed of when considered appropriate. During the year ended October 31, 2018, we recorded an impairment loss of $10 million on real estate properties classified as held for sale ($10 million in 2017 and $18 million in 2016).

Write-offs Subject to Collection Efforts

Generally, we continue to seek recovery on amounts that were written off during the period unless the loan is sold, we no longer have the right to collect or we have exhausted all reasonable efforts to collect.

Collateral

Collateral is used to manage credit risk related to securities borrowed or purchased under resale agreements, residential mortgages, consumer instalment and other personal loans and business and government loans. Additional information on our collateral requirements is included in Notes 14 and 24 as well as in the blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 87 and 88 of this report.

Note 5: Risk Management

We have an enterprise-wide approach to the identification, measurement, monitoring and control of risks faced across our organization.

The key risks related to our financial instruments are classified as credit and counterparty, market, and liquidity and funding risk.

Credit and Counterparty Risk

Credit and counterparty risk is the potential for loss due to the failure of a borrower, endorser, guarantor or counterparty to repay a loan or honour another predetermined financial obligation. Credit risk arises predominantly with respect to loans, over-the-counter and centrally cleared derivatives and other credit instruments. This is the most significant measurable risk that we face.

Our risk management practices and key measures are disclosed in the text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 87 to 91 of this report. Additional information on credit risk related to loans and derivatives is disclosed in Notes 4 and 8, respectively.

Market Risk

Market risk is the potential for adverse changes in the value of our assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, and credit spreads, and includes the risk of credit migration and default in our trading book. We incur market risk in our trading and underwriting activities and in the management of structural market risk in our banking and insurance activities.

Our market risk management practices and key measures are disclosed in the text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 95 to 99 of this report.

Liquidity and Funding Risk

Liquidity and funding risk is the potential for loss if we are unable to meet our financial commitments in a timely manner at reasonable prices as they become due. It is our policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, including liabilities to depositors and suppliers, and lending, investment and pledging commitments, even in times of stress. Managing liquidity and funding risk is essential to maintaining a safe and sound enterprise, depositor confidence and earnings stability.

Our liquidity and funding risk management practices and key measures are disclosed in the text presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 100 to 108 of this report.

Note 6: Transfer of Assets

Loan Securitization

We sell Canadian mortgage loans to third-party Canadian securitization programs, including the Canada Mortgage Bond program, directly to third-party investors under the National Housing Act Mortgage-Backed Securities program and under our own program. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition.

Under these programs, we are entitled to the payment over time of the excess of the sum of interest and fees collected from customers, in connection with the loans that were sold, over the yield paid to investors, less credit losses and other costs. Since we continue to be exposed to substantially all of the prepayment, interest rate and credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financing in our Consolidated Balance Sheet. The interest and fees collected, net of the yield paid to investors, is recorded in net interest income using the effective interest method over the term of the securitization. Credit losses associated with the loans are recorded in the provision for credit losses. During the year ended October 31, 2018, we sold $8,062 million of mortgage loans to these programs ($8,707 million in 2017).

164 BMO Financial Group 201st Annual Report 2018

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Residential mortgages		5,569				4,797
Other related assets (2)		11,640				12,091
Total (3)		17,209		16,925		16,888		16,621

(1) Carrying amount of loans is net of allowance.

(2) Other related assets represent payments received on account of loans pledged under securitization programs that have not yet been applied against the associated liabilities. The payments received are held on behalf of the investors in the securitization vehicles until principal payments are required to be made on the associated liabilities. In order to compare all assets supporting the associated liabilities, this amount is added to the carrying amount of the securitized assets in the table above.

(3) The fair values of assets and associated liabilities are $17,105 million and $16,763 million, respectively, as at October 31, 2018 ($16,847 million and $16,746 million, respectively, in 2017).

We retain the mortgage servicing rights for certain mortgage loans purchased or originated in the U.S. which are sold and derecognized. During the year ended October 31, 2018, we sold $936 million of these loans ($1,012 million in 2017) and recognized $17 million in mortgage servicing rights ($17 million in 2017) due to our continued involvement.

Securities Lent or Sold Under Repurchase Agreements

Securities lent or sold under repurchase agreements represent short-term funding transactions in which we sell securities that we own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. We retain substantially all of the risks and rewards associated with the securities and we continue to recognize them in our Consolidated Balance Sheet, with the obligation to repurchase these securities recorded as secured borrowing transactions at the amount owing. The interest expense related to these liabilities is recorded on an accrual basis. Additional information on securities lent or sold under repurchase agreements is provided in Note 14.

Note 7: Structured Entities

We enter into certain transactions in the ordinary course of business which involve the establishment of structured entities (“SEs”) to facilitate or secure customer transactions and to obtain alternate sources of funding. We are required to consolidate an SE if we control the entity. We control an SE when we have power over the SE, exposure to variable returns as a result of our involvement, and the ability to exercise power to affect the amount of our returns.

In assessing whether we control an SE, we consider the entire arrangement to determine the purpose and design of the SE, the nature of any rights held through contractual arrangements and whether we are acting as a principal or agent.

We perform a reassessment of consolidation if facts and circumstances indicate that there have been changes to one or more of the elements of control over the SE. See Note 1 for more information on our basis of consolidation.

Consolidated Structured Entities

Bank Securitization Vehicles

We use securitization vehicles to securitize our Canadian credit card loans, Canadian real estate lines of credit and Canadian auto loans in order to obtain alternate sources of funding. The structure of these vehicles limits the activities they can undertake and the types of assets they can hold, and the vehicles have limited decision-making authority. The vehicles issue term asset-backed securities to fund their activities. We control and consolidate these vehicles, as we have the key decision-making powers necessary to obtain the majority of the benefits of their activities.

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities issued by our bank securitization vehicles:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Credit card receivables		7,246		5,096		7,058		4,115
Consumer instalment and other personal (2)		6,827		3,083		5,699		2,295
Total (3)		14,073		8,179		12,757		6,410

(1) Carrying amount of loans is net of allowance.

(2) Includes Canadian real estate lines of credit and Canadian auto loans.

(3) The fair values of assets and associated liabilities are $14,045 million and $8,134 million, respectively, as at October 31, 2018 ($12,753 million and $6,403 million, respectively, in 2017).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

U.S. Customer Securitization Vehicle

We sponsor one customer securitization vehicle (also referred to as a bank-sponsored multi-seller conduit) that provides our customers with alternate sources of funding through the securitization of their assets. This vehicle provides clients with access to financing in the asset-backed commercial paper (“ABCP”) markets by allowing them to either sell their assets directly into the vehicle or indirectly by selling an interest in the securitized assets into the vehicle, which then issues ABCP to investors in order to fund the purchases. We do not sell assets to the customer securitization vehicle. We earn fees for providing services related to the securitizations, including liquidity, distribution and financial arrangement fees for supporting the ongoing operations of the vehicle. We have determined that we control and therefore consolidate this vehicle, as we are exposed to its variable returns and we have the key decision-making powers necessary to affect the amount of those returns in our capacity as liquidity provider and servicing agent.

We provide committed liquidity support facilities to this vehicle which may require that we provide additional financing to the vehicle in the event that certain events occur. The total committed undrawn amount under these facilities at October 31, 2018 was $7,100 million ($6,765 million at October 31, 2017).

BMO Financial Group 201st Annual Report 2018 165

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Capital and Funding Vehicles

We have a funding vehicle that was created to guarantee payments due to bondholders on bonds issued by us. We sell assets to this funding vehicle in exchange for an intercompany loan.

We may also use capital vehicles to transfer our credit exposure on certain loan assets. We purchase credit protection against eligible credit events from these vehicles. The vehicles collateralize their obligation through the issuance of guarantee-linked notes. Loan assets are not sold or assigned to the vehicles and remain on our Consolidated Balance Sheet. As at October 31, 2018, $325 million of guarantee-linked notes issued by these vehicles were included in deposits in our Consolidated Balance Sheet ($318 million at October 31, 2017).

For those vehicles that purchase assets from us or are designed to pass on our credit risk, we have determined that based on the rights of the arrangements or through our equity interest we have significant exposure to the variable returns of the vehicles, and we control and therefore consolidate these vehicles. Additional information related to notes issued by and assets sold to these vehicles is provided in Note 13 and Note 24, respectively.

Unconsolidated Structured Entities

The table below presents amounts related to our interests in unconsolidated SEs:

(Canadian $ in millions)					2018						2017
	Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles		Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles
Interests recorded on the balance sheet
Cash and cash equivalents		118		53		–		8		50		–
Trading securities		–		12		–		–		6		209
FVTPL securities		–		582		–		na		na		na
FVOCI securities		2		242		–		na		na		na
Available-for-sale securities		na		na		na		2		725		–
Loans		7		–		–		7		–		–
Other		3		13		–		–		6		–
		130		902		–		17		787		209
Deposits		570		53		–		460		50		146
Derivatives		–		–		–		–		–		63
Other		17		–		–		16		–		–
		587		53		–		476		50		209
Exposure to loss (2)		28		7,135		–		57		6,425		209
Total assets of the entities		587		5,033		–		476		4,592		209

(1) Securities held that are issued by our Canadian customer securitization vehicles are comprised of asset-backed commercial paper and are classified as trading securities, FVTPL securities and FVOCI securities (trading securities and available-for-sale securities in 2017 under IAS 39). All assets held by these vehicles relate to assets in Canada.

(2) Exposure to loss represents securities held, undrawn liquidity facilities, total committed amounts of the BMO funded vehicle, derivative assets and loans.

na – not applicable due to IFRS 9 adoption.

Capital Vehicles

One of our capital vehicles holds a note issued by us as its underlying asset. We intend to redeem the note on December 31, 2018. We may also use capital vehicles to pass our credit risk to security holders of the vehicles. In these situations we are not exposed to significant default or credit risk. Our remaining exposure to variable returns is less than that of the note holders in these vehicles, who are exposed to our default and credit risk. We are not required to consolidate these vehicles.

Canadian Customer Securitization Vehicles

We sponsor customer securitization vehicles (also referred to as bank-sponsored multi-seller conduits) that provide our customers with alternate sources of funding through the securitization of their assets. These vehicles provide clients with access to financing either from BMO or in the ABCP markets by allowing them to either sell their assets directly into the vehicle or indirectly by selling an interest in the securitized assets into the vehicle, which then issues ABCP to either investors or BMO to fund the purchases. We do not sell assets to the customer securitization vehicles. We earn fees for providing services related to the securitizations, including liquidity, distribution and financial arrangement fees for supporting the ongoing operations of the vehicles. We have determined that we do not control these entities, as their key relevant activity, the servicing of program assets, does not reside with us.

We provide liquidity facilities to the market-funded vehicles which may require that we provide additional financing to the vehicles in the event that certain events occur. The total committed and undrawn amount under these liquidity facilities and any undrawn amounts of the BMO funded vehicle at October 31, 2018 was $6,286 million ($5,688 million at October 31, 2017).

Structured Finance Vehicles

We facilitate development of investment products by third parties, including mutual funds, unit investment trusts and other investment funds that are sold to retail investors. We enter into derivative contracts with these third parties to provide investors with their desired exposure, and we hedge our exposure related to these derivative contracts by investing in other funds through SEs. We are not required to consolidate these vehicles.

During 2018, we discontinued these vehicles and we no longer enter into these types of arrangements with third parties.

BMO Managed Funds

We have established a number of funds that we also manage. We assess whether or not we control these funds based on the economic interest we have in the funds, including investments in the funds and management fees earned from the funds, and any investors’ rights to remove us as

166 BMO Financial Group 201st Annual Report 2018

investment manager. Based on our assessment, we have determined that we do not control these funds. Our total interest in unconsolidated BMO managed funds was $1,612 million at October 31, 2018 ($1,750 million in 2017), which is included in securities in our Consolidated Balance Sheet.

Other Structured Entities

We purchase and hold investments in a variety of third-party structured entities, including exchange-traded funds, mutual funds, limited partnerships and investment trusts. We are considered to have an interest in these investments through our holdings and because we may act as a counterparty in certain derivatives contracts. We are not the investment manager or the sponsor of any of these investments. We are generally a passive investor and do not have power over the key decision-making activities of these investments. Our maximum exposure to loss from our investments is limited to the carrying amounts of our investments and any unutilized commitment we have provided.

Sponsored Structured Entities

We may be deemed to be the sponsor of an SE if we are involved in the design, legal set-up or marketing of the SE. We may also be deemed to be the sponsor of an SE if market participants would reasonably associate the entity with us. We do not have an interest in certain SEs that we have sponsored.

Additional information on our compensation trusts is provided in Note 20.

Note 8: Derivative Instruments

Derivative instruments are financial contracts that derive their value from underlying changes in interest rates, foreign exchange rates or other financial or commodity prices or indices.

Derivative instruments are either regulated exchange-traded contracts or negotiated over-the-counter contracts. We use these instruments for trading purposes, as well as to manage our exposures, mainly to foreign currency and interest rate fluctuations, as part of our asset/liability management program.

Types of Derivatives

Swaps

Swaps are contractual agreements between two parties to exchange a series of cash flows. The various swap agreements that we enter into are as follows:

Interest rate swaps – counterparties generally exchange fixed and floating rate interest payments based on a notional value in a single currency.

Cross-currency swaps – fixed rate interest payments and principal amounts are exchanged in different currencies.

Cross-currency interest rate swaps – fixed and/or floating rate interest payments and principal amounts are exchanged in different currencies.

Commodity swaps – counterparties generally exchange fixed and floating rate payments based on a notional value of a single commodity.

Equity swaps – counterparties exchange the return on an equity security or a group of equity securities for the return based on a fixed or floating interest rate or the return on another equity security or group of equity securities.

Credit default swaps – one counterparty pays the other a fee in exchange for that other counterparty agreeing to make a payment if a credit event occurs, such as bankruptcy or failure to pay.

Total return swaps – one counterparty agrees to pay or receive from the other cash amounts based on changes in the value of a reference asset or group of assets, including any returns such as interest earned on these assets, in exchange for amounts that are based on prevailing market funding rates.

Forwards and Futures

Forwards and futures are contractual agreements to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a specified price and date in the future.

Forwards are customized contracts transacted in the over-the-counter market. Futures are transacted in standardized amounts on regulated exchanges and are subject to daily cash margining.

Options

Options are contractual agreements that convey to the purchaser the right but not the obligation to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a fixed future date or at any time within a fixed future period.

For options written by us, we receive a premium from the purchaser for accepting market risk.

For options purchased by us, we pay a premium for the right to exercise the option. Since we have no obligation to exercise the option, our primary exposure to risk is the potential credit risk if the writer of an over-the-counter contract fails to meet the terms of the contract.

Caps, collars and floors are specialized types of written and purchased options. They are contractual agreements in which the writer agrees to pay the purchaser, based on a specified notional amount, the difference between the market rate and the prescribed rate of the cap, collar or floor. The writer receives a premium for selling this instrument.

A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap.

A future option is an option contract in which the underlying instrument is a single futures contract.

The main risks associated with these derivative instruments are related to exposure to movements in interest rates, foreign exchange rates, credit quality, value of the underlying financial instrument or commodity, as applicable, and the possible inability of counterparties to meet the terms of the contracts.

Embedded Derivatives

From time to time, we purchase or issue financial instruments containing embedded derivatives. The embedded derivative in financial liabilities is separated from the host contract and carried at fair value if the economic characteristics of the derivative are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not measured at fair

BMO Financial Group 201st Annual Report 2018 167

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value. To the extent that we cannot reliably identify and measure the embedded derivative, the entire contract is carried at fair value, with changes in fair value reflected in income. Embedded derivatives in certain of our equity linked notes are accounted for separately from the host instrument.

Contingent Features

Certain over-the-counter derivative instruments contain provisions that link the amount of collateral we are required to post or pay to our credit ratings (as determined by the major credit rating agencies). If our credit ratings were to be downgraded, certain counterparties to these derivative instruments could demand immediate and ongoing collateralization on derivative liability positions or request immediate payment. The aggregate fair value of all derivative instruments with collateral posting requirements that were in a liability position on October 31, 2018 was $2,860 million ($3,866 million in 2017), for which we have posted collateral of $2,963 million ($4,223 million in 2017).

Risks Hedged

Interest Rate Risk

We manage interest rate risk through interest rate futures, interest rate swaps and options, which are linked to and adjust the interest rate sensitivity of a specific asset, liability, forecasted transaction or firm commitment, or a specific pool of transactions with similar risk characteristics.

Foreign Currency Risk

We manage foreign currency risk through currency futures, foreign currency options, cross-currency swaps, foreign exchange spot transactions, forward contracts and deposits denominated in foreign currencies.

Equity Price Risk

We manage equity price risk through total return swaps.

Trading Derivatives

Trading derivatives include derivatives entered into with customers to accommodate their risk management needs, market-making to facilitate customer-driven demand for derivatives, derivatives transacted on a limited basis to generate trading income from our principal trading positions and certain derivatives that are executed as part of our risk management strategy that do not qualify as hedges for accounting purposes (“economic hedges”).

We structure and market derivative products to enable customers to transfer, modify or reduce current or expected risks.

Principal trading activities include market-making and positioning activities. Market-making involves quoting bid and offer prices to other market participants with the intention of generating revenues based on spread and volume. Positioning activities involve managing market risk positions with the expectation of profiting from favourable movements in prices, rates or indices.

Trading derivatives are recorded at fair value. Realized and unrealized gains and losses are recorded in trading revenues in our Consolidated Statement of Income. Unrealized gains on trading derivatives are recorded as derivative instrument assets and unrealized losses are recorded as derivative instrument liabilities in our Consolidated Balance Sheet.

We may also economically hedge a portion of our U.S. dollar earnings through forward foreign exchange contracts and/or options to minimize fluctuations in our consolidated net income due to the translation of our U.S. dollar earnings. These contracts are recorded at fair value, with changes in fair value recorded in non-interest revenue, trading revenues, in our Consolidated Statement of Income.

168 BMO Financial Group 201st Annual Report 2018

Fair Value of Trading and Hedging Derivatives

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. A discussion of the fair value measurement of derivatives is included in Note 17.

Fair values of our derivative instruments are as follows:

(Canadian $ in millions)							2018									2017
	Gross assets			Gross liabilities			Net			Gross assets			Gross liabilities			Net
Trading
Interest Rate Contracts
Swaps		7,795			(6,419	)		1,376			8,390			(7,027	)		1,363
Forward rate agreements		36			(10	)		26			41			–			41
Futures		2			(3	)		(1	)		–			–			–
Purchased options		425			–			425			444			–			444
Written options		–			(273	)		(273	)		–			(329	)		(329	)
Foreign Exchange Contracts
Cross-currency swaps		2,362			(1,678	)		684			2,687			(1,752	)		935
Cross-currency interest rate swaps		4,977			(6,057	)		(1,080	)		8,103			(9,051	)		(948	)
Forward foreign exchange contracts		4,335			(2,817	)		1,518			4,954			(3,178	)		1,776
Purchased options		241			–			241			267			–			267
Written options		–			(228	)		(228	)		–			(270	)		(270	)
Commodity Contracts
Swaps		1,559			(1,084	)		475			726			(717	)		9
Futures		17			–			17			–			–			–
Purchased options		484			–			484			352			–			352
Written options		–			(372	)		(372	)		–			(357	)		(357	)
Equity Contracts		2,158			(2,402	)		(244	)		1,388			(3,386	)		(1,998	)
Credit Default Swaps
Purchased		1			(36	)		(35	)		–			(54	)		(54	)
Written		9			(1	)		8			7			(1	)		6
Total fair value – trading derivatives		24,401			(21,380	)		3,021			27,359			(26,122	)		1,237
Hedging
Interest Rate Contracts
Cash flow hedges – swaps		18			(1,261	)		(1,243	)		78			(558	)		(480	)
Fair value hedges – swaps		701			(668	)		33			274			(402	)		(128	)
Total swaps		719			(1,929	)		(1,210	)		352			(960	)		(608	)
Foreign Exchange Contracts
Cash flow hedges		1,084			(1,074	)		10			1,202			(722	)		480
Total foreign exchange contracts		1,084			(1,074	)		10			1,202			(722	)		480
Equity Contracts
Cash flow hedges		–			(28	)		(28	)		38			–			38
Total equity contracts		–			(28	)		(28	)		38			–			38
Total fair value – hedging derivatives (1)		1,803			(3,031	)		(1,228	)		1,592			(1,682	)		(90	)
Total fair value – trading and hedging derivatives		26,204			(24,411	)		1,793			28,951			(27,804	)		1,147
Less: impact of master netting agreements		(15,575	)		15,575			–			(19,909	)		19,909			–
Total		10,629			(8,836	)		1,793			9,042			(7,895	)		1,147

(1) The fair values of hedging derivatives wholly or partially offset the changes in fair values of the related on-balance sheet financial instruments.

Assets are shown net of liabilities to customers where we have a legally enforceable right to offset amounts and we intend to settle contracts on a net basis.

BMO Financial Group 201st Annual Report 2018 169

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Notional Amounts of Trading Derivatives

The notional amounts of our derivatives represent the amount to which a rate or price is applied in order to calculate the amount of cash that must be exchanged under the contract. Notional amounts do not represent assets or liabilities and therefore are not recorded in our Consolidated Balance Sheet.

(Canadian $ in millions)					2018						2017
	Exchange traded		Over-the-counter		Total		Exchange traded		Over-the-counter		Total
Interest Rate Contracts
Swaps		–		3,684,763		3,684,763		–		3,073,490		3,073,490
Forward rate agreements		–		411,573		411,573		–		195,142		195,142
Purchased options		26,629		35,023		61,652		10,407		29,107		39,514
Written options		16,511		48,721		65,232		9,284		37,247		46,531
Futures		192,482		–		192,482		89,053		–		89,053
Total interest rate contracts		235,622		4,180,080		4,415,702		108,744		3,334,986		3,443,730
Foreign Exchange Contracts
Cross-currency swaps		–		57,226		57,226		–		50,534		50,534
Cross-currency interest rate swaps		–		449,187		449,187		–		430,808		430,808
Forward foreign exchange contracts		–		463,743		463,743		–		392,924		392,924
Purchased options		2,625		21,468		24,093		6,001		23,812		29,813
Written options		1,420		24,018		25,438		1,249		29,101		30,350
Futures		739		–		739		794		–		794
Total foreign exchange contracts		4,784		1,015,642		1,020,426		8,044		927,179		935,223
Commodity Contracts
Swaps		–		24,366		24,366		–		18,713		18,713
Purchased options		3,303		6,182		9,485		5,031		7,080		12,111
Written options		4,909		4,233		9,142		6,896		4,905		11,801
Futures		33,104		–		33,104		28,139		–		28,139
Total commodity contracts		41,316		34,781		76,097		40,066		30,698		70,764
Equity Contracts		33,687		52,725		86,412		14,253		63,184		77,437
Credit Default Swaps
Purchased		–		3,047		3,047		–		2,658		2,658
Written		–		443		443		–		448		448
Total		315,409		5,286,718		5,602,127		171,107		4,359,153		4,530,260

Derivatives Used in Hedge Accounting

In accordance with our risk management strategy, we enter into various derivative contracts to hedge our interest rate, foreign currency and equity price exposures. In addition, we use deposits to hedge foreign currency exposure in our net investment in foreign operations. To the extent these instruments qualify for hedge accounting, we designate them in accounting hedge relationships. Our structural market risk strategies, including our approach to managing interest rate and foreign exchange risk, are included in the blue-tinted font in the Structural (Non-Trading) Market Risk section of Management’s Discussion and Analysis on page 98 of this report. In addition, our exposure to foreign exchange rate risk is discussed in the Foreign Exchange Risk section of Management’s Discussion and Analysis on page 99. Our exposure to equity price risk and our approach to managing it are discussed in the “other share-based compensation, mid-term incentive plans” section of Note 20.

By using derivatives to hedge exposures to interest rates, foreign currency exchange rates, and equity prices, we are also exposed to the credit risk of the derivative counterparty. We mitigate credit risk by entering into transactions with high-quality counterparties, requiring the counterparties to post collateral, entering into master netting agreements, or settling through centrally cleared counterparties.

In order to qualify as an accounting hedge, the hedging relationship must be designated and formally documented at its inception, detailing the particular risk management objective and strategy for the hedge and the specific asset, liability or cash flow being hedged, as well as how effectiveness is being assessed. Changes in the fair value of the derivative must be highly effective in offsetting changes in the fair value or changes in the amount of future cash flows of the hedged item. We evaluate hedge effectiveness at the inception of the hedging relationship and on an ongoing basis, retrospectively and prospectively, primarily using a quantitative statistical regression analysis. We consider a hedging relationship highly effective when all of the following criteria are met: correlation between the variables in the regression is at least 0.8; the slope of the regression is within a 0.8 to 1.25 range; and the confidence level of the slope is at least 95%. The practice is different for our net investment hedge, discussed in the Net Investment Hedges section below.

Any ineffectiveness in the hedging relationship is recognized as it arises in non-interest revenue, other, in our Consolidated Statement of Income.

170 BMO Financial Group 201st Annual Report 2018

The following table outlines the notional amounts and average rates of derivatives and the carrying amount of deposits designated as hedging instruments, by term to maturity, hedge type, and risk type, where applicable.

(Canadian $ in millions, except as noted)													2018
		Remaining term to maturity											Total
		Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years			Over 10 years
Cash Flow Hedges
Interest rate risk – Interest rate swaps
Notional amount			5,252		22,976		30,790		14,751			–		73,769
Average fixed interest rate			1.66%		1.67%		2.60%		2.42%			–		2.21%
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards (1)
CAD-USD pair	Notional amount		3,939		10,572		11,781		2,576			251		29,119
	Average fixed interest rate		1.31%		1.20%		2.01%		1.27%			3.02%		1.57%
	Average exchange rate: CAD-USD		1.3347		1.3035		1.2923		1.1871			1.3122		1.2930
CAD-EUR pair	Notional amount		3,804		8,726		8,618		–			201		21,349
	Average fixed interest rate		1.74%		2.10%		2.26%		–			2.97%		2.11%
	Average exchange rate: CAD-EUR		1.5217		1.4685		1.4999		–			1.4870		1.4908
Other currency pairs (2)	Notional amount		–		1,817		4,427		109			–		6,353
	Average fixed interest rate		–		2.05%		2.80%		2.98%			–		2.59%
	Average exchange rate: CAD-Non USD/EUR		–		1.4361		1.3338		0.1696	(3)		–		1.3430
Equity price risk – Total return swap
Notional amount			381		–		–		–			–		381
Fair Value Hedges
Interest rate risk – Interest rate swaps
Notional amount			14,516		21,919		22,928		14,101			–		73,464
Average fixed interest rate			1.81%		2.16%		2.29%		2.36%			–		2.17%
Net Investment Hedges
Foreign exchange risk
USD denominated deposit – carrying amount			6,596		–		–		–			–		6,596
GBP denominated deposit – carrying amount			473		–		–		–			–		473

(1) Under certain hedge strategies using cross-currency swaps, a CAD leg is inserted to create two swaps designated as separate hedges (for example, a EURO-USD cross-currency swap split into EURO-CAD and CAD-USD cross-currency swaps). The relevant notional amount is grossed up in this table as the cross-currency swaps are disclosed by CAD-foreign currency pair.

(2) Includes CAD-AUD, CAD-CHF, CAD-CNH, CAD-GBP or CAD-HKD cross-currency swaps where applicable.

(3) Includes one CAD-HKD cross-currency swap.

Cash Flow Hedges

Cash flow hedges modify exposure to variability in cash flows for variable interest rate bearing instruments, foreign currency denominated assets and liabilities and certain cash-settled share-based payment grants subject to equity price risk. We use interest rate swaps with or without embedded options, cross-currency swaps, and total return swaps to hedge this variability. We hedge the full amount of foreign exchange risk, but interest rate risk is hedged only to the extent of benchmark interest rates. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for example London Interbank Offered Rate (“LIBOR”) or Bankers’ Acceptances (“BA”) rate.

We determine the amount of the exposure to which hedge accounting is applied by assessing the potential impact of changes in interest rates, foreign exchange rates, and equity prices on the future cash flows of floating rate loans and deposits, foreign currency denominated assets and liabilities and certain cash-settled share-based payments. This assessment is performed using analytical techniques, such as simulation, sensitivity analysis, stress testing and gap analysis.

We record interest that we pay or receive on these cash flow hedge derivatives as an adjustment to net interest income in our Consolidated Statement of Income over the life of the hedge.

To the extent that changes in the fair value of the derivative offset changes in the fair value of the hedged item for the designated hedged risk, they are recorded in other comprehensive income. Hedge ineffectiveness, the portion of the change in fair value of the derivative that does not offset changes in the fair value of the hedged item, is recorded directly in non-interest revenue, other, in our Consolidated Statement of Income as it arises.

For cash flow hedges that are discontinued before the end of the original hedge term, the cumulative unrealized gain or loss recorded in other comprehensive income is amortized to our Consolidated Statement of Income in net interest income for interest rate swaps and in employee compensation for total return swaps as the hedged item is recorded in earnings. The entire unrealized gain or loss is recognized immediately in net interest income in our Consolidated Statement of Income, if the hedged item is sold or settled. We do not terminate our foreign exchange hedges before maturity.

Under cash flow hedges, we use a hypothetical derivative to measure the hedged risk of floating rate loans, deposits, foreign currency denominated assets and liabilities, or share-based payment grants. This hypothetical derivative matches the critical terms of the hedged items identically, and it perfectly offsets the hedged cash flow.

In our cash flow hedge relationships, the main sources of ineffectiveness are differences in interest rate indices, tenor and reset/settlement frequencies between the hedging instrument and the hedged item.

Net Investment Hedges

Net investment hedges mitigate our exposure to foreign currency exchange rate fluctuations related to our net investment in foreign operations.

Deposits denominated in foreign currencies are designated as a hedging instrument for a portion of the net investment in foreign operations. The foreign currency translation of our net investment in foreign operations and the effective portion of the corresponding hedging instrument are recorded in unrealized gains (losses) on translation of net foreign operations in other comprehensive income.

Effectiveness of our net investment hedge is determined by using the dollar offset method with spot foreign currency rates. As the notional amount of the deposits and the hedged net investment in foreign operations are the same, there is no source of ineffectiveness in these hedging relationships.

BMO Financial Group 201st Annual Report 2018 171

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For cash flow hedges and net investment hedges, the following table contains information related to items designated as hedging instruments, hedged items and hedge ineffectiveness for the year ended October 31, 2018.

												2018
	Carrying amount of hedging instruments (1)								Hedge ineffectiveness
(Canadian $ in millions)	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other
Cash flow hedges
Interest rate risk – Interest rate swaps		18		(1,261	)		(1,685	)		1,687			(4	)
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards		1,084		(1,074	)		(459	)		459			–
Equity price risk – Total return swaps		–		(28	)		24			(24	)		–
		1,102		(2,363	)		(2,120	)		2,122			(4	)
Net investment hedges
Foreign exchange risk – Deposit liabilities				(7,069	)		(211	)		211			–
Total		1,102		(9,432	)		(2,331	)		2,333			(4	)

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

For cash flow hedges and net investment hedges, the following table contains information related to impacts on the Consolidated Statement of Other Comprehensive Income, on a pre-tax basis for the year ended October 31, 2018.

																2018
													Balance in cash flow hedge AOCI / net foreign operations AOCI
(Canadian $ in millions)	AOCI as at November 1, 2017			Gains / (losses) recognized in OCI			Amount reclassified to net income as the hedged item affects net income			AOCI as at October 31, 2018			Active hedges			Discontinued hedges
Cash flow hedges
Interest rate risk		(597	)		(1,681	)		67			(2,211	)		(1,348	)		(863	)
Foreign exchange risk		298			(3	)		456			751			751			–
Equity price risk		72			24			(66	)		30			30			–
		(227	)		(1,660	)		457			(1,430	) (1)		(567	)		(863	)
Net investment hedges
Foreign exchange risk		(1,580	)		(211	)		–			(1,791	)		(1,791	)		–
Total		(1,807	)		(1,871	)		457			(3,221	)		(2,358	)		(863	)

(1) Tax balance related to cash flow hedge AOCI is $356 million as at October 31, 2018.

Fair Value Hedges

Fair value hedges modify exposure to changes in a fixed rate instrument’s fair value caused by changes in interest rates. These hedges economically convert fixed rate assets and liabilities to floating rate. We use interest rate swaps to hedge interest rate risk, including benchmark interest rates, inherent in fixed rate securities, a portfolio of mortgages, deposits and subordinated debt.

Any fixed rate assets or liabilities that are part of a hedging relationship are adjusted for the change in value of the risk being hedged. To the extent that the change in the fair value of the derivative does not offset changes in the fair value of the hedged item for the risk being hedged, the net amount (hedge ineffectiveness) is recorded directly in non-interest revenue, other, in our Consolidated Statement of Income.

For fair value hedges that are discontinued, we cease adjusting the hedged item. The cumulative fair value adjustment of the hedged item is then amortized to net interest income over the hedged item’s remaining term to maturity. If the hedged item is sold or settled, the cumulative fair value adjustment is included in the gain or loss on sale or settlement.

In our fair value hedge relationships, the main sources of ineffectiveness are the counterparty effect and our own credit risk on the fair value of the swap, and the difference in terms such as fixed interest rate or reset/settlement frequency between the swap and the hedged item.

The amounts relating to derivatives designated as fair value hedging instruments, hedged items and hedge ineffectiveness for the year are as follows:

(Canadian $ in millions )																					2018
	Carrying amount of hedging derivatives (1)					Hedge ineffectiveness												Accumulated amount of fair value hedge gains (losses) on hedged  items
	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hedged item used to calculate  hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other			Carrying amount of the hedged item (2)			Active hedges			Discontinued hedges
Fair value hedge
Interest rate swaps		701		(668	)
FVOCI securities and loans		–		–			850			(843	)		7			36,722			(1,160	)		–
Deposits and subordinated debt		–		–			(764	)		761			(3	)		(34,375	)		719			436
Total		701		(668	)		86			(82	)		4			2,347			(441	)		436

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

(2) Represents the carrying value on the Consolidated Balance Sheet and includes amortized cost, before allowance for credit losses, plus fair value hedge adjustments, except for FVOCI securities that are carried at fair value.

172 BMO Financial Group 201st Annual Report 2018

Comparative Information

During 2017, net losses of $1,161 million related to the effective portion of cash flow hedges were recognized in OCI. A gain of $188 million related to cash flow hedges was transferred from equity to income in interest income or interest expense. Net ineffectiveness recognized on cash flow hedges during 2017 was a loss of $7 million.

Included within non-interest revenue, other, is a fair value loss of $200 million on derivatives held in qualifying fair value hedging relationships, and a gain of $193 million representing net increases in the fair value of the hedged item attributable to the hedged risk.

Derivative-Related Market Risk

Derivative instruments are subject to market risk. Market risk arises from the potential for a negative impact on the balance sheet and/or statement of income due to adverse changes in the value of derivative instruments as a result of changes in certain market variables. These variables include interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, as well as credit spreads, credit migration and default. We strive to limit market risk by employing comprehensive governance and management processes for all market risk-taking activities.

Derivative-Related Credit Risk

Over-the-counter derivative instruments are subject to credit risk arising from the possibility that counterparties may default on their obligations. The credit risk associated with a derivative is normally a small fraction of the notional amount of the derivative instrument. Derivative contracts generally expose us to potential credit loss if changes in market rates affect the counterparty’s position unfavourably and the counterparty defaults on payment. The credit risk is represented by the positive fair value of the derivative instrument. We strive to limit credit risk by dealing with counterparties that we believe are creditworthy, and we manage our credit risk for derivatives using the same credit risk process that is applied to loans and other credit assets.

We also pursue opportunities to reduce our exposure to credit losses on derivative instruments, including through collateral and by entering into master netting agreements with counterparties. The credit risk associated with favourable contracts is mitigated by legally enforceable master netting agreements to the extent that unfavourable contracts with the same counterparty must be settled concurrently with favourable contracts.

Exchange-traded derivatives have limited potential for credit exposure, as they are settled net daily with each exchange.

Terms used in the credit risk table below are as follows:

Replacement cost represents the cost of replacing all contracts that have a positive fair value, determined using current market rates. It represents in effect the unrealized gains on our derivative instruments. Replacement costs disclosed below represent the net of the asset and liability to a specific counterparty where we have a legally enforceable right to offset the amount owed to us with the amount owed by us and we intend either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Credit risk equivalent represents the total replacement cost plus an amount representing the potential future credit exposure, as outlined in OSFI’s Capital Adequacy Guideline.

Risk-weighted assets represent the credit risk equivalent, weighted on the basis of the creditworthiness of the counterparty, and considering collateral, netting and other credit risk mitigants, as prescribed by OSFI.

BMO Financial Group 201st Annual Report 2018 173

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Canadian $ in millions)							2018								2017
	Replacement cost			Credit risk equivalent			Risk-weighted assets		Replacement cost			Credit risk equivalent			Risk-weighted assets
Interest Rate Contracts
Swaps		8,514			10,699			–		8,742			11,603			–
Forward rate agreements		36			34			–		41			42			–
Purchased options		409			393			–		440			381			–
Total interest rate contracts		8,959			11,126			704		9,223			12,026			1,537
Foreign Exchange Contracts
Cross-currency swaps		3,270			7,832			–		3,727			8,345			–
Cross-currency interest rate swaps		5,035			14,909			–		8,157			17,210			–
Forward foreign exchange contracts		4,453			8,373			–		5,062			8,389			–
Purchased options		225			424			–		250			420			–
Total foreign exchange contracts		12,983			31,538			2,544		17,196			34,364			2,701
Commodity Contracts
Swaps		1,559			4,450			–		726			2,971			–
Purchased options		335			1,108			–		120			1,034			–
Total commodity contracts		1,894			5,558			1,188		846			4,005			971
Equity Contracts		1,585			4,332			431		1,322			4,750			461
Credit Default Swaps		10			55			83		7			46			27
Total derivatives		25,431			52,609			4,950		28,594			55,191			5,697
Less: impact of master netting agreements		(15,575	)		(29,170	)		–		(19,909	)		(33,025	)		–
Total		9,856			23,439			4,950		8,685			22,166			5,697

The total derivatives and the impact of master netting agreements for replacement cost do not include exchange-traded derivatives with a fair value of $773 million as at October 31, 2018 ($357 million in 2017).

Transactions are conducted with counterparties in various geographic locations and industry sectors. Set out below is the replacement cost of contracts with customers located in the following countries, based on country of ultimate risk:

(Canadian $ in millions, except as noted)	Before master netting agreements								After master netting agreements
	2018				2017				2018				2017
Canada		13,449	53	%		15,447	54	%		4,901	50	%		5,045	58	%
United States		5,446	21	%		7,149	25	%		2,102	21	%		1,940	22	%
United Kingdom		1,181	5	%		1,079	4	%		315	3	%		182	2	%
Other countries (1)		5,355	21	%		4,919	17	%		2,538	26	%		1,518	18	%
Total		25,431	100	%		28,594	100	%		9,856	100	%		8,685	100	%

(1) No other country represented 15% or more of our replacement cost in 2018 or 2017.

Transactions are conducted with various counterparties. Set out below is the replacement cost of contracts (before the impact of master netting agreements) with customers in the following industries:

As at October 31, 2018 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,509		10,238		360		1,219		10		18,336
Governments		1,694		1,478		56		–		–		3,228
Natural resources		3		27		432		–		–		462
Energy		93		641		727		–		–		1,461
Other		660		599		319		366		–		1,944
Total		8,959		12,983		1,894		1,585		10		25,431
As at October 31, 2017 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,063		13,898		227		1,141		7		21,336
Governments		1,895		1,202		66		–		–		3,163
Natural resources		–		22		74		–		–		96
Energy		155		479		226		–		–		860
Other		1,110		1,595		253		181		–		3,139
Total		9,223		17,196		846		1,322		7		28,594

174 BMO Financial Group 201st Annual Report 2018

Term to Maturity

Our derivative contracts have varying maturity dates. The remaining contractual terms to maturity for the notional amounts of our derivative contracts are set out below:

(Canadian $ in millions)	Term to maturity										2018		2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total notional amounts		Total notional amounts
Interest Rate Contracts
Swaps		1,404,557		707,683		1,167,568		514,392		37,797		3,831,997		3,202,365
Forward rate agreements, futures and options		608,132		100,756		13,885		7,897		269		730,939		370,240
Total interest rate contracts		2,012,689		808,439		1,181,453		522,289		38,066		4,562,936		3,572,605
Foreign Exchange Contracts
Cross-currency swaps		12,466		36,718		24,980		15,413		3,339		92,916		85,586
Cross-currency interest rate swaps		118,783		147,231		97,828		72,857		18,533		455,232		434,210
Forward foreign exchange contracts, futures and options		512,002		9,283		1,148		134		26		522,593		463,665
Total foreign exchange contracts		643,251		193,232		123,956		88,404		21,898		1,070,741		983,461
Commodity Contracts
Swaps		6,234		14,885		2,875		372		–		24,366		18,713
Futures and options		21,910		25,587		3,530		704		–		51,731		52,051
Total commodity contracts		28,144		40,472		6,405		1,076		–		76,097		70,764
Equity Contracts		72,922		7,953		3,873		1,680		366		86,794		77,781
Credit Contracts		746		248		1,262		1,083		151		3,490		3,106
Total notional amount		2,757,752		1,050,344		1,316,949		614,532		60,481		5,800,058		4,707,717

Note 9: Premises and Equipment

We record all premises and equipment at cost less accumulated amortization, and less any accumulated impairment, except land, which is recorded at cost. Buildings, computer equipment and operating system software, other equipment and leasehold improvements are amortized on a straight-line basis over their estimated useful lives. When the major components of a building have different useful lives, they are accounted for separately and amortized over each component’s estimated useful life.

The maximum estimated useful lives we use to amortize our assets are as follows:

Buildings	10 to 40 years
Computer equipment and operating system software	5 years
Other equipment	10 years
Leasehold improvements	Lease term to a maximum of 10 years

Amortization methods, useful lives and the residual values of premises and equipment are reviewed annually for any change in circumstances and are adjusted if appropriate. At each reporting period, we review whether there are any indications that premises and equipment need to be tested for impairment. If there is an indication that an asset may be impaired, we test for impairment by comparing the asset’s carrying value to its recoverable amount. The recoverable amount is calculated as the higher of the value in use and the fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from the asset. An impairment charge is recorded when the recoverable amount is less than the carrying value. There were no significant write-downs of premises and equipment due to impairment during the years ended October 31, 2018 and 2017. Gains and losses on disposal are included in non-interest expense, premises and equipment, in our Consolidated Statement of Income.

BMO Financial Group 201st Annual Report 2018 175

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net rent expense for premises and equipment reported in non-interest expense, premises and equipment, in our Consolidated Statement of Income for the years ended October 31, 2018, 2017 and 2016 was $530 million, $501 million and $502 million, respectively.

(Canadian $ in millions)																2018																		2017
	Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total			Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total
Cost
Balance at beginning of year		174			1,726			1,994			913			1,429			6,236			207			1,784			1,844			902			1,347			6,084
Additions		4			66			236			40			87			433			–			72			156			69			105			402
Disposals (1)		(32	)		(163	)		(11	)		(27	)		(20	)		(253	)		(28	)		(95	)		(13	)		(13	)		(10	)		(159	)
Foreign exchange and other		(1	)		(2	)		10			7			18			32			(5	)		(35	)		7			(45	)		(13	)		(91	)
Balance at end of year		145			1,627			2,229			933			1,514			6,448			174			1,726			1,994			913			1,429			6,236
Accumulated Depreciation and Impairment
Balance at beginning of year		–			1,063			1,465			674			1,001			4,203			–			1,055			1,306			649			927			3,937
Disposals (1)		–			(116	)		(9	)		(24	)		(15	)		(164	)		–			(32	)		(11	)		(8	)		(8	)		(59	)
Amortization		–			60			201			48			91			400			–			63			185			49			94			391
Foreign exchange and other		–			9			5			6			3			23			–			(23	)		(15	)		(16	)		(12	)		(66	)
Balance at end of year		–			1,016			1,662			704			1,080			4,462			–			1,063			1,465			674			1,001			4,203
Net carrying value		145			611			567			229			434			1,986			174			663			529			239			428			2,033

(1) Includes fully depreciated assets written off.

Note 10: Acquisitions

The cost of an acquisition is measured at the fair value of the consideration transferred, including contingent consideration. Acquisition-related costs are recognized as an expense in the period in which they are incurred. The identifiable assets acquired and liabilities assumed and contingent consideration are measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred over the net of the fair value of identifiable assets acquired and liabilities assumed. The results of operations of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition.

KGS-Alpha Capital Markets (“KGS”)

On September 1, 2018, we completed the acquisition of the business of KGS, a U.S. fixed income broker-dealer specializing in U.S. mortgage and asset-backed securities in the institutional investor market, for cash consideration of US$304 million (CAD$397 million). The acquisition was accounted for as a business combination, and the acquired business and corresponding goodwill are included in our Capital Markets reporting segment.

As part of this acquisition, we acquired intangible assets of $49 million and goodwill of $54 million. The intangible assets are being amortized over three to fourteen years on an accelerated basis. Goodwill of $32 million related to this acquisition is deductible for tax purposes.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows:

(Canadian $ in millions)
	KGS
Securities – trading		5,193
Securities borrowed or purchased under resale agreements		5,669
Goodwill and intangible assets		103
Other assets		584
Total assets		11,549
Securities lent or sold under repurchase agreements		9,563
Securities sold but not yet purchased		1,431
Other liabilities		158
Purchase price		397

The purchase price allocation for KGS is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.

Note 11: Goodwill and Intangible Assets

Goodwill

When we complete an acquisition, we allocate the purchase price paid to the assets acquired, including identifiable intangible assets, and the liabilities assumed. Any portion of the consideration transferred that is in excess of the fair value of those net assets is considered to be goodwill. Goodwill is not amortized and is instead tested for impairment annually.

176 BMO Financial Group 201st Annual Report 2018

In performing the impairment test, we utilize the fair value less costs to sell for each group of CGUs based on discounted cash flow projections. Cash flows were projected for the first 10 years based on actual operating results, expected future business performance and past experience. Beyond 10 years, cash flows were assumed to grow at perpetual annual rates of up to 2% (3% in 2017). The discount rates we applied in determining the recoverable amounts in 2018 ranged from 8.6% to 11.4% (8.3% to 12.2% in 2017), and were based on our estimate of the cost of capital for each CGU. The cost of capital for each CGU was estimated using the Capital Asset Pricing Model, based on the historical betas of publicly traded peer companies that are comparable to the CGU.

There were no write-downs of goodwill due to impairment during the years ended October 31, 2018 and 2017.

The key assumptions described above may change as market and economic conditions change. However, we estimate that reasonably possible changes in these assumptions are not expected to cause recoverable amounts of our CGUs to decline below their carrying amounts.

A continuity of our goodwill by group of CGUs for the years ended October 31, 2018 and 2017 is as follows:

(Canadian $ in millions)							Personal and Commercial Banking									Wealth Management			BMO Capital Markets			Total
	Canadian P&C			U.S. P&C			Total			Traditional Wealth Management			Insurance			Total
Balance – October 31, 2016		97			3,861			3,958			2,117			2			2,119			304			6,381
Acquisitions (disposals) during the year		–			–			–			(4	)		–			(4	)		–			(4	)
Foreign exchange and other (1)		–			(142	)		(142	)		24			–			24			(15	)		(133	)
Balance – October 31, 2017		97			3,719			3,816			2,137			2			2,139			289			6,244
Acquisitions (disposals) during the year		–			–			–			–			–			–			54			54
Foreign exchange and other (1)		–			78			78			(8	)		–			(8	)		5			75
Balance – October 31, 2018		97	(2)		3,797	(3)		3,894			2,129	(4)		2	(5)		2,131			348	(6)		6,373

(1) Other changes in goodwill included the effects of translating goodwill denominated in foreign currencies into Canadian dollars and purchase accounting adjustments related to prior-year purchases.

(2) Relates primarily to bcpbank Canada, Diners Club, Aver Media LP and GE Transportation Finance.

(3) Relates primarily to First National Bank & Trust, Ozaukee Bank, Merchants and Manufacturers Bancorporation, Inc., Diners Club, AMCORE, M&I and GE Transportation Finance.

(4) Relates to BMO Nesbitt Burns Inc., Guardian Group of Funds Ltd., Pyrford International plc, LGM Investments Limited, M&I, myCFO, Inc., Stoker Ostler Wealth Advisors, Inc., CTC Consulting LLC, AWMB and F&C Asset Management plc.

(5) Relates to AIG.

(6) Relates to Gerard Klauer Mattison, BMO Nesbitt Burns Inc., Paloma Securities L.L.C., M&I, Greene Holcomb Fisher and KGS.

Intangible Assets

Intangible assets related to our acquisitions are initially recorded at their fair value at the acquisition date and subsequently at cost less accumulated amortization. Software is recorded at cost less accumulated amortization. Amortization expense is recorded in amortization of intangible assets in our Consolidated Statement of Income. The following table presents the changes in the balance of these intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development			Other			Total
Cost as at October 31, 2016		704			968			194			3,189			476			365			5,896
Additions (disposals)		(33	)		–			–			546			(67	)		–			446
Foreign exchange and other		(17	)		(37	)		(7	)		(39	)		(11	)		11			(100	)
Cost as at October 31, 2017		654			931			187			3,696			398			376			6,242
Additions (disposals)		35			–			–			422			94			12			563
Foreign exchange and other		(1	)		20			4			9			4			(4	)		32
Cost as at October 31, 2018		688			951			191			4,127			496			384			6,837

Certain comparative figures have been reclassified to conform with the current year’s presentation.

The following table presents the accumulated amortization of our intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development		Other			Total
Accumulated amortization at October 31, 2016		398			735			194			2,329			–		62			3,718
Amortization		68			56			–			336			–		25			485
Disposals		(22	)		–			–			(11	)		–		–			(33	)
Foreign exchange and other		(13	)		(29	)		(7	)		(36	)		–		(2	)		(87	)
Accumulated amortization at October 31, 2017		431			762			187			2,618			–		85			4,083
Amortization		46			51			–			387			–		19			503
Disposals		–			–			–			(20	)		–		–			(20	)
Foreign exchange and other		(2	)		17			4			(15	)		–		(5	)		(1	)
Accumulated amortization at October 31, 2018		475			830			191			2,970			–		99			4,565
Carrying value at October 31, 2018		213			121			–			1,157			496		285			2,272
Carrying value at October 31, 2017		223			169			–			1,078			398		291			2,159

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Intangible assets are amortized to income over the period during which we believe the assets will benefit us, on either a straight-line or an accelerated basis, over a period not to exceed 15 years. We have $165 million as at October 31, 2018 ($169 million as at October 31, 2017) in intangible assets with indefinite lives that relate primarily to fund management contracts.

BMO Financial Group 201st Annual Report 2018 177

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The useful lives of intangible assets are reviewed annually for any changes in circumstances. We test definite-life intangible assets for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable. Indefinite-life intangible assets are tested annually for impairment. If any intangible assets are determined to be impaired, we write them down to their recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

There were write-downs of intangible assets of $13 million during the year ended October 31, 2018 ($5 million in 2017).

Note 12: Other Assets

Customers’ Liability under Acceptances

Acceptances represent a form of negotiable short-term debt that is issued by our customers, which we guarantee for a fee. The fees earned are recorded in lending fees in our Consolidated Statement of Income over the term of the acceptance. The amount potentially due under the acceptances is recorded in other liabilities on our Consolidated Balance Sheet. We record the bank’s equivalent claim against our customers in the event of a call on these commitments in other assets on our Consolidated Balance Sheet.

Other

The components of other within other assets are as follows:

(Canadian $ in millions)	2018		2017
Accounts receivable, prepaid expenses and other items		6,910		6,508
Accrued interest receivable		1,461		1,079
BMO Transportation Finance – leased vehicles		937		928
Cash collateral		2,019		3,165
Due from clients, dealers and brokers		236		156
Insurance-related assets		822		644
Pension asset (Note 21)		664		508
Precious metals		1,603		582
Total		14,652		13,570

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Note 13: Deposits

	Payable on demand
(Canadian $ in millions)	Interest bearing				Non-interest bearing				Payable       after notice				Payable on       a fixed date				Total
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Deposits by:
Banks (1)		1,450		818		1,400		1,864		526		586		24,531		24,937		27,907		28,205
Business and government		25,266		20,621		33,984		33,968		67,026		61,790		187,024		166,897		313,300		283,276
Individuals		3,476		3,278		21,345		20,044		90,233		89,859		65,790		55,130		180,844		168,311
Total (2)(3)		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792
Booked in:
Canada		21,735		21,557		47,231		44,380		82,091		81,590		161,192		145,648		312,249		293,175
United States		7,395		2,259		9,477		11,496		74,476		69,555		86,805		75,517		178,153		158,827
Other countries		1,062		901		21		–		1,218		1,090		29,348		25,799		31,649		27,790
Total		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792

(1) Includes regulated and central banks.

(2) Includes structured notes designated at fair value through profit or loss.

(3) As at October 31, 2018 and 2017, total deposits payable on a fixed date included $29,673 million and $30,419 million, respectively, of federal funds purchased, commercial paper issued and other deposit liabilities. Included in deposits as at October 31, 2018 and 2017 are $259,747 million and $237,127 million, respectively, of deposits denominated in U.S. dollars, and $37,427 million and $27,686 million, respectively, of deposits denominated in other foreign currencies.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Deposits payable on demand are comprised primarily of our customers’ chequing accounts, some of which we pay interest on. Our customers need not notify us prior to withdrawing money from their chequing accounts.

Deposits payable after notice are comprised primarily of our customers’ savings accounts, on which we pay interest. Deposits payable on a fixed date are comprised of:

• Various investment instruments purchased by our customers to earn interest over a fixed period, such as term deposits and guaranteed investment certificates. The terms of these deposits can vary from one day to 10 years.

• Federal funds purchased, which are overnight borrowings of other banks’ excess reserve funds at the United States Federal Reserve Bank. As at October 31, 2018, we had borrowed $55 million of federal funds ($707 million in 2017).

• Commercial paper, which totalled $9,121 million as at October 31, 2018 ($8,430 million in 2017).

• Covered bonds, which totalled $25,045 million as at October 31, 2018 ($23,108 million in 2017).

178 BMO Financial Group 201st Annual Report 2018

The following table presents the maturity schedule for our deposits payable on a fixed date:

(Canadian $ in millions)	2018		2017
Within 1 year		162,666		145,039
1 to 2 years		34,154		25,620
2 to 3 years		26,107		23,323
3 to 4 years		16,708		19,345
4 to 5 years		22,196		15,850
Over 5 years		15,514		17,787
Total (1)		277,345		246,964

(1) Includes $247,808 million of deposits, each greater than one hundred thousand dollars, of which $146,697 million were booked in Canada, $71,770 million were booked in the United States and $29,341 million were booked in other countries ($221,954 million, $130,197 million, $65,963 million and $25,794 million, respectively, in 2017). Of the $146,697 million of deposits booked in Canada, $55,190 million mature in less than three months, $3,836 million mature in three to six months, $12,909 million mature in six to twelve months and $74,762 million mature after 12 months ($130,197 million, $41,418 million, $7,922 million, $10,574 million and $70,283 million, respectively, in 2017). We have unencumbered liquid assets of $242,612 million to support these and other deposit liabilities ($213,757 million in 2017).

Most of our structured note liabilities included in deposits have been designated at fair value through profit or loss and are accounted for at fair value, which aligns the accounting result with the way the portfolio is managed. The fair value and notional amount due at contractual maturity of these notes as at October 31, 2018 were $15,309 million and $15,668 million respectively ($13,674 million and $13,563 million, respectively, in 2017). The change in fair value of these structured notes was recorded as an increase of $498 million in non-interest revenue, trading revenues, and a decrease of $28 million before tax was recorded in other comprehensive income related to changes in our own credit spread for the year ended October 31, 2018 (a decrease of $72 million recorded in non-interest revenue, trading revenues, and a decrease of $169 million related to changes in our own credit spread in 2017). The impact of changes in our own credit spread is measured based on movements in our own credit spread year over year.

The cumulative change in fair value related to changes in our own credit spread that has been recognized since the notes were designated at fair value to October 31, 2018 was an unrealized loss of approximately $331 million (unrealized loss of approximately $303 million in 2017), and $255 million of this unrealized loss has been recorded in other comprehensive income ($227 million in 2017).

Note 14: Other Liabilities

Acceptances

Acceptances represent a form of negotiable short-term debt that is issued by our customers, which we guarantee for a fee. The fees earned are recorded in lending fees in our Consolidated Statement of Income over the term of the acceptance. The amount potentially due under acceptances is recorded in other liabilities on our Consolidated Balance Sheet. We record the bank’s equivalent claim against our customers in the event of a call on these commitments in other assets on our Consolidated Balance Sheet.

Securities Lending and Borrowing

Securities lending and borrowing transactions are generally collateralized by securities or cash. Cash advanced or received as collateral is recorded in other assets or other liabilities, respectively. Interest earned on cash collateral is recorded in interest, dividend and fee income in our Consolidated Statement of Income, and interest expense on cash collateral is recorded in interest expense, other liabilities, in our Consolidated Statement of Income. The transfer of the securities to counterparties is only reflected in our Consolidated Balance Sheet if the risks and rewards of ownership have also been transferred. Securities borrowed are not recognized in our Consolidated Balance Sheet unless they are then sold to third parties, in which case the obligation to return the securities is recorded in Securities sold but not yet purchased at fair value, with any gains or losses recorded in non-interest revenue, trading revenues.

Securities Sold but not yet Purchased

Securities sold but not yet purchased represent our obligations to deliver securities that we did not own at the time of sale. These obligations are recorded at their fair value. Adjustments to the fair value as at the balance sheet date and gains and losses on the settlement of these obligations are recorded in trading revenues in our Consolidated Statement of Income.

Securities Lent or Sold Under Repurchase Agreements

Securities lent or sold under repurchase agreements represent short-term funding transactions in which we sell securities that we own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. The obligation to repurchase these securities is recorded at the amount owing. The interest expense related to these liabilities is recorded on an accrual basis in interest expense, other liabilities, in our Consolidated Statement of Income.

Securitization and Structured Entities’ Liabilities

Securitization and structured entities’ liabilities include notes issued by our consolidated bank securitization vehicles and liabilities associated with the securitization of our Canadian mortgage loans as part of the Canada Mortgage Bond program, the National Housing Act Mortgage-Backed Securities program and our own program. Additional information on our securitization program and associated liabilities is provided in Notes 6 and 7. These liabilities are initially measured at fair value plus any directly attributable costs and are subsequently measured at amortized cost. The interest expense related to these liabilities is recorded in interest expense, other liabilities, in our Consolidated Statement of Income.

BMO Financial Group 201st Annual Report 2018 179

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other

The components of other within other liabilities are as follows:

(Canadian $ in millions)	2018		2017
Accounts payable, accrued expenses and other items		8,119		7,894
Accrued interest payable		1,385		1,037
Cash collateral		4,343		3,696
Insurance-related liabilities		9,585		8,959
Liabilities of subsidiaries, other than deposits		9,283		6,931
Other employee future benefits liability (Note 21)		960		1,303
Payable to brokers, dealers and clients		1,898		2,177
Pension liability (Note 21)		256		364
Total		35,829		32,361

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Insurance-Related Liabilities

We are engaged in insurance businesses related to life and health insurance, annuities and reinsurance.

We designate the obligation related to certain investment contracts in our insurance business at fair value through profit or loss, which eliminates a measurement inconsistency that would otherwise arise from measuring the investment contract liabilities and offsetting changes in the fair value of the investments supporting them on a different basis. The fair value of these investment contract liabilities as at October 31, 2018 of $800 million ($749 million as at October 31, 2017) is recorded in other liabilities in our Consolidated Balance Sheet. The change in fair value of these investment contract liabilities resulted in a decrease of $28 million in insurance claims, commissions and changes in policy benefit liabilities for the year ended October 31, 2018 (decrease of $41 million in 2017 and an increase of $55 million in 2016). For the year ended October 31, 2018, a loss of $2 million was recorded in other comprehensive income related to changes in our credit spread (loss of $32 million in 2017 and $7 million in 2016). The impact of changes in our own credit spread is measured based on movements in our own credit spread year over year. Changes in the fair value of investments backing these investment contract liabilities are recorded in non-interest revenue, insurance revenue.

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy benefit liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions.

A reconciliation of the change in insurance-related liabilities is as follows:

(Canadian $ in millions)	2018			2017
Insurance-related liabilities, beginning of year		8,959			7,909
Increase (decrease) in life insurance policy benefit liabilities from:
New business		742			545
In-force policies		(400	)		66
Changes in actuarial assumptions and methodology		3			(52	)
Foreign currency		–			(1	)
Net increase in life insurance policy benefit liabilities		345			558
Change in other insurance-related liabilities		281			492
Insurance-related liabilities, end of year		9,585			8,959

Reinsurance

In the ordinary course of business, our insurance subsidiaries reinsure risks to other insurance and reinsurance companies in order to provide greater diversification, limit loss exposure to large risks, and provide additional capacity for future growth. These ceding reinsurance arrangements do not relieve our insurance subsidiaries of their direct obligation to the insured parties. We evaluate the financial condition of the reinsurers and monitor their credit ratings to minimize our exposure to losses from reinsurer insolvency.

Reinsurance premiums ceded are recorded net against direct premium income and are included in non-interest revenue, insurance revenue, in our Consolidated Statement of Income for the years ended October 31, 2018, 2017 and 2016, as shown in the table below:

(Canadian $ in millions)	2018			2017			2016
Direct premium income		1,976			1,750			1,561
Ceded premiums		(148	)		(157	)		(271	)
		1,828			1,593			1,290

180 BMO Financial Group 201st Annual Report 2018

Note 15: Subordinated Debt

Subordinated debt represents our direct unsecured obligations to our debt holders, in the form of notes and debentures and forms part of our regulatory capital. Subordinated debt is recorded at amortized cost using the effective interest rate method. Where appropriate, we enter into fair value hedges to hedge the risks caused by changes in interest rates (see Note 8). The rights of the holders of our notes and debentures are subordinate to the claims of depositors and certain other creditors. We require approval from OSFI before we can redeem any part of our subordinated debt.

The face values, terms to maturity and carrying values of our subordinated debt are as follows:

(Canadian $ in millions, except as noted)	Face value	Maturity date	Interest rate (%)	Redeemable at our option	2018 Total	2017 Total
Debentures Series 20	150	December 2025 to 2040	8.25	Not redeemable	143	148
Series F Medium-Term Notes, First Tranche	900	March 2023	6.17	March 2018 (1)	–	905
Series H Medium-Term Notes, First Tranche (8)	1,000	September 2024	3.12	September 2019 (2)	1,003	1,016
Series H Medium-Term Notes, Second Tranche (8)	1,000	December 2025	3.34	December 2020 (3)	916	969
Series I Medium-Term Notes, First Tranche (8)	1,250	June 2026	3.32	June 2021 (4)	1,222	1,178
Series I Medium-Term Notes, Second Tranche (8)	850	June 2027	2.57	June 2022 (5)	813	813
3.803% Subordinated Notes due 2032 (8)(9)	US 1,250	December 2032	3.80	December 2027 (6)	1,573	–
4.338% Subordinated Notes due 2028 (8)(10)	US 850	October 2028	4.34	October 2023 (7)	1,112	–
Total (11)					6,782	5,029

(1) All $900 million Series F Medium-Term Notes, First Tranche were redeemed on March 28, 2018 for 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

(2) Redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing September 19, 2019.

(3) Redeemable at the greater of par and the Canada Yield Price prior to December 8, 2020, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing December 8, 2020.

(4) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2021, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2021.

(5) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2022, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2022.

(6) Redeemable at par on December 15, 2027 together with accrued and unpaid interest to, but excluding, the redemption date.

(7) Redeemable at par on October 5, 2023 together with accrued and unpaid interest to, but excluding, the redemption date.

(8) These notes include a non-viability contingent capital provision, which is necessary for notes issued after a certain date to qualify as regulatory capital under Basel III. As such, the notes are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each note is convertible into common shares pursuant to an automatic conversion formula with a multiplier and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the par value of the note (including accrued and unpaid interest on such note) by the conversion price and then times the multiplier.

(9) On December 12, 2017, we issued US$1,250 million of 3.803% subordinated notes.

(10) On October 5, 2018, we issued US$850 million of 4.338% subordinated notes.

(11) Certain amounts of subordinated debt were issued at a premium or discount and include fair value hedge adjustments, which together decreased their carrying value as at October 31, 2018 by $233 million ($121 million in 2017); see Note 8 for further details. The carrying value is also adjusted for the subordinated debt holdings, held for market making purposes.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

The aggregate remaining maturities of our subordinated debt, based on the maturity dates under the terms of issue, can be found in the blue-tinted font in the Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments section of Management’s Discussion and Analysis on pages 107 to 108 of this report.

BMO Financial Group 201st Annual Report 2018 181

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 16: Equity

Share Capital

(Canadian $ in millions, except as noted)	2018								2017
	Number of shares			Amount			Dividends declared per share		Number of shares			Amount			Dividends declared per share
Preferred Shares – Classified as Equity
Class B – Series 14 (1)		–			–			–		–			–			0.66
Class B – Series 15 (2)		–			–			–		–			–			0.73
Class B – Series 16 (3)		–			–			0.64		6,267,391			157			0.85
Class B – Series 17 (4)		–			–			0.52		5,732,609			143			0.55
Class B – Series 25		9,425,607			236			0.45		9,425,607			236			0.45
Class B – Series 26		2,174,393			54			0.59		2,174,393			54			0.43
Class B – Series 27		20,000,000			500			1.00		20,000,000			500			1.00
Class B – Series 29		16,000,000			400			0.98		16,000,000			400			0.98
Class B – Series 31		12,000,000			300			0.95		12,000,000			300			0.95
Class B – Series 33		8,000,000			200			0.95		8,000,000			200			0.95
Class B – Series 35		6,000,000			150			1.25		6,000,000			150			1.25
Class B – Series 36		600,000			600			58.50		600,000			600			58.50
Class B – Series 38		24,000,000			600			1.21		24,000,000			600			1.33
Class B – Series 40 (5)		20,000,000			500			1.13		20,000,000			500			0.80
Class B – Series 42 (6)		16,000,000			400			1.10		16,000,000			400			0.45
Class B – Series 44 (7)		16,000,000			400			–		–			–			–
					4,340								4,240
Common Shares
Balance at beginning of year		647,816,318			13,032					645,761,333			12,539
Issued under the Shareholder Dividend
Reinvestment and Share Purchase Plan		–			–					4,821,184			448
Issued/cancelled under the Stock Option Plan and other stock-based compensation plans (Note 20)		1,513,307			99					2,233,801			146
Repurchased for cancellation		(10,000,000	)		(202	)				(5,000,000	)		(101	)
Balance at End of Year		639,329,625			12,929			3.78		647,816,318			13,032			3.56
Share Capital					17,269								17,272

(1) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 14, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.66 per share and 10 million shares were outstanding at the time of the dividend declaration.

(2) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 15, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.73 per share and 10 million shares were outstanding at the time of the dividend declaration.

(3) On August 25, 2018, we redeemed all 6,267,391 Non-Cumulative Perpetual Class B Preferred Shares, Series 16, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.64 per share and 6,267,391 shares were outstanding at the time of the dividend declaration.

(4) On August 25, 2018, we redeemed all 5,732,609 Non-Cumulative Perpetual Class B Preferred Shares, Series 17, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.52 per share and 5,732,609 shares were outstanding at the time of the dividend declaration.

(5) On March 9, 2017, we issued 20 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 40, at a price of $25.00 cash per share for gross proceeds of $500 million.

(6) On June 29, 2017, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 42, at a price of $25.00 cash per share for gross proceeds of $400 million.

(7) On September 17, 2018, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44, at a price of $25.00 cash per share for gross proceeds of $400 million.

Preferred Share Rights and Privileges

(Canadian $, except as noted)
	Redemption amount		Quarterly non-cumulative dividend (1)			Reset premium		Date redeemable / convertible			Convertible to
Class B – Series 25		25.00		$0.112813	(2)		1.15%		August 25, 2021	(3)(4)		Class B – Series 26	(8)
Class B – Series 26		25.00		Floating	(7)		1.15%		August 25, 2021	(3)(5)		Class B – Series 25	(8)
Class B – Series 27		25.00		$    0.2500	(2)		2.33%		May 25, 2019	(3)(4)		Class B – Series 28	(8)
Class B – Series 29		25.00		$  0.24375	(2)		2.24%		August 25, 2019	(3)(4)		Class B – Series 30	(8)
Class B – Series 31		25.00		$    0.2375	(2)		2.22%		November 25, 2019	(3)(4)		Class B – Series 32	(8)
Class B – Series 33		25.00		$    0.2375	(2)		2.71%		August 25, 2020	(3)(4)		Class B – Series 34	(8)
Class B – Series 35		25.00		$    0.3125			Does not reset		August 25, 2020	(6)		Not convertible
Class B – Series 36		1,000.00		$  14.6250	(2)		4.97%		November 25, 2020	(3)(4)		Class B – Series 37	(8)
Class B – Series 38		25.00		$0.303125	(2)		4.06%		February 25, 2022	(3)(4)		Class B – Series 39	(8)
Class B – Series 40		25.00		$  0.28125	(2)		3.33%		May 25, 2022	(3)(4)		Class B – Series 41	(8)
Class B – Series 42		25.00		$    0.2750	(2)		3.17%		August 25, 2022	(3)(4)		Class B – Series 43	(8)
Class B – Series 44		25.00		$0.303125	(2)		2.68%		November 25, 2023	(3)(4)		Class B – Series 45	(8)

(1) Non-cumulative dividends are payable quarterly as and when declared by the Board of Directors.

(2) The dividend rate will reset on the date redeemable and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus the reset premium noted. If converted to a floating rate series, the rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus the reset premium noted.

(3) Redeemable on the date noted and every five years thereafter.

(4) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 26, 28, 30, 32, 34, 37, 39, 41, 43 and 45 are floating rate preferred shares.

(5) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 25 are fixed rate preferred shares.

(6) Series 35 is subject to a redemption premium if redeemed prior to August 25, 2024.

(7) Floating rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus a reset premium.

(8) If converted, the holders have the option to convert back to the original preferred shares on subsequent redemption dates.

182 BMO Financial Group 201st Annual Report 2018

Authorized Share Capital

We classify financial instruments that we issue as financial liabilities, equity instruments or compound instruments. Financial instruments that will be settled by a variable number of our common shares upon conversion by the holders are classified as liabilities on our Consolidated Balance Sheet. Dividends and interest payments on financial liabilities are classified as interest expense in our Consolidated Statement of Income. Financial instruments are classified as equity instruments when there is no contractual obligation to transfer cash or other financial assets. Further, issued instruments that are not mandatorily redeemable, or that are not convertible into a variable number of our common shares at the holder’s option, are classified as equity and presented in share capital. Dividend payments on equity instruments are recognized as a reduction in equity.

Common Shares

We are authorized by our shareholders to issue an unlimited number of our common shares, without par value, for unlimited consideration. Our common shares are not redeemable or convertible. Dividends are declared by our Board of Directors at their discretion. Historically, the Board of Directors has declared dividends on a quarterly basis and the amount can vary from quarter to quarter.

Preferred Shares

We are authorized by our shareholders to issue an unlimited number of Class A Preferred Shares and Class B Preferred Shares, without par value, in series, for unlimited consideration. Class B Preferred Shares may be issued in a foreign currency.

Treasury Shares

When we purchase our common shares as part of our trading business, we record the cost of those shares as a reduction in shareholders’ equity. If those shares are resold at a price higher than their cost, the premium is recorded as an increase in contributed surplus. If those shares are resold at a price below their cost, the discount is recorded as a reduction first to contributed surplus and then to retained earnings for any amount in excess of total contributed surplus related to treasury shares.

Non-Viability Contingent Capital

Class B – Series 27, Class B – Series 29, Class B – Series 31, Class B – Series 33, Class B – Series 35, Class B – Series 36, Class B – Series 38, Class B – Series 40, Class B – Series 42 and Class B – Series 44 preferred share issues include a non-viability contingent capital provision, which is necessary for the shares to qualify as regulatory capital under Basel III. As such, the shares are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each preferred share is convertible into common shares pursuant to an automatic conversion formula and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the share value of the preferred share issuance (including declared and unpaid dividends on such preferred share issuance) by the conversion price and then times the multiplier.

Normal Course Issuer Bid

We renewed our normal course issuer bid (“NCIB”), effective June 1, 2018 for one year. Under this NCIB, we may purchase up to 20 million of our common shares for cancellation. The timing and amount of purchases under the NCIB are subject to management discretion based on factors such as market conditions and capital levels. The bank will consult with OSFI before making purchases under the NCIB.

During the year ended October 31, 2018, we purchased for cancellation 10 million of our common shares.

During the year ended October 31, 2017, we purchased for cancellation 5 million of our common shares.

Share Redemption and Dividend Restrictions

OSFI must approve any plan to redeem any of our preferred share issues for cash.

We are prohibited from declaring dividends on our preferred or common shares when we would be, as a result of paying such a dividend, in contravention of the capital adequacy, liquidity or any other regulatory directive issued under the Bank Act (Canada). In addition, common share dividends cannot be paid unless all dividends declared and payable on our preferred shares have been paid or sufficient funds have been set aside to do so.

In addition, we have agreed that if BMO Capital Trust II (the “Trust”), an unconsolidated structured entity, fails to pay any required distribution on its capital trust securities, we will not declare dividends of any kind on any of our preferred or common shares for a period of time following the Trust’s failure to pay the required distribution (as defined in the applicable prospectuses) unless the Trust first pays such distribution to the holders of its capital trust securities.

Currently, these limitations do not restrict the payment of dividends on common or preferred shares.

Shareholder Dividend Reinvestment and Share Purchase Plan

We offer a Dividend Reinvestment and Share Purchase Plan (“DRIP”) for our shareholders. Participation in the plan is optional. Under the terms of the DRIP, cash dividends on common shares are reinvested to purchase additional common shares. Shareholders also have the opportunity to make optional cash payments to acquire additional common shares.

For dividends paid in fiscal 2018, common shares to supply the DRIP were purchased in the open market.

For the dividends paid in the first two quarters of 2017, common shares to supply the DRIP were issued from treasury with a two percent discount. For the dividends paid in the third quarter of 2017, common shares to supply the DRIP were issued from treasury without a discount. For the dividends paid in the fourth quarter, common shares to supply the DRIP were purchased on the open market.

During the year ended October 31, 2018, we did not issue any common shares from treasury (4,821,184 in 2017) and purchased 1,995,353 common shares in the open market (504,873 in 2017) for delivery to shareholders under the DRIP.

Potential Share Issuances

As at October 31, 2018, we had reserved 39,947,147 common shares (39,947,147 in 2017) for potential issuance in respect of the DRIP. We have also reserved 6,095,201 common shares (7,525,296 in 2017) for the potential exercise of stock options, as further described in Note 20.

BMO Financial Group 201st Annual Report 2018 183

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 17: Fair Value of Financial Instruments and Trading-Related Revenue

We record trading assets and liabilities, derivatives, certain equity and debt securities and securities sold but not yet purchased at fair value, and other non-trading assets and liabilities at amortized cost less allowances or write-downs for impairment. The fair values presented in this note are based upon the amounts estimated for individual assets and liabilities and do not include an estimate of the fair value of any of the legal entities or underlying operations that comprise our business. For certain portfolios of financial instruments where we manage exposures to similar and offsetting risks, fair value is determined on the basis of our net exposure to that risk.

Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The fair value amounts disclosed represent point-in-time estimates that may change in subsequent reporting periods due to changes in market conditions or other factors. Some financial instruments are not typically exchangeable or exchanged and therefore it is difficult to determine their fair value. Where there is no quoted market price, we determine fair value using management’s best estimates based on a range of valuation techniques and assumptions; since these involve uncertainties, the fair values may not be realized in an actual sale or immediate settlement of the asset or liability.

Governance Over the Determination of Fair Value

Senior executive oversight of our valuation processes is provided through various valuation and risk committees. In order to ensure that all financial instruments carried at fair value are reasonably measured for risk management and financial reporting purposes, we have established governance structures and controls, such as model validation and approval, independent price verification (“IPV”) and profit or loss attribution analysis (“PAA”), consistent with industry practice. These controls are applied independently of the relevant operating groups.

We establish and regularly update valuation methodologies for each financial instrument that is required to be measured at fair value. The application of valuation models for products or portfolios is subject to independent approval to ensure only validated models are used. The impact of known limitations of models and data inputs is also monitored on an ongoing basis. IPV is a process that regularly and independently verifies the accuracy and appropriateness of market prices or model inputs used in the valuation of financial instruments. This process assesses fair values using a variety of different approaches to verify and validate the valuations. PAA is a daily process used by management to identify and explain changes in fair value positions across all operating lines of business within BMO Capital Markets. This process works in concert with other processes to ensure that the fair values being reported are reasonable and appropriate.

Securities

For traded securities, quoted market value is considered to be fair value. Quoted market value is based on bid or ask prices, depending on which is the most appropriate to measure fair value. Securities for which no active market exists are valued using all reasonably available market information. Our fair value methodologies are described below.

Government Securities

The fair value of government issued or guaranteed debt securities in active markets is determined by reference to recent transaction prices, broker quotes or third-party vendor prices. The fair value of securities that are not traded in an active market is modelled using implied yields derived from the prices of similar actively traded government securities and observable spreads. Market inputs to the model include coupon, maturity and duration.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

The fair value of mortgage-backed securities and collateralized mortgage obligations is determined using independent prices obtained from third-party vendor prices, broker quotes and relevant market indices, as applicable. If such prices are not available, fair value is determined using cash flow models that make maximum use of observable market inputs or benchmark prices for similar instruments. Valuation assumptions for mortgage-backed securities and collateralized mortgage obligations include discount rates, expected prepayments, credit spreads and recoveries.

Corporate Debt Securities

The fair value of corporate debt securities is determined using prices observed in the most recent transactions. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discounting curves and spreads obtained from independent dealers, brokers and multi-contributor pricing sources.

Corporate Equity Securities

The fair value of equity securities is based on quoted prices in active markets, where available. Where quoted prices in active markets are not readily available, fair value is determined using either quoted market prices for similar securities or using valuation techniques, which include discounted cash flow analysis and earnings multiples.

Privately Issued Securities

Privately issued debt and equity securities are valued using prices observed in recent market transactions, where available. Otherwise, fair value is derived from valuation models using a market or income approach. These models consider various factors, including projected cash flows, earnings, revenue and 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.

Prices from brokers and multi-contributor pricing sources are corroborated as part of our independent review process, which may include using valuation techniques or obtaining consensus or composite prices from other pricing services. We validate the estimates of fair value by independently obtaining multiple quotes for external market prices and input values. We review the approach taken by third-party vendors to ensure that the vendor employs a valuation model which maximizes the use of observable inputs such as benchmark yields, bid-ask spreads, underlying collateral, weighted-average terms to maturity and prepayment rate assumptions. Fair value estimates from internal valuation techniques are verified, where possible, by reference to prices obtained from third-party vendors.

184 BMO Financial Group 201st Annual Report 2018

Loans

In determining the fair value of our fixed rate performing loans, we discount the remaining contractual cash flows, adjusted for estimated prepayment, at market interest rates currently offered for loans with similar terms and risks. For floating rate performing loans, changes in interest rates have minimal impact on fair value since interest rates are repriced or reset frequently. On that basis, fair value is assumed to be equal to carrying value.

Derivative Instruments

A number of valuation techniques are employed to estimate fair value, including discounted cash flow analysis, the Black-Scholes model, Monte Carlo simulation and other accepted market models. These independently validated models incorporate current market data for interest rates, currency exchange rates, equity and commodity prices and indices, credit spreads, recovery rates, corresponding market volatility levels, spot prices, correlation levels and other market-based pricing factors. Option implied volatilities, an input into many valuation models, are either obtained directly from market sources or calculated from market prices. Multi-contributor pricing sources are used wherever possible.

In determining the fair value of complex and customized derivatives, we consider all reasonably available information, including dealer and broker quotations, multi-contributor pricing sources and any relevant observable market inputs. Our 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 volatilities.

We calculate a credit valuation adjustment (“CVA”) to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. The CVA is derived from market-observed credit spreads or proxy credit spreads and our assessment of the net counterparty credit risk exposure, taking into account credit mitigants such as collateral, master netting agreements and novation to central counterparties. We also calculate a funding valuation adjustment (“FVA”) to recognize the implicit funding costs associated with over-the-counter derivative positions. The FVA is determined by reference to market funding spreads.

Deposits

In determining the fair value of our deposits, we incorporate the following assumptions:

• For fixed rate, fixed maturity deposits, we discount the remaining contractual cash flows for these deposits, adjusted for expected redemptions, at market interest rates currently offered for deposits with similar terms and risks. Fair value of our senior note liabilities and covered bonds is determined by referring to current market prices for similar instruments or using valuation techniques, such as discounted cash flows that use market interest rate curves and funding spreads.

• For fixed rate deposits with no defined maturities, we consider fair value to equal carrying value, based on carrying value being equivalent to the amount payable on the reporting date.

• For floating rate deposits, changes in interest rates have minimal impact on fair value since deposits reprice to market frequently. On that basis, fair value is assumed to equal carrying value.

A portion of our structured note liabilities that have coupons or repayment terms linked to the performance of interest rates, foreign currencies, commodities or equity securities have been designated at fair value through profit or loss. The fair value of these structured notes is estimated using internally validated valuation models and incorporates observable market prices for identical or comparable securities, as well as other inputs, such as interest rate yield curves, option volatilities and foreign exchange rates, where appropriate. Where observable prices or inputs are not available, management judgment is required to determine the fair value by assessing other relevant sources of information, such as historical data and proxy information from similar transactions.

Securities Sold But Not Yet Purchased

The fair value of these obligations is based on the fair value of the underlying securities, which can be equity or debt securities. As these obligations are fully collateralized, the method used to determine fair value would be the same as that used for the relevant underlying equity or debt securities.

Securitization and Structured Entities’ Liabilities

The determination of the fair value of securitization and structured entities’ liabilities is based on quoted market prices or quoted market prices for similar financial instruments, where available. Where quoted prices are not available, fair value is determined using valuation techniques, such as discounted cash flow models that maximize the use of observable inputs.

Subordinated Debt

The fair value of our subordinated debt is determined by referring to current market prices for the same or similar instruments.

Financial Instruments with a Carrying Value Approximating Fair Value

Short-term and Other Financial Instruments

Carrying value is assumed to be a reasonable estimate of fair value for our cash and cash equivalents.

The carrying value of certain financial assets and liabilities, such as interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities, is a reasonable estimate of fair value due to their short-term nature or because they are frequently repriced to current market rates.

Certain assets, including premises and equipment, goodwill and intangible assets, as well as shareholders’ equity, are not considered financial instruments and therefore no fair value has been determined for these items.

BMO Financial Group 201st Annual Report 2018 185

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Hierarchy

We use a fair value hierarchy to categorize financial instruments according to the inputs we use in valuation techniques to measure fair value.

Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet

Set out in the following tables are the fair values of financial instruments not carried at fair value on our Consolidated Balance Sheet.

(Canadian $ in millions)									2018
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Amortized cost		6,485		6,288		429		5,795		64
Loans (1)
Residential mortgages		119,544		118,609		–		118,609		–
Consumer instalment and other personal		62,687		62,618		–		62,618		–
Credit cards		8,099		8,099		–		8,099		–
Business and government (2)		192,225		191,989		–		191,989		–
		382,555		381,315		–		381,315		–
Deposits (3)		506,742		506,581		–		506,581		–
Securitization and structured entities’ liabilities		25,051		24,838		–		24,838		–
Subordinated debt		6,782		6,834		–		6,834		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $1,450 million of loans classified as FVTPL upon adoption of IFRS 9 (refer to Note 28).

(3) Excludes $15,309 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

(Canadian $ in millions)									2017
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Held to maturity		9,094		9,096		2,522		6,574		–
Loans (1)
Residential mortgages		115,165		114,821		–		114,821		–
Consumer instalment and other personal		61,465		61,470		–		61,470		–
Credit cards		7,828		7,828		–		7,828		–
Business and government		174,084		174,105		–		174,105		–
		358,542		358,224		–		358,224		–
Deposits (2)		466,118		466,441		–		466,441		–
Securitization and structured entities’ liabilities		23,054		23,148		–		23,148		–
Subordinated debt		5,029		5,255		–		5,255		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $13,674 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Valuation Techniques and Significant Inputs

We determine the fair value of publicly traded fixed maturity debt and equity securities using quoted prices in active markets (Level 1) when these are available. When quoted prices in active markets are not available, we determine the fair value of financial instruments using models such as discounted cash flows, with observable market data for inputs, such as yield and prepayment rates or broker quotes and other third-party vendor quotes (Level 2). Fair value may also be determined using models where significant market inputs are not observable due to inactive markets or minimal market activity (Level 3). We maximize the use of observable market inputs to the extent possible.

Our Level 2 trading securities are primarily valued using discounted cash flow models with observable spreads or broker quotes. The fair value of Level 2 FVOCI securities, previously classified as available-for-sale securities, is determined using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry-standard models and observable market information.

186 BMO Financial Group 201st Annual Report 2018

The extent of our use of actively quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and models without observable market information as inputs (Level 3) in the valuation of securities, fair value liabilities, derivative assets and derivative liabilities is presented in the following tables:

Classified under IFRS 9

(Canadian $ in millions)	2018
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		9,107		1,213		–		10,320
Canadian provincial and municipal governments		4,013		4,689		–		8,702
U.S. federal government		9,465		52		–		9,517
U.S. states, municipalities and agencies		78		1,138		–		1,216
Other governments		1,210		201		–		1,411
NHA MBS and U.S. agency MBS and CMO		60		8,869		255		9,184
Corporate debt		2,973		6,218		7		9,198
Loans		–		199		–		199
Corporate equity		49,946		4		–		49,950
		76,852		22,583		262		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		103		–		431
Canadian provincial and municipal governments		219		727		–		946
U.S. federal government		69		–		–		69
NHA MBS and U.S. agency MBS and CMO		–		7		–		7
Corporate debt		178		6,643		–		6,821
Corporate equity		1,378		134		1,825		3,337
		2,172		7,614		1,825		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government		11,978		827		–		12,805
Canadian provincial and municipal governments		3,315		3,547		–		6,862
U.S. federal government		16,823		–		–		16,823
U.S. states, municipalities and agencies		14		3,640		1		3,655
Other governments		3,143		1,647		–		4,790
NHA MBS and U.S. agency MBS and CMO		–		13,687		–		13,687
Corporate debt		1,959		1,797		–		3,756
Corporate equity		–		–		62		62
		37,232		25,145		63		62,440
Business and Government Loans		–		–		1,450		1,450
Fair Value Liabilities
Securities sold but not yet purchased		26,336		2,468		–		28,804
Structured note liabilities and other note liabilities		–		15,309		–		15,309
Annuity liabilities		–		800		–		800
		26,336		18,577		–		44,913
Derivative Assets
Interest rate contracts		18		8,959		–		8,977
Foreign exchange contracts		16		12,983		–		12,999
Commodity contracts		166		1,894		–		2,060
Equity contracts		286		1,872		–		2,158
Credit default swaps		–		10		–		10
		486		25,718		–		26,204
Derivative Liabilities
Interest rate contracts		14		8,620		–		8,634
Foreign exchange contracts		2		11,852		–		11,854
Commodity contracts		295		1,161		–		1,456
Equity contracts		246		2,183		1		2,430
Credit default swaps		–		36		1		37
		557		23,852		2		24,411

BMO Financial Group 201st Annual Report 2018 187

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Classified under IAS 39

(Canadian $ in millions)	2017
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		8,712		2,115		–		10,827
Canadian provincial and municipal governments		3,177		4,150		–		7,327
U.S. federal government		9,417		56		–		9,473
U.S. states, municipalities and agencies		189		1,942		–		2,131
Other governments		630		193		–		823
NHA MBS, U.S. agency MBS and CMO		–		931		–		931
Corporate debt		1,485		10,278		–		11,763
Loans		3		150		–		153
Corporate equity		55,640		1		–		55,641
		79,253		19,816		–		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government		8,283		897		–		9,180
Canadian provincial and municipal governments		920		2,707		–		3,627
U.S. federal government		14,269		–		–		14,269
U.S. states, municipalities and agencies		18		4,077		1		4,096
Other governments		2,290		1,268		–		3,558
NHA MBS, U.S. agency MBS and CMO		–		13,216		–		13,216
Corporate debt		1,551		2,972		2		4,525
Corporate equity		37		126		1,441		1,604
		27,368		25,263		1,444		54,075
Other Securities		–		–		333		333
Fair Value Liabilities
Securities sold but not yet purchased		22,992		2,171		–		25,163
Structured note liabilities and other note liabilities		–		13,674		–		13,674
Annuity liabilities		–		749		–		749
		22,992		16,594		–		39,586
Derivative Assets
Interest rate contracts		4		9,223		–		9,227
Foreign exchange contracts		17		17,196		–		17,213
Commodity contracts		232		846		–		1,078
Equity contracts		93		1,333		–		1,426
Credit default swaps		–		7		–		7
		346		28,605		–		28,951
Derivative Liabilities
Interest rate contracts		7		8,309		–		8,316
Foreign exchange contracts		6		14,967		–		14,973
Commodity contracts		239		835		–		1,074
Equity contracts		166		3,220		–		3,386
Credit default swaps		–		55		–		55
		418		27,386		–		27,804

Quantitative Information about Level 3 Fair Value Measurements

The table below presents the fair values of our significant Level 3 financial instruments, the valuation techniques used to determine their fair values and the value ranges of significant unobservable inputs used in the valuations. We have not applied any other reasonably possible alternative assumption to the significant Level 3 categories of private equity investments, as the net asset values are provided by the investment or fund managers.

As at October 31, 2018 (Canadian $ in millions, except as noted)

Reporting line in fair value hierarchy table

Fair value of assets

Valuation techniques

Significant unobservable inputs

Range of input values (1)

Change in fair value reasonably possible alternatives (2)

Low

High

Private equity (3)

Corporate equity

1,825

Net Asset Value EV/EBITDA

Net Asset Value Multiple

na 6x

na 18x

na na

Loans

Business and government loans

1,450

Discounted cash flows

Discount margin

50 bps

175 bps

3

(1) The low and high input values represent the highest and lowest actual level of inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the specific underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date.

(2) The impact of assuming a 10 basis point increase or decrease in discount margin for business and government loans.

(3) Included in private equity is $889 million of Federal Reserve Bank and U.S. Federal Home Loan Bank shares that we hold to meet regulatory requirements.

na – not applicable

188 BMO Financial Group 201st Annual Report 2018

Significant Unobservable Inputs in Level 3 Instrument Valuations

Net Asset Value

Net asset value represents the estimated value of a security based on valuations received from the investment or fund manager. The valuation of certain private equity securities is based on the economic benefit we derive from our investment.

EV/EBITDA Multiple

The fair value of private equity and merchant banking investments is derived by calculating an enterprise value (“EV”) using the EV/EBITDA multiple and then proceeding through a waterfall of the company’s capital structure to determine the value of the assets or securities we hold. The EV/EBITDA multiple is determined using judgment in considering factors such as multiples for comparable listed companies, recent transactions and company-specific factors, as well as liquidity discounts that account for the lack of active trading in these assets and securities.

Discount Margin

Loan and corporate debt yield is the interest rate used to discount expected future cash flows in the valuation model. The discount margin is the difference between an instrument’s yield and a benchmark instrument’s yield. Benchmark instruments have high credit quality ratings and similar maturities, such as government bonds. The discount margin therefore represents a market return required for uncertainty in future cash flows. Generally a higher or lower discount margin will result in a lower or higher fair value.

Significant Transfers

Our policy is to record transfers of assets and liabilities between fair value hierarchy levels at their fair values as at the end of each reporting period, consistent with the date of the determination of fair value. Transfers between the various fair value hierarchy levels reflect changes in the availability of quoted market prices or observable market inputs that result from changes in market conditions. The following is a discussion of the significant transfers between Level 1, Level 2 and Level 3 balances for the year ended October 31, 2018.

During the year ended October 31, 2018, $2,578 million of trading securities, $714 million of FVTPL securities and $2,266 million of FVOCI securities ($176 million of trading securities and $107 million of available-for-sale securities, respectively, in 2017) were transferred from Level 1 to Level 2 due to reduced observability of the inputs used to value these securities. During the year ended October 31, 2018, $4,122 million of trading securities, $742 million of FVTPL securities and $4,044 million of FVOCI securities ($156 million of trading securities and $56 million of available-for-sale securities, respectively, in 2017) were transferred from Level 2 to Level 1 due to increased availability of quoted prices in active markets.

During the year ended October 31, 2017, $33 million of available-for-sale securities were transferred from Level 3 to Level 1 due to the availability of observable prices used to value these securities. No such transfers happened in 2018.

Changes in Level 3 Fair Value Measurements

The tables below present a reconciliation of all changes in Level 3 financial instruments during the years ended October 31, 2018 and 2017, including realized and unrealized gains (losses) included in earnings and other comprehensive income.

			Change in fair value
For the year ended October 31, 2018 (Canadian $ in millions)	Balance November 1, 2017		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2018		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
NHA MBS and U.S. agency MBS and CMO		–		(1	)		4			306		(54	)		–			–		–			255		(5	)
Corporate debt		–		–			–			7		–			–			–		–			7		–
Total trading securities		–		(1	)		4			313		(54	)		–			–		–			262		(5	)
FVTPL Securities
Corporate debt (3)		73		–			(4	)		5		–			–			–		(74	)		–		–
Corporate equity (3)(4)		1,701		12			31			307		(161	)		(2	)		–		(63	)		1,825		5
Total FVTPL securities		1,774		12			27			312		(161	)		(2	)		–		(137	)		1,825		5
FVOCI Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		2		–			–			–		–			(2	)		–		–			–		na
Corporate equity		–		–			–			62		–			–			–		–			62		na
Total FVOCI securities		3		–			–			62		–			(2	)		–		–			63		na
Business and Government Loans (5)		2,372		(2	)		24			604		–			(1,548	)		–		–			1,450		–
Derivative Liabilities
Equity contracts		–		–			–			–		–			–			1		–			1		–
Credit default swaps		–		–			–			–		–			–			1		–			1		–
Total derivative liabilities		–		–			–			–		–			–			2		–			2		–

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on FVTPL securities still held on October 31, 2018 are included in earnings for the year.

(3) Includes $73 million of debt instruments and $260 million of equity instruments reclassified from other securities to FVTPL upon adoption of IFRS 9 (see Note 28).

(4) Includes $1,441 million of equity instruments reclassified from available-for-sale to FVTPL upon adoption of IFRS 9 (see Note 28).

(5) Business and government loans were reclassified from amortized cost to FVTPL upon adoption of IFRS 9 (see Note 28).

na – not applicable

BMO Financial Group 201st Annual Report 2018 189

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

			Change in fair value
For the year ended October 31, 2017 (Canadian $ in millions)	Balance October 31, 2016		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2017		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
Corporate debt		91		1			1			–		–			(93	)		–		–			–		–
Total trading securities		91		1			1			–		–			(93	)		–		–			–		–
Available-for-Sale Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		4		–			–			–		(1	)		(1	)		–		–			2		na
Corporate equity		1,456		(40	)		(15	)		190		(117	)		–			–		(33	)		1,441		na
Total available-for-sale securities		1,461		(40	)		(15	)		190		(118	)		(1	)		–		(33	)		1,444		na
Other Securities		320		(9	)		(7	)		134		(102	)		(3	)		–		–			333		(8	)

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on trading securities, derivative assets and derivative liabilities still held on October 31, 2017 are included in earnings for the year.

na – not applicable

Trading-Related Revenue

Trading assets and liabilities, including derivatives, securities and financial instruments designated at fair value through profit or loss, are measured at fair value, with gains and losses recognized in trading revenues, non-interest revenue, in the Consolidated Statement of Income. Trading-related revenue includes net interest income and non-interest revenue and excludes underwriting fees and commissions on securities transactions, which are shown separately in the Consolidated Statement of Income. Net interest income arises from interest and dividends related to trading assets and liabilities and is reported net of interest expense associated with funding these assets and liabilities in the following table.

(Canadian $ in millions)	2018			2017			2016
Interest rates		437			480			663
Foreign exchange		377			369			349
Equities		449			239			188
Commodities		63			84			66
Other		82			47			25
Total trading revenue		1,408			1,219			1,291
Reported as:
Net interest income (1)		(422	)		(133	)		99
Non-interest revenue – trading revenue		1,830			1,352			1,192
Total trading revenue		1,408			1,219			1,291

(1) Amounts in brackets denote net interest expense.

Note 18: Offsetting of Financial Assets and Financial Liabilities

Financial assets and financial liabilities are offset and the net amount is reported in our Consolidated Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The following table presents the amounts that have been offset in our Consolidated Balance Sheet, including securities purchased under resale agreements, securities sold under repurchase agreements and derivative instruments, generally under a market settlement mechanism (e.g. an exchange or clearing house) where simultaneous net settlement can be achieved to eliminate credit and liquidity risk between counterparties. Also presented are amounts not offset in the Consolidated Balance Sheet related to transactions where a master netting agreement or similar arrangement is in place with a right to offset the amounts only in the event of default, insolvency or bankruptcy, or where the offset criteria are otherwise not met.

(Canadian $ in millions)													2018
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		86,635		1,584		85,051		13,355		70,640		–		1,056
Derivative instruments		52,810		26,606		26,204		15,575		505		3,576		6,548
		139,445		28,190		111,255		28,930		71,145		3,576		7,604
Financial Liabilities
Derivative instruments		51,017		26,606		24,411		15,575		555		1,492		6,789
Securities lent or sold under repurchase agreements		68,268		1,584		66,684		13,355		53,071		–		258
		119,285		28,190		91,095		28,930		53,626		1,492		7,047

190 BMO Financial Group 201st Annual Report 2018

(Canadian $ in millions)													2017
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		80,948		5,901		75,047		9,382		65,044		–		621
Derivative instruments		45,064		16,113		28,951		19,909		933		2,903		5,206
		126,012		22,014		103,998		29,291		65,977		2,903		5,827
Financial Liabilities
Derivative instruments		43,917		16,113		27,804		19,909		1,263		1,642		4,990
Securities lent or sold under repurchase agreements		61,020		5,901		55,119		9,382		45,436		–		301
		104,937		22,014		82,923		29,291		46,699		1,642		5,291

(1) Financial assets received/pledged as collateral are disclosed at fair value and are limited to the net balance sheet exposure (i.e. any over-collateralization is excluded from the table).

(2) Certain amounts of collateral are restricted from being sold or repledged except in the event of default or the occurrence of other predetermined events.

(3) Not intended to represent our actual exposure to credit risk.

Note 19: Capital Management

Our objective is to maintain a strong capital position in a cost-effective structure that: is appropriate given our target regulatory capital ratios and internal assessment of required economic capital; is consistent with our target credit ratings; underpins our operating groups’ business strategies; and supports depositor, investor and regulator confidence, while building long-term shareholder value.

Our approach includes establishing limits, targets and performance measures that are used to manage balance sheet positions, risk levels and capital requirements, as well as issuing and redeeming capital instruments to achieve a cost-effective capital structure.

Regulatory capital requirements and risk-weighted assets for the consolidated entity are determined in accordance with OSFI’s Capital Adequacy Requirements Guideline.

Common Equity Tier 1 (CET1) capital is the most permanent form of capital. It is comprised of common shareholders’ equity less deductions for goodwill, intangible assets and certain other items. Tier 1 capital is primarily comprised of CET1, preferred shares and innovative hybrid instruments, less certain regulatory deductions.

Tier 2 capital is primarily comprised of subordinated debentures and may include certain loan loss allowances, less certain regulatory deductions. Total capital includes Tier 1 and Tier 2 capital. Details of the components of our capital position are presented in Notes 11, 12, 15 and 16.

CET1 Capital Ratio, Tier 1 Capital Ratio, Total Capital Ratio and Leverage Ratio are the primary regulatory capital measures.

• The CET1 Capital Ratio is defined as common shareholders’ equity, net of capital adjustments, divided by CET1 capital risk-weighted assets.

• The Tier 1 Capital Ratio is defined as Tier 1 capital divided by Tier 1 capital risk-weighted assets.

• The Total Capital Ratio is defined as Total capital divided by Total capital risk-weighted assets.

• The Leverage Ratio is defined as Tier 1 capital divided by the sum of on-balance sheet items and specified off-balance sheet items, net of specified adjustments.

As at October 31, 2018, we met OSFI’s required target capital ratios, which include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Tier 1 Surcharge for domestic systemically important banks, a Countercyclical Buffer and a 1.5% Domestic Stability Buffer.

Regulatory Capital Measures and Risk-Weighted Assets

(Canadian $ in millions, except as noted)	2018		2017
Common Equity Tier 1 Capital		32,721		30,633
Tier 1 Capital		37,220		35,108
Total Capital		44,116		40,596
Common Equity Tier 1 Capital Risk-Weighted Assets		289,237		269,466
Tier 1 Capital Risk-Weighted Assets		289,420		269,466
Total Capital Risk-Weighted Assets		289,604		269,466
Common Equity Tier 1 Capital Ratio		11.3%		11.4%
Tier 1 Capital Ratio		12.9%		13.0%
Total Capital Ratio		15.2%		15.1%
Leverage Ratio		4.2%		4.4%

All 2018 and 2017 balances above are on an “all-in” basis.

BMO Financial Group 201st Annual Report 2018 191

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 20: Employee Compensation – Share-Based Compensation

Stock Option Plan

We maintain a Stock Option Plan for designated officers and employees. Options are granted at an exercise price equal to the closing price of our common shares on the day before the grant date. Stock options granted on or after December 2013 vest in equal tranches of 50% on the third and fourth anniversaries of their grant date. Options granted prior to December 2013 vest in tranches over a four-year period starting from their grant date. Each tranche is treated as a separate award with a different vesting period. Certain options can only be exercised once certain performance targets are met. All options expire 10 years from their grant date.

We determine the fair value of stock options on their grant date and record this amount as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. When these stock options are exercised, we issue shares and record the amount of proceeds, together with the amount recorded in contributed surplus, in share capital. The estimated grant date fair value of stock options granted to employees who are eligible to retire is expensed at the date of grant.

The following table summarizes information about our Stock Option Plan:

(Canadian $, except as noted)			2018				2017				2016
	Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)
Outstanding at beginning of year		7,525,296		72.05		9,805,299		77.41		12,111,153		80.19
Granted		705,398		100.63		723,431		96.90		754,714		77.23
Exercised		1,513,307		58.40		2,233,801		57.80		2,103,391		55.32
Forfeited/cancelled		152,417		86.85		13,243		66.89		104,606		71.76
Expired		469,769		153.40		756,390		195.02		852,571		179.53
Outstanding at end of year		6,095,201		72.19		7,525,296		72.05		9,805,299		77.41
Exercisable at end of year		3,782,481		61.39		4,584,375		67.42		5,605,485		83.34
Available for grant		3,405,239				3,811,157				4,151,676

(1) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018, October 31, 2017 and October 31, 2016, respectively.

For foreign currency denominated options exercised or expired during the year, the weighted-average exercise prices are translated using the exchange rates as at the settlement date and expiry date respectively.

Employee compensation expense related to this plan for the years ended October 31, 2018, 2017 and 2016 was $7 million, $8 million and $6 million before tax, respectively ($7 million, $7 million and $6 million after tax, respectively).

The intrinsic value of a stock option grant is the difference between the current market price of our common shares and the strike price of the option. The aggregate intrinsic value of stock options outstanding at October 31, 2018, 2017 and 2016 was $162 million, $232 million and $211 million, respectively. The aggregate intrinsic value of stock options exercisable at October 31, 2018, 2017 and 2016 was $140 million, $174 million and $146 million, respectively.

Options outstanding and exercisable at October 31, 2018 by range of exercise price were as follows:

(Canadian $, except as noted)											2018
			Options outstanding						Options exercisable
Range of exercise prices	Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)		Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)
$30.01 to $40.00		13,690		0.1		34.13		13,690		0.1		34.13
$50.01 to $60.00		1,736,930		2.3		55.88		1,736,930		2.3		55.88
$60.01 to $70.00		1,798,219		4.7		64.68		1,798,219		4.7		64.68
$70.01 and over (1)		2,546,362		7.7		88.83		233,642		6.0		78.62

(1) Certain options were issued as part of the acquisition of M&I.

(2) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018.

The following table summarizes further information about our Stock Option Plan:

(Canadian $ in millions, except as noted)	2018		2017		2016
Unrecognized compensation cost for non-vested stock option awards		5		5		4
Weighted-average period over which this cost will be recognized (in years)		2.6		2.7		2.5
Total intrinsic value of stock options exercised		67		90		55
Cash proceeds from stock options exercised		88		129		116
Weighted-average share price for stock options exercised (in dollars)		102.55		98.05		81.41

192 BMO Financial Group 201st Annual Report 2018

The fair value of options granted was estimated using a binomial option pricing model. The weighted-average fair value of options granted during the years ended October 31, 2018, 2017 and 2016 was $11.30, $11.62 and $7.60, respectively. To determine the fair value of the stock option tranches on the grant date, the following ranges of values were used for each option pricing assumption:

	2018		2017		2016
Expected dividend yield		4.1%		4.3%		5.5%
Expected share price volatility		17.0% – 17.3%		18.4% – 18.8%		19.8% – 20.0%
Risk-free rate of return		2.1%		1.7% – 1.8%		1.3% – 1.4%
Expected period until exercise (in years)		6.5 – 7.0		6.5 – 7.0		6.5 – 7.0

Changes to the input assumptions can result in different fair value estimates.

Expected dividend yield is based on market expectations of future dividends on our common shares. Expected share price volatility is determined based on the market consensus implied volatility for traded options on our common shares. The risk-free rate is based on the yields of a Canadian swap curve with maturities similar to the expected period until exercise of the options. The weighted-average exercise price on the grant date for the years ended October 31, 2018, 2017 and 2016 was $100.63, $96.90 and $77.23, respectively.

Other Share-Based Compensation

Share Purchase Plans

We offer various employee share purchase plans. The largest of these plans provides employees with the option of directing a portion of their gross salary toward the purchase of our common shares. We match 50% of employee contributions up to 6% of their individual gross salary to a maximum of $100,000. Our contributions during the first two years vest after two years of participation in the plan, with subsequent contributions vesting immediately. The shares held in the employee share purchase plan are purchased on the open market and are considered outstanding for purposes of computing earnings per share. The dividends earned on our common shares held by the plan are used to purchase additional common shares on the open market.

We account for our contribution as employee compensation expense when it is contributed to the plan.

Employee compensation expense related to these plans for the years ended October 31, 2018, 2017 and 2016 was $51 million, $53 million and $51 million, respectively. There were 17.8 million, 18.3 million and 18.9 million common shares held in these plans for the years ended October 31, 2018, 2017 and 2016, respectively.

Compensation Trusts

We sponsor various share ownership arrangements, certain of which are administered through trusts into which our matching contributions are paid.

We are not required to consolidate our compensation trusts. The assets held by the trusts are not included in our consolidated financial statements.

Total assets held under our share ownership arrangements amounted to $1,752 million as at October 31, 2018 ($1,805 million in 2017).

Mid-Term Incentive Plans

We offer mid-term incentive plans for executives and certain senior employees. Payment amounts are adjusted to reflect reinvested dividends and changes in the market value of our common shares. Depending on the plan, the recipient receives either a single cash payment at the end of the three-year period of the plan, or cash payments over the three years of the plan. As the awards are cash settled, they are recorded as liabilities. Amounts payable under such awards are recorded as compensation expense over the vesting period. Amounts related to units granted to employees who are eligible to retire are expensed at the time of grant. Subsequent changes in the fair value of the liability are recorded in compensation expense in the period in which they arise.

Mid-term incentive plan units granted during the years ended October 31, 2018, 2017 and 2016 totalled 5.9 million, 5.9 million and 6.4 million, respectively.

Prior to 2015, we entered into agreements with third parties to assume our liabilities related to a portion of units granted for a fixed up-front payment. For units subject to such arrangements, we no longer have any obligation for future cash payments and as a result no liability is recorded related to these awards. All cash payments made under such arrangements are deferred in the Consolidated Balance Sheet as other assets and are recognized on a straight-line basis over the vesting period. Subsequent changes in the market value of our common shares do not affect the amount of compensation expense related to these awards. During the year ended October 31, 2017, all remaining deferred compensation related to these arrangements was recognized.

Employee compensation expense related to plans where we entered into agreements with third parties for the years ended October 31, 2018, 2017 and 2016 was $nil, $(7) million and $26 million before tax, respectively ($nil, $(5) million and $19 million after tax, respectively).

Mid-term incentive plan units for which we did not enter into agreements with third parties for the years ended October 31, 2018, 2017 and 2016 totalled 5.9 million, 5.9 million and 6.4 million units, respectively. The grant date fair value of these awards as at October 31, 2018, 2017 and 2016 was $581 million, $515 million and $492 million, respectively, for which we recorded employee compensation expense of $595 million, $703 million and $537 million before tax, respectively ($437 million, $516 million and $397 million after tax, respectively). We hedge the impact of the change in market value of our common shares by entering into total return swaps (equity contracts). We also enter into foreign currency swaps to manage the foreign exchange translation from our United States businesses. Gains on total return swaps and foreign currency swaps recognized for the years ended October 31, 2018, 2017 and 2016 were $51 million, $183 million and $111 million, respectively, resulting in net employee compensation expense of $544 million, $520 million and $426 million, respectively.

A total of 17.1 million, 17.0 million and 17.0 million mid-term incentive plan units were outstanding as at October 31, 2018, 2017 and 2016, respectively, and the intrinsic value of those awards which had vested was $1,269 million, $1,253 million and $883 million, respectively. Cash payments made in relation to these liabilities were $598 million, $343 million and $131 million, respectively.

BMO Financial Group 201st Annual Report 2018 193

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Deferred Incentive Plans

We offer deferred incentive plans for members of our Board of Directors, executives and key employees in BMO Capital Markets and Wealth Management. Under these plans, fees, annual incentive payments and/or commissions can be deferred as share units of our common shares. These share units are either fully vested on the grant date or vest at the end of three years. The value of these share units is adjusted to reflect reinvested dividends and changes in the market value of our common shares.

Deferred incentive plan payments are paid in cash upon the participant’s departure from the bank.

Employee compensation expense for these plans is recorded in the year the fees, incentive payments and/or commissions are earned. Changes in the amount of the incentive plan payments as a result of dividends and share price movements are recorded as increases or decreases in employee compensation expense in the period of the change.

Deferred incentive plan units granted during the years ended October 31, 2018, 2017 and 2016 totalled 0.3 million, 0.3 million and 0.4 million, respectively, and the grant date fair value of these units was $33 million, $32 million and $28 million, respectively.

Liabilities related to these plans are recorded in other liabilities in our Consolidated Balance Sheet and totalled $485 million and $499 million as at October 31, 2018 and 2017, respectively. Payments made under these plans for the years ended October 31, 2018, 2017 and 2016 were $60 million, $32 million and $53 million, respectively.

Employee compensation expense related to these plans for the years ended October 31, 2018, 2017 and 2016 was $27 million, $91 million and $67 million before tax, respectively ($20 million, $67 million and $50 million after tax, respectively). We have entered into derivative instruments to hedge our exposure related to these plans. Changes in the fair value of these derivatives are recorded as employee compensation expense in the period in which they arise. Gains on these derivatives for the years ended October 31, 2018, 2017 and 2016 were $8 million, $78 million and $57 million before tax, respectively. These gains resulted in net employee compensation expense for the years ended October 31, 2018, 2017 and 2016 of $19 million, $13 million and $10 million before tax, respectively ($14 million, $10 million and $7 million after tax, respectively).

A total of 4.9 million, 5.0 million and 4.8 million deferred incentive plan units were outstanding as at October 31, 2018, 2017 and 2016, respectively.

Note 21: Employee Compensation – Pension and Other Employee Future Benefits

Pension and Other Employee Future Benefit Plans

We sponsor a number of arrangements globally, that provide pension and other employee future benefits to our retired and current employees. The largest of these arrangements, by defined benefit obligation, are the primary defined benefit pension plans for employees in Canada and the United States and the primary other employee future benefit plan for employees in Canada.

Pension arrangements include defined benefit pension plans, as well as supplementary arrangements that provide pension benefits in excess of statutory limits. Generally, under these plans we provide retirement benefits based on an employee’s years of service and average annual earnings over a period of time prior to retirement. Our pension and other employee future benefit expenses, recorded in employee compensation expense, mainly comprise the current service cost plus or minus the interest on net defined benefit assets or liabilities. In addition, we provide defined contribution pension plans to employees in some of our subsidiaries. The costs of these plans, recorded in employee compensation expense, are equal to our contributions to the plans.

The defined benefit pension plans for our employees in the United States were closed to new members on April 1, 2016 and closed to future accruals on March 1, 2017. A defined contribution pension plan was made available for employees affected by the closure. As a result of the closure of these plans, we recorded a curtailment gain of $52 million in non-interest expense, employee compensation, in our Consolidated Statement of Income in 2016.

During the fourth quarter of 2018, we announced changes to our other employee future benefits plan for Canadian employees that will become mandatory for new retirees beginning January 1, 2021. Plan changes include an increase in the service requirement for eligibility and flexible benefits with employer premium caps. We recorded a $277 million benefit from the remeasurement of the benefit liability in non-interest expense, employee compensation, in our Consolidated Statement of Income.

We also provide other employee future benefits, including health and dental care benefits and life insurance, for eligible current and retired employees.

Short-term employee benefits, such as salaries, paid absences, bonuses and other benefits, are accounted for on an accrual basis over the period in which the employees provide the related services.

Investment Policy

The defined benefit pension plans are administered under a defined governance structure, with the oversight resting with the Board of Directors.

The plans are managed under a framework that considers both assets and liabilities in the development of an investment policy and in managing risk. Over the past several years, we have implemented a liability-driven investment strategy for the primary Canadian plan to enhance risk-adjusted returns while reducing the plan’s surplus volatility. This strategy has reduced the impact of the plan on our regulatory capital.

The plans invest in asset classes that include equities, fixed income and alternative strategies, under established investment guidelines. Plan assets are diversified across asset classes and by geographic exposure. They are managed by asset management firms that are responsible for the selection of investment securities. Derivative instruments are permitted under policy guidelines and are generally used to hedge foreign currency exposures, manage interest rate exposures or replicate the return of an asset.

194 BMO Financial Group 201st Annual Report 2018

Asset Allocations

The asset allocation ranges and weighted-average actual asset allocations of our primary pension plans, based on the fair market values at October 31, are as follows:

	Pension benefit plans
	Target range 2018		Actual 2018		Actual 2017
Equities		25% – 50%		37%		40%
Fixed income investments		25% – 55%		46%		46%
Other		10% – 40%		17%		14%

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis.

Risk Management

The defined benefit pension plans are exposed to various risks, including market risk (interest rate, equity and foreign currency risks), credit risk, operational risk, surplus risk and longevity risk. We follow a number of approaches to monitor and actively manage these risks, including:

• monitoring surplus-at-risk, which measures a plan’s risk in an asset-liability framework;

• stress testing and scenario analyses to evaluate the volatility of the plans’ financial positions and any potential impact on the bank;

• hedging of currency exposures and interest rate risk within policy limits;

• controls related to asset mix allocations, geographic allocations, portfolio duration, credit quality of debt securities, sector guidelines, issuer/counterparty limits and others; and

• ongoing monitoring of exposures, performance and risk levels.

Pension and Other Employee Future Benefit Liabilities

Our actuaries perform valuations of our defined benefit obligations for pension and other employee future benefits as at October 31 of each year using the projected unit credit method based on management’s assumptions about discount rates, rates of compensation increase, retirement age, mortality and health care cost trend rates.

The discount rates for the primary Canadian and U.S. pension and other employee future benefit plans were selected based on the yields of high-quality AA rated corporate bonds with terms matching the plans’ cash flows.

The fair value of plan assets is deducted from the defined benefit obligation to determine the net defined benefit asset or liability. For defined benefit pension plans that are in a net defined benefit asset position, 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”). Changes in the asset ceiling are recognized in other comprehensive income. Components of the change in our net defined benefit assets or liabilities and our pension and other employee future benefit expense are as follows:

Current service cost represents benefits earned in the current year. The cost is determined with reference to the current workforce and the amount of benefits to which employees will be entitled upon retirement, based on the provisions of our benefit plans.

Interest on net defined benefit asset or liability represents the increase in the net defined benefit asset or liability that results from the passage of time and is determined by applying the discount rate to the net defined benefit asset or liability.

Actuarial gains and losses may arise in two ways. First, each year our actuaries recalculate the defined benefit obligations and compare them to those estimated as at the previous year end. Any differences that result from changes in demographic and economic assumptions or from plan member experience being different from management’s expectations at the previous year end are considered actuarial gains or losses. Second, actuarial gains and losses arise when there are differences between the discount rate and actual returns on plan assets. Actuarial gains and losses are recognized immediately in other comprehensive income as they occur and are not subsequently reclassified to income in future periods.

Plan amendments are changes in our defined benefit obligations that result from changes to provisions of the plans. The effects of plan amendments are recognized immediately in income when a plan is amended.

Settlements occur when defined benefit obligations for plan participants are settled, usually through lump sum cash payments, and as a result we no longer have any obligation to provide such participants with benefit payments in the future.

Funding of Pension and Other Employee Future Benefit Plans

We fund our defined benefit pension plans in Canada and the United States in accordance with statutory requirements, and the assets in these plans are used to pay benefits to retirees and other employees. Some groups of employees are also eligible to make voluntary contributions in order to receive enhanced benefits. Our supplementary pension plan in Canada is funded, while in the United States the supplementary pension plan is unfunded.

Our other employee future benefit plans in Canada and the United States are either partially funded or unfunded. Benefit payments related to these plans are paid either through the respective plan or directly by us.

We measure the fair value of plan assets for our plans in Canada and the United States as at October 31. In addition to actuarial valuations for accounting purposes, we are required to prepare valuations for determining our minimum funding requirements for our pension arrangements in accordance with the relevant statutory framework (our “funding valuation”). An annual funding valuation is performed for our plans in Canada and the United States. The most recent funding valuation for our primary Canadian pension plan was performed as at October 31, 2018 and the most recent funding valuation for our primary U.S. pension plan was performed as at January 1, 2018. Benefit payments for fiscal 2019 are estimated to be $486 million.

BMO Financial Group 201st Annual Report 2018 195

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary of plan information for the past three years is as follows:

(Canadian $ in millions)	Pension benefit plans									Other employee future benefit plans
	2018			2017			2016			2018			2017			2016
Defined benefit obligation		8,311			8,846			8,992			1,113			1,460			1,493
Fair value of plan assets		8,719			8,990			8,655			153			157			150
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)
Surplus (deficit) is comprised of:
Funded or partially funded plans		573			339			(127	)		37			28			7
Unfunded plans		(165	)		(195	)		(210	)		(997	)		(1,331	)		(1,350	)
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)

Pension and Other Employee Future Benefit Expenses

Pension and other employee future benefit expenses are determined as follows:

(Canadian $ in millions)	Pension benefit plans								Other employee future benefit plans
	2018			2017		2016			2018			2017			2016
Annual benefits expense
Current service cost		210			254		224			26			32			25
Net interest (income) expense on net defined benefit (asset) liability		(10	)		7		(10	)		45			47			52
Past service cost (income)		7			–		–			(277	)		–			–
Administrative expenses		5			5		5			–			–			–
Remeasurement of other long-term benefits		–			–		–			(10	)		(6	)		6
Benefits expense		212			266		219			(216	)		73			83
Canada and Quebec pension plan expense		76			75		73			–			–			–
Defined contribution expense		153			123		96			–			–			–
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income		441			464		388			(216	)		73			83

Weighted-average Assumptions Used to Determine Benefit Expenses

	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018			2017			2016
Discount rate at beginning of year (3)(4)		3.5%		3.4%		4.2%		3.6%			3.6%			4.4%
Rate of compensation increase		2.4%		2.8%		2.7%		2.0%			2.4%			2.4%
Assumed overall health care cost trend rate		na		na		na		4.9%	(1)		5.2%	(2)		5.3%	(2)

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

(3) The pension benefit current service cost was calculated using a separate discount rate of 3.70% and 3.68% for 2018 and 2017, respectively.

(4) The other employee future benefit plans current service cost was calculated using a separate discount rate of 3.76% and 3.78% for 2018 and 2017, respectively.

na – not applicable

Assumptions regarding future mortality are based on published statistics and mortality tables calibrated to plan experience, when applicable. The current life expectancies underlying the amounts of the defined benefit obligations for our primary plans are as follows:

(Years)	Canada				United States
	2018		2017		2018		2017
Life expectancy for those currently age 65
Males		23.7		23.6		21.9		22.0
Females		24.0		24.0		23.4		23.4
Life expectancy at age 65 for those currently age 45
Males		24.6		24.6		23.1		23.2
Females		25.0		24.9		24.5		24.6

196 BMO Financial Group 201st Annual Report 2018

Changes in the estimated financial positions of our defined benefit pension plans and other employee future benefit plans are as follows:

(Canadian $ in millions, except as noted)	Pension benefit plans						Other employee future benefit plans
	2018			2017			2018			2017
Defined benefit obligation
Defined benefit obligation at beginning of year		8,846			8,992			1,460			1,493
Current service cost		210			254			26			32
Past service cost (income)		7			–			(277	)		–
Interest cost		299			300			51			52
Benefits paid		(492	)		(448	)		(43	)		(45	)
Employee contributions		15			15			5			5
Actuarial (gains) losses due to:
Changes in demographic assumptions		(50	)		(127	)		(31	)		(107	)
Changes in financial assumptions		(562	)		(150	)		(77	)		(2	)
Plan member experience		16			45			(4	)		39
Foreign exchange and other		22			(35	)		3			(7	)
Defined benefit obligation at end of year		8,311			8,846			1,113			1,460
Wholly or partially funded defined benefit obligation		8,146			8,651			116			129
Unfunded defined benefit obligation		165			195			997			1,331
Total defined benefit obligation		8,311			8,846			1,113			1,460
Weighted-average assumptions used to determine the defined benefit obligation
Discount rate at end of year		4.0%			3.5%			4.1%			3.6%
Rate of compensation increase		2.4%			2.4%			2.0%			2.0%
Assumed overall health care cost trend rate		na			na			4.9%	(1)		5.2%	(2)
Fair value of plan assets
Fair value of plan assets at beginning of year		8,990			8,655			157			150
Interest income		309			293			6			5
Return on plan assets (excluding interest income)		(323	)		277			(10	)		8
Employer contributions		213			219			35			40
Employee contributions		15			15			5			5
Benefits paid		(492	)		(448	)		(43	)		(45	)
Administrative expenses		(5	)		(5	)		–			–
Foreign exchange and other		12			(16	)		3			(6	)
Fair value of plan assets at end of year		8,719			8,990			153			157
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Recorded in:
Other assets		664			508			–			–
Other liabilities		(256	)		(364	)		(960	)		(1,303	)
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Actuarial gains (losses) recognized in other comprehensive income
Net actuarial gains (losses) on plan assets		(323	)		277			(10	)		8
Actuarial gains (losses) on defined benefit obligation due to:
Changes in demographic assumptions		50			127			30			104
Changes in financial assumptions		562			150			72			–
Plan member experience		(16	)		(45	)		1			(41	)
Foreign exchange and other		6			(3	)		–			–
Actuarial gains recognized in other comprehensive income for the year		279			506			93			71

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

na – not applicable

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis. The fair values of plan assets held by our primary plans as at October 31 are as follows:

(Canadian $ in millions)	2018								2017
	Quoted		Unquoted			Total			Quoted		Unquoted			Total
Cash and money market funds		114		–			114			150		5			155
Securities issued or guaranteed by:
Canadian federal government		108		41			149			143		47			190
Canadian provincial and municipal governments		219		309			528			471		320			791
U.S. federal government		297		–			297			307		20			327
U.S. states, municipalities and agencies		–		12			12			–		16			16
Pooled funds		1,591		2,715			4,306			1,743		2,012			3,755
Derivative instruments		1		(14	)		(13	)		1		(29	)		(28	)
Corporate debt		6		1,055			1,061			9		1,251			1,260
Corporate equity		1,105		–			1,105			1,291		–			1,291
	3,441		4,118			7,559			4,115		3,642			7,757

Certain comparative figures have been reclassified to conform with the current year’s presentation.

No plan assets are directly invested in the bank’s or related parties’ securities as at October 31, 2018 and 2017. As at October 31, 2018, our primary Canadian plan indirectly held, through pooled funds, approximately $15 million ($3 million in 2017) of our common shares. The plans do not hold any property we occupy or other assets we use.

The plans paid $4 million in the year ended October 31, 2018 ($4 million in 2017) to the bank and certain of our subsidiaries for investment management, record-keeping, custodial and administrative services rendered.

BMO Financial Group 201st Annual Report 2018 197

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Sensitivity of Assumptions

Key weighted-average assumptions used in measuring the defined benefit obligations for our primary plans are outlined in the following table. The sensitivity analysis provided in the table should be used with caution as it is hypothetical and the impact of changes in each key assumption may not be linear. The sensitivities to changes in each key variable have been calculated independently of the impact of changes in other key variables. Actual experience may result in simultaneous changes in a number of key assumptions, which would amplify or reduce certain sensitivities.

		Defined benefit obligation
(Canadian $ in millions, except as noted)		Pension benefit plans			Other employee future benefit plans
Discount rate (%)			4.0			4.1
Impact of:	1% increase ($)		(811	)		(102	)
	1% decrease ($)		1,016			126
Rate of compensation increase (%)			2.4			2.0
Impact of:	0.25% increase ($)		39			–	(1)
	0.25% decrease ($)		(38	)		–	(1)
Mortality
Impact of:	1 year shorter life expectancy ($)		(138	)		(23	)
	1 year longer life expectancy ($)		135			23
Assumed overall health care cost trend rate (%)			na			4.9	(2)
Impact of:	1% increase ($)		na			47
	1% decrease ($)		na			(48	)

(1) The change in this assumption is immaterial.

(2) Trending to 4.1% in 2040 and remaining at that level thereafter.

na – not applicable

Maturity Profile

The duration of the defined benefit obligation for our primary plans is as follows:

(Years)	2018		2017
Canadian pension plans		14.0		14.7
U.S. pension plans		7.2		8.0
Canadian other employee future benefit plans		14.3		16.5

Cash Flows

Cash payments we made during the year in connection with our employee future benefit plans are as follows:

(Canadian $ in millions)	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018		2017		2016
Contributions to defined benefit plans		154		187		192		–		–		–
Contributions to defined contribution plans		153		123		96		–		–		–
Benefits paid directly to pensioners		59		32		43		35		40		38
		366		342		331		35		40		38

Our best estimate of the contributions we expect to make for the year ending October 31, 2019 is approximately $246 million to our defined benefit pension plans and $41 million to our other employee future benefit plans.

Note 22: Income Taxes

We report our provision for income taxes in our Consolidated Statement of Income based upon transactions recorded in our consolidated financial statements regardless of when they are recognized for income tax purposes, with the exception of repatriation of retained earnings from our subsidiaries, as noted below.

In addition, we record an income tax expense or benefit in other comprehensive income or directly in shareholders’ equity when the taxes relate to amounts recorded in other comprehensive income or shareholders’ equity. For example, income tax expense (recovery) on hedging gains (losses) related to our net investment in foreign operations is recorded in our Consolidated Statement of Comprehensive Income as part of unrealized gains (losses) on translation of net foreign operations.

Current tax is the amount of income tax recoverable (payable) in respect of the taxable loss (profit) for a period. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for accounting and tax purposes. Deferred income tax assets and liabilities are measured at the tax rates expected to apply when temporary differences reverse. Changes in deferred income tax assets and liabilities related to a change in tax rates are recorded in income in the period the tax rate is substantively enacted, except to the extent that the tax arises from a transaction or event which is recognized either in other comprehensive income or directly in shareholders’ equity. Current and deferred taxes are offset only when they are levied by the same taxing authority, levied on the same entity or group of entities and when there is a legal right to offset.

Included in deferred income tax assets is $42 million ($126 million in 2017) related to Canadian tax loss carryforwards that will expire in 2037, $962 million ($1,545 million in 2017) related to both U.S. tax loss carryforwards and tax credits that will expire in various amounts in U.S. taxation years from 2026 through 2038 and $17 million ($16 million in 2017) related to U.K. tax loss carryforwards that are available for use indefinitely against relevant profits generated in the U.K. On the evidence available, including management projections of income, we believe that it is probable there will be sufficient taxable income generated by our business operations to support these deferred tax assets. The amount of tax on temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognized in our Consolidated Balance Sheet as at October 31, 2018 is $132 million ($282 million in 2017), of which $8 million ($53 million in 2017) is scheduled to expire within five years. Deferred tax assets have not been recognized in respect of these items because it is not probable that realization of these assets will occur.

198 BMO Financial Group 201st Annual Report 2018

Income that we earn through our foreign subsidiaries is generally taxed in the foreign country in which they operate. Income that we earn through our foreign branches is also generally taxed in the foreign country in which they operate. Canada also taxes the income we earn through foreign branches and a credit is allowed for certain foreign taxes paid on such income. Repatriation of earnings from certain foreign subsidiaries would require us to pay tax on certain of these earnings. As repatriation of such earnings is not planned in the foreseeable future, we have not recorded a related deferred income tax liability. The taxable temporary differences associated with the repatriation of earnings from investments in certain subsidiaries, branches, associates and interests in joint ventures for which deferred tax liabilities have not been recognized totalled $13 billion as at October 31, 2018 ($12 billion in 2017).

Provision for Income Taxes

(Canadian $ in millions)	2018			2017			2016
Consolidated Statement of Income
Current
Provision for income taxes for the current period		1,331			1,254			927
Adjustments in respect of current tax for prior periods		20			18			8
Deferred
Origination and reversal of temporary differences		276			80			183
Effect of changes in tax rates		425			(2	)		(2	)
Previously unrecognized tax loss, tax credit or temporary difference for a prior period		(92	)		(54	)		(15	)
		1,960			1,296			1,101
Other Comprehensive Income and Shareholders’ Equity
Income tax expense (recovery) related to:
Unrealized gains (losses) on FVOCI securities (1)		(69	)		21			64
Reclassification to earnings of (gains) on FVOCI securities (1)		(23	)		(36	)		(11	)
Gains (losses) on derivatives designated as cash flow hedges		(432	)		(322	)		4
Reclassification to earnings of losses on derivatives designated as cash flow hedges		121			21			6
Hedging of unrealized (gains) losses on translation of net foreign operations		(56	)		8			10
Gains (losses) on remeasurement of pension and other employee future benefit plans		111			157			(156	)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value		(6	)		(53	)		(55	)
Share-based compensation		10			(12	)		–
Total provision for income taxes		1,616			1,080			963

(1) Fiscal 2017 and prior years represent available-for-sale securities (Note 3).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Components of Total Provision for Income Taxes (Canadian $ in millions)	2018			2017		2016
Canada: Current income taxes
Federal		501			470		434
Provincial		299			272		248
		800			742		682
Canada: Deferred income taxes
Federal		(45	)		2		(120	)
Provincial		(27	)		–		(67	)
		(72	)		2		(187	)
Total Canadian		728			744		495
Foreign: Current income taxes		224			281		220
Deferred income taxes		664			55		248
Total foreign		888			336		468
Total provision for income taxes		1,616			1,080		963

Set out below is a reconciliation of our statutory tax rates and income taxes that would be payable at these rates to the effective income tax rates and provision for income taxes that we have recorded in our Consolidated Statement of Income:

(Canadian $ in millions, except as noted)			2018					2017					2016
Combined Canadian federal and provincial income taxes at the statutory tax rate	1,971			26.6	%	1,768			26.6	%	1,525			26.6	%
Increase (decrease) resulting from:
Tax-exempt income from securities	(226	)		(3.0	)	(409	)		(6.2	)	(367	)		(6.4	)
Foreign operations subject to different tax rates	(110	)		(1.5	)	22			0.3		13			0.3
Change in tax rate for deferred income taxes	425			5.7		(2	)		–		(2	)		–
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(92	)		(1.2	)	(54	)		(0.8	)	(15	)		(0.3	)
Income attributable to investments in associates and joint ventures	(39	)		(0.5	)	(103	)		(1.5	)	(47	)		(0.8	)
Adjustments in respect of current tax for prior periods	20			0.3		18			0.2		8			0.1
Other	11			0.1		56			0.9		(14	)		(0.3	)
Provision for income taxes and effective tax rate	1,960			26.5	%	1,296			19.5	%	1,101			19.2	%

BMO Financial Group 201st Annual Report 2018 199

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of Deferred Income Tax Balances

(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, November 1, 2017 (2)			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2018
Allowance for credit losses		684			(150	)		–			(50	)		484
Employee future benefits		416			(111	)		(23	)		–			282
Deferred compensation benefits		545			(50	)		–			(1	)		494
Other comprehensive income		50			–			138			7			195
Tax loss carryforwards		1,233			(628	)		–			1			606
Tax credits		454			(39	)		–			–			415
Premises and equipment		(664	)		148			–			1			(515	)
Pension benefits		(52	)		19			(88	)		–			(121	)
Goodwill and intangible assets		(261	)		60			–			–			(201	)
Securities		21			17			–			–			38
Other		180			125			(10	)		(9	)		286
Total		2,606			(609	)		17			(51	)		1,963
(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, October 31, 2016			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2017
Allowance for credit losses		883			(118	)		–			(55	)		710
Employee future benefits		424			12			(14	)		(6	)		416
Deferred compensation benefits		462			102			–			(19	)		545
Other comprehensive income		(82	)		–			112			(3	)		27
Tax loss carryforwards		1,343			(18	)		–			(92	)		1,233
Tax credits		407			64			–			(17	)		454
Premises and equipment		(613	)		(83	)		–			32			(664	)
Pension benefits		89			5			(143	)		(3	)		(52	)
Goodwill and intangible assets		(253	)		(23	)		–			15			(261	)
Securities		12			11			–			(2	)		21
Other		187			24			12			(20	)		203
Total		2,859			(24	)		(33	)		(170	)		2,632

(1) Deferred tax assets of $2,037 million and $2,865 million and deferred tax liabilities of $74 million and $233 million as at October 31, 2018 and 2017, respectively, are presented on the balance sheet net by legal jurisdiction.

(2) Includes IFRS 9 adoption (refer to Note 28)

Certain comparative figures have been reclassified to conform with the current year’s presentation.

In fiscal 2018, we were reassessed by the Canada Revenue Agency (“CRA”) for additional income taxes and interest in an amount of approximately $169 million in respect of certain 2013 Canadian corporate dividends. In prior fiscal years, we were reassessed for additional income taxes and interest of approximately $116 million and $76 million, respectively, for certain 2012 and 2011 Canadian corporate dividends. In its reassessments, the CRA denied dividend deductions on the basis that the dividends were received as part of a “dividend rental arrangement.” The tax rules raised by the CRA in the reassessments were prospectively addressed in the 2015 and 2018 Canadian federal budgets. In the future, it is possible that we may be reassessed for significant income tax for similar activities in 2014 and subsequent years. We remain of the view that our tax filing positions were appropriate and intend to challenge any reassessment.

On December 22, 2017, the U.S. government enacted new tax legislation that became effective on January 1, 2018. Under the new legislation, our U.S. net deferred tax asset was revalued by $483 million because of the lower income tax rate. The $483 million revaluation is comprised of a $425 million income tax expense recorded in our Consolidated Statement of Income, and a $58 million income tax charge recorded in other comprehensive income and shareholders’ equity for the year ended October 31, 2018.

Note 23: Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to our shareholders, after deducting preferred share dividends, by the daily average number of fully paid common shares outstanding throughout the year.

Diluted earnings per share is calculated in the same manner, with further adjustments made to reflect the dilutive impact of instruments convertible into our common shares.

200 BMO Financial Group 201st Annual Report 2018

The following table presents our basic and diluted earnings per share:

Basic Earnings per Share (Canadian $ in millions, except as noted)	2018			2017			2016
Net income attributable to bank shareholders		5,450			5,348			4,622
Dividends on preferred shares		(184	)		(184	)		(150	)
Net income available to common shareholders		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Basic earnings per share (Canadian $)		8.19			7.95			6.94
Diluted Earnings per Share
Net income available to common shareholders adjusted for impact of dilutive instruments		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Effect of dilutive instruments
Stock options potentially exercisable (1)		5,876			6,859			8,706
Common shares potentially repurchased		(3,893	)		(4,548	)		(6,629	)
Weighted-average number of diluted common shares outstanding (in thousands)		644,913			651,961			646,126
Diluted earnings per share (Canadian $)		8.17			7.92			6.92

(1) In computing diluted earnings per share, we excluded average stock options outstanding of 1,101,938, 1,330,564 and 1,353,464 with weighted-average exercise prices of $127.45, $182.70 and $238.45 for the years ended October 31, 2018, 2017 and 2016, respectively, as the average share price for the period did not exceed the exercise price.

Note 24: Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities

In the normal course of business, we enter into a variety of contracts under which we may be required to make payments to reimburse a counterparty for a loss if a third party does not perform according to the terms of a contract or does not make payments when due under the terms of a debt instrument, and contracts under which we provide indirect guarantees of the indebtedness of another party, all of which are considered guarantees.

Guarantees that qualify as derivatives are accounted for in accordance with the policy for derivative instruments (see Note 8). For guarantees that do not qualify as derivatives, the liability is initially recorded at fair value, which is generally the fee received. Subsequently, guarantees are recorded at the higher of the initial fair value, less amortization to recognize any fee income earned over the period, and our best estimate of the amount required to settle the obligation. Any change in the liability is reported in our Consolidated Statement of Income.

We enter into a variety of commitments, including off-balance sheet credit instruments, such as backstop liquidity facilities, securities lending, letters of credit, credit default swaps and commitments to extend credit, as a method of meeting the financial needs of our customers. These commitments include contracts where we may be required to make payments to a counterparty, based on changes in the value of an asset, liability or equity security that the counterparty holds, due to changes in an underlying interest rate, foreign exchange rate or other variable. The contractual amount of our commitments represents our maximum undiscounted potential exposure, before possible recoveries under recourse and collateral provisions. Collateral requirements for these instruments are consistent with collateral requirements for loans.

A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

We strive to limit credit risk by dealing only with counterparties that we believe are creditworthy, and we manage our credit risk for these instruments using the same credit risk process that is applied to loans and other credit assets.

The maximum amount payable related to our various commitments is as follows:

(Canadian $ in millions)	2018		2017
Financial Guarantees
Standby letters of credit		18,458		18,126
Credit default swaps (1)		443		448
Other Credit Instruments
Backstop liquidity facilities		5,627		5,044
Securities lending		4,939		5,336
Documentary and commercial letters of credit		1,263		1,030
Commitments to extend credit (2)		137,995		122,881
Other commitments		8,935		4,329
Total		177,660		157,194

(1) The fair value of the related derivatives included in our Consolidated Balance Sheet was $8 million as at October 31, 2018 ($6 million in 2017).

(2) Commitments to extend credit exclude personal lines of credit and credit cards that are unconditionally cancellable at our discretion.

Financial Guarantees

Standby letters of credit represent our obligation to make payments to third parties on behalf of customers if they are unable to make the required payments or meet other contractual requirements. The majority have a term of one year or less. Collateral requirements for standby letters of credit and guarantees are consistent with our collateral requirements for loans. Standby letters of credit and guarantees include our guarantee of a subsidiary’s debt directly provided to a third party.

Written credit default swaps require us to compensate a counterparty following the occurrence of a credit event in relation to a specified reference obligation, such as a bond or a loan. The terms of these contracts range from less than one year to 10 years. Refer to Note 8 for details.

BMO Financial Group 201st Annual Report 2018 201

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other Credit Instruments

Backstop liquidity facilities are provided to asset-backed commercial paper (“ABCP”) or commercial paper (“CP”) programs administered by either us or third parties as an alternative source of financing when ABCP or CP markets cannot be accessed and for ABCP programs when predetermined performance measures of the financial assets held by these programs are not met. The terms of the backstop liquidity facilities do not require us to advance money to these programs in the event of insolvency of the borrower. The facilities’ terms are generally no longer than one year, but can be several years.

We lend eligible customers’ securities to third-party borrowers who have been evaluated for credit risk using the same credit risk process that is applied to loans and other credit assets. In connection with these activities, we may provide indemnification to clients against losses resulting from the failure of the borrower to return loaned securities when due. All borrowings are fully collateralized with cash or marketable securities. As securities are loaned, we require borrowers to maintain collateral which is equal to or in excess of 100% of the fair value of the securities borrowed. The collateral is revalued on a daily basis.

Documentary and commercial letters of credit represent our agreement to honour drafts presented by a third party upon completion of specific activities.

Commitments to extend credit represent our commitment to our customers to grant them credit in the form of loans or other financings for specific amounts and maturities, subject to their meeting certain conditions.

Other commitments include commitments to fund external private equity funds and investments in equity and debt securities at market value at the time the commitments are drawn. In addition, we act as underwriter for certain new issuances under which we, alone or together with a syndicate of financial institutions, purchase the new issue for resale to investors.

Indemnification Agreements

In the normal course of operations, we enter into various agreements that provide general indemnifications. These indemnifications typically occur in connection with sales of assets, securities offerings, service contracts, membership agreements, clearing arrangements, derivative contracts and leasing transactions. Based on historical experience, we expect the risk of loss to be remote.

Exchange and Clearinghouse Guarantees

We are a member of several securities and futures exchanges and central counterparties. Membership in certain of these organizations may require us to pay a pro rata share of the losses incurred by the organization in the event of default of another member. It is difficult to estimate our maximum exposure under these membership agreements, since this would require an assessment of future claims that may be made against us that have not yet occurred. Based on historical experience, we expect the risk of loss to be remote.

Pledged Assets

In the normal course of business, we pledge assets as security for various liabilities that we incur.

The following tables summarize our pledged assets and collateral, and the activities to which they relate:

(Canadian $ in millions)	2018		2017
Bank Assets
Cash and securities (1)
Issued or guaranteed by the Government of Canada		7,784		11,904
Issued or guaranteed by a Canadian province, municipality or school corporation		7,143		6,170
Other		60,812		51,848
Mortgages, securities borrowed or purchased under resale agreements and other		115,256		99,474
		190,995		169,396
(Canadian $ in millions)	2018		2017
Assets pledged in relation to:
Central counterparties, payment systems and depositories		2,403		2,043
Bank of Canada		525		725
Foreign governments and central banks		3		3
Obligations related to securities sold under repurchase agreements		54,606		42,450
Securities borrowing and lending		50,388		51,120
Derivatives transactions		6,120		5,924
Securitization		28,710		27,632
Covered bonds		26,721		24,983
Other		21,519		14,516
Total pledged assets and collateral (1)		190,995		169,396

(1) Excludes cash pledged with central banks disclosed as restricted cash in Note 2.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Collateral

When entering into trading activities, such as purchases under resale agreements, securities borrowing and lending activities or financing for certain derivative transactions, we require our counterparties to provide us with collateral that will protect us from losses in the event of their default. Collateral transactions (received or pledged) are typically conducted under terms that are usual and customary in standard trading activities. If there is no default, the securities or their equivalents must be returned to, or returned by, the counterparty at the end of the contract.

The fair value of counterparty collateral that we are permitted to sell or repledge (in the absence of default by the owner of the collateral) was $123,782 million as at October 31, 2018 ($118,324 million as at October 31, 2017). The fair value of collateral that we have sold or repledged was $82,392 million as at October 31, 2018 ($76,909 million as at October 31, 2017).

Lease Commitments

We have entered into a number of non-cancellable leases for premises and equipment. Our computer and software leases are typically fixed for one term and our premises leases have various renewal options and rights. Our total contractual rental commitments as at October 31, 2018 were

202 BMO Financial Group 201st Annual Report 2018

$2,742 million. The commitments for each of the next five years and thereafter are $404 million for 2019, $358 million for 2020, $301 million for 2021, $254 million for 2022, $215 million for 2023 and $1,210 million thereafter. Included in these amounts are commitments related to 1,130 leased branch locations as at October 31, 2018.

Provisions and Contingent Liabilities

Provisions are recognized when we have a legal or constructive obligation as a result of past events, such as contractual commitments, legal or other obligations where we can reliably estimate the obligation, and it is probable we will be required to settle the obligation. We recognize as a provision our best estimate of the amount required to settle the obligations as of the balance sheet date, taking into account the risks and uncertainties surrounding the obligations. Provisions are recorded in other liabilities on the Consolidated Balance Sheet. Contingent liabilities are potential obligations arising from past events, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within our control and are not included in the table below.

Restructuring Charges

Included in provisions as at October 31, 2018 is $176 million ($98 million in 2017) of restructuring charges related to our ongoing enterprise-wide initiative to simplify how we work, drive increased efficiency, and invest in technology to move our business forward. This amount represents our best estimate of the amount that will be ultimately paid out.

Legal Proceedings

The bank and its subsidiaries are party to legal proceedings, including regulatory investigations, in the ordinary course of business. While there is inherent difficulty in predicting the outcome of these proceedings, management does not expect the outcome of any of these proceedings, individually or in the aggregate, to have a material adverse effect on the consolidated financial position or the results of operations of the bank.

Changes in the provision balance during the year were as follows:

(Canadian $ in millions)	2018			2017
Balance at beginning of year		170			268
Additional provisions/increase in provisions		375			153
Provisions utilized		(250	)		(172	)
Amounts reversed		(11	)		(75	)
Exchange differences and other movements		–			(4	)
Balance at end of year (1)		284			170

(1) Balance includes severance obligations, restructuring charges and legal provisions.

Note 25: Operating and Geographic Segmentation

Operating Groups

We conduct our business through three operating groups, each of which has a distinct mandate. We determine our operating groups based on our management structure and therefore these groups, and the results attributed to them, may not be comparable with those of other financial services companies. We evaluate the performance of our groups using reported and adjusted measures, such as net income, revenue growth, return on equity, and non-interest expense-to-revenue (productivity) ratio, as well as operating leverage.

Effective with the adoption of IFRS 9, we allocate the provision for credit losses on performing loans and the related allowance to operating groups. In 2017 and prior years, the collective provision and allowance were held in Corporate Services.

Personal and Commercial Banking

Personal and Commercial Banking (“P&C”) is comprised of two operating segments: Canadian Personal and Commercial Banking and U.S. Personal and Commercial Banking.

Canadian Personal and Commercial Banking

Canadian Personal and Commercial Banking (“Canadian P&C”) provides a full range of financial products and services to eight million customers. Personal Banking provides financial solutions for everyday banking, financing, investing, credit card and creditor insurance needs. Commercial Banking provides our small business and commercial banking customers with a broad suite of integrated commercial and capital markets products, as well as financial advisory services.

U.S. Personal and Commercial Banking

U.S. Personal and Commercial Banking (“U.S. P&C”) offers a broad range of products and services. Our retail and small and mid-sized business banking customers are served through our branches, contact centres, online and mobile banking platforms and automated banking machines across eight states. Our commercial banking customers are offered in-depth specific industry knowledge, as well as strategic capital markets solutions.

BMO Wealth Management

BMO’s group of wealth management businesses serves a full range of client segments from mainstream to ultra high net worth and institutional, with a broad offering of wealth management products and services, including insurance products. Wealth Management (“BMO WM”) is a global business with an active presence in markets across Canada, the United States, Europe and Asia.

BMO Financial Group 201st Annual Report 2018 203

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BMO Capital Markets

BMO Capital Markets (“BMO CM”) is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. Through our Investment and Corporate Banking and Trading Products lines of business, we operate in 33 locations around the world, including 19 offices in North America.

Corporate Services

Corporate Services consists of Corporate Units and Technology and Operations (“T&O”). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics, and innovation. T&O manages, maintains and provides governance of information technology, cyber security, and operations services for the bank.

The costs of these Corporate Units and T&O services are largely transferred to the three operating groups (P&C, BMO WM and BMO CM), with any remaining amounts retained in Corporate Services results. As such, Corporate Services results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, residual unallocated expenses and certain acquisition integration costs and restructuring costs.

Basis of Presentation

The results of these operating groups are based on our internal financial reporting systems. The accounting policies used in these segments are generally consistent with those followed in the preparation of our consolidated financial statements, as disclosed in Note 1 and throughout the consolidated financial statements. Income taxes presented below may not be reflective of taxes paid in each jurisdiction where we operate. Income taxes are generally applied to each segment based on a statutory tax rate and may be adjusted for items and activities specific to each segment. A notable accounting measurement difference is the taxable equivalent basis adjustment as described below.

Periodically, certain business lines and units within the business lines are transferred between client and corporate support groups to more closely align our organizational structure with our strategic priorities. In addition, revenue and expense allocations are updated to more accurately align with current experience. Results for prior periods are restated to conform with the current year’s presentation.

Taxable Equivalent Basis

We analyze revenue on a taxable equivalent basis (“teb”) at the operating group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the groups’ teb adjustments is reflected in Corporate Services revenue and provision for income taxes. The teb adjustment for the year ended October 31, 2018 was $313 million ($567 million in 2017 and $510 million in 2016).

Inter-Group Allocations

Various estimates and allocation methodologies are used in the preparation of the operating groups’ financial information. Overhead expenses are allocated to operating groups using allocation formulas applied on a consistent basis. Operating group net interest income reflects internal funding charges and credits on the groups’ assets, liabilities and capital, at market rates, taking into account relevant terms and currency considerations. The offset of the net impact of these charges and credits is reflected in Corporate Services. These inter-group allocations are also applied to the geographical segmentation.

Our results and average assets, grouped by operating segment, are as follows:

(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2018
Net interest income (2)		5,541		3,843			826		659			(556	)		10,313
Non-interest revenue		2,171		1,140			5,468		3,696			249			12,724
Total Revenue		7,712		4,983			6,294		4,355			(307	)		23,037
Provision for (recovery of) credit losses on impaired loans		466		258			6		(17	)		(13	)		700
Provision for (recovery of) credit losses on performing loans		3		(38	)		–		(1	)		(2	)		(38	)
Total provision for (recovery of) credit losses		469		220			6		(18	)		(15	)		662
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,352		–			–			1,352
Amortization		318		454			231		124			–			1,127
Non-interest expense		3,487		2,558			3,278		2,727			436			12,486
Income (loss) before taxes and non-controlling interest in subsidiaries		3,438		1,751			1,427		1,522			(728	)		7,410
Provision for (recovery of) income taxes		884		357			355		366			(2	)		1,960
Reported net income (loss)		2,554		1,394			1,072		1,156			(726	)		5,450
Non-controlling interest in subsidiaries		–		–			–		–			–			–
Net Income (loss) attributable to bank shareholders		2,554		1,394			1,072		1,156			(726	)		5,450
Average Assets		224,553		110,351			35,913		307,087			76,391			754,295

204 BMO Financial Group 201st Annual Report 2018

(Canadian $ in millions)	Canadian P&C		U.S. P&C		Wealth Management		BMO CM		Corporate Services (1)			Total
2017
Net interest income (2)		5,261		3,551		722		1,233		(760	)		10,007
Non-interest revenue		2,182		1,066		5,492		3,336		177			12,253
Total Revenue		7,443		4,617		6,214		4,569		(583	)		22,260
Provision for (recovery of) credit losses (3)		483		289		8		44		(78	)		746
Insurance claims, commissions and changes in policy benefit liabilities		–		–		1,538		–		–			1,538
Amortization		309		434		241		119		–			1,103
Non-interest expense		3,313		2,510		3,110		2,659		635			12,227
Income (loss) before taxes and non-controlling interest in subsidiaries		3,338		1,384		1,317		1,747		(1,140	)		6,646
Provision for (recovery of) income taxes		827		357		350		472		(710	)		1,296
Reported net income (loss)		2,511		1,027		967		1,275		(430	)		5,350
Non-controlling interest in subsidiaries		–		–		2		–		–			2
Net Income (loss) attributable to bank shareholders		2,511		1,027		965		1,275		(430	)		5,348
Average Assets		217,685		104,209		32,562		302,518		65,652			722,626
(Canadian $ in millions)	Canadian P&C		U.S. P&C		Wealth Management		BMO CM		Corporate Services (1)			Total
2016
Net interest income (2)		5,080		3,491		635		1,459		(793	)		9,872
Non-interest revenue		1,909		1,119		5,274		2,855		58			11,215
Total Revenue		6,989		4,610		5,909		4,314		(735	)		21,087
Provision for (recovery of) credit losses (3)		506		249		9		81		(74	)		771
Insurance claims, commissions and changes in policy benefit liabilities		–		–		1,543		–		–			1,543
Amortization		276		433		233		105		–			1,047
Non-interest expense		3,224		2,481		3,104		2,469		716			11,994
Income (loss) before taxes and non-controlling interest in subsidiaries		2,983		1,447		1,020		1,659		(1,377	)		5,732
Provision for (recovery of) income taxes		766		396		245		424		(730	)		1,101
Reported net income (loss)		2,217		1,051		775		1,235		(647	)		4,631
Non-controlling interest in subsidiaries		–		–		2		–		7			9
Net Income (loss) attributable to bank shareholders		2,217		1,051		773		1,235		(654	)		4,622
Average Assets		208,018		106,111		30,642		301,623		60,728			707,122

(1) Corporate Services includes Technology and Operations.

(2) Operating groups report on a taxable equivalent basis – see Basis of Presentation section.

(3) 2017 and 2016 have not been restated to reflect the adoption of IFRS 9.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Geographic Information

We operate primarily in Canada and the United States, but we also have operations in the United Kingdom, Europe, the Caribbean and Asia, which are grouped in other countries. We allocate our results by geographic region based on the location of the unit responsible for managing the related assets, liabilities, revenues and expenses.

Our results and average assets, grouped by geographic region, are as follows:

(Canadian $ in millions)	Canada		United States		Other countries		Total
2018
Total Revenue		13,733		7,315		1,989		23,037
Income before taxes and non-controlling interest in subsidiaries		4,838		1,870		702		7,410
Reported net income		3,795		1,099		556		5,450
Average Assets		441,376		277,764		35,155		754,295
(Canadian $ in millions)	Canada		United States		Other countries		Total
2017
Total Revenue		13,469		7,073		1,718		22,260
Income before taxes and non-controlling interest in subsidiaries		4,597		1,588		461		6,646
Reported net income		3,817		1,210		323		5,350
Average Assets		430,570		264,473		27,583		722,626
(Canadian $ in millions)	Canada		United States		Other countries		Total
2016
Total Revenue		12,868		6,796		1,423		21,087
Income before taxes and non-controlling interest in subsidiaries		3,902		1,499		331		5,732
Reported net income		3,286		1,105		240		4,631
Average Assets		420,155		260,018		26,949		707,122

Certain comparative figures have been reclassified to conform with the current year’s presentation.

BMO Financial Group 201st Annual Report 2018 205

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 26: Significant Subsidiaries

As at October 31, 2018, the bank, either directly or indirectly through its subsidiaries, controls the following significant operating subsidiaries.

Significant subsidiaries (1)(2)	Head or principal office		Book value of shares owned by the bank (Canadian $ in millions)
Bank of Montreal Capital Markets (Holdings) Limited and subsidiaries, including:		London, England		332
BMO Capital Markets Limited		London, England
Pyrford International Limited		London, England
Bank of Montreal (China) Co. Ltd.		Beijing, China		448
Bank of Montreal Holding Inc. and subsidiaries, including:		Toronto, Canada		29,028
Bank of Montreal Mortgage Corporation		Calgary, Canada
BMO Mortgage Corp.		Vancouver, Canada
BMO Investments Limited		Hamilton, Bermuda
BMO Reinsurance Limited		St. Michaels, Barbados
BMO Nesbitt Burns Holdings Corporation		Toronto, Canada
BMO Nesbitt Burns Inc.		Toronto, Canada
BMO Investments Inc.		Toronto, Canada
BMO InvestorLine Inc.		Toronto, Canada
Bank of Montreal Ireland plc		Dublin, Ireland		1,022
BMO Financial Corp. and subsidiaries, including:		Chicago, United States		21,893
BMO Asset Management Corp. and subsidiaries		Chicago, United States
BMO Capital Markets Corp.		New York, United States
BMO Harris Bank National Association and subsidiaries, including:		Chicago, United States
BMO Harris Investment Company LLC		Las Vegas, United States
BMO Harris Financial Advisors, Inc.		Chicago, United States
BMO Harris Financing, Inc. and subsidiaries		Chicago, United States
CTC myCFO, LLC		Palo Alto, United States
BMO Global Asset Management (Europe) Limited and subsidiaries, including:		London, England		692
BMO Asset Management (Holdings) plc and subsidiaries (3)		London, England
BMO Life Insurance Company and subsidiaries, including:		Toronto, Canada		1,195
BMO Life Holdings (Canada), ULC		Halifax, Canada
BMO Life Assurance Company		Toronto, Canada
BMO Trust Company		Toronto, Canada		768
BMO Trustee Asia Limited		Hong Kong, China		2
LGM (Bermuda) Limited and subsidiaries, including:		Hamilton, Bermuda		147
BMO Global Asset Management (Asia) Limited		Hong Kong, China
LGM Investments Limited		London, England

(1) Each subsidiary is incorporated or organized under the laws of the state or country in which the principal office is situated, except for BMO Financial Corp., BMO Asset Management Corp., BMO Capital Markets Corp., BMO Harris Financial Advisors, Inc., BMO Harris Financing, Inc., and CTC myCFO, LLC, which are incorporated under the laws of the state of Delaware, United States. BMO Asset Management (Holdings) plc is incorporated under the laws of Scotland.

(2) Unless otherwise noted, the bank, either directly or indirectly through its subsidiaries, owns 100% of the outstanding voting shares of each subsidiary.

(3) Effective October 31, 2018, F&C Asset Management plc changed its name to BMO Asset Management (Holdings) plc.

Significant Restrictions

Our ability to transfer funds between our subsidiaries may be restricted by statutory, contractual, capital and regulatory requirements. Restrictions include:

• Assets pledged as security for various liabilities we incur. Refer to Note 24 for details.

• Assets of our consolidated structured entities that are held for the benefit of the note holders. Refer to Note 7 for details.

• Assets held by our insurance subsidiaries. Refer to Note 12 for details.

• Regulatory and statutory requirements that reflect capital and liquidity requirements. Refer to Note 19 for details.

• Funds required to be held with central banks. Refer to Note 2 for details.

Note 27: Related Party Transactions

Related parties include subsidiaries, associates, joint ventures, employee future benefit plans and key management personnel and their close family members. Close family members include spouses, common-law partners and dependent minors. Transactions with our subsidiaries are eliminated on consolidation, and are not disclosed as related party transactions.

Key Management Personnel Compensation

Key management personnel is defined as those persons having authority and responsibility for planning, directing and/or controlling the activities of an entity, being the members of our Board of Directors (“directors”) and certain senior executives.

The following table presents the compensation of our key management personnel:

(Canadian $ in millions)	2018		2017		2016
Base salary and incentives		21		23		22
Post-employment benefits		2		1		2
Share-based payments (1)		31		38		32
Total key management personnel compensation		54		62		56

(1) Amounts included in share-based payments are the fair values of awards granted in the year.

206 BMO Financial Group 201st Annual Report 2018

We offer senior executives market interest rates on credit card balances, a fee-based subsidy on annual credit card fees, and a select suite of customer loan and mortgage products at rates normally accorded to preferred customers. At October 31, 2018, loans to key management personnel totalled $16 million ($10 million in 2017).

Directors receive a specified amount of their annual retainer in deferred stock units. Until a director’s shareholdings (including deferred stock units) are eight times greater than their annual retainer, they are required to take 100% of their annual retainer and other fees in the form of either our common shares or deferred stock units. They may elect to receive the remainder of such retainer fees and other remuneration in cash, common shares or deferred stock units.

Directors of our wholly owned subsidiary, BMO Financial Corp., are required to take a specified minimum amount of their annual retainer and other fees in the form of deferred stock units.

Joint Ventures and Associates

We provide banking services to our joint ventures and associates on the same terms offered to our customers for these services. Our investments in joint ventures of which we own 50% totalled $231 million as at October 31, 2018 ($182 million in 2017). Our investments in associates over which we exert significant influence totalled $471 million as at October 31, 2018 ($444 million in 2017).

The following table presents transactions with our joint ventures and associates:

(Canadian $ in millions)	2018		2017
Loans		195		178
Deposits		114		132
Fees paid for services received		71		66

Note 28: Transition to IFRS 9

The following table shows the pre-transition IAS 39 and corresponding IFRS 9 classification and measurement categories, and reconciles the IAS 39 and IFRS 9 carrying amounts for loans, securities and other financial assets as at November 1, 2017 as a result of adopting IFRS 9. There were no changes to the measurement basis of other financial asset categories or any financial liabilities.

(Canadian $ in millions)	IAS 39 measurement category		IFRS 9 measurement category		IAS 39 carrying amount			Reclassification			Remeasurement			IFRS 9 carrying amount
Financial Assets
Securities
		Trading		Trading		99,069			(8,534	)		–			90,535
				FVTPL		–			8,534			–			8,534
		Available-for-sale		na		54,075			(54,075	)		–			–
				FVOCI		–			51,909			–			51,909
				FVTPL		–			2,081			–			2,081
				Amortized cost		–			85			–			85
		Held-to-maturity		Amortized cost		9,094			–			(2	)		9,092
		Other		Other		960			(333	)		–			627
				FVTPL		–			333			–			333
Total Securities						163,198			–			(2	)		163,196
Loans
Residential mortgages		Amortized cost		Amortized cost		115,258			–			–			115,258
Consumer instalment and other		Amortized cost		Amortized cost		61,944			–			–			61,944
Credit cards		Amortized cost		Amortized cost		8,071			–			–			8,071
Business and government		Amortized cost		Amortized cost		175,067			(2,372	)		–			172,695
				FVTPL		–			2,372			–			2,372
Total Loans						360,340			–			–			360,340
Allowance for credit losses						(1,833	)		–			154			(1,679	)
						358,507			–			154			358,661
Remaining financial assets (1)						127,706			–			(6	)		127,700
Financial Liabilities
Allowance for credit losses on off-balance sheet exposures						163			–			76			239
Total pre-tax impact of IFRS 9 adoption						na			–			70			na
Total after-tax Accumulated Other Comprehensive Income						3,066			(55	)		–			3,011
Total after-tax Retained Earnings (2)(3)						23,709			55			44			23,808
Total after-tax Shareholders’ Equity						44,354			–			44			44,398

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements and other assets. Remeasurement represents the impact of the impairment provisions of IFRS 9 on these remaining financial assets.

(2) Reclassification amount represents the after-tax impact ($105 million pre-tax) that resulted from the reclassification of equity securities from available-for-sale under IAS 39 to fair value through profit or loss under IFRS 9.

(3) Remeasurement represents the after-tax impact ($70 million pre-tax) of the adoption of the impairment provisions of IFRS 9.

na – not applicable due to IFRS 9 adoption.

BMO Financial Group 201st Annual Report 2018 207

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The securities balances by measurement category following the adoption of IFRS 9 as at November 1, 2017 were:

(Canadian $ in millions)	November 1, 2017
Trading		90,535
FVTPL		10,948
FVOCI		51,909
Amortized cost		9,177
Other		627
Total		163,196

The primary impact as a result of adopting the classification and measurement provisions of IFRS 9 relates to securities held by the bank.

On transition, our existing held-to-maturity securities continued to qualify for amortized cost treatment, as they are held with the intent to collect contractual cash flows and those cash flows represent solely payments of principal and interest.

Our available-for-sale portfolio was reclassified based on the result of the business model and contractual cash flow tests. All available-for-sale securities that represented equity instruments were reclassified as fair value through profit or loss. Available-for-sale securities that represented investments in debt instruments were generally classified as fair value through other comprehensive income. Certain available-for-sale debt securities were classified as fair value through profit or loss, as their contractual cash flows did not represent solely payments of principal and interest. Certain available-for-sale debt securities were classified as amortized cost, as they are held with the intent to collect contractual cash flows and those cash flows represent only payments of principal and interest. On transition, investments held in our merchant banking business are classified as fair value through profit or loss and no longer require designation under the fair value option.

Our lending portfolios continue to be recorded at amortized cost, with the exception of certain business and government loans, whose contractual cash flows did not represent only payments of principal and interest, and were classified as fair value through profit or loss.

The following table illustrates the impact of transition to IFRS 9 on the allowance for credit loss as of November 1, 2017.

(Canadian $ in millions)	IAS 39 collective allowance		IAS 39 specific allowance		IAS 39 allowance		Remeasurement			IFRS 9 allowance		IFRS 9 Stage 1		IFRS 9 Stage 2		IFRS 9 Stage 3
Loans
Residential mortgages		69		24		93		(20	)		73		16		33		24
Consumer instalment and other		343		136		479		71			550		70		344		136
Credit cards		243		–		243		41			284		63		221		–
Business and government		785		233		1,018		(246	)		772		205		334		233
Total allowance for credit losses		1,440		393		1,833		(154	)		1,679		354		932		393
Allowance for credit losses on remaining financial assets (1)		–		–		–		8			8		7		1		–
Allowance for credit losses on off-balance sheet exposures		136		27		163		76			239		89		123		27
Total		1,576		420		1,996		(70	)		1,926		450		1,056		420

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities, securities borrowed or purchased under resale agreements and other assets.

Accounting Policies for Financial Instruments under IAS 39, Financial Instruments: Recognition and Measurement

The following accounting policies apply to comparative information for 2017 and 2016 in our consolidated financial statements as we did not restate prior periods on adoption of IFRS 9.

Classification and Measurement of Securities

Securities are divided into four types: trading securities designated at FVTPL, available-for-sale securities, held-to-maturity and other securities.

Trading securities are securities that we purchase for resale over a short period of time. We classify trading securities and securities designated under the fair value option at fair value through profit or loss.

We record the transaction costs, gains and losses realized on disposal and unrealized gains and losses due to changes in fair value in our Consolidated Statement of Income in trading revenues. Securities designated at FVTPL are financial instruments that are accounted for at fair value, with changes in fair value recorded in income provided they meet certain criteria.

Available-for-sale securities consist of debt and equity securities that may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or in order to meet liquidity needs.

Available-for-sale securities are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in unrealized gains (losses) on available-for-sale securities in our Consolidated Statement of Comprehensive Income until the security is sold. Gains and losses on disposal and impairment losses (recoveries) are recorded in our Consolidated Statement of Income in non-interest revenue, securities gains, other than trading. Interest income earned and dividends received on available-for-sale securities are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

Held-to-maturity securities are debt securities that we have the intention and ability to hold to maturity and that do not meet the definition of a loan. These securities are initially recorded at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method. Impairment losses are recorded in our Consolidated Statement of Income in securities gains (losses), other than trading. Interest income earned and amortization of premiums or discounts on these debt securities are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

208 BMO Financial Group 201st Annual Report 2018

Other securities are investments in companies where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). We account for these other securities using the equity method of accounting. Other securities also include certain securities held by our merchant banking business.

Impairment of Securities

We review held-to-maturity, available-for-sale and other securities at each quarter-end reporting period to identify and evaluate investments that show indications of possible impairment.

For held-to-maturity, available-for-sale and other securities, impairment losses are recognized if there is objective evidence of impairment as a result of an event that reduces the estimated future cash flows from the security and the impact can be reliably estimated.

We do not record impairment write-downs on debt securities when impairment is due to changes in market interest rates if future contractual cash flows associated with the debt security are still expected to be recovered.

The impairment loss on available-for-sale securities is the difference between the security’s amortized cost and its current fair value, less any previously recognized impairment losses. If there is objective evidence of impairment, a write-down is transferred from our Consolidated Statement of Comprehensive Income, unrealized gains (losses) on available-for-sale securities, to our Consolidated Statement of Income in securities gains, other than trading.

The impairment loss on held-to-maturity securities is the difference between a security’s carrying amount and the present value of its estimated future cash flows discounted at the original effective interest rate. If there is objective evidence of impairment, a write-down is recorded in our Consolidated Statement of Income in securities gains, other than trading.

For available-for-sale debt securities, a previous impairment loss is reversed through net income if an event occurs after the impairment was recognized that can be objectively attributed to an increase in fair value, to a maximum of the original impairment charge. For available-for-sale equity securities, previous impairment losses are not reversed through net income, and any subsequent increases in fair value are recorded in other comprehensive income. Reversals of impairment losses on held-to-maturity securities are recorded to a maximum of the amortized cost of the investment before the original impairment charge.

Loans

Loans are initially measured at fair value plus directly attributable costs, and are subsequently measured at amortized cost using the effective interest method. The effective interest method allocates interest income over the expected term of the loan by applying the effective interest rate to the carrying amount of the loan. The effective interest rate is defined as the rate that exactly discounts future cash receipts through the expected term of the loan to the net carrying amount of the loan. Under the effective interest method, the amount recognized in interest, dividend and fee income, loans, varies over the term of the loan based on the principal outstanding.

Allowance for Credit Losses

The allowance for credit losses adjusts the value of loans to reflect their estimated realizable value. In assessing their estimated realizable value, we must rely on estimates and exercise judgment regarding matters for which the ultimate outcome is unknown. These include economic factors, developments affecting companies in particular industries, and specific issues with respect to single borrowers. Changes in circumstances may cause future assessments of credit risk to be materially different from current assessments, which could result in an increase or decrease in the allowance for credit losses.

The allowance is comprised of a specific allowance and a collective allowance.

Specific Allowance

These allowances are recorded for individually identified impaired loans to reduce their carrying value to the expected recoverable amount. We review our loans on an ongoing basis to assess whether any loans should be classified as impaired and whether an allowance or write-off should be recorded (excluding credit card loans, which are classified as impaired and written off when principal or interest payments are 180 days past due, as discussed under Impaired Loans). The review of individually significant problem loans is conducted at least quarterly by the account managers, each of whom assesses the ultimate collectability and estimated recoveries for a specific loan based on all events and conditions that are relevant to the loan. This assessment is then reviewed and approved by an independent credit officer.

Individually Significant Impaired Loans

To determine the amount we expect to recover from an individually significant impaired loan, we use the value of the estimated future cash flows discounted at the loan’s original effective interest rate. The determination of estimated future cash flows of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real estate properties, accounts receivable, guarantees, inventory or other capital assets.

Individually Insignificant Impaired Loans

Residential mortgages, consumer instalment and other personal loans are individually insignificant and may be individually assessed or collectively assessed for losses at the time of impairment, taking into account historical loss experience.

Collective Allowance

We maintain a collective allowance in order to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the collective allowance is based on the requirements of IAS 39, considering guidelines issued by OSFI.

The collective allowance methodology incorporates both quantitative and qualitative factors to determine an appropriate level for the collective allowance. For the purpose of calculating the collective allowance, we group loans on the basis of similarities in credit risk characteristics. The loss factors for groups of loans are determined based on a minimum of five years of historical data and a one-year loss emergence period, except for credit cards, where a seven-month loss emergence period is used. The loss factors are back-tested and calibrated on a regular basis to ensure that they continue to reflect our best estimate of losses that have been incurred but not yet identified, on an individual basis, within the pools of loans. Historical loss experience data is also reviewed in the determination of loss factors. Qualitative factors are based on current observable data, such as current macroeconomic and business conditions, portfolio-specific considerations and model risk factors.

BMO Financial Group 201st Annual Report 2018 209

EX-99.4

Exhibit 99.4

KPMG LLP Chartered Professional Accountants Bay Adelaide Centre 333 Bay Street, Suite 4600 Toronto ON M5H 2S5 Telephone    (416) 777-8500 Fax               (416) 777-8818 Internet:     www.kpmg.ca

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Bank of Montreal

We consent to the inclusion in this annual report on Form 40-F of:

i) our independent auditors’ report of registered public accounting firm dated December 4, 2018 on the consolidated balance sheets of Bank of Montreal (the “Bank”) as at October 31, 2018 and October 31, 2017, the 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, 2018, and notes, comprising a summary of significant accounting policies and other explanatory information; and

ii) our report of independent registered public accounting firm dated December 4, 2018 on the effectiveness of the Bank’s internal control over financial reporting as of October 31, 2018;

each of which is contained in this annual report on Form 40-F of the Bank for the fiscal year ended October 31, 2018. Our independent auditors report on the consolidated financial statements refers to a change to the Bank’s method of accounting for financial instruments in 2018 due to the adoption of International Financial Reporting Standard 9 Financial Instruments.

We also consent to the incorporation by reference of such reports in the following Registration Statements of the Bank:

1. Registration Statement – Form F-3 – File No. 333-217200

2. Registration Statement – Form F-3 – File No. 333-214934

3. Registration Statement – Form S-8 – File No. 333-191591

4. Registration Statement – Form S-8 – File No. 333-180968

5. Registration Statement – Form S-8 – File No. 333-177579

6. Registration Statement – Form S-8 – File No. 333-177568

7. Registration Statement – Form S-8 – File No. 333-176479

8. Registration Statement – Form S-8 – File No. 333-175413

9. Registration Statement – Form S-8 – File No. 333-175412

10. Registration Statement – Form S-8 – File No. 333-113096

11. Registration Statement – Form S-8 – File No. 333-14260

12. Registration Statement – Form S-8 – File No. 33-92112

13. Registration Statement – Form S-8 – File No. 333-207739

Chartered Professional Accountants, Licensed Public Accountants

December 4, 2018

Toronto, Canada

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of

independent member firms affiliated with KPMG International Cooperative (“KPMG International”),

a Swiss entity. KPMG Canada provides services to KPMG LLP.

EX-99.5

Exhibit 99.5

Certifications

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Darryl White, Chief Executive Officer of Bank of Montreal, certify that:

1.    I have reviewed this annual report on Form 40-F (the “report”) of Bank of Montreal (the “issuer”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.    The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)    Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5.    The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: December 4, 2018

/s/ Darryl White

Darryl White

Chief Executive Officer

EX-99.6

Exhibit 99.6

Certifications

Pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Thomas E. Flynn, Chief Financial Officer of Bank of Montreal, certify that:

1.    I have reviewed this annual report on Form 40-F (the “report”) of Bank of Montreal (the “issuer”);

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.    The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)    Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)    Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5.    The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Date: December 4, 2018

/s/ Thomas E. Flynn

Thomas E. Flynn

Chief Financial Officer

EX-99.7

Exhibit 99.7

Certifications

Pursuant to Rule 13(a) or 15(d) under the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. 1350, the undersigned officers of Bank of Montreal (the “Bank”), hereby certify that, to his knowledge, (a) the annual report on Form 40-F for the period ended October 31, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and (b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Bank.

Date: December 4, 2018	/s/ Darryl White
	Darryl White Chief Executive Officer
Date: December 4, 2018	/s/ Thomas E. Flynn
	Thomas E. Flynn Chief Financial Officer

XML

Document and Entity Information	12 Months Ended
	Oct. 31, 2018 shares
Document - Document and Entity Information [Abstract]
Document Type	40-F
Amendment Flag	false
Document Period End Date	Oct. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Trading Symbol	BMO
Entity Registrant Name	BANK OF MONTREAL /CAN/
Entity Central Index Key	0000927971
Current Fiscal Year End Date	--10-31
Entity Current Reporting Status	Yes
Entity Common Stock, Shares Outstanding	647,816,318

XML

Consolidated Statement of Income - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Interest, Dividend and Fee Income
Loans	$ 16,275	$ 13,564	$ 12,575
Securities (Note 3)	2,535	1,801	1,590
Deposits with banks	641	324	223
Interest, Dividend and Fee Income	19,451	15,689	14,388
Interest Expense
Deposits	6,080	3,894	3,036
Subordinated debt	226	155	170
Other liabilities	2,832	1,633	1,310
Interest Expense	9,138	5,682	4,516
Net Interest Income	10,313	10,007	9,872
Non-Interest Revenue
Securities commissions and fees	1,029	969	924
Deposit and payment service charges	1,144	1,123	1,076
Trading revenues	1,830	1,352	1,192
Lending fees	997	917	859
Card fees	564	479	526
Investment management and custodial fees	1,742	1,622	1,556
Mutual fund revenues	1,473	1,411	1,364
Underwriting and advisory fees	936	1,036	820
Securities gains, other than trading (Note 3)	239	171	84
Foreign exchange gains, other than trading	182	191	162
Insurance revenue	1,879	2,070	2,023
Investments in associates and joint ventures	167	386	140
Other	542	526	489
Non-Interest Revenue	12,724	12,253	11,215
Total Revenue	23,037	22,260	21,087
Provision for Credit Losses (Notes 1 and 4)	662	746	771
Insurance Claims, Commissions and Changes in Policy Benefit Liabilities(Note 14)	1,352	1,538	1,543
Non-Interest Expense
Employee compensation (Notes 20 and 21)	7,459	7,467	7,382
Premises and equipment (Note 9)	2,753	2,491	2,393
Amortization of intangible assets (Note 11)	503	485	444
Travel and business development	673	693	646
Communications	282	286	294
Professional fees	564	563	523
Other	1,379	1,345	1,359
Non-Interest Expense	13,613	13,330	13,041
Income (loss) before taxes and non-controlling interest in subsidiaries	7,410	6,646	5,732
Provision for income taxes (Note 22)	1,960	1,296	1,101
Net Income	5,450	5,350	4,631
Attributable to:
Bank shareholders	5,450	5,348	4,622
Non-controlling interest in subsidiaries		2	9
Net Income	$ 5,450	$ 5,350	$ 4,631
Earnings Per Share (Canadian $) (Note 23)
Basic	$ 8.19	$ 7.95	$ 6.94
Diluted	8.17	7.92	6.92
Common shares [member]
Earnings Per Share (Canadian $) (Note 23)
Dividends per share	$ 3.78	$ 3.56	$ 3.40

XML

Consolidated Statement of Income (Parenthetical) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Operating Income Expenses [abstract]
Interest income, calculated using the effective interest rate method	$ 1,284

XML

Consolidated Statement of Comprehensive Income - CAD ($) $ in Millions		12 Months Ended
		Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Statement of comprehensive income [abstract]
Net Income		$ 5,450	$ 5,350	$ 4,631
Net change in unrealized gains (losses) on fair value through OCI securities
Unrealized (losses) on fair value through OCI debt securities arising during the year	[1]	(251)
Unrealized gains on available-for-sale securities arising during the year	[2]		95	151
Reclassification to earnings of (gains) in the year	[3]	(65)	(87)	(28)
Other comprehensive income net of tax available for sale financial assets		(316)	8	123
Net change in unrealized (losses) on cash flow hedges
(Losses) on derivatives designated as cash flow hedges arising during the year	[4]	(1,228)	(839)	(26)
Reclassification to earnings of losses on derivatives designated as cash flow hedges	[5]	336	61	10
Other comprehensive income net of tax cash flow hedges		(892)	(778)	(16)
Net gains (losses) on translation of net foreign operations
Unrealized gains (losses) on translation of net foreign operations		417	(885)	213
Unrealized gains (losses) on hedges of net foreign operations	[6]	(155)	23	41
Other comprehensive income, net of taxes, translation of net foreign operations		262	(862)	254
Items that will not be reclassified to net income
Gains (losses) on remeasurement of pension and other employee future benefit plans	[7]	261	420	(422)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1)	[8]	(24)	(148)	(153)
Items that will not be reclassified to net income		237	272	(575)
Other Comprehensive (Loss), net of taxes (Note 22)		(709)	(1,360)	(214)
Total Comprehensive Income		4,741	3,990	4,417
Attributable to:
Bank shareholders		4,741	3,988	4,408
Non-controlling interest in subsidiaries			2	9
Total Comprehensive Income		$ 4,741	$ 3,990	$ 4,417

[1] Net of income tax recovery of $69 million, na and na for the year ended, respectively.

[2] Net of income tax (provision) of na, $(21) million and $(64) million for the year ended, respectively.

[3] Net of income tax provision of $23 million, $36 million and $11 million for the year ended, respectively.

[4] Net of income tax (provision) recovery of $432 million, $322 million and $(4) million for the year ended, respectively.

[5] Net of income tax (recovery) of $(121) million, $(21) million and $(6) million for the year ended, respectively.

[6] Net of income tax (provision) recovery of $56 million, $(8) million and $(10) million for the year ended, respectively.

[7] Net of income tax (provision) recovery of $(111) million, $(157) million and $156 million for the year ended, respectively.

[8] Net of income tax recovery of $6 million, $53 million and $55 million for the year ended, respectively.

XML

Consolidated Statement of Comprehensive Income (Parenthetical) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Net of income tax (provision), unrealized gains on available-for-sale securities		$ (21)	$ (64)
Net of income tax provision, reclassification to earnings of (gains) losses	$ 23	36	11
Net of income tax (provision) recovery, gains (losses) on derivatives designated as cash flow hedges	432	322	(4)
Net of income tax provision (recovery), reclassification to earnings of losses on derivatives designated as cash flow hedges	(121)	(21)	(6)
Net of income tax (provision) recovery, unrealized gains on hedges of net foreign operations	56	(8)	(10)
Net of income tax (provision) recovery, gains (losses) on remeasurement of pension and other employee future benefit plans	(111)	(157)	156
Net of income tax recovery, gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value	6	$ 53	$ 55
Debt securities [member]
Net of income tax recovery, unrealized gains on fair value through OCI securities	$ 69

XML

Consolidated Balance Sheet - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Assets
Cash and cash equivalents	$ 42,142	$ 32,599
Interest bearing deposits with banks	8,305	6,490
Securities	180,935	163,198
Securities borrowed or purchased under resale agreements	85,051	75,047
Loans
Residential mortgages	119,620	115,258
Consumer instalment and other personal	63,225	61,944
Credit cards	8,329	8,071
Business and government	194,456	175,067
Loans gross of allowance for loan losses	385,630	360,340
Allowance for credit losses	(1,639)	(1,833)
Loans,net	383,991	358,507
Other Assets
Derivative instruments	26,204	28,951
Customers' liability under acceptances	18,585	16,546
Premises and equipment	1,986	2,033
Goodwill	6,373	6,244
Intangible assets	2,272	2,159
Current tax assets	1,515	1,371
Deferred tax assets	2,037	2,865
Other	14,652	13,570
Other assets	73,624	73,739
Total Assets	774,048	709,580
Liabilities and Equity
Deposits	522,051	479,792
Other liabilities
Derivative instruments	24,411	27,804
Acceptances	18,585	16,546
Securities sold but not yet purchased	28,804	25,163
Securities lent or sold under repurchase agreements	66,684	55,119
Securitization and structured entities' liabilities	25,051	23,054
Current tax liabilities	50	125
Deferred tax liabilities	74	233
Other (Note 14)	35,829	32,361
Other liabilities	199,488	180,405
Subordinated debt	6,782	5,029
Equity
Contributed surplus	300	307
Retained earnings	25,856	23,709
Accumulated other comprehensive income	2,302	3,066
Total Equity	45,727	44,354
Total Liabilities and Equity	774,048	709,580
Preferred shares [member]
Equity
Issued capital	4,340	4,240
Total Equity	4,340	4,240
Common shares [member]
Equity
Issued capital	12,929	13,032
Total Equity	$ 12,929	$ 13,032

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Consolidated Statement of Changes in Equity - CAD ($) $ in Millions	Total		Share premium [member]	Retained earnings [member]	Accumulated other comprehensive income (loss) on Available-for-Sale Securities, net of taxes [member]	Accumulated other comprehensive income (loss) on Available-for-Sale Securities, net of taxes [member] Debt securities [member]	Accumulated Other Comprehensive Income (Loss) on derivatives designated as Cash Flow Hedges, net of taxes [Member]	Accumulated other comprehensive income on translation of net foreign operations, net of taxes [member]	Accumulated other comprehensive income (loss) on own credit risk on financial liabilities designated at fair value, net of taxes [member]	Total accumulated other comprehensive income [member]	Total shareholders' equity [member]	Non-controlling interest in subsidiaries [member]	Accumulated other comprehensive income on fair value through other comprehensive income securities net of taxes [member]	Preferred shares [member]	Preferred shares [member] Retained earnings [member]	Common shares [member]	Common shares [member] Retained earnings [member]
Balance at beginning of year at Oct. 31, 2015			$ 299	$ 18,930	$ (75)		$ 612	$ 4,073	$ (90)			$ 491	$ 120	$ 3,240		$ 12,313
Net income attributable to non-controllinginterest	$ 9											9
Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan (Note 16)																90
Issued during the year														600
Stock option expense, net of options exercised (Note 20)			(14)
(Losses) on derivatives designated as cash flow hedges arising during the year	(26)	[1]					(26)
Unrealized gains (losses) on translation of net foreign operations	213							213
Gains (losses) on remeasurement of pension and other employee future benefit plans	(422)	[2]							(422)
Gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1)	(153)	[3]											(153)
Net income attributable to bank shareholders	4,622			4,622
Dividends												(10)			$ (150)		$ (2,191)
Issued under the Stock Option Plan (Note 16)																136
Reclassification to earnings of losses on derivatives designated as cash flow hedges in the year	10	[4]					10
Unrealized gains (losses) on hedges of net foreign operations	41	[5]						41
Share issue expense				(6)
Redemption/purchase of non-controlling interest												(450)
Unrealized gains on available-for-sale securities arising during the year	151	[6]			151
Reclassification to earnings of (gains) in the year	(28)	[7]			(28)
Other			9									(16)
Balance at End of Year at Oct. 31, 2016	42,328		294	21,205	48		596	4,327	(512)	$ 4,426	$ 42,304	24	(33)	3,840		12,539
Net income attributable to non-controllinginterest	2											2
Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan (Note 16)																448
Issued during the year														900
Stock option expense, net of options exercised (Note 20)			6
(Losses) on derivatives designated as cash flow hedges arising during the year	(839)	[1]					(839)
Unrealized gains (losses) on translation of net foreign operations	(885)							(885)
Gains (losses) on remeasurement of pension and other employee future benefit plans	420	[2]							420
Gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1)	(148)	[3]											(148)
Net income attributable to bank shareholders	5,348			5,348
Dividends															(184)		(2,312)
Issued under the Stock Option Plan (Note 16)																146
Redeemed during the year														(500)
Reclassification to earnings of losses on derivatives designated as cash flow hedges in the year	61	[4]					61
Unrealized gains (losses) on hedges of net foreign operations	23	[5]						23
Share issue expense				(9)
Redemption/purchase of non-controlling interest												(25)
Repurchased for cancellation (Note 16)																(101)
Unrealized gains on available-for-sale securities arising during the year	95	[6]			95
Common shares repurchased for cancellation (Note 16)				(339)
Reclassification to earnings of (gains) in the year	(87)	[7]			(87)
Other			7									$ (1)
Balance at End of Year at Oct. 31, 2017	44,354		307	23,709	56		(182)	3,465	(92)	3,066	44,354		(181)	4,240		13,032
Impact from adopting IFRS 9 (Note 28)	44
Balance at beginning of year at Oct. 31, 2017	44,354		307	23,709	56		(182)	3,465	(92)	3,066	44,354		(181)	4,240		13,032
Impact from adopting IFRS 9 (Note 28)				99	(55)
Issued during the year														400
Stock option expense, net of options exercised (Note 20)			(12)
(Losses) on derivatives designated as cash flow hedges arising during the year	(1,228)	[1]					(1,228)
Unrealized gains (losses) on translation of net foreign operations	417							417
Gains (losses) on remeasurement of pension and other employee future benefit plans	261	[2]							261
Gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1)	(24)	[3]											(24)
Net income attributable to bank shareholders	5,450			5,450
Dividends															$ (184)		$ (2,424)
Issued under the Stock Option Plan (Note 16)																99
Unrealized gains (losses) on fair value through OCI debt securities arising during the year	(251)	[8]				$ (251)
Redeemed during the year														(300)
Reclassification to earnings of losses on derivatives designated as cash flow hedges in the year	336	[4]					336
Unrealized gains (losses) on hedges of net foreign operations	(155)	[5]						(155)
Share issue expense				(5)
Repurchased for cancellation (Note 16)																(202)
Common shares repurchased for cancellation (Note 16)				(789)
Reclassification to earnings of (gains) in the year	(65)	[7]			(65)
Other			5
Balance at End of Year at Oct. 31, 2018	$ 45,727		$ 300	$ 25,856	$ (315)		$ (1,074)	$ 3,727	$ 169	$ 2,302	$ 45,727		$ (205)	$ 4,340		$ 12,929

[1] Net of income tax (provision) recovery of $432 million, $322 million and $(4) million for the year ended, respectively.

[2] Net of income tax (provision) recovery of $(111) million, $(157) million and $156 million for the year ended, respectively.

[3] Net of income tax recovery of $6 million, $53 million and $55 million for the year ended, respectively.

[4] Net of income tax (recovery) of $(121) million, $(21) million and $(6) million for the year ended, respectively.

[5] Net of income tax (provision) recovery of $56 million, $(8) million and $(10) million for the year ended, respectively.

[6] Net of income tax (provision) of na, $(21) million and $(64) million for the year ended, respectively.

[7] Net of income tax provision of $23 million, $36 million and $11 million for the year ended, respectively.

[8] Net of income tax recovery of $69 million, na and na for the year ended, respectively.

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Consolidated Statement of Cash Flows - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Cash Flows from Operating Activities
Net Income	$ 5,450	$ 5,350	$ 4,631
Adjustments to determine net cash flows provided by (used in) operating activities
Provision on securities, other than trading (Note 3)	14	7	17
Net (gain) on securities, other than trading (Note 3)	(253)	(178)	(101)
Net (increase) in trading securities	(2,650)	(16,237)	(11,403)
Provision for credit losses (Note 4)	662	746	771
(Increase) decrease in derivative asset	5,287	15,544	(306)
(Decrease) in derivative liability	(6,699)	(14,923)	(5,598)
Amortization of premises and equipment (Note 9)	400	391	384
Amortization of other assets	224	227	219
Amortization of intangible assets (Note 11)	503	485	444
Net decrease in deferred income tax asset	834	156	108
Net increase (decrease) in deferred income tax liability	2	(12)	(7)
Net (increase) in current income tax asset	(232)	(497)	(345)
Net increase (decrease) in current income tax liability	(87)	52	(18)
(Increase) in interest receivable	(366)	(130)	(81)
Increase in interest payable	337	15	64
Changes in other items and accruals, net	956	(3,416)	1,199
Net increase in deposits	35,261	15,409	23,385
Net (increase) in loans	(23,089)	(6,823)	(23,169)
Net increase in securities sold but not yet purchased	2,004	336	3,739
Net increase (decrease) in securities lent or sold under repurchase agreements	452	16,535	(82)
Net (increase) decrease in securities borrowed or purchased under resale agreements	(2,958)	(10,891)	2,793
Net increase in securitization and structured entities' liabilities	1,860	762	628
Net Cash Provided by (Used in) Operating Activities	17,912	2,908	(2,728)
Cash Flows from Financing Activities
Net increase (decrease) in liabilities of subsidiaries	2,203	(87)	3,100
Proceeds from issuance of covered bonds (Note 13)	2,706	5,845	8,945
Redemption of covered bonds (Note 13)	(567)	(2,602)	(2,101)
Proceeds from issuance of subordinated debt (Note 15)	2,685	850	2,250
Repayment of subordinated debt (Note 15)	(900)	(100)	(2,200)
Proceeds from issuance of preferred shares (Note 16)	400	900	600
Redemption of preferred shares (Note 16)	(300)	(500)
Redemption of capital trust securities			(450)
Share issue expense	(5)	(9)	(6)
Proceeds from issuance of common shares (Note 16)	88	149	137
Common shares repurchased for cancellation (Note 16)	(991)	(440)
Cash dividends paid	(2,582)	(2,010)	(2,219)
Cash dividends paid to non-controlling interest			(10)
Net Cash Provided by Financing Activities	2,737	1,996	8,046
Cash Flows from Investing Activities
Net (increase) decrease in interest bearing deposits with banks	(1,648)	(2,245)	3,007
Purchases of securities, other than trading	(46,749)	(30,424)	(28,860)
Maturities of securities, other than trading	14,754	5,930	6,985
Proceeds from sales of securities, other than trading	23,561	24,400	16,294
Purchase of non-controlling interest		(25)
Premises and equipment - net (purchases)	(330)	(301)	(224)
Purchased and developed software - net (purchases)	(556)	(490)	(387)
Acquisitions (Note 10)	(365)		(12,147)
Net Cash (Used in) Investing Activities	(11,333)	(3,155)	(15,332)
Effect of Exchange Rate Changes on Cash and Cash Equivalents	227	(803)	1,372
Net increase (decrease) in Cash and Cash Equivalents	9,543	946	(8,642)
Cash and Cash Equivalents at Beginning of Year	32,599	31,653	40,295
Cash and Cash Equivalents at End of Year (Note 2)	42,142	32,599	31,653
Net cash provided by operating activities includes:
Interest paid in the year	8,790	5,826	4,561
Income taxes paid in the year	1,261	1,338	1,201
Interest received in the year	18,867	15,553	14,273
Dividends received in the year	$ 1,277	$ 1,607	$ 1,336

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IFRS 7 Disclosure

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

IFRS 7 Disclosure

Text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of the MD&A form an integral part of the 2018 annual consolidated financial statements. They present required disclosures as set out by the International Accounting Standards Board in IFRS 7, Financial Instruments – Disclosures, which permits cross-referencing between the notes to the consolidated financial statements and the MD&A. See Note 1 on page 148 and Note 5 on page 164 of the consolidated financial statements.

Credit and Counterparty Risk Governance

The objective of our credit risk management framework is to ensure that all material credit risks to which the enterprise is exposed are identified, measured, managed, monitored and reported. The RRC has oversight of the management of all material risks that we face, including the credit risk management framework. BMO’s credit risk management framework incorporates governing principles that are defined in a series of corporate policies and standards and are applied to more specific operating procedures. These are reviewed on a regular basis and modified when necessary to keep them current and consistent with BMO’s risk appetite. The structure, limits (both notional and capital-based), collateral requirements, monitoring, reporting and ongoing management of our credit exposures are all governed by these credit risk management principles.

Lending officers in the operating groups are responsible for recommending credit decisions based on the completion of appropriate due diligence, and they assume accountability for the risks. With limited exceptions, credit officers in ERPM approve all credit transactions and are accountable for providing an objective independent assessment of the lending recommendations and risks assumed by the lending officers. All of these skilled and experienced individuals in the first and second lines of defence are subject to a rigorous lending qualification process and operate in a disciplined environment with clear delegation of decision-making authority, including individually delegated lending limits, which are reviewed annually. The Board annually reviews our Credit Risk Management Policy and delegates to the CEO discretionary lending limits for further specific delegation to senior officers. Credit decision-making is conducted at the management level appropriate to the size and risk of each transaction, in accordance with comprehensive corporate policies, standards and procedures governing the conduct of activities in which credit risk arises. Corporate Audit Division reviews and tests management processes and controls and samples credit transactions in order to assess adherence to acceptable lending standards within the enterprise risk appetite, as well as compliance with all applicable governing policies, standards and procedures.

All credit risk exposures are subject to regular monitoring. Performing accounts are reviewed on a regular basis, with most commercial and corporate accounts reviewed no less frequently than annually. The frequency of review increases in accordance with the likelihood and size of potential credit losses, and deteriorating higher-risk situations are referred to specialized account management groups for closer attention, when appropriate. In addition, regular portfolio and sector reviews are carried out, including stress testing and scenario analysis based on current, emerging or prospective risks. Reporting is provided at least quarterly, and more frequently where appropriate, to RRC and senior management committees in order to keep them informed of credit risk developments in our portfolios, including changes in credit risk concentrations, watchlist accounts, impaired loans, provisions for credit losses, negative credit migration and significant emerging credit risk issues. This facilitates the RRC and senior management committees to effect any measures they may decide to take.

Counterparty credit risk (CCR) creates a bilateral risk of loss because the market value of a transaction can be positive or negative for either counterparty. CCR exposures are also subject to the credit oversight, limit framework and approval processes outlined above. However, given the nature of the risk, CCR exposures are also monitored through the market risk framework and many are collateralized. In order to reduce our exposure to CCR, we often use a regulated central counterparty (CCP) that intermediates between counterparties for contracts in financial markets. CCPs aim to mitigate risk through the use of margin requirements (both initial and variation) and a default management process, including a default fund and other resources. Our exposures to CCPs are subject to the same credit risk governance, monitoring and rating framework we apply to all other corporate accounts.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Credit and Counterparty Risk Management

Collateral Management

Collateral is used for credit risk mitigation purposes to minimize losses that would otherwise be incurred in the event of a default. Depending on the type of borrower or counterparty, the assets available and the structure and term of the credit obligations, collateral can take various forms. For corporate and commercial borrowers, collateral can take the form of pledges of the assets of a business, such as accounts receivable, inventory, machinery, real estate, or personal assets pledged in support of guarantees. For trading counterparties, we may enter into legally enforceable netting agreements for on-balance sheet credit exposures, when possible. In our securities financing transaction business (including repurchase agreements and securities lending), we take eligible financial collateral that we control and can readily liquidate.

Collateral for our derivatives trading counterparty exposures is primarily comprised of cash and high-quality liquid securities (U.S. and Canadian treasury securities, U.S. agency securities, Canadian provincial government securities and certain high-quality European sovereign securities) that are monitored and revalued on a daily basis. Collateral is obtained under the contractual terms of standardized industry documentation. With limited exceptions, we utilize the International Swaps and Derivatives Association Inc. Master Agreement, frequently with a Credit Support Annex, to document our collateralized trading relationships with our counterparties for over-the-counter (OTC) derivatives that are not centrally cleared. Credit Support Annexes entitle a party to demand collateral (or other credit support) when its OTC derivatives exposure to another party exceeds an agreed threshold. Collateral transferred can include an independent initial margin and/or variation margin. Credit Support Annexes contain, among other things, provisions setting out acceptable types of collateral and a method for their valuation (discounts are often applied to the market values), as well as thresholds, whether or not the collateral can be re-pledged by the recipient and how interest is to be calculated.

To document our contractual securities financing relationships with our counterparties, we utilize master repurchase agreements for repurchase transactions and for securities lending transactions, we utilize master securities lending agreements.

On a periodic basis, collateral is subject to revaluation specific to asset type. For loans, the value of collateral is initially established at the time of origination, and the frequency of revaluation is dependent on the type of collateral. For commercial real estate collateral, a full external appraisal of the property is typically obtained at the time of loan origination, unless the exposure is below a specified threshold amount, in which case an internal evaluation and a site inspection are conducted. Internal evaluations may consider property tax assessments, purchase prices, real estate listings or realtor opinions. The case for an updated appraisal is reviewed annually, with consideration given to the borrower risk rating, existing tenants and lease contracts, as well as current market conditions.

When a commercial loan is determined to be impaired, a thorough review of collateral is conducted and updated external appraisals or valuations may be obtained. Quarterly reviews are then completed and collateral positions are reviewed and updated as deemed appropriate.

In Canada, for residential real estate that has a loan-to-value (LTV) ratio of less than 80%, an external property appraisal is routinely obtained at the time of loan origination. We may use an external service provided by Canada Mortgage and Housing Corporation or an automated valuation model provided by our appraisal management company to assist with determining either the current value of a property or the necessity of a full property appraisal.

For insured mortgages in Canada with a high LTV ratio (greater than 80%), we determine the value of the property through the default insurer.

Portfolio Management and Concentrations of Credit and Counterparty Risk

BMO’s credit risk governance policies require an acceptable level of diversification to help ensure we avoid undue concentrations of credit risk. Concentrations of credit risk may exist if a number of clients are engaged in similar activities, are located in the same geographic region or have similar economic characteristics such that their ability to meet contractual obligations could be similarly affected by changes in economic, political or other conditions. Limits may be specified for several portfolio dimensions, including industry, specialty segment (e.g., hedge funds and leveraged lending), country, product and single-name concentrations. The diversification of our credit exposure may be supplemented by the purchase or sale of credit protection through guarantees, insurance or credit default swaps.

Our credit assets consist of a well-diversified portfolio representing millions of clients, the majority of them consumers and small to medium-sized businesses. From an industry viewpoint, our most significant exposure at October 31, 2018 was to individual consumers, comprising $238,400 million ($223,962 million in 2017).

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Total non-trading exposures at default by industry sector, as at October 31, 2018 and 2017, based on the Basel III classifications are as follows:

(Canadian $ in millions)	Drawn				Commitments (undrawn)				OTC derivatives				Other off-balance sheet items				Repo-style transactions				Total (1)
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Financial institutions		102,552		89,681		21,741		19,457		1,649		1,474		5,016		4,137		177,094		139,187		308,052		253,936
Governments		44,552		36,829		2,118		2,243		1		–		667		682		8,401		10,626		55,739		50,380
Manufacturing		22,580		19,737		13,490		12,258		10		9		1,396		1,360		–		–		37,476		33,364
Real estate		31,534		26,991		8,170		6,472		1		–		820		829		–		–		40,525		34,292
Retail trade		19,961		18,242		3,617		3,410		–		–		559		523		–		–		24,137		22,175
Service industries		39,067		34,723		12,666		11,207		1		1		2,389		2,831		–		–		54,123		48,762
Wholesale trade		14,659		11,440		4,531		4,675		2		1		436		481		–		–		19,628		16,597
Oil and gas		9,131		8,185		10,410		7,706		–		–		1,804		1,496		–		–		21,345		17,387
Individual		190,688		180,612		47,586		43,223		–		–		126		127		–		–		238,400		223,962
Others (2)		35,617		35,523		18,197		15,709		88		3		6,474		6,617		–		–		60,376		57,852
Total exposure at default		510,341		461,963		142,526		126,360		1,752		1,488		19,687		19,083		185,495		149,813		859,801		758,707

(1) Credit exposure excluding equity, securitization, trading book and other assets such as non-significant investments, goodwill, deferred tax asset and intangibles.

(2) Includes industries having a total exposure of less than 2%.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Risk Rating Systems

BMO’s risk rating systems are designed to assess and measure the risk of any exposure.

Credit risk-based parameters are reviewed, validated and monitored regularly. The monitoring is on a quarterly basis for both the wholesale and retail models.

Retail (Consumer and Small Business)

The retail portfolios are comprised of a diversified group of individual customer accounts and include residential mortgages, personal loans, credit cards, auto loans and small business loans. These loans are managed in pools of homogeneous risk exposures for risk rating purposes. Decision support systems are developed using established statistical techniques and expert systems for underwriting and monitoring purposes. Adjudication models, behavioural scorecards, decision trees and expert knowledge are combined to generate optimal credit decisions in a centralized and automated environment.

The retail risk rating system assesses risk based on individual loan characteristics. BMO has a range of internally developed PD, LGD and EAD models for each of the major retail portfolios. The major product lines within each of the retail risk areas are modelled separately, so that the risk-based parameters capture the distinct nature of each product. The models, in general, are designed based on internal data recorded over a period of more than seven years, and adjustments are made at the parameter level to account for any uncertainty. The retail parameters are tested and calibrated on an annual basis, if required, to incorporate additional data points in the parameter estimation process, ensuring that the most recent experience is incorporated. Our largest retail portfolios are the Canadian mortgage, Canadian home equity line of credit and Canadian retail credit card portfolio.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Wholesale (Corporate, Commercial, Bank and Sovereign)

Within our wholesale portfolios, we utilize an enterprise-wide risk rating framework that is applied to all our sovereign, bank, corporate and commercial counterparties. One key element of this framework is the assignment of appropriate borrower or counterparty risk ratings (BRRs). BMO has a range of internally designed general and sector-specific BRR models, as well as portfolio-level LGD and EAD models for each of the corporate, commercial, bank and sovereign portfolios.

The BRR models capture the key financial and non-financial characteristics of the borrowers and generate a borrower-level rating that reflects the ranking ordering of the default risk. The models are primarily designed by using internal data, supplemented with judgment as necessary, for low default portfolios. BRRs are assessed and assigned at the time of loan origination, and reassessed when borrowers request changes to credit facilities or when events trigger a review, such as an external rating change or covenant breach. BRRs are reviewed no less frequently than annually, and more frequent reviews are conducted for borrowers with less acceptable risk ratings.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Credit Quality Information

Portfolio Review

Total enterprise-wide credit risk exposures were $860 billion at October 31, 2018, comprised of $445 billion in Canada, $347 billion in the United States and $68 billion in other jurisdictions.

Loan Maturities and Interest Rate Sensitivity

The following table presents gross loans and acceptances by contractual maturity and by country of ultimate risk:

(Canadian $ in millions)	1 year or less				Over 1 year to 5 years				Over 5 years				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Canada
Consumer		54,375		55,568		109,991		106,023		4,199		4,349		168,565		165,940
Commercial and corporate (excluding real estate)		57,530		49,693		16,438		14,699		1,750		1,367		75,718		65,759
Commercial real estate		7,397		6,226		10,143		8,997		1,275		1,453		18,815		16,676
United States		33,688		33,382		71,928		61,394		25,955		20,947		131,571		115,723
Other countries		8,628		11,184		624		920		294		684		9,546		12,788
Total		161,618		156,053		209,124		192,033		33,473		28,800		404,215		376,886

The following table presents net loans and acceptances by interest rate sensitivity:

(Canadian $ in millions)	2018		2017
Fixed rate		193,661		190,254
Floating rate		190,330		168,253
Non-interest sensitive (1)		18,585		16,546
Total		402,576		375,053

(1) Non-interest sensitive is comprised of customers’ liability under acceptances.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Market Risk

Market risk arises from BMO’s trading and underwriting activities, as well as its structural banking activities. The magnitude and importance of these activities to the enterprise, along with the potential volatility of market variables, call for diligent governance and a robust market risk management framework that ensures effective identification, measurement, reporting and control of market risk exposures.

Trading and Underwriting Market Risk Governance

BMO’s market risk-taking activities are subject to a comprehensive governance framework. The RRC provides oversight of the management of market risk on behalf of the Board of Directors and approves limits governing market risk exposures that are consistent with our risk appetite. The RMC regularly reviews and discusses significant market risk exposures and positions, and provides ongoing senior management oversight of BMO’s risk-taking activities. Both of these committees are kept apprised of specific market risk exposures and other factors that could expose BMO to unusual, unexpected or unquantified risks associated with market exposures, as well as other current and emerging market risks. In addition, all businesses and individuals authorized to conduct trading and underwriting activities on behalf of BMO are required to work within BMO’s risk governance framework and, as part of their first-line-of-defence responsibilities, they must adhere to all relevant corporate policies, standards and procedures and maintain and manage market risk exposures within specified limits and risk tolerances. In support of BMO’s risk governance framework, our market risk management framework is comprised of the processes, infrastructure and supporting documentation which, together, ensure that the bank’s market risk exposures are appropriately identified, accurately measured, and independently monitored and controlled on an ongoing basis.

Trading and Underwriting Market Risk

Our trading and underwriting businesses give rise to market risk associated with buying and selling financial products in the course of servicing customer requirements, market making and related financing activities, and from assisting clients to raise funds by way of securities issuance.

Identification and Measurement of Trading and Underwriting Market Risk

As the first step in the management of market risk, thorough assessment processes are in place to identify market risk exposures associated with both new products and the evolving risk profile of existing products, including on- and off-balance sheet positions, trading and non-trading positions and market risk exposures arising from the domestic and foreign operations of our operating groups.

Reflecting the multi-dimensional nature of market risk, various metrics and techniques are then employed to measure identified market risk exposures. These metrics primarily include Value at Risk, Stressed Value at Risk, and regulatory and economic capital attribution, as well as stress testing. Other techniques include the analysis of the sensitivity of our trading and underwriting portfolios to various market risk factors and the review of position concentrations, notional values and trading losses.

A consistent set of VaR and SVaR models is used for both management and regulatory purposes across all BMO Financial Group legal entities in which trading and/or underwriting activities are conducted.

We use a variety of methods to verify the integrity of our risk models, including the application of back-testing against hypothetical losses and approval by an independent model validation team. This testing is aligned with defined regulatory expectations, and its results confirm the reliability of our models. The volatility data and correlations that underpin our models are updated frequently, so that risk measures reflect current conditions.

Back-testing assumes there are no changes in the previous day’s closing positions and then isolates the effects of each day’s price movements against those closing positions. The bank’s VaR model is back-tested daily, and the one-day 99% confidence level VaR at the local and consolidated BMO levels is compared with the estimated daily profit and loss (P&L) that would be recorded if the portfolio composition remained unchanged. If this P&L result is negative and its absolute value is greater than the previous day’s VaR, a back-testing exception occurs. Each exception is investigated, explained and documented, and the back-testing results are reviewed by senior management and reported to our regulators.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Although it is a valuable indicator of risk, as with any model-driven metric, VaR has limitations. Among these limitations is the assumption that all positions can be liquidated within the assumed one-day holding period, which may not be the case under illiquid market conditions. Generally, market liquidity horizons are reviewed for suitability and updated where appropriate for relevant risk metrics. Further limitations of the VaR metric include the assumption that historical data can be used as a proxy to forecast future market events, and the fact that VaR calculations are based upon portfolio positions at the close of business and do not reflect the impact of intra-day trading activity.

Monitoring and Control of Trading and Underwriting Market Risk

A comprehensive set of limits is applied to these metrics, and these limits are subject to regular monitoring and reporting, with any breach of the limits escalated to the appropriate level of management. Risk profiles of our trading and underwriting activities are maintained within our risk appetite and supporting limits, and are monitored and reported to traders, management, senior executives and Board committees. Other significant controls include the independent valuation of financial assets and liabilities, as well as compliance with our Model Risk Management Framework to mitigate model risk.

Total Trading Value at Risk (VaR) Summary (1)(2)

As at or for the year ended October 31 (pre-tax Canadian $ equivalent in millions)	2018										2017
	Year-end			Average			High		Low		Year-end			Average			High		Low
Commodity VaR		0.7			0.9			13.6		0.3		0.9			0.9			1.7		0.4
Equity VaR		4.4			4.4			7.8		2.9		3.3			3.1			8.5		2.2
Foreign exchange VaR		0.5			0.6			2.2		0.1		0.3			0.8			3.1		0.1
Interest rate VaR		6.1			5.9			8.7		3.6		5.0			6.1			11.4		3.9
Credit VaR		7.4			2.6			7.4		1.5		1.9			2.3			4.1		1.5
Diversification		(8.3	)		(6.8	)		nm		nm		(5.9	)		(7.0	)		nm		nm
Total Trading VaR		10.8			7.6			17.5		4.7		5.5			6.2			10.0		4.3
Total Trading SVaR		56.3			26.8			56.3		16.6		24.6			20.5			34.6		13.4

(1) One-day measure using a 99% confidence interval. Benefits are presented in brackets and losses are presented as positive numbers.

(2) Stressed VaR is produced weekly and at month end.

nm – not meaningful

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Structural (Non-Trading) Market Risk

Structural market risk is comprised of interest rate risk arising from our banking activities (loans and deposits) and foreign exchange risk arising from our foreign currency operations and exposures.

Structural Market Risk Governance

BMO’s Corporate Treasury group is responsible for the ongoing management of structural market risk across the enterprise, with independent oversight provided by the Market Risk group. In addition to Board-approved limits on earnings at risk and economic value sensitivities due to changes in interest rates, more granular management limits are in place to guide the daily management of this risk.

The RRC has oversight of the management of structural market risk, annually approves the structural market risk plan and limits, and regularly reviews structural market risk positions. The RMC and the Balance Sheet and Capital Management Committee (BSCMC) regularly review structural market risk positions and provide senior management oversight.

Structural Market Risk Measurement

Interest Rate Risk

Structural interest rate risk arises when changes in interest rates affect the market value, cash flows and earnings of assets and liabilities related to our banking activities. The objective of structural interest rate risk management is to maintain high-quality earnings and maximize sustainable product spread, while managing the risk to the economic value of our assets arising from changes in interest rates.

Structural interest rate risk is primarily comprised of interest rate mismatch risk and product embedded option risk.

Interest rate mismatch risk arises when there are differences in the scheduled maturities, repricing dates or reference rates of assets, liabilities and derivatives. The net interest rate mismatch, representing residual assets funded by common shareholders’ equity, is managed to a target profile through interest rate swaps and securities.

Product embedded option risk arises when product features allow customers to alter cash flows, such as scheduled maturity or repricing dates, usually in response to changes in market conditions. Product embedded options include loan prepayments, deposit redemption privileges and committed rates on unadvanced mortgages. Product embedded options and associated customer behaviours are captured in risk modelling, and hedging programs may be used to manage this risk to low levels.

Structural interest rate risk is measured using simulations, earnings sensitivity and economic value sensitivity analysis, stress testing and gap analysis, in addition to other treasury risk metrics.

 The models used to measure structural interest rate risk use projected changes in interest rates and predict how customers would likely react to these changes. For customer loans and deposits with scheduled maturity and repricing dates (such as mortgages and term deposits), our models measure the extent to which customers are likely to use embedded options to alter those scheduled terms. For customer loans and deposits without scheduled maturity and repricing dates (such as credit card loans and chequing accounts), we measure our exposure using models that adjust for elasticity in product pricing and reflect historical and forecasted trends in balances. The results of these structural market risk models, by their nature, have inherent uncertainty, as they reflect potential anticipated pricing and customer behaviours, which may differ from actual experience. These models have been developed using statistical analysis and are independently validated and periodically updated through regular model performance assessment, back-testing processes and ongoing dialogue with the lines of business. Models developed to predict customer behaviour are also used in support of product pricing.

Structural interest rate earnings and economic value sensitivity to an immediate parallel increase or decrease of 100 basis points in the yield curve is disclosed in the following table.

There were no significant changes in our structural market risk management framework during the year.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Structural Interest Rate Sensitivity (1)

	As at October 31, 2018						As at October 31, 2017
(Pre-tax Canadian $ equivalent in millions)	Economic value sensitivity			Earnings sensitivity over the next 12 months			Economic value sensitivity			Earnings sensitivity over the next 12 months
100 basis point increase		(1,079.2	)		136.5			(957.8	)		136.9
100 basis point decrease		626.5			(304.1	)		78.6			(433.4	)

(1) Losses are presented in brackets and benefits are presented as positive numbers.

Insurance Market Risk

Insurance market risk includes interest rate and equity market risk arising from BMO’s insurance business activities. A 100 basis point increase in interest rates at October 31, 2018 would result in an increase in earnings before tax of $37 million ($52 million at October 31, 2017). A 100 basis point decrease in interest rates at October 31, 2018 would result in a decrease in earnings before tax of $37 million ($50 million at October 31, 2017). On an unhedged basis, a 10% decrease in equity market values at October 31, 2018 would result in a decrease in earnings before tax of $44 million ($40 million at October 31, 2017). A 10% increase in equity market values at October 31, 2018 would result in an increase in earnings before tax of $42 million ($40 million at October 31, 2017). During the quarter, a hedging program was put in place that will limit the decrease in earnings before tax due to decreases in equity market values to a maximum of $34 million in a quarter. The impact on earnings from insurance market risk is reflected in insurance claims, commissions and changes in policy benefit liabilities on the Consolidated Statement of Income and the corresponding change in the fair value of our policy benefit liabilities is reflected in Other Liabilities on the Consolidated Balance Sheet. Insurance market risk impacts are not reflected in the table above.

Foreign Exchange Risk

Structural foreign exchange risk arises primarily from translation risk related to the net investment in our U.S. operations and from transaction risk associated with our U.S.-dollar-denominated net income.

Translation risk represents the impact that changes in foreign exchange rates could have on BMO’s reported shareholders’ equity and capital ratios. BMO may enter into arrangements to offset the impact of foreign exchange movements on its capital ratios, and did so during the 2018 fiscal year.

Transaction risk represents the impact that fluctuations in the Canadian/U.S. dollar exchange rate could have on the Canadian dollar equivalent of BMO’s U.S.-dollar-denominated financial results. Exchange rate fluctuations will affect future results measured in Canadian dollars and the impact on those results is a function of the periods during which revenues, expenses and provisions for credit losses arise. Hedging positions may be taken to partially offset the pre-tax effects of Canadian/U.S. dollar exchange rate fluctuations on financial results, although no hedges were executed in the year. If future results are consistent with results in 2018, each one cent increase (decrease) in the Canadian/U.S. dollar exchange rate would be expected to increase (decrease) the Canadian dollar equivalent of our U.S. segment net income before income taxes for the year by $14 million, in the absence of hedging transactions.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Liquidity and Funding Risk  

Managing liquidity and funding risk is essential to maintaining a safe and sound enterprise, depositor confidence and earnings stability. It is BMO’s policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, even in times of stress.

Liquidity and Funding Risk Governance

The Corporate Treasury group and the operating groups, as the first line of defence, are responsible for the ongoing management of liquidity and funding risk across the enterprise. The Corporate Treasury group is responsible for identifying, assessing, managing, monitoring, mitigating and reporting on liquidity and funding risks. The Corporate Treasury group develops and recommends the Liquidity and Funding Risk Management Framework and the related risk appetite and limits, monitors compliance with the relevant corporate policies and assesses the impact of market events on liquidity and funding requirements on an ongoing basis.

Enterprise Risk and Portfolio Management, as the second line of defence, provides oversight, independent risk assessment and effective challenge of liquidity and funding management, frameworks, policies, limits, monitoring and reporting across the enterprise. The Risk Management Committee (RMC) and Balance Sheet and Capital Management Committee (BSCMC) provide senior management oversight and also review and discuss significant liquidity and funding policies, issues and developments that arise in the pursuit of our strategic priorities. The Risk Review Committee (RRC) provides oversight of the management of liquidity and funding risk, annually approves applicable policies, limits and the contingency plan, and regularly reviews liquidity and funding positions.

Liquidity and Funding Risk Management

BMO’s Liquidity and Funding Risk Management Framework is defined and authorized under Board-approved corporate policies and management-approved standards. These policies and standards outline key management principles, liquidity and funding metrics and related limits, as well as roles and responsibilities for the management of liquidity and funding risk across the enterprise.

BMO has a robust limit structure in place in order to manage liquidity and funding risk. Limits define the enterprise-level risk appetite for our key Net Liquidity Position (NLP) measure, regulatory liquidity ratios, secured and unsecured funding appetite, for both trading and structural activities, and enterprise collateral pledging. Limits also establish the tolerance for concentrations of maturities, requirements for counterparty liability diversification, business pledging activity, and the size and type of uncommitted and committed credit and liquidity facilities that may be outstanding. Operating within these limits helps to confirm that liquidity and funding risk is appropriately managed. An enterprise-wide contingency plan designed to facilitate effective management in the event of a disruption is also in place. Early warning indicators identified in the contingency plan are regularly monitored in order to detect any signs of growing liquidity or funding risk in the market or risks specific to BMO.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Liquidity and Funding Risk Measurement

A key component of liquidity risk management is the measurement of liquidity risk under stress. BMO uses the NLP as a key measure of liquidity risk. The NLP represents the amount by which liquid assets exceed potential funding needs under a severe combined enterprise-specific and systemic stress scenario. Potential funding needs may arise from obligations to repay retail, commercial and wholesale deposits that are withdrawn or not renewed or to fund drawdowns on available credit and liquidity lines, obligations to pledge collateral due to ratings downgrades or market volatility, and the continuing need to fund new assets or strategic investments. Potential funding needs are quantified by applying factors to various business activities based on management’s view of the relative level of liquidity risk related to each activity. These factors vary by depositor classification (e.g., retail, small business, non-financial corporate or wholesale counterparties) and deposit type (e.g., insured, uninsured, operational or non-operational deposits), as well as by commitment type (e.g., uncommitted or committed credit or liquidity facilities by counterparty type). The stress scenario also considers the time horizon over which liquid assets can be monetized and management’s assessment of the liquidity value of those assets under conditions of market stress. These funding needs are assessed under severe systemic and enterprise-specific stress scenarios and a combination thereof.

Stress testing results are evaluated against BMO’s stated risk tolerance and are considered in management decisions on setting limits and internal liquidity transfer pricing, and they also help to inform and shape the design of business plans and contingency plans. The Liquidity and Funding Risk Management Framework is integrated with enterprise-wide stress testing.

In addition to the NLP, we regularly monitor positions in relation to the limits and liquidity ratios noted in the Liquidity and Funding Risk Management section above. These include regulatory metrics such as the Liquidity Coverage Ratio (LCR) and Net Cumulative Cash Flow.

Unencumbered Liquid Assets

Unencumbered liquid assets include high-quality assets that are marketable, can be pledged as security for borrowings, and can be converted to cash in a time frame that meets our liquidity and funding requirements. Liquid assets are primarily held in our trading businesses, as well as in supplemental liquidity pools that are maintained for contingent liquidity risk management purposes.

As part of the Liquidity and Funding Risk Management Framework, a Pledging of Assets Corporate Policy sets out the framework and pledging limits for financial and non-financial assets.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Funding Strategy

Our funding philosophy requires that secured and unsecured wholesale funding used to support loans and less liquid assets must have a term (typically maturing in two to ten years) that will support the effective term to maturity of these assets. Wholesale secured and unsecured funding for liquid trading assets is largely shorter term (maturing in one year or less), is aligned with the liquidity of the assets being funded, and is subject to limits on aggregate maturities that are permitted across different time periods. Supplemental liquidity pools are funded largely with wholesale term funding.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments

																				2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		41,162		–		–		–		–		–		–		–		980			42,142
Interest bearing deposits with banks		4,964		1,717		1,037		457		112		18		–		–		–			8,305
Securities		4,522		4,283		5,049		7,749		4,943		11,854		32,480		56,004		54,051			180,935
Securities borrowed or purchased under resale agreements		67,804		12,732		2,490		1,781		191		53		–		–		–			85,051
Loans
Residential mortgages		1,782		1,848		4,343		6,306		4,769		24,522		64,636		11,414		–			119,620
Consumer instalment and other personal		607		440		1,026		1,143		943		5,414		19,910		9,812		23,930			63,225
Credit cards		–		–		–		–		–		–		–		–		8,329			8,329
Business and government		13,088		5,921		7,126		6,779		6,218		19,543		75,099		12,247		48,435			194,456
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,639	)		(1,639	)
Total loans and acceptances, net of allowance		15,477		8,209		12,495		14,228		11,930		49,479		159,645		33,473		79,055			383,991
Other Assets
Derivative instruments		2,040		3,385		1,645		1,012		807		3,407		6,074		7,834		–			26,204
Customers’ liability under acceptances		16,529		1,988		65		3		–		–		–		–		–			18,585
Other		1,740		506		189		26		6		17		20		4,824		21,507			28,835
Total other assets		20,309		5,879		1,899		1,041		813		3,424		6,094		12,658		21,507			73,624
Total Assets		154,238		32,820		22,970		25,256		17,989		64,828		198,219		102,135		155,593			774,048

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		16,966		6,032		1,200		227		106		–		–		–		3,376		27,907
Business and government		23,524		32,231		22,713		15,893		8,629		22,418		48,684		12,932		126,276		313,300
Individuals		2,582		6,455		7,953		7,619		10,536		11,736		16,327		2,582		115,054		180,844
Total deposits		43,072		44,718		31,866		23,739		19,271		34,154		65,011		15,514		244,706		522,051
Other liabilities
Derivative instruments		1,499		2,456		1,616		913		639		3,831		6,335		7,122		–		24,411
Acceptances		16,529		1,988		65		3		–		–		–		–		–		18,585
Securities sold but not yet purchased		28,804		–		–		–		–		–		–		–		–		28,804
Securities lent or sold under repurchase agreements		63,496		2,249		8		931		–		–		–		–		–		66,684
Current tax liabilities		–		–		–		–		–		–		–		–		50		50
Deferred tax liabilities		–		–		–		–		–		–		–		–		74		74
Securitization and structured entities’ liabilities		1,044		1,084		475		512		588		4,912		13,398		3,038		–		25,051
Other		8,548		5,568		44		34		184		789		4,455		1,905		14,302		35,829
Total other liabilities		119,920		13,345		2,208		2,393		1,411		9,532		24,188		12,065		14,426		199,488
Subordinated debt		–		–		–		–		–		–		–		6,782		–		6,782
Total Equity		–		–		–		–		–		–		–		–		45,727		45,727
Total Liabilities and Equity		162,992		58,063		34,074		26,132		20,682		43,686		89,199		34,361		304,859		774,048

(1) Deposits payable on demand and payable after notice have been included under no maturity.

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,472		3,610		6,892		9,620		11,345		21,056		84,295		3,144		–		141,434
Backstop liquidity facilities		–		–		–		–		–		–		5,627		–		–		5,627
Operating leases		34		70		99		101		100		358		770		1,210		–		2,742
Securities lending		4,939		–		–		–		–		–		–		–		–		4,939
Purchase obligations		56		388		153		155		158		615		186		82		–		1,793

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

																				2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		31,641		–		–		–		–		–		–		–		958			32,599
Interest bearing deposits with banks		3,784		1,579		626		319		182		–		–		–		–			6,490
Securities		3,620		2,917		5,933		5,845		3,625		7,675		22,842		52,615		58,126			163,198
Securities borrowed or purchased under resale agreements		57,919		13,236		2,353		1,241		249		49		–		–		–			75,047
Loans
Residential mortgages		1,045		1,551		4,531		7,687		6,201		19,866		65,547		8,830		–			115,258
Consumer instalment and other personal		517		371		1,084		1,374		1,285		4,211		20,845		8,590		23,667			61,944
Credit cards		–		–		–		–		–		–		–		–		8,071			8,071
Business and government		13,379		7,352		6,454		6,169		5,059		17,948		63,614		11,380		43,712			175,067
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,833	)		(1,833	)
Total loans and acceptances, net of allowance		14,941		9,274		12,069		15,230		12,545		42,025		150,006		28,800		73,617			358,507
Other Assets
Derivative instruments		1,701		3,748		1,580		1,229		1,306		3,272		7,426		8,689		–			28,951
Customers’ liability under acceptances		14,179		2,263		104		–		–		–		–		–		–			16,546
Other		1,340		475		129		17		11		11		131		4,431		21,697			28,242
Total other assets		17,220		6,486		1,813		1,246		1,317		3,283		7,557		13,120		21,697			73,739
Total Assets		129,125		33,492		22,794		23,881		17,918		53,032		180,405		94,535		154,398			709,580

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		12,462		9,321		2,633		496		25		–		–		–		3,268		28,205
Business and government		23,917		25,224		19,112		12,897		10,806		16,522		42,707		15,712		116,379		283,276
Individuals		3,835		5,081		5,569		5,662		7,999		9,098		15,811		2,075		113,181		168,311
Total deposits		40,214		39,626		27,314		19,055		18,830		25,620		58,518		17,787		232,828		479,792
Other liabilities
Derivative instruments		1,876		3,227		1,512		1,510		1,206		3,477		6,885		8,111		–		27,804
Acceptances		14,179		2,263		104		–		–		–		–		–		–		16,546
Securities sold but not yet purchased		25,163		–		–		–		–		–		–		–		–		25,163
Securities lent or sold under repurchase agreements		53,165		1,644		290		20		–		–		–		–		–		55,119
Current tax liabilities		–		–		–		–		–		–		–		–		125		125
Deferred tax liabilities		–		–		–		–		–		–		–		–		233		233
Securitization and structured entities’ liabilities		10		709		1,523		556		845		3,931		11,812		3,668		–		23,054
Other		12,616		2,536		517		43		239		752		154		2,361		13,143		32,361
Total other liabilities		107,009		10,379		3,946		2,129		2,290		8,160		18,851		14,140		13,501		180,405
Subordinated debt		–		–		–		–		–		–		–		5,029		–		5,029
Total Equity		–		–		–		–		–		–		–		–		44,354		44,354
Total Liabilities and Equity		147,223		50,005		31,260		21,184		21,120		33,780		77,369		36,956		290,683		709,580

(1) Deposits payable on demand and payable after notice have been included under no maturity.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,377		2,302		4,755		8,312		14,560		21,985		71,481		2,283		–		127,055
Backstop liquidity facilities		–		–		–		–		–		–		5,044		–		–		5,044
Operating leases		31		62		91		89		87		329		712		1,032		–		2,433
Securities lending		5,336		–		–		–		–		–		–		–		–		5,336
Purchase obligations		42		83		128		124		129		519		577		157		–		1,759

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

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Basis of Presentation

12 Months Ended

Oct. 31, 2018

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Basis of Presentation

Note 1: Basis of Presentation

Bank of Montreal (“the bank”) is a chartered bank under the Bank Act (Canada) and is a public company incorporated in Canada. We are a highly diversified financial services company, providing a broad range of personal and commercial banking, wealth management and investment banking products and services. The bank’s head office is at 129 rue Saint-Jacques, Montreal, Quebec. Its executive offices are at 100 King Street West, 1 First Canadian Place, Toronto, Ontario. Our common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange.

We have prepared these consolidated financial statements in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). We also comply with interpretations of IFRS by our regulator, the Office of the Superintendent of Financial Institutions Canada (“OSFI”).

Our consolidated financial statements have been prepared on a historic cost basis, except for the revaluation of the following items: assets and liabilities held for trading; financial assets and liabilities measured or designated at fair value through profit or loss (“FVTPL”); financial assets measured or designated at fair value through other comprehensive income (“FVOCI”); financial assets and financial liabilities designated as hedged items in qualifying fair value hedge relationships; cash-settled share-based payment liabilities; defined benefit pension and other employee future benefit liabilities; and insurance-related liabilities.

These consolidated financial statements were authorized for issue by the Board of Directors on December 4, 2018.

Basis of Consolidation

These consolidated financial statements are inclusive of the financial statements of our subsidiaries as at October 31, 2018. We conduct business through a variety of corporate structures, including subsidiaries, structured entities (“SEs”), associates and joint ventures. Subsidiaries are those entities where we exercise control through our ownership of the majority of the voting shares. We also hold interests in SEs, which we consolidate when we control the SEs. These are more fully described in Note 7. All of the assets, liabilities, revenues and expenses of our subsidiaries and consolidated SEs are included in our consolidated financial statements. All intercompany transactions and balances are eliminated on consolidation.

We hold investments in associates, where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method. The equity method is also applied to our investments in joint ventures. Joint ventures are those entities where we exercise joint control through an agreement with other shareholders. Under the equity method of accounting, investments are initially recorded at cost, and the carrying amount is increased or decreased to recognize our share of investee net income or loss, including other comprehensive income or loss. Our equity accounted investments are recorded as other securities and our share of the net income or loss is recorded in investments in associates and joint ventures, in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income. Additional information regarding accounting for other securities is included in Note 3.

Non-controlling interest in subsidiaries is presented in our Consolidated Balance Sheet as a separate component of equity that is distinct from our shareholders’ equity. The net income attributable to non-controlling interest in subsidiaries is presented separately in our Consolidated Statement of Income.

Specific Accounting Policies

To facilitate a better understanding of our consolidated financial statements, we have disclosed our significant accounting policies throughout the following notes with the related financial disclosures by major caption:

Note	Topic	Page
1	Basis of Presentation		148
2	Cash and Interest Bearing Deposits with Banks		153
3	Securities		153
4	Loans and Allowance for Credit Losses		157
5	Risk Management		164
6	Transfer of Assets		164
7	Structured Entities		165
8	Derivative Instruments		167
9	Premises and Equipment		175
10	Acquisitions		176
11	Goodwill and Intangible Assets		176
12	Other Assets		178
13	Deposits		178
14	Other Liabilities		179
15	Subordinated Debt		181

Note	Topic	Page
16	Equity		182
17	Fair Value of Financial Instruments and Trading-Related Revenue		184
18	Offsetting of Financial Assets and Financial Liabilities		190
19	Capital Management		191
20	Employee Compensation – Share-Based Compensation		192
21	Employee Compensation – Pension and Other Employee Future Benefits		194
22	Income Taxes		198
23	Earnings Per Share		200
24	Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities		201
25	Operating and Geographic Segmentation		203
26	Significant Subsidiaries		206
27	Related Party Transactions		206
28	Transition to IFRS 9		207

Translation of Foreign Currencies

We conduct business in a variety of foreign currencies and present our consolidated financial statements in Canadian dollars, which is our functional currency. Monetary assets and liabilities, as well as non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies, are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities not measured at fair value are translated into Canadian dollars at historical rates. Revenues and expenses denominated in foreign currencies are translated using the average exchange rate for the year.

Unrealized gains and losses arising from translating our net investment in foreign operations into Canadian dollars, net of related hedging activities and applicable income taxes, are included in our Consolidated Statement of Comprehensive Income within net gain (loss) on translation of net foreign operations. When we dispose of a foreign operation such that control, significant influence or joint control is lost, the cumulative amount of the translation gain (loss) and any applicable hedging activities and related income taxes is reclassified to our Consolidated Statement of Income as part of the gain or loss on disposition.

Foreign currency translation gains and losses on equity securities measured at FVOCI that are denominated in foreign currencies are included in accumulated other comprehensive income on FVOCI equity securities, net of taxes, in our Consolidated Statement of Changes in Equity. All other foreign currency translation gains and losses are included in foreign exchange, other than trading, in our Consolidated Statement of Income as they arise.

From time to time, we enter into foreign exchange hedge contracts to reduce our exposure to changes in the value of foreign currencies. Realized and unrealized gains and losses that arise on the mark-to-market of foreign exchange contracts related to economic hedges are included in non-interest revenue in our Consolidated Statement of Income. Changes in the fair value of derivative contracts that qualify as accounting hedges are recorded in our Consolidated Statement of Comprehensive Income within net change in unrealized gains (losses) on derivatives designated as cash flow hedges, with the spot/forward differential (the difference between the foreign currency exchange rate at the inception of the contract and the rate at the end of the contract) recorded in interest income (expense) over the term of the hedge.

Revenue

Dividend Income

Dividend income is recognized when the right to receive payment is established. This is the ex-dividend date for listed equity securities.

Fee Income

Securities commissions and fees are earned in Wealth Management and Capital Markets on brokerage transactions executed for customers, generally as a fixed fee per share traded, where the commissions and related clearing expense are recognized on trade date. There are also fees based on a percentage of the customer’s portfolio holdings that entitle clients to investment advice and a certain number of trades which are recorded over the period to which they relate.

Deposit and payment service charges are primarily earned in Personal and Commercial Banking and include monthly account maintenance fees and other activity-based fees earned on deposit and cash management services. Fees are recognized over time or at a point in time, i.e. over the period that account maintenance and cash management services are provided, or when an income-generating activity is performed.

Card fees arise in Personal and Commercial Banking and primarily include interchange income, late fees and annual fees. Card fees are recorded when the related services are provided, except for annual fees, which are recorded evenly throughout the year. Interchange income is calculated as a percentage of the transaction amount and/or a fixed price per transaction as established by the payment network and is recognized when the card transaction is settled. Reward costs for certain of our cards are recorded as a reduction in card fees.

Investment management and custodial fees are earned in Wealth Management and are based primarily on the balance of assets under management or assets under administration, as at the period end, for investment management, custodial, estate and trustee services provided. Fees are recorded over the period the services are performed.

Mutual fund revenues arise in Wealth Management and are earned on fund management services which are primarily calculated and recorded based on a percentage of the fund’s net asset value. The fees are recorded over the period the services are performed.

Underwriting and advisory fees are earned in Capital Markets and arise from securities offerings in which we act as an underwriter or agent, structuring and administering loan syndications and fees earned from providing merger-and-acquisition services and structuring advice. Underwriting and advisory fees are generally recognized when the services or milestones are completed.

Leases

We are lessors in both financing leases and operating leases. Leases are classified as financing leases if they transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. Otherwise they are classified as operating leases, as we retain substantially all the risks and rewards of asset ownership.

As lessor in a financing lease, a loan is recognized equal to the investment in the lease, which is calculated as the present value of the minimum payments to be received from the lessee, discounted at the interest rate implicit in the lease, plus any unguaranteed residual value we expect to recover at the end of the lease. Finance lease income is recognized in interest, dividend and fee income, loans, in our Consolidated Statement of Income.

Assets under operating leases are recorded in other assets in our Consolidated Balance Sheet. Rental income is recognized on a straight-line basis over the term of the lease in non-interest revenue, other, in our Consolidated Statement of Income. Depreciation on these assets is recognized on a straight-line basis over the life of the lease in non-interest expense, other, in our Consolidated Statement of Income.

Assets Held-for-Sale

Non-current non-financial assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell and are presented within other assets in our Consolidated Balance Sheet. Subsequent to its initial classification, a non-current asset is no longer depreciated or amortized, and any subsequent write-down in fair value less costs to sell is recognized in non-interest revenue, other, in our Consolidated Statement of Income.

Changes in Accounting Policies

Financial Instruments

Effective November 1, 2017 we adopted IFRS 9 Financial Instruments (“IFRS 9”), which replaces IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 addresses impairment, classification and measurement, and hedge accounting. The impact to shareholders’ equity at November 1, 2017 was an increase of $70 million ($44 million after-tax) related to the impairment requirements of the standard. Prior periods have not been restated. Refer to Note 28, Transition to IFRS 9, for the impact on the opening balance sheet at November 1, 2017 and for accounting policies under IAS 39, which were applicable in prior periods.

Impairment

IFRS 9 introduces a new expected credit loss (“ECL”) impairment model for all financial assets and certain off-balance sheet loan commitments and guarantees. The new ECL model results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual impairment. This differs from our previous approach where the allowance recorded on performing loans was designed to capture only incurred losses whether or not they have been specifically identified.

The ECL model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and will vary by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria such as 30-day past due and watchlist status. The allowance for assets in Stage 2 will be higher than for those in Stage 1 as a result of the longer time horizon associated with this stage. Stage 3 requires the recognition of lifetime losses for all credit impaired assets.

IFRS 9 requires consideration of past events, current market conditions and reasonable supportable information about future economic conditions, in determining whether there has been a significant increase in credit risk and in calculating the amount of expected losses. The standard also requires future economic conditions be based on an unbiased, probability-weighted assessment of possible future outcomes.

In considering the lifetime of an instrument, IFRS 9 generally requires the use of the contractual period, including pre-payment, extension and other options. For revolving instruments, such as credit cards, that may not have a defined contractual period, lifetime is based on historical behaviour.

Classification and Measurement

Debt instruments, including loans, are classified based on both our business model for managing the assets and the contractual cash flow characteristics of the assets. Debt instruments are measured at fair value through profit or loss (“FVTPL”) unless certain conditions are met that permit measurement at either fair value through other comprehensive income (“FVOCI”) or amortized cost.

FVOCI is permitted where debt instruments are held with the objective of selling the assets or collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs. Changes in fair value are recorded in other comprehensive income; gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

Amortized cost is permitted where debt instruments are held with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. Gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

For both FVOCI and amortized cost instruments, premiums, discounts and transaction costs are amortized over the term of the instrument on an effective yield basis as an adjustment to interest income.

Equity instruments are measured at FVTPL unless we elect to measure at FVOCI, in which case gains and losses are never recognized in income.

As permitted by IFRS 9, in fiscal 2015, we have early adopted the provisions relating to the recognition of changes in own credit risk for financial liabilities designated at FVTPL.

Additional information regarding changes in own credit risk is included in Notes 13 and 14.

Hedge Accounting

IFRS 9 introduced a new hedge accounting model that expands the scope of hedged items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. The new model no longer specifies quantitative measures for effectiveness testing and does not permit hedge de-designation. IFRS 9 includes a policy choice that allows us to continue to apply the existing hedge accounting rules, which we have elected to use. However, as required by the standard, we adopted the new hedge accounting disclosures. Refer to Note 8.

Use of Estimates and Judgments

The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the carrying amounts of certain assets and liabilities, certain amounts reported in net income and other related disclosures.

The most significant assets and liabilities for which we must make estimates include allowance for credit losses; financial instruments measured at fair value; pension and other employee future benefits; impairment of securities; income taxes and deferred taxes; goodwill and intangible assets; insurance-related liabilities; and provisions. We make judgments in assessing whether substantially all risks and rewards have been transferred in respect of transfers of financial assets and whether we control SEs, as discussed in Notes 6 and 7, respectively. If actual results were to differ from the estimates, the impact would be recorded in future periods.

We have established detailed policies and control procedures that are intended to ensure these judgments are well controlled, independently reviewed and consistently applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate.

Allowance for Credit Losses

The expected credit loss model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability of default since origination, and certain other criteria, such as 30-day past due and watchlist status. The assessment of a significant increase in credit risk requires experienced credit judgment.

In determining whether there has been a significant increase in credit risk and in calculating the amount of expected credit losses, we must rely on estimates and exercise judgment regarding matters for which the ultimate outcome is unknown. These judgments include changes in circumstances that may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or decrease in the allowance for credit losses.

The calculation of expected credit losses includes the explicit incorporation of forecasts of future economic conditions. We have developed models incorporating specific macroeconomic variables that are relevant to each portfolio. Key economic variables for our retail portfolios include primary operating markets of Canada, the United States and regional markets where considered significant. Forecasts are developed internally by our Economics group, considering external data and our view of future economic conditions. We exercise experienced credit judgment to incorporate multiple economic forecasts which are probability-weighted in the determination of the final expected credit loss. The allowance is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario.

Additional information regarding the allowance for credit losses is included in Notes 4 and 28.

Financial Instruments Measured at Fair Value

Fair value measurement techniques are used to value various financial assets and financial liabilities and are used in performing impairment testing on certain non-financial assets. Detailed discussions of our fair value measurement techniques are included in Note 17.

Pension and Other Employee Future Benefits

Our pension and other employee future benefits expense is calculated by our independent actuaries using assumptions determined by management. If actual experience were to differ from the assumptions used, we would recognize this difference in other comprehensive income.

Pension and other employee future benefits expense, plan assets and defined benefit obligations are also sensitive to changes in discount rates. We determine discount rates for all of our plans using high-quality AA rated corporate bond yields with terms matching the plans’ specific cash flows.

Additional information regarding our accounting for pension and other employee future benefits is included in Note 21.

Impairment of Securities

We review other securities at each quarter-end reporting period to identify and evaluate investments that show indications of possible impairment. For these equity securities, a significant or prolonged decline in the fair value of a security below its cost is objective evidence of impairment.

Debt securities measured at amortized cost or FVOCI are assessed for impairment using the expected credit loss model. For securities determined to have low credit risk, the allowance for credit losses is measured at a 12 month expected credit loss.

Additional information regarding our accounting for debt securities measured at amortized cost or FVOCI and other securities, allowance for credit losses and the determination of fair value is included in Notes 3 and 17.

Income Taxes and Deferred Tax Assets

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in either our Consolidated Statement of Income or Consolidated Statement of Changes in Equity. In determining the provision for income taxes, we interpret tax legislation, case law and administrative positions in numerous jurisdictions and, based on our judgment, record our estimate of the amount required to settle tax obligations. We also make assumptions about the expected timing of the reversal of deferred tax assets and liabilities. If our interpretations differ from those of taxing authorities or if the timing of reversals is not as expected, our provision for income taxes could increase or decrease in future periods. The amount of any such increase or decrease cannot be reasonably estimated.

Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available in future periods against which deductible temporary differences may be utilized. We are required to assess whether it is probable that our deferred income tax assets will be realized prior to expiration and, based on all the available evidence, determine if any portion of our deferred income tax assets should not be recognized. The factors used to assess the probability of realization are our past experience of income and capital gains, our forecast of future net income before taxes, and the period remaining before the expiration of tax loss carryforwards. Changes in our assessment of these factors could increase or decrease our provision for income taxes in future periods.

Additional information regarding our accounting for income taxes is included in Note 22.

Goodwill and Intangible Assets

For the purpose of impairment testing, goodwill is allocated to our groups of cash-generating units (“CGUs”), which represent the lowest level within the bank at which goodwill is monitored for internal management purposes. Impairment testing is performed at least annually, by comparing the carrying values and the recoverable amounts of the CGUs to which goodwill has been allocated to determine whether the recoverable amount of each group is greater than its carrying value. If the carrying value of the group were to exceed its recoverable amount, an impairment calculation would be performed. The recoverable amount of a CGU is the higher of its fair value less costs to sell and the value in use.

In determining fair value less costs to sell, we employ a discounted cash flow model consistent with those used when we acquire businesses. This model is dependent on assumptions related to revenue growth, discount rates, synergies achieved on acquisition and the availability of comparable acquisition data. Changes in any of these assumptions would affect the determination of fair value for each of the business units in a different manner. Management must exercise judgment and make assumptions in determining fair value less costs to sell, and differences in judgment and assumptions could affect the determination of fair value and any resulting impairment write-down.

Intangible assets with a definite life are amortized to income on either a straight-line or an accelerated basis over a period not exceeding 15 years, depending on the nature of the asset. We test definite-life intangible assets for impairment when circumstances indicate the carrying value may not be recoverable. Indefinite-life intangible assets are tested annually for impairment. If any intangible assets are determined to be impaired, we write them down to their recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

Additional information regarding goodwill and intangible assets is included in Note 11.

Insurance-Related Liabilities

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy benefit liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions. The most significant impact on the valuation of a liability would result from a change in the assumption for future investment yields.

Additional information regarding insurance-related liabilities is included in Note 14.

Provisions

The bank and its subsidiaries are involved in various legal actions in the ordinary course of business.

Provisions are recorded at the best estimate of the amounts required to settle any obligations related to these legal actions as at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. Factors considered in making the assessment include: a case-by-case assessment of specific facts and circumstances, our past experience and the opinions of legal experts. Management and external experts are involved in estimating any provisions. The actual costs of resolving these claims may be substantially higher or lower than the amounts of the provisions.

Additional information regarding provisions is included in Note 24.

Transfer of Financial Assets and Consolidation of Structured Entities

We enter into transactions in which we transfer assets, typically mortgage loans and credit cards, to a structured entity or third party to obtain alternate sources of funding. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition. Since we continue to be exposed to substantially all of the repayment, interest rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financings in our Consolidated Balance Sheet.

For securitization vehicles sponsored by the bank, the vehicles typically have limited decision-making authority. The structure of these vehicles limits the activities they can undertake, the types of assets they can hold and how activities are funded. We control and consolidate these vehicles when we have the key decision-making powers necessary to obtain the majority of the benefits of their activities.

For certain investments in limited partnerships, we exercise judgment in determining whether we control an entity. Based on an assessment of our interests and rights, we have determined that we do not control certain entities, even though we may have an ownership interest greater than 50%. This may be the case when we are not the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity. Additionally, we have determined that we control certain entities despite having an ownership interest less than 50%. This may be the case when we are the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity.

Transferred assets are discussed in greater detail in Note 6 and structured entities are discussed in greater detail in Notes 7 and 20.

Future Changes in IFRS

Revenue

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers (“IFRS 15”), which replaces the existing standards for revenue recognition. The new standard establishes a framework for the recognition and measurement of revenues generated from contracts with customers, providing a principles-based approach for revenue recognition, and introduces the concept of recognizing revenue for performance obligations as they are satisfied. Revenues outside of the scope of IFRS 15 include interest and dividend income, trading revenues, securities gains/losses, insurance revenues, investments in associates and joint ventures and lease income. The standard also requires additional disclosures about the nature, amount, timing and uncertainty of revenues and cash flows arising from transactions with our customers.

In April 2016, the IASB issued clarifications to IFRS 15, which provided additional clarity on revenue recognition related to identifying performance obligations, application guidance on principal versus agent and licences of intellectual property.

The primary impact of IFRS 15 will be the reclassification of amounts within the Consolidated Statement of Income. Loyalty rewards and cash promotion costs on cards currently recorded in non-interest expense will be presented as a reduction in non-interest revenue. Reimbursement of certain expenses incurred on behalf of customers currently recorded as a reduction in non-interest expense will be recorded in non-interest revenue. In addition, there will be minimal impacts to net income as a result of no longer discounting our loyalty rewards costs and the amortization of costs to obtain card customers, which are currently expensed as incurred.

On transition to IFRS 15 on November 1, 2018, we can either restate prior periods as if we had always applied IFRS 15 or alternatively, we can recognize the cumulative effect of any changes resulting from our adoption of IFRS 15 in opening retained earnings with no comparison for prior years. We have elected to restate prior periods.

The impact of adopting IFRS 15 in 2018 and 2017 would have been a decrease in non-interest revenue of $132 million and $153 million, a decrease in non-interest expense of $136 million and $138 million, and an increase in net income of $3 million and a decrease in net income of $11 million, in our Consolidated Statement of Income, respectively. The impact in our Consolidated Balance Sheet as at October 31, 2018 and 2017 is not significant.

Share-based Payment

In June 2016, the IASB issued amendments to IFRS 2 Share-based Payment (“IFRS 2”) in relation to the classification and measurement of share-based payment transactions. The amendments will not have a significant impact on our consolidated financial statements. The amendments are effective for our fiscal year beginning November 1, 2018.

Leases

In January 2016, the IASB issued IFRS 16 Leases (“IFRS 16”), which provides guidance for leases whereby lessees will recognize a liability for the present value of future lease liabilities and record a corresponding asset on the balance sheet for most leases. There are minimal changes to lessor accounting. IFRS 16 is effective for our fiscal year beginning November 1, 2019.

In order to meet the requirements of IFRS 16, we have established an enterprise-wide project and are currently assessing the impact of the standard on our future financial results. The main impact identified to date is the requirement to record real estate leases on balance sheet. Currently, most of our real estate leases are classified as operating leases, whereby we record lease expense over the term of the lease with no asset or liability recorded on the balance sheet other than any related leasehold improvements. Under IFRS 16, we will recognize a right-of-use asset and a lease liability on the balance sheet. There will be no significant impact on our lessor businesses.

When we adopt IFRS 16, we can either recognize the cumulative effect of any changes resulting from our adoption of IFRS 16 in opening retained earnings with no comparison for prior years or alternatively, we can restate prior periods as if we had always applied IFRS 16. We are assessing our transition approach as part of our project.

Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts (“IFRS 17”), which provides a comprehensive approach to accounting for all types of insurance contracts and will replace the existing IFRS 4 Insurance Contracts. In November 2018, the IASB tentatively decided to defer the effective date of IFRS 17 by one year, which would change the anticipated effective date for the bank to November 1, 2022. We will continue to closely monitor the ongoing discussions at the IASB. We are currently assessing the impact of the standard on our future financial results.

Conceptual Framework

In March 2018, the IASB issued the revised Conceptual Framework (“Framework”), which sets out the fundamental concepts for financial reporting to ensure consistency in standard-setting decisions and that similar transactions are treated in a similar way, so as to provide useful information to users of financial statements. The revised Framework, which is effective for our fiscal year beginning November 1, 2020, will inform future standard-setting decisions but does not impact existing IFRS. We do not expect the Framework to have a significant impact on our accounting policies.

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Cash and Interest Bearing Deposits with Banks

12 Months Ended

Oct. 31, 2018

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Cash and Interest Bearing Deposits with Banks

Note 2: Cash and Interest Bearing Deposits with Banks

(Canadian $ in millions)	2018		2017
Cash and deposits with banks (1)		40,738		30,002
Cheques and other items in transit, net		1,404		2,597
Total cash and cash equivalents		42,142		32,599

(1) Includes deposits with the Bank of Canada, the U.S. Federal Reserve and other central banks.

Cheques and Other Items in Transit, Net

Cheques and other items in transit are recorded at cost and represent the net position of the uncleared cheques and other items in transit between us and other banks.

Cash Restrictions

Certain of our foreign operations are required to maintain reserves or minimum balances with central banks in their respective countries of operation, totalling $1,655 million as at October 31, 2018 ($1,435 million in 2017).

Interest Bearing Deposits with Banks

Deposits with banks are recorded at amortized cost and include acceptances we have purchased that were issued by other banks. Interest income earned on these deposits is recorded on an accrual basis.

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Securities

12 Months Ended

Oct. 31, 2018

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Securities

Note 3: Securities

Securities are divided into six types, each with a different purpose and accounting treatment. The types of securities we hold are as follows:

Trading securities are securities purchased for resale over a short period of time. Trading securities are recorded at fair value through profit or loss. Transaction costs and changes in fair value are recorded in our Consolidated Statement of Income in trading revenues.

Fair value through profit or loss securities are measured at fair value with changes in fair value and related transaction costs recorded in our Consolidated Statement of Income in securities gains and losses, other than trading, except as noted below. This category includes the following:

Securities Designated at FVTPL

In order to qualify for this designation, the security must have reliably measurable fair values and the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the gains and losses on a different basis. Securities must be designated on initial recognition, and the designation is irrevocable. If these securities were not designated at FVTPL, they would be accounted for as either FVOCI or amortized cost.

We designate certain securities held by our insurance subsidiaries that support our insurance liabilities at fair value through profit or loss since the actuarial calculation of insurance liabilities is based on the fair value of the investments supporting them. This designation aligns the accounting result with the way the portfolio is managed on a fair value basis. The change in fair value of the securities is recorded in non-interest revenue, insurance revenue and the change in fair value of the liabilities is recorded in insurance claims, commissions and changes in policy benefit liabilities. The fair value of these investments as at October 31, 2018 of $8,783 million ($8,465 million as at October 31, 2017) is recorded in securities in our Consolidated Balance Sheet. The impact of recording these investments at fair value through profit or loss was a decrease of $372 million in non-interest revenue, insurance revenue, for the year ended October 31, 2018 (increase of $39 million for the year ended October 31, 2017).

Securities Mandatorily Measured at FVTPL

Securities managed on a fair value basis, but not held for trading, or debt securities whose cash flows do not represent solely payments of principal and interest and equity securities not held for trading are classified as FVTPL.

Debt securities measured at amortized cost are debt securities purchased with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities are initially recorded at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method. Impairment losses (recoveries) are recorded in our Consolidated Statement of Income in securities gains, other than trading. Interest income earned and amortization of premiums, discounts and transaction costs are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

Debt securities measured at FVOCI are debt securities purchased with the objective of both collecting contractual cash flows and selling the securities. The securities’ cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs.

Debt securities measured at FVOCI are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in our Consolidated Statement of Comprehensive Income until the security is sold or impaired. Gains and losses on disposal and impairment losses (recoveries) are recorded in our Consolidated Statement of Income in non-interest revenue, securities gains, other than trading. Interest income earned is recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities using the effective interest method.

Equity securities measured at FVOCI are equity securities where we have elected to record changes in the fair value of the instrument in other comprehensive income as opposed to fair value through profit or loss. Gains or losses recorded on these instruments will never be recognized in profit or loss. Equity securities measured at FVOCI are not subject to an impairment assessment.

Other securities are investments in associates and joint ventures where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method of accounting. Our share of the net income or loss is recorded in investments in associates and joint ventures in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income.

We account for all of our securities transactions using settlement date accounting in our Consolidated Balance Sheet. Changes in fair value between the trade date and settlement date are recorded in net income, except for those related to securities measured at FVOCI, which are recorded in other comprehensive income.

Impairment Review

Debt securities classified as amortized cost or FVOCI are assessed for impairment using the ECL model, with the exception of securities determined to have low credit risk where the allowance for credit losses is measured at a 12 month expected credit loss. A financial asset is considered to have low credit risk if the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations.

Classification of Securities

Our securities are classified as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 as follows:

(Canadian $ in millions)	2018		2017
Trading		99,697		99,069
FVTPL (1)		11,611		na
FVOCI - Debt and Equity (2)		62,440		na
Available-for-sale		na		54,075
Amortized cost (3)		6,485		na
Held-to-maturity		na		9,094
Other		702		960
		180,935		163,198

(1) Comprised of $2,828 million mandatorily measured at fair value and $8,783 million designated at fair value.

(2) Includes allowances for credit losses on FVOCI debt securities of $2 million (na at October 31, 2017).

(3) Net of allowances for credit losses of $1 million (na at October 31, 2017).

na – not applicable due to IFRS 9 adoption.

Fair Value Measurement

For traded securities, quoted market value is considered to be fair value. Quoted market value is based on bid prices. For securities where market quotes are not available, we use estimation techniques to determine fair value. A discussion of fair value measurement is included in Note 17.

Classified under IFRS 9

(Canadian $ in millions, except as noted)	Term to maturity										2018
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,103		2,195		2,038		1,077		907		10,320
Canadian provincial and municipal governments		1,293		2,029		1,235		1,355		2,790		8,702
U.S. federal government		2,684		2,835		1,260		1,895		843		9,517
U.S. states, municipalities and agencies		756		135		29		114		182		1,216
Other governments		485		557		330		40		–		1,412
NHA MBS, U.S. agency MBS and CMO (1)		382		497		477		346		7,482		9,184
Corporate debt		2,635		1,821		1,295		1,413		2,034		9,198
Loans		14		82		55		48		–		199
Corporate equity		–		–		–		–		49,949		49,949
Total trading securities		12,352		10,151		6,719		6,288		64,187		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		–		4		2		97		431
Canadian provincial and municipal governments		–		23		5		22		896		946
U.S. federal government		69		–		–		–		–		69
NHA MBS, U.S. agency MBS and CMO (1)		–		3		4		–		–		7
Corporate debt		616		56		125		692		5,331		6,820
Corporate equity		–		–		–		–		3,338		3,338
Total FVTPL securities		1,013		82		138		716		9,662		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		6,600		4,036		1,711		537		–		12,884
Fair value		6,592		4,006		1,688		519		–		12,805
Yield (%)		1.52		1.58		2.09		2.14		–		1.64
Canadian provincial and municipal governments
Amortized cost		3,200		1,229		1,742		713		12		6,896
Fair value		3,204		1,227		1,726		693		12		6,862
Yield (%)		1.36		1.81		2.67		2.59		3.58		1.90
U.S. federal government
Amortized cost		462		1,604		7,116		8,221		–		17,403
Fair value		454		1,595		6,858		7,916		–		16,823
Yield (%)		2.39		2.61		1.98		2.35		–		2.22
U.S. states, municipalities and agencies
Amortized cost		356		684		542		1,177		935		3,694
Fair value		355		678		540		1,158		924		3,655
Yield (%)		1.69		2.07		2.59		2.59		2.66		2.42
Other governments
Amortized cost		1,193		1,187		2,135		303		–		4,818
Fair value		1,192		1,183		2,113		302		–		4,790
Yield (%)		1.82		2.21		2.74		2.87		–		2.39
NHA MBS (1)
Amortized cost		306		62		2,014		–		–		2,382
Fair value		310		62		1,998		–		–		2,370
Yield (%)		1.95		1.32		2.00		–		–		1.98
U.S. agency MBS and CMO (1)
Amortized cost		–		13		109		1,819		9,870		11,811
Fair value		–		13		106		1,761		9,437		11,317
Yield (%)		–		2.31		2.50		2.51		2.29		2.33
Corporate debt
Amortized cost		672		1,992		569		509		41		3,783
Fair value		671		1,980		566		498		41		3,756
Yield (%)		1.45		2.86		2.87		3.24		4.02		2.67
Corporate equity
Amortized cost		–		–		–		–		62		62
Fair value		–		–		–		–		62		62
Yield (%)		–		–		–		–		–		–
Total cost or amortized cost		12,789		10,807		15,938		13,279		10,920		63,733
Total fair value		12,778		10,744		15,595		12,847		10,476		62,440
Yield (%)		1.55		2.09		2.23		2.44		2.32		2.13
Amortized Cost Securities
Issued or guaranteed by:
Canadian provincial and municipal governments
Amortized cost		230		280		143		179		–		832
Fair value		230		282		145		184		–		841
Other governments
Amortized cost		–		3		7		–		–		10
Fair value		–		3		7		–		–		10
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		171		452		–		1,884		3,045		5,552
Fair value		171		454		–		1,808		2,913		5,346
Corporate debt
Amortized cost		1		10		10		5		65		91
Fair value		1		10		10		5		65		91
Total cost or amortized cost		402		745		160		2,068		3,110		6,485
Total fair value		402		749		162		1,997		2,978		6,288
Other Securities
Carrying value		–		–		–		–		702		702
Total carrying value or amortized cost of securities		26,556		21,785		22,955		22,351		88,581		182,228
Total value of securities		26,545		21,722		22,612		21,919		88,137		180,935
Total by Currency (in Canadian $ equivalent)
Canadian dollar		18,091		12,284		9,782		5,475		37,135		82,767
U.S. dollar		7,799		9,423		12,718		16,404		49,922		96,266
Other currencies		655		15		112		40		1,080		1,902
Total securities		26,545		21,722		22,612		21,919		88,137		180,935

Classified under IAS 39

(Canadian $ in millions, except as noted)	Term to maturity										2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,862		1,527		2,021		1,313		1,104		10,827
Canadian provincial and municipal governments		812		1,343		714		1,991		2,467		7,327
U.S. federal government		1,332		1,758		2,000		1,906		2,477		9,473
U.S. states, municipalities and agencies		642		222		86		100		1,081		2,131
Other governments		85		438		266		34		–		823
NHA MBS, U.S. agency MBS and CMO (1)		147		571		203		8		2		931
Corporate debt		1,298		1,375		795		1,281		7,014		11,763
Loans		–		28		7		118		–		153
Corporate equity		–		–		–		–		55,641		55,641
Total trading securities		9,178		7,262		6,092		6,751		69,786		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		5,585		1,764		1,266		597		–		9,212
Fair value		5,578		1,749		1,262		591		–		9,180
Yield (%)		0.66		1.48		1.46		1.57		–		0.99
Canadian provincial and municipal governments
Amortized cost		1,157		265		1,293		860		38		3,613
Fair value		1,156		266		1,310		855		40		3,627
Yield (%)		0.85		1.45		2.24		2.32		3.27		1.77
U.S. federal government
Amortized cost		15		–		3,128		11,338		–		14,481
Fair value		17		–		3,115		11,137		–		14,269
Yield (%)		0.88		–		1.81		1.80		–		1.80
U.S. states, municipalities and agencies
Amortized cost		370		563		463		1,329		1,333		4,058
Fair value		370		566		467		1,357		1,336		4,096
Yield (%)		1.63		1.78		2.26		2.40		1.71		2.00
Other governments
Amortized cost		1,592		1,231		725		19		–		3,567
Fair value		1,593		1,225		722		18		–		3,558
Yield (%)		1.44		1.34		1.52		2.72		–		1.43
NHA MBS (1)
Amortized cost		255		1,143		1,059		–		–		2,457
Fair value		262		1,141		1,052		–		–		2,455
Yield (%)		2.05		1.83		1.56		–		–		1.74
U.S. agency MBS and CMO – U.S. (1)
Amortized cost		1		20		62		658		10,161		10,902
Fair value		1		19		62		659		10,020		10,761
Yield (%)		1.83		3.12		2.25		2.31		1.97		1.99
Corporate debt
Amortized cost		995		2,082		737		607		93		4,514
Fair value		997		2,080		734		619		95		4,525
Yield (%)		0.75		2.08		2.48		3.08		3.64		2.02
Corporate equity
Amortized cost		–		–		–		–		1,499		1,499
Fair value		–		–		–		–		1,604		1,604
Yield (%)		–		–		–		–		2.37		2.37
Total cost or amortized cost		9,970		7,068		8,733		15,408		13,124		54,303
Total fair value		9,974		7,046		8,724		15,236		13,095		54,075
Yield (%)		0.89		1.72		1.85		1.95		2.00		1.72
Held-to-Maturity Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		1,855		–		–		–		–		1,855
Fair value		1,857		–		–		–		–		1,857
Canadian provincial and municipal governments
Amortized cost		735		510		–		322		–		1,567
Fair value		737		512		–		341		–		1,590
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		191		485		364		999		3,633		5,672
Fair value		191		486		366		997		3,609		5,649
Total cost or amortized cost		2,781		995		364		1,321		3,633		9,094
Total fair value		2,785		998		366		1,338		3,609		9,096
Other Securities
Carrying value		7		21		13		38		881		960
Total carrying value or amortized cost of securities		21,936		15,346		15,202		23,518		87,424		163,426
Total value of securities		21,940		15,324		15,193		23,346		87,395		163,198
Total by Currency (in Canadian $ equivalent)
Canadian dollar		16,959		8,546		7,222		6,235		41,261		80,223
U.S. dollar		3,948		6,662		7,916		17,087		44,384		79,997
Other currencies		1,033		116		55		24		1,750		2,978
Total securities		21,940		15,324		15,193		23,346		87,395		163,198

(1) These amounts are supported by insured mortgages or issued by U.S. agencies and government-sponsored enterprises. NHA refers to the National Housing Act, MBS refers to mortgage-backed securities and CMO refers to collateralized mortgage obligations.

Yields in the tables above are calculated using the cost of the security and the contractual interest rate associated with each security, adjusted for any amortization of premiums and discounts. Tax effects are not taken into consideration. The term to maturity included in the table above is based on the contractual maturity date of the security. Actual maturities could differ, as issuers may have the right to call or prepay obligations. Equity securities with no maturity date are included in the over 10 years category.

Unrealized Gains and Losses

The following table summarizes the unrealized gains and losses on FVOCI securities as at October 31, 2018 under IFRS 9 and the unrealized gains and losses on available-for-sale securities as at October 31, 2017 under IAS 39.

(Canadian $ in millions)							2018								2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Issued or guaranteed by:
Canadian federal government		12,884		1		80		12,805		9,212		6		38		9,180
Canadian provincial and municipal governments		6,896		8		42		6,862		3,613		29		15		3,627
U.S. federal government		17,403		4		584		16,823		14,481		12		224		14,269
U.S. states, municipalities and agencies		3,694		16		55		3,655		4,058		43		5		4,096
Other governments		4,818		2		30		4,790		3,567		3		12		3,558
NHA MBS		2,382		6		18		2,370		2,457		9		11		2,455
U.S. agency MBS and CMO		11,811		2		496		11,317		10,902		6		147		10,761
Corporate debt		3,783		6		33		3,756		4,514		23		12		4,525
Corporate equity		62		–		–		62		1,499		121		16		1,604
Total		63,733		45		1,338		62,440		54,303		252		480		54,075

Unrealized gains (losses) may be offset by related (losses) gains on hedge contracts.

Interest, Dividend and Fee Income

Interest, dividend and fee income has been included in our consolidated financial statements as follows, excluding other securities and trading securities. Related income for trading securities is included in Note 17 Trading-Related Revenue.

(Canadian $ in millions)	2018		2017		2016
FVTPL		16		na		na
FVOCI		1,118		na		na
Amortized cost		172		na		na
Available-for-sale securities		na		662		509
Held-to-maturity securities		na		150		143
Total		1,306		812		652

na – not applicable due to IFRS 9 adoption.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Non-Interest Revenue

Net gains and losses from securities, excluding net realized and unrealized gains on trading securities, have been included in our Consolidated Statement of Income as follows:

(Canadian $ in millions)	2018			2017			2016
Non-Interest Revenue
FVTPL securities		106			na			na
FVOCI securities (1)
Gross realized gains		363			228			59
Gross realized (losses)		(216	)		(99	)		(16	)
Unrealized gains on investments reclassified from available-for-sale to other		na			–			7
Other securities, net realized and unrealized gains		–			49			51
Impairment write-downs		(14	)		(7	)		(17	)
Securities gains, other than trading (2)		239			171			84

(1) Realized gains (losses) are net of unrealized gains (losses) on related hedge contracts. Fiscal 2017 and prior years represent available-for-sale securities (Note 1).

(2) The following amounts of income related to our insurance operations were included in non-interest revenue, insurance revenue, in our Consolidated Statement of Income: Interest, dividend and fee income of $354 million for the year ended October 31, 2018 ($325 million in 2017); and securities gains, other than trading, of $1 million for the year ended October 31, 2018 ($nil in 2017).

Unrealized gains and losses on trading securities are included in trading-related revenue in Note 17.

na – not applicable due to IFRS 9 adoption.

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Loans and Allowance for Credit Losses

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Loans and Allowance for Credit Losses

Note 4: Loans and Allowance for Credit Losses

Loans are initially measured at fair value plus directly attributable costs, and are subsequently measured at amortized cost using the effective interest method. The effective interest method allocates interest income over the expected term of the loan by applying the effective interest rate to the carrying amount of the loan. The effective interest rate is defined as the rate that exactly discounts estimated future cash receipts through the expected term of the loan to the net carrying amount of the loan. Under the effective interest method, the amount recognized in interest, dividend and fee income, loans, varies over the term of the loan based on the principal outstanding. The treatment of interest income for impaired loans is described below.

Securities Borrowed or Purchased Under Resale Agreements

Securities borrowed or purchased under resale agreements represent the amounts we will receive as a result of our commitment to return or resell securities that we have borrowed or purchased, back to the original lender or seller, on a specified date at a specified price. We account for these instruments as if they were loans.

Lending Fees

Lending fees arise in Personal and Commercial Banking and Capital Markets. The accounting treatment for lending fees varies depending on the transaction. Some loan origination, restructuring and renegotiation fees are recorded as interest income over the term of the loan, while other lending fees are taken into income at the time of loan origination. Commitment fees are calculated as a percentage of the facility balance at the end

of the period. The fees are recorded as interest income over the term of the loan, unless we believe the loan commitment will not be used. In the latter case, commitment fees are recorded as lending fees earned over the commitment period. Loan syndication fees are payable and included in lending fees at the time the syndication is completed, unless the yield on any loans we retain is less than that of other comparable lenders involved in the financing. In the latter case, an appropriate portion of the syndication fee is recorded as interest income over the term of the loan.

Impaired Loans

We classify a loan as impaired when one or more loss events have occurred, such as bankruptcy, default or delinquency. Generally, consumer loans in both Canada and the U.S. are classified as impaired when payment is contractually 90 days past due, or one year past due for residential mortgages if guaranteed by the Government of Canada. Credit card loans are immediately written off when principal or interest payments are 180 days past due, and are not reported as impaired. In Canada, consumer instalment loans, other personal loans and some small business loans are normally written off when they are one year past due. In the U.S., all consumer loans are generally written off when they are 180 days past due, except for non-real estate term loans, which are generally written off when they are 120 days past due. For the purpose of measuring the amount to be written off, the determination of the recoverable amount includes an estimate of future recoveries.

Corporate and commercial loans are classified as impaired when we determine there is no longer reasonable assurance that principal or interest will be collected in their entirety on a timely basis. Generally, we consider corporate and commercial loans to be impaired when payments are 90 days past due. Corporate and commercial loans are written off following a review on an individual loan basis that confirms all recovery attempts have been exhausted.

A loan will be reclassified to performing status when we determine that there is reasonable assurance of full and timely repayment of interest and principal in accordance with the terms and conditions of the loan, and that none of the criteria for classification of the loan as impaired continue to apply.

Loans are in default when the borrower is unlikely to pay its credit obligations in full without recourse by the bank, such as realizing security, or when the borrower’s payments are past due more than 90 days (180 days for credit card loans). Overdrafts are considered to be past due once the customer has breached an advised limit or been advised of a limit smaller than currently outstanding or, in the case of retail overdrafts, has not brought the overdraft down to a $nil balance within a specified time period.

Our average gross impaired loans were $2,115 million for the year ended October 31, 2018 ($2,248 million in 2017). Our average impaired loans, net of the specific allowance, were $1,706 million for the year ended October 31, 2018 ($1,838 million in 2017).

Once a loan is identified as impaired, we continue to recognize interest income based on the original effective interest rate on the loan amount net of its related allowance. In the periods following the recognition of impairment, adjustments to the allowance for these loans reflecting the time value of money are recognized and presented as interest income. Interest income on impaired loans of $67 million was recognized for the year ended October 31, 2018 ($75 million in 2017 and $74 million in 2016).

During the year ended October 31, 2018, we recorded a net gain of $4 million before tax ($28 million in 2017 and $5 million in 2016) on the sale of impaired and written-off loans.

Allowance for Credit Losses (“ACL”)

The allowance for credit losses recorded in our Consolidated Balance Sheet is maintained at a level that we consider adequate to absorb credit-related losses on our loans and other credit instruments. The allowance for credit losses amounted to $1,870 million as at October 31, 2018, of which $1,639 million was recorded in loans and $231 million was recorded in other liabilities in our Consolidated Balance Sheet.

Allowance on Performing Loans

We maintain an allowance in order to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the allowance on performing loans is based on the requirements of IFRS, considering guidelines issued by OSFI.

Under the IFRS 9 ECL methodology, an allowance is recorded for expected credit losses on financial assets regardless of whether there has been an actual impairment. We recognize a loss allowance at an amount equal to 12 month expected credit losses, if the credit risk at the reporting date has not increased significantly since initial recognition (Stage 1). We will record expected credit losses over the remaining life of performing financial assets which are considered to have experienced a significant increase in credit risk (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria, such as 30-day past due and watchlist status.

For each exposure, ECL is a function of the probability of default (“PD”), exposure at default (“EAD”) and loss given default (“LGD”), with the timing of the loss also considered, and is estimated by incorporating forward-looking economic information and through the use of experienced credit judgment to reflect factors not captured in ECL models.

PD represents the likelihood that a loan will not be repaid and will go into default in either a 12 month horizon for Stage 1 or a lifetime horizon for Stage 2. The PD for each individual instrument is modelled based on historical data and is estimated based on current market conditions and reasonable and supportable information about future economic conditions.

EAD is modelled on historical data and represents an estimate of the outstanding amount of credit exposure at the time a default may occur. For off-balance sheet and undrawn amounts, EAD includes an estimate of any further amounts to be drawn at the time of default.

LGD is the amount that may not be recovered in the event of default and is modelled based on historical data and reasonable and supportable information about future economic conditions, where appropriate. LGD takes into consideration the amount and quality of any collateral held.

We consider past events, current market conditions and reasonable forward-looking supportable information about future economic conditions in calculating the amount of expected losses. In assessing information about possible future economic conditions, we utilize multiple economic scenarios including our base case, which represents, in our view, the most probable outcome, as well as benign and adverse forecasts, all of which are developed by our Economics group. Key economic variables used in the determination of the allowance for credit losses reflect the geographic diversity of our portfolios, where appropriate.

In considering the lifetime of a loan, the contractual period of the loan, including prepayment, extension and other options, is generally used. For revolving instruments, such as credit cards, which may not have a defined contractual period, the lifetime is based on historical behaviour.

Our ECL methodology also requires the use of experienced credit judgment to incorporate the estimated impact of factors that are not captured in the modelled ECL results.

Allowance on Impaired Loans

We maintain an allowance on individually identified impaired loans (Stage 3) of $370 million on our gross impaired loans of $1,936 million, to reduce their carrying value to an expected recoverable amount of $1,566 million as at October 31, 2018 ($1,827 million as at October 31, 2017). We review our loans on an ongoing basis to assess whether any loans should be classified as impaired and whether an allowance or write-off should be recorded (excluding credit card loans, which are classified as impaired and written off when principal or interest payments are 180 days past due). The review of individually significant problem loans is conducted at least quarterly by the account managers, each of whom assesses the ultimate collectability and estimated recoveries for a specific loan based on all events and conditions that are relevant to the loan. This assessment is then reviewed and approved by an independent credit officer.

Individually Significant Impaired Loans

To determine the amount we expect to recover from an individually significant impaired loan, we use the value of the estimated future cash flows discounted at the loan’s original effective interest rate. The determination of estimated future cash flows of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real estate properties, accounts receivable, guarantees, inventory or other capital assets.

Individually Insignificant Impaired Loans

Residential mortgages, consumer instalment and other personal loans are individually insignificant and may be individually assessed or collectively assessed for losses at the time of impairment, taking into account historical loss experience and expectations of future economic conditions.

Collectively assessed loans are grouped together by similar risk characteristics, such as type of instrument, geographic location, industry, type of collateral and term to maturity.

Loans Credit Risk Exposure

The following table sets out our credit risk exposure for all loans carried at amortized cost or FVTPL as at October 31, 2018. Stage 1 represents those performing loans carried with a 12 month expected credit loss, Stage 2 represents those performing loans carried with a lifetime expected credit loss, and Stage 3 represents those loans with a lifetime credit loss that are credit impaired.

(Canadian $ in millions)							2018
	Stage 1		Stage 2		Stage 3		Total
Loans: Residential mortgages
Exceptionally low		–		–		–		–
Very low		76,314		125		–		76,439
Low		18,975		2,479		–		21,454
Medium		12,621		3,765		–		16,386
High		90		445		–		535
Not rated		4,250		181		–		4,431
Impaired		–		–		375		375
Allowance for credit losses		20		37		19		76
Carrying amount		112,230		6,958		356		119,544
Loans: Consumer instalment and other personal
Exceptionally low		20,236		20		–		20,256
Very low		13,364		222		–		13,586
Low		12,581		364		–		12,945
Medium		7,707		4,153		–		11,860
High		127		1,657		–		1,784
Not rated		2,105		168		–		2,273
Impaired		–		–		521		521
Allowance for credit losses		83		312		143		538
Carrying amount		56,037		6,272		378		62,687
Loans: Credit cards
Exceptionally low		2,403		4		–		2,407
Very low		1,140		11		–		1,151
Low		943		107		–		1,050
Medium		1,742		874		–		2,616
High		108		428		–		536
Not rated		568		1		–		569
Impaired		–		–		–		–
Allowance for credit losses		39		191		–		230
Carrying amount		6,865		1,234		–		8,099
Loans: Business and government (1)
Acceptable
Investment grade		109,774		2,148		–		111,922
Sub-investment grade		88,348		7,308		–		95,656
Watchlist		–		4,423		–		4,423
Impaired		–		–		1,040		1,040
Allowance for credit losses		232		355		208		795
Carrying amount		197,890		13,524		832		212,246
Commitments and financial guarantee contracts
Acceptable
Investment grade		116,108		1,722		–		117,830
Sub-investment grade		44,895		3,426		–		48,321
Watchlist		–		1,650		–		1,650
Impaired		–		–		242		242
Allowance for credit losses		108		96		27		231
Carrying amount		160,895		6,702		215		167,812

(1) Includes customers’ liability under acceptances.

The following table shows the continuity in the loss allowance by each product type as at October 31, 2018.

(Canadian $ in millions)
For the twelve months ended	Stage 1			Stage 2			Stage 3			Total
Loans: Residential mortgages
Balance as at November 1, 2017		16			34			49			99
Transfer to Stage 1		34			(31	)		(3	)		–
Transfer to Stage 2		(1	)		7			(6	)		–
Transfer to Stage 3		–			(9	)		9			–
Net remeasurement of loss allowance		(37	)		42			19			24
Loan originations		10			–			–			10
Derecognitions and maturities		(2	)		(6	)		–			(8	)
Total provision for credit losses (“PCL”) (1)		4			3			19			26
Write-offs		–			–			(20	)		(20	)
Recoveries of previous write-offs		–			–			7			7
Foreign exchange and other		–			1			(11	)		(10	)
Balance as at October 31, 2018		20			38			44			102
Loans: Consumer instalment and other personal
Balance as at November 1, 2017		76			357			137			570
Transfer to Stage 1		214			(200	)		(14	)		–
Transfer to Stage 2		(22	)		105			(83	)		–
Transfer to Stage 3		(4	)		(162	)		166			–
Net remeasurement of loss allowance		(196	)		272			162			238
Loan originations		39			–			–			39
Derecognitions and maturities		(18	)		(50	)		–			(68	)
Total PCL (1)		13			(35	)		231			209
Write-offs		–			–			(301	)		(301	)
Recoveries of previous write-offs		–			–			92			92
Foreign exchange and other		1			4			(15	)		(10	)
Balance as at October 31, 2018		90			326			144			560
Loans: Credit cards
Balance as at November 1, 2017		83			254			–			337
Transfer to Stage 1		177			(177	)		–			–
Transfer to Stage 2		(37	)		37			–			–
Transfer to Stage 3		(1	)		(195	)		196			–
Net remeasurement of loss allowance		(164	)		342			20			198
Loan originations		19			–			–			19
Derecognitions and maturities		(3	)		(42	)		–			(45	)
Total PCL (1)		(9	)		(35	)		216			172
Write-offs		–			–			(319	)		(319	)
Recoveries of previous write-offs		–			–			103			103
Balance as at October 31, 2018		74			219			–			293
Loans: Business and government
Balance as at November 1, 2017		268			410			234			912
Transfer to Stage 1		136			(128	)		(8	)		–
Transfer to Stage 2		(31	)		66			(35	)		–
Transfer to Stage 3		(1	)		(61	)		62			–
Net remeasurement of loss allowance		(155	)		203			215			263
Loan originations		163			–			–			163
Derecognitions and maturities		(80	)		(86	)		–			(166	)
Model changes		(7	)		(3	)		–			(10	)
Total PCL (1)		25			(9	)		234			250
Write-offs		–			–			(297	)		(297	)
Recoveries of previous write-offs		–			–			59			59
Foreign exchange and other		5			7			(21	)		(9	)
Balance as at October 31, 2018		298			408			209			915
Total as at October 31, 2018		482			991			397			1,870
Comprised of: Loans		374			895			370			1,639
Other credit instruments (2)		108			96			27			231

(1) Excludes provision for credit losses on other assets of $5 million.

(2) Recorded in other liabilities on the Consolidated Balance Sheet.

The following table shows the continuity of our allowance for credit losses under IAS 39 as at October 31, 2017:

(Canadian $ in millions)	Residential mortgages						Credit card, consumer instalment and other personal loans						Business and   government loans						Total
	2017			2016			2017			2016			2017			2016			2017			2016
Impairment allowances (specific ACL), beginning of year		59			69			123			113			250			210			432			392
Amounts written off		(27	)		(38	)		(631	)		(616	)		(296	)		(349	)		(954	)		(1,003	)
Recoveries of amounts written off in previous years		16			16			199			173			50			154			265			343
Charge to income statement (specific PCL)		11			24			464			478			347			269			822			771
Foreign exchange and other movements		(10	)		(12	)		(18	)		(25	)		(117	)		(34	)		(145	)		(71	)
Specific ACL, end of year		49			59			137			123			234			250			420			432
Collective ACL, beginning of year		71			111			596			714			1,015			835			1,682			1,660
Charge (recovery) to income statement (collective PCL)		(1	)		(42	)		(6	)		(120	)		(69	)		162			(76	)		–
Foreign exchange and other movements		(1	)		2			(4	)		2			(25	)		18			(30	)		22
Collective ACL, end of year		69			71			586			596			921			1,015			1,576			1,682
Total ACL		118			130			723			719			1,155			1,265			1,996			2,114
Comprised of: Loans		93			104			722			719			1,018			1,102			1,833			1,925
Other credit instruments (1)		25			26			1			–			137			163			163			189

(1) The total specific and collective allowances related to other credit instruments are included in other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Significant changes in the gross balances, including originations, maturities and repayments in the normal course of operations, impact the allowance for credit losses.

Loans and allowance for credit losses by geographic region as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	2018								2017
	Gross amount		Allowance on impaired loans (2)		Allowance on performing loans (3)		Net amount		Gross amount		Specific allowance (2)		Collective allowance (3)		Net amount
By geographic region: (1)
Canada		244,837		189		689		243,959		233,672		212		799		232,661
United States		131,247		181		574		130,492		115,029		161		641		114,227
Other countries		9,546		–		6		9,540		11,639		20		–		11,619
Total		385,630		370		1,269		383,991		360,340		393		1,440		358,507

(1) Geographic region is based upon the country of ultimate risk.

(2) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

(3) Excludes allowance for credit losses on performing loans of $204 million for other credit instruments, which is included in other liabilities ($136 million in 2017).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Impaired loans, including the related allowances, as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	Gross impaired amount (1)				Allowance on impaired loans (3)		Specific allowance (3)		Net		Net impaired amount
	2018		2017		2018		2017		2018		2017
Residential mortgages		375		391		19		24		356		367
Consumer instalment and other personal loans		521		556		143		136		378		420
Business and government loans		1,040		1,273		208		233		832		1,040
Total		1,936		2,220		370		393		1,566		1,827
By geographic region: (2)
Canada		735		793		189		212		546		581
United States		1,201		1,377		181		161		1,020		1,216
Other countries		–		50		–		20		–		30
Total		1,936		2,220		370		393		1,566		1,827

(1) Excludes purchased credit impaired loans.

(2) Geographic region is based upon the country of ultimate risk.

(3) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

Fully secured loans with amounts past due between 90 and 180 days that we have not classified as impaired totalled $49 million and $62 million as at October 31, 2018 and 2017, respectively.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Loans Past Due Not Impaired

Loans that are past due but not classified as impaired are loans where our customers have failed to make payments when contractually due, but for which we expect the full amount of principal and interest payments to be collected, or which are held at fair value. The following table presents loans that are past due but not classified as impaired as at October 31, 2018 and 2017.

(Canadian $ in millions)	1 to 29 days				30 to 89 days				90 days or more				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Residential mortgages (1)		660		649		513		438		21		19		1,194		1,106
Credit card, consumer instalment and other personal loans		1,431		1,480		415		466		88		94		1,934		2,040
Business and government loans		611		589		268		297		55		72		934		958
Total		2,702		2,718		1,196		1,201		164		185		4,062		4,104

(1) The percentage of loans 90 days or more past due but not impaired that were guaranteed by the Government of Canada is 66% for 2018 and 67% for 2017.

ECL Sensitivity and Key Economic Variables

The allowance for performing loans is sensitive to changes in both economic forecasts and the probability-weight assigned to each forecast scenario. Many of the factors have a high degree of interdependency although there is no single factor to which loan impairment allowances as a whole are sensitive.

If we assumed a 100% base case economic forecast and included the impact of loan migration by restaging, with other assumptions held constant including the application of experienced credit judgment, the allowance for performing loans would be approximately $1,250 million as at October 31, 2018 compared to the reported allowance for performing loans of $1,473 million.

If we assumed a 100% adverse economic forecast and included the impact of loan migration by restaging, with other assumptions held constant including the application of experienced credit judgment, the allowance for performing loans would be approximately $2,650 million as at October 31, 2018, compared to the reported allowance for performing loans of $1,473 million.

Actual results in a recession will differ as our portfolio will change through time due to migration, growth, risk mitigation actions and other factors. In addition, our allowance will reflect the three economic scenarios used in assessing the allowance with weightings attached to adverse and benign scenarios often unequally weighted and the weightings will change through time.

The following table shows the key economic variables we use to estimate our allowance on performing loans during the forecast period. The values shown represent the end of period national average values for the first 12 months and then the national average for the remaining horizon. While the values disclosed below are national variables, in our underlying models we use regional variables where considered appropriate.

	Benign scenario					Base scenario					Adverse scenario
As at October 31, 2018	First 12 months		Remaining horizon (1)			First 12 months		Remaining horizon (1)			First 12 months			Remaining horizon (1)
Real gross domestic product (2)
Canada		3.1%		2.4	%		1.8%		1.6	%		(3.2	)%		0.8	%
U.S.		2.9%		1.9	%		2.4%		1.6	%		(2.9	)%		0.9	%
Corporate BBB 10-year spread
Canada		2.0%		2.1	%		2.3%		2.3	%		4.7	%		3.9	%
U.S.		1.8%		2.0	%		2.2%		2.3	%		4.3	%		3.5	%
Unemployment rates
Canada		5.4%		5.2	%		5.6%		5.6	%		9.3	%		9.3	%
U.S.		3.2%		3.1	%		3.6%		3.7	%		6.7	%		6.8	%
Housing Price Index
Canada (3)		2.4%		2.6	%		1.4%		1.8	%		(12.8	)%		(3.2	)%
U.S. (4)		5.1%		4.3	%		3.6%		3.0	%		(7.3	)%		(1.2	)%

(1) The remaining forecast period is two years.

(2) Real gross domestic product is based on year over year growth.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the U.S., we use the National Case-Shiller House Price Index.

The ECL approach requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under our current probability-weighted scenarios, if all our performing loans were in Stage 1, our models would generate an allowance for performing loans of approximately $1,000 million compared to the reported allowance for performing loans of $1,473 million.

Renegotiated Loans

From time to time we modify the contractual terms of a loan due to the poor financial condition of the borrower. We assess renegotiated loans for impairment consistent with our existing policies for impairment. When renegotiation leads to significant concessions being granted, and the concessions are for economic or legal reasons related to the borrower’s financial difficulty that we would not otherwise consider, the loan is classified as impaired. We consider one or a combination of the following to be significant concessions: (1) a reduction of the stated interest rate, (2) an extension of the maturity date or dates at a stated interest rate lower than the current market rate for a new loan with similar terms, or (3) forgiveness of principal or accrued interest.

Renegotiated loans are permitted to remain in performing status if the modifications are not considered to be significant, or are returned to performing status when none of the criteria for classification as impaired continue to apply.

The carrying value of our renegotiated loans was $1,129 million as at October 31, 2018 ($1,064 million in 2017). Renegotiated loans of $541 million were classified as performing during the year ended October 31, 2018 ($509 million in 2017). Renegotiated loans of $53 million were written off in the year ended October 31, 2018 ($36 million in 2017).

Foreclosed Assets

Property or other assets that we receive from borrowers to satisfy their loan commitments are classified as either held for use or held for sale according to management’s intention and are recorded at their carrying amount.

During the year ended October 31, 2018, we foreclosed on impaired loans and received $117 million of real estate properties that we classified as held for sale ($62 million in 2017).

As at October 31, 2018, real estate properties held for sale totalled $58 million ($55 million in 2017). These properties are disposed of when considered appropriate. During the year ended October 31, 2018, we recorded an impairment loss of $10 million on real estate properties classified as held for sale ($10 million in 2017 and $18 million in 2016).

Write-offs Subject to Collection Efforts

Generally, we continue to seek recovery on amounts that were written off during the period unless the loan is sold, we no longer have the right to collect or we have exhausted all reasonable efforts to collect.

Collateral

Collateral is used to manage credit risk related to securities borrowed or purchased under resale agreements, residential mortgages, consumer instalment and other personal loans and business and government loans. Additional information on our collateral requirements is included in Notes 14 and 24 as well as in the blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 87 and 88 of this report.

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Risk Management

12 Months Ended

Oct. 31, 2018

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Risk Management

Note 5: Risk Management

We have an enterprise-wide approach to the identification, measurement, monitoring and control of risks faced across our organization.

The key risks related to our financial instruments are classified as credit and counterparty, market, and liquidity and funding risk.

Credit and Counterparty Risk

Credit and counterparty risk is the potential for loss due to the failure of a borrower, endorser, guarantor or counterparty to repay a loan or honour another predetermined financial obligation. Credit risk arises predominantly with respect to loans, over-the-counter and centrally cleared derivatives and other credit instruments. This is the most significant measurable risk that we face.

Our risk management practices and key measures are disclosed in the text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 87 to 91 of this report. Additional information on credit risk related to loans and derivatives is disclosed in Notes 4 and 8, respectively.

Market Risk

Market risk is the potential for adverse changes in the value of our assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, and credit spreads, and includes the risk of credit migration and default in our trading book. We incur market risk in our trading and underwriting activities and in the management of structural market risk in our banking and insurance activities.

Our market risk management practices and key measures are disclosed in the text and tables presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 95 to 99 of this report.

Liquidity and Funding Risk

Liquidity and funding risk is the potential for loss if we are unable to meet our financial commitments in a timely manner at reasonable prices as they become due. It is our policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, including liabilities to depositors and suppliers, and lending, investment and pledging commitments, even in times of stress. Managing liquidity and funding risk is essential to maintaining a safe and sound enterprise, depositor confidence and earnings stability.

Our liquidity and funding risk management practices and key measures are disclosed in the text presented in a blue-tinted font in the Enterprise-Wide Risk Management section of Management’s Discussion and Analysis on pages 100 to 108 of this report.

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Transfer of Assets

12 Months Ended

Oct. 31, 2018

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Transfer of Assets

Note 6: Transfer of Assets

Loan Securitization

We sell Canadian mortgage loans to third-party Canadian securitization programs, including the Canada Mortgage Bond program, directly to third-party investors under the National Housing Act Mortgage-Backed Securities program and under our own program. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition.

Under these programs, we are entitled to the payment over time of the excess of the sum of interest and fees collected from customers, in connection with the loans that were sold, over the yield paid to investors, less credit losses and other costs. Since we continue to be exposed to substantially all of the prepayment, interest rate and credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financing in our Consolidated Balance Sheet. The interest and fees collected, net of the yield paid to investors, is recorded in net interest income using the effective interest method over the term of the securitization. Credit losses associated with the loans are recorded in the provision for credit losses. During the year ended October 31, 2018, we sold $8,062 million of mortgage loans to these programs ($8,707 million in 2017).

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Residential mortgages		5,569				4,797
Other related assets (2)		11,640				12,091
Total (3)		17,209		16,925		16,888		16,621

(1) Carrying amount of loans is net of allowance.

(2) Other related assets represent payments received on account of loans pledged under securitization programs that have not yet been applied against the associated liabilities. The payments received are held on behalf of the investors in the securitization vehicles until principal payments are required to be made on the associated liabilities. In order to compare all assets supporting the associated liabilities, this amount is added to the carrying amount of the securitized assets in the table above.

(3) The fair values of assets and associated liabilities are $17,105 million and $16,763 million, respectively, as at October 31, 2018 ($16,847 million and $16,746 million, respectively, in 2017).

We retain the mortgage servicing rights for certain mortgage loans purchased or originated in the U.S. which are sold and derecognized. During the year ended October 31, 2018, we sold $936 million of these loans ($1,012 million in 2017) and recognized $17 million in mortgage servicing rights ($17 million in 2017) due to our continued involvement.

Securities Lent or Sold Under Repurchase Agreements

Securities lent or sold under repurchase agreements represent short-term funding transactions in which we sell securities that we own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. We retain substantially all of the risks and rewards associated with the securities and we continue to recognize them in our Consolidated Balance Sheet, with the obligation to repurchase these securities recorded as secured borrowing transactions at the amount owing. The interest expense related to these liabilities is recorded on an accrual basis. Additional information on securities lent or sold under repurchase agreements is provided in Note 14.

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Structured Entities

12 Months Ended

Oct. 31, 2018

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Structured Entities

Note 7: Structured Entities

We enter into certain transactions in the ordinary course of business which involve the establishment of structured entities (“SEs”) to facilitate or secure customer transactions and to obtain alternate sources of funding. We are required to consolidate an SE if we control the entity. We control an SE when we have power over the SE, exposure to variable returns as a result of our involvement, and the ability to exercise power to affect the amount of our returns.

In assessing whether we control an SE, we consider the entire arrangement to determine the purpose and design of the SE, the nature of any rights held through contractual arrangements and whether we are acting as a principal or agent.

We perform a reassessment of consolidation if facts and circumstances indicate that there have been changes to one or more of the elements of control over the SE. See Note 1 for more information on our basis of consolidation.

Consolidated Structured Entities

Bank Securitization Vehicles

We use securitization vehicles to securitize our Canadian credit card loans, Canadian real estate lines of credit and Canadian auto loans in order to obtain alternate sources of funding. The structure of these vehicles limits the activities they can undertake and the types of assets they can hold, and the vehicles have limited decision-making authority. The vehicles issue term asset-backed securities to fund their activities. We control and consolidate these vehicles, as we have the key decision-making powers necessary to obtain the majority of the benefits of their activities.

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities issued by our bank securitization vehicles:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Credit card receivables		7,246		5,096		7,058		4,115
Consumer instalment and other personal (2)		6,827		3,083		5,699		2,295
Total (3)		14,073		8,179		12,757		6,410

(1) Carrying amount of loans is net of allowance.

(2) Includes Canadian real estate lines of credit and Canadian auto loans.

(3) The fair values of assets and associated liabilities are $14,045 million and $8,134 million, respectively, as at October 31, 2018 ($12,753 million and $6,403 million, respectively, in 2017).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

U.S. Customer Securitization Vehicle

We sponsor one customer securitization vehicle (also referred to as a bank-sponsored multi-seller conduit) that provides our customers with alternate sources of funding through the securitization of their assets. This vehicle provides clients with access to financing in the asset-backed commercial paper (“ABCP”) markets by allowing them to either sell their assets directly into the vehicle or indirectly by selling an interest in the securitized assets into the vehicle, which then issues ABCP to investors in order to fund the purchases. We do not sell assets to the customer securitization vehicle. We earn fees for providing services related to the securitizations, including liquidity, distribution and financial arrangement fees for supporting the ongoing operations of the vehicle. We have determined that we control and therefore consolidate this vehicle, as we are exposed to its variable returns and we have the key decision-making powers necessary to affect the amount of those returns in our capacity as liquidity provider and servicing agent.

We provide committed liquidity support facilities to this vehicle which may require that we provide additional financing to the vehicle in the event that certain events occur. The total committed undrawn amount under these facilities at October 31, 2018 was $7,100 million ($6,765 million at October 31, 2017).

Capital and Funding Vehicles

We have a funding vehicle that was created to guarantee payments due to bondholders on bonds issued by us. We sell assets to this funding vehicle in exchange for an intercompany loan.

We may also use capital vehicles to transfer our credit exposure on certain loan assets. We purchase credit protection against eligible credit events from these vehicles. The vehicles collateralize their obligation through the issuance of guarantee-linked notes. Loan assets are not sold or assigned to the vehicles and remain on our Consolidated Balance Sheet. As at October 31, 2018, $325 million of guarantee-linked notes issued by these vehicles were included in deposits in our Consolidated Balance Sheet ($318 million at October 31, 2017).

For those vehicles that purchase assets from us or are designed to pass on our credit risk, we have determined that based on the rights of the arrangements or through our equity interest we have significant exposure to the variable returns of the vehicles, and we control and therefore consolidate these vehicles. Additional information related to notes issued by and assets sold to these vehicles is provided in Note 13 and Note 24, respectively.

Unconsolidated Structured Entities

The table below presents amounts related to our interests in unconsolidated SEs:

(Canadian $ in millions)					2018						2017
	Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles		Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles
Interests recorded on the balance sheet
Cash and cash equivalents		118		53		–		8		50		–
Trading securities		–		12		–		–		6		209
FVTPL securities		–		582		–		na		na		na
FVOCI securities		2		242		–		na		na		na
Available-for-sale securities		na		na		na		2		725		–
Loans		7		–		–		7		–		–
Other		3		13		–		–		6		–
		130		902		–		17		787		209
Deposits		570		53		–		460		50		146
Derivatives		–		–		–		–		–		63
Other		17		–		–		16		–		–
		587		53		–		476		50		209
Exposure to loss (2)		28		7,135		–		57		6,425		209
Total assets of the entities		587		5,033		–		476		4,592		209

(1) Securities held that are issued by our Canadian customer securitization vehicles are comprised of asset-backed commercial paper and are classified as trading securities, FVTPL securities and FVOCI securities (trading securities and available-for-sale securities in 2017 under IAS 39). All assets held by these vehicles relate to assets in Canada.

(2) Exposure to loss represents securities held, undrawn liquidity facilities, total committed amounts of the BMO funded vehicle, derivative assets and loans.

na – not applicable due to IFRS 9 adoption.

Capital Vehicles

One of our capital vehicles holds a note issued by us as its underlying asset. We intend to redeem the note on December 31, 2018. We may also use capital vehicles to pass our credit risk to security holders of the vehicles. In these situations we are not exposed to significant default or credit risk. Our remaining exposure to variable returns is less than that of the note holders in these vehicles, who are exposed to our default and credit risk. We are not required to consolidate these vehicles.

Canadian Customer Securitization Vehicles

We sponsor customer securitization vehicles (also referred to as bank-sponsored multi-seller conduits) that provide our customers with alternate sources of funding through the securitization of their assets. These vehicles provide clients with access to financing either from BMO or in the ABCP markets by allowing them to either sell their assets directly into the vehicle or indirectly by selling an interest in the securitized assets into the vehicle, which then issues ABCP to either investors or BMO to fund the purchases. We do not sell assets to the customer securitization vehicles. We earn fees for providing services related to the securitizations, including liquidity, distribution and financial arrangement fees for supporting the ongoing operations of the vehicles. We have determined that we do not control these entities, as their key relevant activity, the servicing of program assets, does not reside with us.

We provide liquidity facilities to the market-funded vehicles which may require that we provide additional financing to the vehicles in the event that certain events occur. The total committed and undrawn amount under these liquidity facilities and any undrawn amounts of the BMO funded vehicle at October 31, 2018 was $6,286 million ($5,688 million at October 31, 2017).

Structured Finance Vehicles

We facilitate development of investment products by third parties, including mutual funds, unit investment trusts and other investment funds that are sold to retail investors. We enter into derivative contracts with these third parties to provide investors with their desired exposure, and we hedge our exposure related to these derivative contracts by investing in other funds through SEs. We are not required to consolidate these vehicles.

During 2018, we discontinued these vehicles and we no longer enter into these types of arrangements with third parties.

BMO Managed Funds

We have established a number of funds that we also manage. We assess whether or not we control these funds based on the economic interest we have in the funds, including investments in the funds and management fees earned from the funds, and any investors’ rights to remove us as investment manager. Based on our assessment, we have determined that we do not control these funds. Our total interest in unconsolidated BMO managed funds was $1,612 million at October 31, 2018 ($1,750 million in 2017), which is included in securities in our Consolidated Balance Sheet.

Other Structured Entities

We purchase and hold investments in a variety of third-party structured entities including exchange-traded funds, mutual funds, limited partnerships and investment trusts. We are considered to have an interest in these investments through our holdings and because we may act as a counterparty in certain derivatives contracts. We are not the investment manager or the sponsor of any of these investments. We are generally a passive investor and do not have power over the key decision-making activities of these investments. Our maximum exposure to loss from our investments is limited to the carrying amounts of our investments and any unutilized commitment we have provided.

Sponsored Structured Entities

We may be deemed to be the sponsor of an SE if we are involved in the design, legal set-up or marketing of the SE. We may also be deemed to be the sponsor of an SE if market participants would reasonably associate the entity with us. We do not have an interest in certain SEs that we have sponsored.

Additional information on our compensation trusts is provided in Note 20.

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Derivative Instruments

12 Months Ended

Oct. 31, 2018

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Derivative Instruments

Note 8: Derivative Instruments

Derivative instruments are financial contracts that derive their value from underlying changes in interest rates, foreign exchange rates or other financial or commodity prices or indices.

Derivative instruments are either regulated exchange-traded contracts or negotiated over-the-counter contracts. We use these instruments for trading purposes, as well as to manage our exposures, mainly to foreign currency and interest rate fluctuations, as part of our asset/liability management program.

Types of Derivatives

Swaps

Swaps are contractual agreements between two parties to exchange a series of cash flows. The various swap agreements that we enter into are as follows:

Interest rate swaps – counterparties generally exchange fixed and floating rate interest payments based on a notional value in a single currency.

Cross-currency swaps – fixed rate interest payments and principal amounts are exchanged in different currencies.

Cross-currency interest rate swaps – fixed and/or floating rate interest payments and principal amounts are exchanged in different currencies.

Commodity swaps – counterparties generally exchange fixed and floating rate payments based on a notional value of a single commodity.

Equity swaps – counterparties exchange the return on an equity security or a group of equity securities for the return based on a fixed or floating interest rate or the return on another equity security or group of equity securities.

Credit default swaps – one counterparty pays the other a fee in exchange for that other counterparty agreeing to make a payment if a credit event occurs, such as bankruptcy or failure to pay.

Total return swaps – one counterparty agrees to pay or receive from the other cash amounts based on changes in the value of a reference asset or group of assets, including any returns such as interest earned on these assets, in exchange for amounts that are based on prevailing market funding rates.

Forwards and Futures

Forwards and futures are contractual agreements to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a specified price and date in the future.

Forwards are customized contracts transacted in the over-the-counter market. Futures are transacted in standardized amounts on regulated exchanges and are subject to daily cash margining.

Options

Options are contractual agreements that convey to the purchaser the right but not the obligation to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a fixed future date or at any time within a fixed future period.

For options written by us, we receive a premium from the purchaser for accepting market risk.

For options purchased by us, we pay a premium for the right to exercise the option. Since we have no obligation to exercise the option, our primary exposure to risk is the potential credit risk if the writer of an over-the-counter contract fails to meet the terms of the contract.

Caps, collars and floors are specialized types of written and purchased options. They are contractual agreements in which the writer agrees to pay the purchaser, based on a specified notional amount, the difference between the market rate and the prescribed rate of the cap, collar or floor. The writer receives a premium for selling this instrument.

A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap.

A future option is an option contract in which the underlying instrument is a single futures contract.

The main risks associated with these derivative instruments are related to exposure to movements in interest rates, foreign exchange rates, credit quality, value of the underlying financial instrument or commodity, as applicable, and the possible inability of counterparties to meet the terms of the contracts.

Embedded Derivatives

From time to time, we purchase or issue financial instruments containing embedded derivatives. The embedded derivative in financial liabilities is separated from the host contract and carried at fair value if the economic characteristics of the derivative are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not measured at fair

value. To the extent that we cannot reliably identify and measure the embedded derivative, the entire contract is carried at fair value, with changes in fair value reflected in income. Embedded derivatives in certain of our equity linked notes are accounted for separately from the host instrument.

Contingent Features

Certain over-the-counter derivative instruments contain provisions that link the amount of collateral we are required to post or pay to our credit ratings (as determined by the major credit rating agencies). If our credit ratings were to be downgraded, certain counterparties to these derivative instruments could demand immediate and ongoing collateralization on derivative liability positions or request immediate payment. The aggregate fair value of all derivative instruments with collateral posting requirements that were in a liability position on October 31, 2018 was $2,860 million ($3,866 million in 2017), for which we have posted collateral of $2,963 million ($4,223 million in 2017).

Risks Hedged

Interest Rate Risk

We manage interest rate risk through interest rate futures, interest rate swaps and options, which are linked to and adjust the interest rate sensitivity of a specific asset, liability, forecasted transaction or firm commitment, or a specific pool of transactions with similar risk characteristics.

Foreign Currency Risk

We manage foreign currency risk through currency futures, foreign currency options, cross-currency swaps, foreign exchange spot transactions, forward contracts and deposits denominated in foreign currencies.

Equity Price Risk

We manage equity price risk through total return swaps.

Trading Derivatives

Trading derivatives include derivatives entered into with customers to accommodate their risk management needs, market-making to facilitate customer-driven demand for derivatives, derivatives transacted on a limited basis to generate trading income from our principal trading positions and certain derivatives that are executed as part of our risk management strategy that do not qualify as hedges for accounting purposes (“economic hedges”).

We structure and market derivative products to enable customers to transfer, modify or reduce current or expected risks.

Principal trading activities include market-making and positioning activities. Market-making involves quoting bid and offer prices to other market participants with the intention of generating revenues based on spread and volume. Positioning activities involve managing market risk positions with the expectation of profiting from favourable movements in prices, rates or indices.

Trading derivatives are recorded at fair value. Realized and unrealized gains and losses are recorded in trading revenues in our Consolidated Statement of Income. Unrealized gains on trading derivatives are recorded as derivative instrument assets and unrealized losses are recorded as derivative instrument liabilities in our Consolidated Balance Sheet.

We may also economically hedge a portion of our U.S. dollar earnings through forward foreign exchange contracts and/or options to minimize fluctuations in our consolidated net income due to the translation of our U.S. dollar earnings. These contracts are recorded at fair value, with changes in fair value recorded in non-interest revenue, trading revenues, in our Consolidated Statement of Income.

Fair Value of Trading and Hedging Derivatives

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. A discussion of the fair value measurement of derivatives is included in Note 17.

Fair values of our derivative instruments are as follows:

(Canadian $ in millions)							2018									2017
	Gross assets			Gross liabilities			Net			Gross assets			Gross liabilities			Net
Trading
Interest Rate Contracts
Swaps		7,795			(6,419	)		1,376			8,390			(7,027	)		1,363
Forward rate agreements		36			(10	)		26			41			–			41
Futures		2			(3	)		(1	)		–			–			–
Purchased options		425			–			425			444			–			444
Written options		–			(273	)		(273	)		–			(329	)		(329	)
Foreign Exchange Contracts
Cross-currency swaps		2,362			(1,678	)		684			2,687			(1,752	)		935
Cross-currency interest rate swaps		4,977			(6,057	)		(1,080	)		8,103			(9,051	)		(948	)
Forward foreign exchange contracts		4,335			(2,817	)		1,518			4,954			(3,178	)		1,776
Purchased options		241			–			241			267			–			267
Written options		–			(228	)		(228	)		–			(270	)		(270	)
Commodity Contracts
Swaps		1,559			(1,084	)		475			726			(717	)		9
Futures		17			–			17			–			–			–
Purchased options		484			–			484			352			–			352
Written options		–			(372	)		(372	)		–			(357	)		(357	)
Equity Contracts		2,158			(2,402	)		(244	)		1,388			(3,386	)		(1,998	)
Credit Default Swaps
Purchased		1			(36	)		(35	)		–			(54	)		(54	)
Written		9			(1	)		8			7			(1	)		6
Total fair value – trading derivatives		24,401			(21,380	)		3,021			27,359			(26,122	)		1,237
Hedging
Interest Rate Contracts
Cash flow hedges – swaps		18			(1,261	)		(1,243	)		78			(558	)		(480	)
Fair value hedges – swaps		701			(668	)		33			274			(402	)		(128	)
Total swaps		719			(1,929	)		(1,210	)		352			(960	)		(608	)
Foreign Exchange Contracts
Cash flow hedges		1,084			(1,074	)		10			1,202			(722	)		480
Total foreign exchange contracts		1,084			(1,074	)		10			1,202			(722	)		480
Equity Contracts
Cash flow hedges		–			(28	)		(28	)		38			–			38
Total equity contracts		–			(28	)		(28	)		38			–			38
Total fair value – hedging derivatives (1)		1,803			(3,031	)		(1,228	)		1,592			(1,682	)		(90	)
Total fair value – trading and hedging derivatives		26,204			(24,411	)		1,793			28,951			(27,804	)		1,147
Less: impact of master netting agreements		(15,575	)		15,575			–			(19,909	)		19,909			–
Total		10,629			(8,836	)		1,793			9,042			(7,895	)		1,147

(1) The fair values of hedging derivatives wholly or partially offset the changes in fair values of the related on-balance sheet financial instruments.

Assets are shown net of liabilities to customers where we have a legally enforceable right to offset amounts and we intend to settle contracts on a net basis.

Notional Amounts of Trading Derivatives

The notional amounts of our derivatives represent the amount to which a rate or price is applied in order to calculate the amount of cash that must be exchanged under the contract. Notional amounts do not represent assets or liabilities and therefore are not recorded in our Consolidated Balance Sheet.

(Canadian $ in millions)					2018						2017
	Exchange traded		Over-the-counter		Total		Exchange traded		Over-the-counter		Total
Interest Rate Contracts
Swaps		–		3,684,763		3,684,763		–		3,073,490		3,073,490
Forward rate agreements		–		411,573		411,573		–		195,142		195,142
Purchased options		26,629		35,023		61,652		10,407		29,107		39,514
Written options		16,511		48,721		65,232		9,284		37,247		46,531
Futures		192,482		–		192,482		89,053		–		89,053
Total interest rate contracts		235,622		4,180,080		4,415,702		108,744		3,334,986		3,443,730
Foreign Exchange Contracts
Cross-currency swaps		–		57,226		57,226		–		50,534		50,534
Cross-currency interest rate swaps		–		449,187		449,187		–		430,808		430,808
Forward foreign exchange contracts		–		463,743		463,743		–		392,924		392,924
Purchased options		2,625		21,468		24,093		6,001		23,812		29,813
Written options		1,420		24,018		25,438		1,249		29,101		30,350
Futures		739		–		739		794		–		794
Total foreign exchange contracts		4,784		1,015,642		1,020,426		8,044		927,179		935,223
Commodity Contracts
Swaps		–		24,366		24,366		–		18,713		18,713
Purchased options		3,303		6,182		9,485		5,031		7,080		12,111
Written options		4,909		4,233		9,142		6,896		4,905		11,801
Futures		33,104		–		33,104		28,139		–		28,139
Total commodity contracts		41,316		34,781		76,097		40,066		30,698		70,764
Equity Contracts		33,687		52,725		86,412		14,253		63,184		77,437
Credit Default Swaps
Purchased		–		3,047		3,047		–		2,658		2,658
Written		–		443		443		–		448		448
Total		315,409		5,286,718		5,602,127		171,107		4,359,153		4,530,260

Derivatives Used in Hedge Accounting

In accordance with our risk management strategy, we enter into various derivative contracts to hedge our interest rate, foreign currency and equity price exposures. In addition, we use deposits to hedge foreign currency exposure in our net investment in foreign operations. To the extent these instruments qualify for hedge accounting, we designate them in accounting hedge relationships. Our structural market risk strategies, including our approach to managing interest rate and foreign exchange risk, are included in the blue-tinted font in the Structural (Non-Trading) Market Risk section of Management’s Discussion and Analysis on page 98 of this report. In addition, our exposure to foreign exchange rate risk is discussed in the Foreign Exchange Risk section of Management’s Discussion and Analysis on page 99. Our exposure to equity price risk and our approach to managing it are discussed in the “other share-based compensation, mid-term incentive plans” section of Note 20.

By using derivatives to hedge exposures to interest rates, foreign currency exchange rates, and equity prices, we are also exposed to the credit risk of the derivative counterparty. We mitigate credit risk by entering into transactions with high-quality counterparties, requiring the counterparties to post collateral, entering into master netting agreements, or settling through centrally cleared counterparties.

In order to qualify as an accounting hedge, the hedging relationship must be designated and formally documented at its inception, detailing the particular risk management objective and strategy for the hedge and the specific asset, liability or cash flow being hedged, as well as how effectiveness is being assessed. Changes in the fair value of the derivative must be highly effective in offsetting changes in the fair value or changes in the amount of future cash flows of the hedged item. We evaluate hedge effectiveness at the inception of the hedging relationship and on an ongoing basis, retrospectively and prospectively, primarily using a quantitative statistical regression analysis. We consider a hedging relationship highly effective when all of the following criteria are met: correlation between the variables in the regression is at least 0.8; the slope of the regression is within a 0.8 to 1.25 range; and the confidence level of the slope is at least 95%. The practice is different for our net investment hedge, discussed in the Net Investment Hedges section below.

Any ineffectiveness in the hedging relationship is recognized as it arises in non-interest revenue, other, in our Consolidated Statement of Income.

The following table outlines the notional amounts and average rates of derivatives and the carrying amount of deposits designated as hedging instruments, by term to maturity, hedge type, and risk type, where applicable.

(Canadian $ in millions, except as noted)													2018
		Remaining term to maturity											Total
		Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years			Over 10 years
Cash Flow Hedges
Interest rate risk – Interest rate swaps
Notional amount			5,252		22,976		30,790		14,751			–		73,769
Average fixed interest rate			1.66%		1.67%		2.60%		2.42%			–		2.21%
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards (1)
CAD-USD pair	Notional amount		3,939		10,572		11,781		2,576			251		29,119
	Average fixed interest rate		1.31%		1.20%		2.01%		1.27%			3.02%		1.57%
	Average exchange rate: CAD-USD		1.3347		1.3035		1.2923		1.1871			1.3122		1.2930
CAD-EUR pair	Notional amount		3,804		8,726		8,618		–			201		21,349
	Average fixed interest rate		1.74%		2.10%		2.26%		–			2.97%		2.11%
	Average exchange rate: CAD-EUR		1.5217		1.4685		1.4999		–			1.4870		1.4908
Other currency pairs (2)	Notional amount		–		1,817		4,427		109			–		6,353
	Average fixed interest rate		–		2.05%		2.80%		2.98%			–		2.59%
	Average exchange rate: CAD-Non USD/EUR		–		1.4361		1.3338		0.1696	(3)		–		1.3430
Equity price risk – Total return swap
Notional amount			381		–		–		–			–		381
Fair Value Hedges
Interest rate risk – Interest rate swaps
Notional amount			14,516		21,919		22,928		14,101			–		73,464
Average fixed interest rate			1.81%		2.16%		2.29%		2.36%			–		2.17%
Net Investment Hedges
Foreign exchange risk
USD denominated deposit – carrying amount			6,596		–		–		–			–		6,596
GBP denominated deposit – carrying amount			473		–		–		–			–		473

(1) Under certain hedge strategies using cross-currency swaps, a CAD leg is inserted to create two swaps designated as separate hedges (for example, a EURO-USD cross-currency swap split into EURO-CAD and CAD-USD cross-currency swaps). The relevant notional amount is grossed up in this table as the cross-currency swaps are disclosed by CAD-foreign currency pair.

(2) Includes CAD-AUD, CAD-CHF, CAD-CNH, CAD-GBP or CAD-HKD cross-currency swaps where applicable.

(3) Includes one CAD-HKD cross-currency swap.

Cash Flow Hedges

Cash flow hedges modify exposure to variability in cash flows for variable interest rate bearing instruments, foreign currency denominated assets and liabilities and certain cash-settled share-based payment grants subject to equity price risk. We use interest rate swaps with or without embedded options, cross-currency swaps, and total return swaps to hedge this variability. We hedge the full amount of foreign exchange risk, but interest rate risk is hedged only to the extent of benchmark interest rates. The benchmark interest rate is a component of interest rate risk that is observable in the relevant financial markets, for example London Interbank Offered Rate (“LIBOR”) or Bankers’ Acceptances (“BA”) rate.

We determine the amount of the exposure to which hedge accounting is applied by assessing the potential impact of changes in interest rates, foreign exchange rates, and equity prices on the future cash flows of floating rate loans and deposits, foreign currency denominated assets and liabilities and certain cash-settled share-based payments. This assessment is performed using analytical techniques, such as simulation, sensitivity analysis, stress testing and gap analysis.

We record interest that we pay or receive on these cash flow hedge derivatives as an adjustment to net interest income in our Consolidated Statement of Income over the life of the hedge.

To the extent that changes in the fair value of the derivative offset changes in the fair value of the hedged item for the designated hedged risk, they are recorded in other comprehensive income. Hedge ineffectiveness, the portion of the change in fair value of the derivative that does not offset changes in the fair value of the hedged item, is recorded directly in non-interest revenue, other, in our Consolidated Statement of Income as it arises.

For cash flow hedges that are discontinued before the end of the original hedge term, the cumulative unrealized gain or loss recorded in other comprehensive income is amortized to our Consolidated Statement of Income in net interest income for interest rate swaps and in employee compensation for total return swaps as the hedged item is recorded in earnings. The entire unrealized gain or loss is recognized immediately in net interest income in our Consolidated Statement of Income, if the hedged item is sold or settled. We do not terminate our foreign exchange hedges before maturity.

Under cash flow hedges, we use a hypothetical derivative to measure the hedged risk of floating rate loans, deposits, foreign currency denominated assets and liabilities, or share-based payment grants. This hypothetical derivative matches the critical terms of the hedged items identically, and it perfectly offsets the hedged cash flow.

In our cash flow hedge relationships, the main sources of ineffectiveness are differences in interest rate indices, tenor and reset/settlement frequencies between the hedging instrument and the hedged item.

Net Investment Hedges

Net investment hedges mitigate our exposure to foreign currency exchange rate fluctuations related to our net investment in foreign operations.

Deposits denominated in foreign currencies are designated as a hedging instrument for a portion of the net investment in foreign operations. The foreign currency translation of our net investment in foreign operations and the effective portion of the corresponding hedging instrument are recorded in unrealized gains (losses) on translation of net foreign operations in other comprehensive income.

Effectiveness of our net investment hedge is determined by using the dollar offset method with spot foreign currency rates. As the notional amount of the deposits and the hedged net investment in foreign operations are the same, there is no source of ineffectiveness in these hedging relationships.

For cash flow hedges and net investment hedges, the following table contains information related to items designated as hedging instruments, hedged items and hedge ineffectiveness for the year ended October 31, 2018.

												2018
	Carrying amount of hedging instruments (1)								Hedge ineffectiveness
(Canadian $ in millions)	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other
Cash flow hedges
Interest rate risk – Interest rate swaps		18		(1,261	)		(1,685	)		1,687			(4	)
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards		1,084		(1,074	)		(459	)		459			–
Equity price risk – Total return swaps		–		(28	)		24			(24	)		–
		1,102		(2,363	)		(2,120	)		2,122			(4	)
Net investment hedges
Foreign exchange risk – Deposit liabilities				(7,069	)		(211	)		211			–
Total		1,102		(9,432	)		(2,331	)		2,333			(4	)

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

For cash flow hedges and net investment hedges, the following table contains information related to impacts on the Consolidated Statement of Other Comprehensive Income, on a pre-tax basis for the year ended October 31, 2018.

																2018
													Balance in cash flow hedge AOCI / net foreign operations AOCI
(Canadian $ in millions)	AOCI as at November 1, 2017			Gains / (losses) recognized in OCI			Amount reclassified to net income as the hedged item affects net income			AOCI as at October 31, 2018			Active hedges			Discontinued hedges
Cash flow hedges
Interest rate risk		(597	)		(1,681	)		67			(2,211	)		(1,348	)		(863	)
Foreign exchange risk		298			(3	)		456			751			751			–
Equity price risk		72			24			(66	)		30			30			–
		(227	)		(1,660	)		457			(1,430	) (1)		(567	)		(863	)
Net investment hedges
Foreign exchange risk		(1,580	)		(211	)		–			(1,791	)		(1,791	)		–
Total		(1,807	)		(1,871	)		457			(3,221	)		(2,358	)		(863	)

(1) Tax balance related to cash flow hedge AOCI is $356 million as at October 31, 2018.

Fair Value Hedges

Fair value hedges modify exposure to changes in a fixed rate instrument’s fair value caused by changes in interest rates. These hedges economically convert fixed rate assets and liabilities to floating rate. We use interest rate swaps to hedge interest rate risk, including benchmark interest rates, inherent in fixed rate securities, a portfolio of mortgages, deposits and subordinated debt.

Any fixed rate assets or liabilities that are part of a hedging relationship are adjusted for the change in value of the risk being hedged. To the extent that the change in the fair value of the derivative does not offset changes in the fair value of the hedged item for the risk being hedged, the net amount (hedge ineffectiveness) is recorded directly in non-interest revenue, other, in our Consolidated Statement of Income.

For fair value hedges that are discontinued, we cease adjusting the hedged item. The cumulative fair value adjustment of the hedged item is then amortized to net interest income over the hedged item’s remaining term to maturity. If the hedged item is sold or settled, the cumulative fair value adjustment is included in the gain or loss on sale or settlement.

In our fair value hedge relationships, the main sources of ineffectiveness are the counterparty effect and our own credit risk on the fair value of the swap, and the difference in terms such as fixed interest rate or reset/settlement frequency between the swap and the hedged item.

The amounts relating to derivatives designated as fair value hedging instruments, hedged items and hedge ineffectiveness for the year are as follows:

(Canadian $ in millions )																					2018
	Carrying amount of hedging derivatives (1)					Hedge ineffectiveness												Accumulated amount of fair value hedge gains (losses) on hedged  items
	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hedged item used to calculate  hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other			Carrying amount of the hedged item (2)			Active hedges			Discontinued hedges
Fair value hedge
Interest rate swaps		701		(668	)
FVOCI securities and loans		–		–			850			(843	)		7			36,722			(1,160	)		–
Deposits and subordinated debt		–		–			(764	)		761			(3	)		(34,375	)		719			436
Total		701		(668	)		86			(82	)		4			2,347			(441	)		436

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

(2) Represents the carrying value on the Consolidated Balance Sheet and includes amortized cost, before allowance for credit losses, plus fair value hedge adjustments, except for FVOCI securities that are carried at fair value.

Comparative Information

During 2017, net losses of $1,161 million related to the effective portion of cash flow hedges were recognized in OCI. A gain of $188 million related to cash flow hedges was transferred from equity to income in interest income or interest expense. Net ineffectiveness recognized on cash flow hedges during 2017 was a loss of $7 million.

Included within non-interest revenue, other, is a fair value loss of $200 million on derivatives held in qualifying fair value hedging relationships, and a gain of $193 million representing net increases in the fair value of the hedged item attributable to the hedged risk.

Derivative-Related Market Risk

Derivative instruments are subject to market risk. Market risk arises from the potential for a negative impact on the balance sheet and/or statement of income due to adverse changes in the value of derivative instruments as a result of changes in certain market variables. These variables include interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, as well as credit spreads, credit migration and default. We strive to limit market risk by employing comprehensive governance and management processes for all market risk-taking activities.

Derivative-Related Credit Risk

Over-the-counter derivative instruments are subject to credit risk arising from the possibility that counterparties may default on their obligations. The credit risk associated with a derivative is normally a small fraction of the notional amount of the derivative instrument. Derivative contracts generally expose us to potential credit loss if changes in market rates affect the counterparty’s position unfavourably and the counterparty defaults on payment. The credit risk is represented by the positive fair value of the derivative instrument. We strive to limit credit risk by dealing with counterparties that we believe are creditworthy, and we manage our credit risk for derivatives using the same credit risk process that is applied to loans and other credit assets.

We also pursue opportunities to reduce our exposure to credit losses on derivative instruments, including through collateral and by entering into master netting agreements with counterparties. The credit risk associated with favourable contracts is mitigated by legally enforceable master netting agreements to the extent that unfavourable contracts with the same counterparty must be settled concurrently with favourable contracts.

Exchange-traded derivatives have limited potential for credit exposure, as they are settled net daily with each exchange.

Terms used in the credit risk table below are as follows:

Replacement cost represents the cost of replacing all contracts that have a positive fair value, determined using current market rates. It represents in effect the unrealized gains on our derivative instruments. Replacement costs disclosed below represent the net of the asset and liability to a specific counterparty where we have a legally enforceable right to offset the amount owed to us with the amount owed by us and we intend either to settle on a net basis or to realize the asset and settle the liability simultaneously.

Credit risk equivalent represents the total replacement cost plus an amount representing the potential future credit exposure, as outlined in OSFI’s Capital Adequacy Guideline.

Risk-weighted assets represent the credit risk equivalent, weighted on the basis of the creditworthiness of the counterparty, and considering collateral, netting and other credit risk mitigants, as prescribed by OSFI.

(Canadian $ in millions)							2018								2017
	Replacement cost			Credit risk equivalent			Risk-weighted assets		Replacement cost			Credit risk equivalent			Risk-weighted assets
Interest Rate Contracts
Swaps		8,514			10,699			–		8,742			11,603			–
Forward rate agreements		36			34			–		41			42			–
Purchased options		409			393			–		440			381			–
Total interest rate contracts		8,959			11,126			704		9,223			12,026			1,537
Foreign Exchange Contracts
Cross-currency swaps		3,270			7,832			–		3,727			8,345			–
Cross-currency interest rate swaps		5,035			14,909			–		8,157			17,210			–
Forward foreign exchange contracts		4,453			8,373			–		5,062			8,389			–
Purchased options		225			424			–		250			420			–
Total foreign exchange contracts		12,983			31,538			2,544		17,196			34,364			2,701
Commodity Contracts
Swaps		1,559			4,450			–		726			2,971			–
Purchased options		335			1,108			–		120			1,034			–
Total commodity contracts		1,894			5,558			1,188		846			4,005			971
Equity Contracts		1,585			4,332			431		1,322			4,750			461
Credit Default Swaps		10			55			83		7			46			27
Total derivatives		25,431			52,609			4,950		28,594			55,191			5,697
Less: impact of master netting agreements		(15,575	)		(29,170	)		–		(19,909	)		(33,025	)		–
Total		9,856			23,439			4,950		8,685			22,166			5,697

The total derivatives and the impact of master netting agreements for replacement cost do not include exchange-traded derivatives with a fair value of $773 million as at October 31, 2018 ($357 million in 2017).

Transactions are conducted with counterparties in various geographic locations and industry sectors. Set out below is the replacement cost of contracts with customers located in the following countries, based on country of ultimate risk:

(Canadian $ in millions, except as noted)	Before master netting agreements								After master netting agreements
	2018				2017				2018				2017
Canada		13,449	53	%		15,447	54	%		4,901	50	%		5,045	58	%
United States		5,446	21	%		7,149	25	%		2,102	21	%		1,940	22	%
United Kingdom		1,181	5	%		1,079	4	%		315	3	%		182	2	%
Other countries (1)		5,355	21	%		4,919	17	%		2,538	26	%		1,518	18	%
Total		25,431	100	%		28,594	100	%		9,856	100	%		8,685	100	%

(1) No other country represented 15% or more of our replacement cost in 2018 or 2017.

Transactions are conducted with various counterparties. Set out below is the replacement cost of contracts (before the impact of master netting agreements) with customers in the following industries:

As at October 31, 2018 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,509		10,238		360		1,219		10		18,336
Governments		1,694		1,478		56		–		–		3,228
Natural resources		3		27		432		–		–		462
Energy		93		641		727		–		–		1,461
Other		660		599		319		366		–		1,944
Total		8,959		12,983		1,894		1,585		10		25,431
As at October 31, 2017 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,063		13,898		227		1,141		7		21,336
Governments		1,895		1,202		66		–		–		3,163
Natural resources		–		22		74		–		–		96
Energy		155		479		226		–		–		860
Other		1,110		1,595		253		181		–		3,139
Total		9,223		17,196		846		1,322		7		28,594

Term to Maturity

Our derivative contracts have varying maturity dates. The remaining contractual terms to maturity for the notional amounts of our derivative contracts are set out below:

(Canadian $ in millions)	Term to maturity										2018		2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total notional amounts		Total notional amounts
Interest Rate Contracts
Swaps		1,404,557		707,683		1,167,568		514,392		37,797		3,831,997		3,202,365
Forward rate agreements, futures and options		608,132		100,756		13,885		7,897		269		730,939		370,240
Total interest rate contracts		2,012,689		808,439		1,181,453		522,289		38,066		4,562,936		3,572,605
Foreign Exchange Contracts
Cross-currency swaps		12,466		36,718		24,980		15,413		3,339		92,916		85,586
Cross-currency interest rate swaps		118,783		147,231		97,828		72,857		18,533		455,232		434,210
Forward foreign exchange contracts, futures and options		512,002		9,283		1,148		134		26		522,593		463,665
Total foreign exchange contracts		643,251		193,232		123,956		88,404		21,898		1,070,741		983,461
Commodity Contracts
Swaps		6,234		14,885		2,875		372		–		24,366		18,713
Futures and options		21,910		25,587		3,530		704		–		51,731		52,051
Total commodity contracts		28,144		40,472		6,405		1,076		–		76,097		70,764
Equity Contracts		72,922		7,953		3,873		1,680		366		86,794		77,781
Credit Contracts		746		248		1,262		1,083		151		3,490		3,106
Total notional amount		2,757,752		1,050,344		1,316,949		614,532		60,481		5,800,058		4,707,717

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Premises and Equipment

12 Months Ended

Oct. 31, 2018

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Premises and Equipment

Note 9: Premises and Equipment

We record all premises and equipment at cost less accumulated amortization, and less any accumulated impairment, except land, which is recorded at cost. Buildings, computer equipment and operating system software, other equipment and leasehold improvements are amortized on a straight-line basis over their estimated useful lives. When the major components of a building have different useful lives, they are accounted for separately and amortized over each component’s estimated useful life.

The maximum estimated useful lives we use to amortize our assets are as follows:

Buildings	10 to 40 years
Computer equipment and operating system software	5 years
Other equipment	10 years
Leasehold improvements	Lease term to a maximum of 10 years

Amortization methods, useful lives and the residual values of premises and equipment are reviewed annually for any change in circumstances and are adjusted if appropriate. At each reporting period, we review whether there are any indications that premises and equipment need to be tested for impairment. If there is an indication that an asset may be impaired, we test for impairment by comparing the asset’s carrying value to its recoverable amount. The recoverable amount is calculated as the higher of the value in use and the fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from the asset. An impairment charge is recorded when the recoverable amount is less than the carrying value. There were no significant write-downs of premises and equipment due to impairment during the years ended October 31, 2018 and 2017. Gains and losses on disposal are included in non-interest expense, premises and equipment, in our Consolidated Statement of Income.

Net rent expense for premises and equipment reported in non-interest expense, premises and equipment, in our Consolidated Statement of Income for the years ended October 31, 2018, 2017 and 2016 was $530 million, $501 million and $502 million, respectively.

(Canadian $ in millions)																2018																		2017
	Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total			Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total
Cost
Balance at beginning of year		174			1,726			1,994			913			1,429			6,236			207			1,784			1,844			902			1,347			6,084
Additions		4			66			236			40			87			433			–			72			156			69			105			402
Disposals (1)		(32	)		(163	)		(11	)		(27	)		(20	)		(253	)		(28	)		(95	)		(13	)		(13	)		(10	)		(159	)
Foreign exchange and other		(1	)		(2	)		10			7			18			32			(5	)		(35	)		7			(45	)		(13	)		(91	)
Balance at end of year		145			1,627			2,229			933			1,514			6,448			174			1,726			1,994			913			1,429			6,236
Accumulated Depreciation and Impairment
Balance at beginning of year		–			1,063			1,465			674			1,001			4,203			–			1,055			1,306			649			927			3,937
Disposals (1)		–			(116	)		(9	)		(24	)		(15	)		(164	)		–			(32	)		(11	)		(8	)		(8	)		(59	)
Amortization		–			60			201			48			91			400			–			63			185			49			94			391
Foreign exchange and other		–			9			5			6			3			23			–			(23	)		(15	)		(16	)		(12	)		(66	)
Balance at end of year		–			1,016			1,662			704			1,080			4,462			–			1,063			1,465			674			1,001			4,203
Net carrying value		145			611			567			229			434			1,986			174			663			529			239			428			2,033

(1) Includes fully depreciated assets written off.

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Acquisitions

12 Months Ended

Oct. 31, 2018

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Acquisitions

Note 10: Acquisitions

The cost of an acquisition is measured at the fair value of the consideration transferred, including contingent consideration. Acquisition-related costs are recognized as an expense in the period in which they are incurred. The identifiable assets acquired and liabilities assumed and contingent consideration are measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred over the net of the fair value of identifiable assets acquired and liabilities assumed. The results of operations of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition.

KGS-Alpha Capital Markets (“KGS”)

On September 1, 2018, we completed the acquisition of the business of KGS, a U.S. fixed income broker-dealer specializing in U.S. mortgage and asset-backed securities in the institutional investor market, for cash consideration of US$304 million (CAD$397 million). The acquisition was accounted for as a business combination, and the acquired business and corresponding goodwill are included in our Capital Markets reporting segment.

As part of this acquisition, we acquired intangible assets of $49 million and goodwill of $54 million. The intangible assets are being amortized over three to fourteen years on an accelerated basis. Goodwill of $32 million related to this acquisition is deductible for tax purposes.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows:

(Canadian $ in millions)
	KGS
Securities – trading		5,193
Securities borrowed or purchased under resale agreements		5,669
Goodwill and intangible assets		103
Other assets		584
Total assets		11,549
Securities lent or sold under repurchase agreements		9,563
Securities sold but not yet purchased		1,431
Other liabilities		158
Purchase price		397

The purchase price allocation for KGS is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.

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Goodwill and Intangible Assets

12 Months Ended

Oct. 31, 2018

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Goodwill and Intangible Assets

Note 11: Goodwill and Intangible Assets

Goodwill

When we complete an acquisition, we allocate the purchase price paid to the assets acquired, including identifiable intangible assets, and the liabilities assumed. Any portion of the consideration transferred that is in excess of the fair value of those net assets is considered to be goodwill. Goodwill is not amortized and is instead tested for impairment annually.

In performing the impairment test, we utilize the fair value less costs to sell for each group of CGUs based on discounted cash flow projections. Cash flows were projected for the first 10 years based on actual operating results, expected future business performance and past experience. Beyond 10 years, cash flows were assumed to grow at perpetual annual rates of up to 2% (3% in 2017). The discount rates we applied in determining the recoverable amounts in 2018 ranged from 8.6% to 11.4% (8.3% to 12.2% in 2017), and were based on our estimate of the cost of capital for each CGU. The cost of capital for each CGU was estimated using the Capital Asset Pricing Model, based on the historical betas of publicly traded peer companies that are comparable to the CGU.

There were no write-downs of goodwill due to impairment during the years ended October 31, 2018 and 2017.

The key assumptions described above may change as market and economic conditions change. However, we estimate that reasonably possible changes in these assumptions are not expected to cause recoverable amounts of our CGUs to decline below their carrying amounts.

A continuity of our goodwill by group of CGUs for the years ended October 31, 2018 and 2017 is as follows:

(Canadian $ in millions)							Personal and Commercial Banking									Wealth Management			BMO Capital Markets			Total
	Canadian P&C			U.S. P&C			Total			Traditional Wealth Management			Insurance			Total
Balance – October 31, 2016		97			3,861			3,958			2,117			2			2,119			304			6,381
Acquisitions (disposals) during the year		–			–			–			(4	)		–			(4	)		–			(4	)
Foreign exchange and other (1)		–			(142	)		(142	)		24			–			24			(15	)		(133	)
Balance – October 31, 2017		97			3,719			3,816			2,137			2			2,139			289			6,244
Acquisitions (disposals) during the year		–			–			–			–			–			–			54			54
Foreign exchange and other (1)		–			78			78			(8	)		–			(8	)		5			75
Balance – October 31, 2018		97	(2)		3,797	(3)		3,894			2,129	(4)		2	(5)		2,131			348	(6)		6,373

(1) Other changes in goodwill included the effects of translating goodwill denominated in foreign currencies into Canadian dollars and purchase accounting adjustments related to prior-year purchases.

(2) Relates primarily to bcpbank Canada, Diners Club, Aver Media LP and GE Transportation Finance.

(3) Relates primarily to First National Bank & Trust, Ozaukee Bank, Merchants and Manufacturers Bancorporation, Inc., Diners Club, AMCORE, M&I and GE Transportation Finance.

(4) Relates to BMO Nesbitt Burns Inc., Guardian Group of Funds Ltd., Pyrford International plc, LGM Investments Limited, M&I, myCFO, Inc., Stoker Ostler Wealth Advisors, Inc., CTC Consulting LLC, AWMB and F&C Asset Management plc.

(5) Relates to AIG.

(6) Relates to Gerard Klauer Mattison, BMO Nesbitt Burns Inc., Paloma Securities L.L.C., M&I, Greene Holcomb Fisher and KGS.

Intangible Assets

Intangible assets related to our acquisitions are initially recorded at their fair value at the acquisition date and subsequently at cost less accumulated amortization. Software is recorded at cost less accumulated amortization. Amortization expense is recorded in amortization of intangible assets in our Consolidated Statement of Income. The following table presents the changes in the balance of these intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development			Other			Total
Cost as at October 31, 2016		704			968			194			3,189			476			365			5,896
Additions (disposals)		(33	)		–			–			546			(67	)		–			446
Foreign exchange and other		(17	)		(37	)		(7	)		(39	)		(11	)		11			(100	)
Cost as at October 31, 2017		654			931			187			3,696			398			376			6,242
Additions (disposals)		35			–			–			422			94			12			563
Foreign exchange and other		(1	)		20			4			9			4			(4	)		32
Cost as at October 31, 2018		688			951			191			4,127			496			384			6,837

Certain comparative figures have been reclassified to conform with the current year’s presentation.

The following table presents the accumulated amortization of our intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development		Other			Total
Accumulated amortization at October 31, 2016		398			735			194			2,329			–		62			3,718
Amortization		68			56			–			336			–		25			485
Disposals		(22	)		–			–			(11	)		–		–			(33	)
Foreign exchange and other		(13	)		(29	)		(7	)		(36	)		–		(2	)		(87	)
Accumulated amortization at October 31, 2017		431			762			187			2,618			–		85			4,083
Amortization		46			51			–			387			–		19			503
Disposals		–			–			–			(20	)		–		–			(20	)
Foreign exchange and other		(2	)		17			4			(15	)		–		(5	)		(1	)
Accumulated amortization at October 31, 2018		475			830			191			2,970			–		99			4,565
Carrying value at October 31, 2018		213			121			–			1,157			496		285			2,272
Carrying value at October 31, 2017		223			169			–			1,078			398		291			2,159

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Intangible assets are amortized to income over the period during which we believe the assets will benefit us, on either a straight-line or an accelerated basis, over a period not to exceed 15 years. We have $165 million as at October 31, 2018 ($169 million as at October 31, 2017) in intangible assets with indefinite lives that relate primarily to fund management contracts.

The useful lives of intangible assets are reviewed annually for any changes in circumstances. We test definite-life intangible assets for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable. Indefinite-life intangible assets are tested annually for impairment. If any intangible assets are determined to be impaired, we write them down to their recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

There were write-downs of intangible assets of $13 million during the year ended October 31, 2018 ($5 million in 2017).

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Other Assets

12 Months Ended

Oct. 31, 2018

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Other Assets

Note 12: Other Assets

Customers’ Liability under Acceptances

Acceptances represent a form of negotiable short-term debt that is issued by our customers, which we guarantee for a fee. The fees earned are recorded in lending fees in our Consolidated Statement of Income over the term of the acceptance. The amount potentially due under the acceptances is recorded in other liabilities on our Consolidated Balance Sheet. We record the bank’s equivalent claim against our customers in the event of a call on these commitments in other assets on our Consolidated Balance Sheet.

Other

The components of other within other assets are as follows:

(Canadian $ in millions)	2018		2017
Accounts receivable, prepaid expenses and other items		6,910		6,508
Accrued interest receivable		1,461		1,079
BMO Transportation Finance – leased vehicles		937		928
Cash collateral		2,019		3,165
Due from clients, dealers and brokers		236		156
Insurance-related assets		822		644
Pension asset (Note 21)		664		508
Precious metals		1,603		582
Total		14,652		13,570

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Deposits

12 Months Ended

Oct. 31, 2018

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Deposits

Note 13: Deposits

	Payable on demand
(Canadian $ in millions)	Interest bearing				Non-interest bearing				Payable       after notice				Payable on       a fixed date				Total
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Deposits by:
Banks (1)		1,450		818		1,400		1,864		526		586		24,531		24,937		27,907		28,205
Business and government		25,266		20,621		33,984		33,968		67,026		61,790		187,024		166,897		313,300		283,276
Individuals		3,476		3,278		21,345		20,044		90,233		89,859		65,790		55,130		180,844		168,311
Total (2)(3)		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792
Booked in:
Canada		21,735		21,557		47,231		44,380		82,091		81,590		161,192		145,648		312,249		293,175
United States		7,395		2,259		9,477		11,496		74,476		69,555		86,805		75,517		178,153		158,827
Other countries		1,062		901		21		–		1,218		1,090		29,348		25,799		31,649		27,790
Total		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792

(1) Includes regulated and central banks.

(2) Includes structured notes designated at fair value through profit or loss.

(3) As at October 31, 2018 and 2017, total deposits payable on a fixed date included $29,673 million and $30,419 million, respectively, of federal funds purchased, commercial paper issued and other deposit liabilities. Included in deposits as at October 31, 2018 and 2017 are $259,747 million and $237,127 million, respectively, of deposits denominated in U.S. dollars, and $37,427 million and $27,686 million, respectively, of deposits denominated in other foreign currencies.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Deposits payable on demand are comprised primarily of our customers’ chequing accounts, some of which we pay interest on. Our customers need not notify us prior to withdrawing money from their chequing accounts.

Deposits payable after notice are comprised primarily of our customers’ savings accounts, on which we pay interest. Deposits payable on a fixed date are comprised of:

• Various investment instruments purchased by our customers to earn interest over a fixed period, such as term deposits and guaranteed investment certificates. The terms of these deposits can vary from one day to 10 years.

• Federal funds purchased, which are overnight borrowings of other banks’ excess reserve funds at the United States Federal Reserve Bank. As at October 31, 2018, we had borrowed $55 million of federal funds ($707 million in 2017).

• Commercial paper, which totalled $9,121 million as at October 31, 2018 ($8,430 million in 2017).

• Covered bonds, which totalled $25,045 million as at October 31, 2018 ($23,108 million in 2017).

The following table presents the maturity schedule for our deposits payable on a fixed date:

(Canadian $ in millions)	2018		2017
Within 1 year		162,666		145,039
1 to 2 years		34,154		25,620
2 to 3 years		26,107		23,323
3 to 4 years		16,708		19,345
4 to 5 years		22,196		15,850
Over 5 years		15,514		17,787
Total (1)		277,345		246,964

(1) Includes $247,808 million of deposits, each greater than one hundred thousand dollars, of which $146,697 million were booked in Canada, $71,770 million were booked in the United States and $29,341 million were booked in other countries ($221,954 million, $130,197 million, $65,963 million and $25,794 million, respectively, in 2017). Of the $146,697 million of deposits booked in Canada, $55,190 million mature in less than three months, $3,836 million mature in three to six months, $12,909 million mature in six to twelve months and $74,762 million mature after 12 months ($130,197 million, $41,418 million, $7,922 million, $10,574 million and $70,283 million, respectively, in 2017). We have unencumbered liquid assets of $242,612 million to support these and other deposit liabilities ($213,757 million in 2017).

Most of our structured note liabilities included in deposits have been designated at fair value through profit or loss and are accounted for at fair value, which aligns the accounting result with the way the portfolio is managed. The fair value and notional amount due at contractual maturity of these notes as at October 31, 2018 were $15,309 million and $15,668 million respectively ($13,674 million and $13,563 million, respectively, in 2017). The change in fair value of these structured notes was recorded as an increase of $498 million in non-interest revenue, trading revenues, and a decrease of $28 million before tax was recorded in other comprehensive income related to changes in our own credit spread for the year ended October 31, 2018 (a decrease of $72 million recorded in non-interest revenue, trading revenues, and a decrease of $169 million related to changes in our own credit spread in 2017). The impact of changes in our own credit spread is measured based on movements in our own credit spread year over year.

The cumulative change in fair value related to changes in our own credit spread that has been recognized since the notes were designated at fair value to October 31, 2018 was an unrealized loss of approximately $331 million (unrealized loss of approximately $303 million in 2017), and $255 million of this unrealized loss has been recorded in other comprehensive income ($227 million in 2017).

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Other Liabilities

12 Months Ended

Oct. 31, 2018

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Other Liabilities

Note 14: Other Liabilities

Acceptances

Acceptances represent a form of negotiable short-term debt that is issued by our customers, which we guarantee for a fee. The fees earned are recorded in lending fees in our Consolidated Statement of Income over the term of the acceptance. The amount potentially due under acceptances is recorded in other liabilities on our Consolidated Balance Sheet. We record the bank’s equivalent claim against our customers in the event of a call on these commitments in other assets on our Consolidated Balance Sheet.

Securities Lending and Borrowing

Securities lending and borrowing transactions are generally collateralized by securities or cash. Cash advanced or received as collateral is recorded in other assets or other liabilities, respectively. Interest earned on cash collateral is recorded in interest, dividend and fee income in our Consolidated Statement of Income, and interest expense on cash collateral is recorded in interest expense, other liabilities, in our Consolidated Statement of Income. The transfer of the securities to counterparties is only reflected in our Consolidated Balance Sheet if the risks and rewards of ownership have also been transferred. Securities borrowed are not recognized in our Consolidated Balance Sheet unless they are then sold to third parties, in which case the obligation to return the securities is recorded in Securities sold but not yet purchased at fair value, with any gains or losses recorded in non-interest revenue, trading revenues.

Securities Sold but not yet Purchased

Securities sold but not yet purchased represent our obligations to deliver securities that we did not own at the time of sale. These obligations are recorded at their fair value. Adjustments to the fair value as at the balance sheet date and gains and losses on the settlement of these obligations are recorded in trading revenues in our Consolidated Statement of Income.

Securities Lent or Sold Under Repurchase Agreements

Securities lent or sold under repurchase agreements represent short-term funding transactions in which we sell securities that we own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. The obligation to repurchase these securities is recorded at the amount owing. The interest expense related to these liabilities is recorded on an accrual basis in interest expense, other liabilities, in our Consolidated Statement of Income.

Securitization and Structured Entities’ Liabilities

Securitization and structured entities’ liabilities include notes issued by our consolidated bank securitization vehicles and liabilities associated with the securitization of our Canadian mortgage loans as part of the Canada Mortgage Bond program, the National Housing Act Mortgage-Backed Securities program and our own program. Additional information on our securitization program and associated liabilities is provided in Notes 6 and 7. These liabilities are initially measured at fair value plus any directly attributable costs and are subsequently measured at amortized cost. The interest expense related to these liabilities is recorded in interest expense, other liabilities, in our Consolidated Statement of Income.

Other

The components of other within other liabilities are as follows:

(Canadian $ in millions)	2018		2017
Accounts payable, accrued expenses and other items		8,119		7,894
Accrued interest payable		1,385		1,037
Cash collateral		4,343		3,696
Insurance-related liabilities		9,585		8,959
Liabilities of subsidiaries, other than deposits		9,283		6,931
Other employee future benefits liability (Note 21)		960		1,303
Payable to brokers, dealers and clients		1,898		2,177
Pension liability (Note 21)		256		364
Total		35,829		32,361

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Insurance-Related Liabilities

We are engaged in insurance businesses related to life and health insurance, annuities and reinsurance.

We designate the obligation related to certain investment contracts in our insurance business at fair value through profit or loss, which eliminates a measurement inconsistency that would otherwise arise from measuring the investment contract liabilities and offsetting changes in the fair value of the investments supporting them on a different basis. The fair value of these investment contract liabilities as at October 31, 2018 of $800 million ($749 million as at October 31, 2017) is recorded in other liabilities in our Consolidated Balance Sheet. The change in fair value of these investment contract liabilities resulted in a decrease of $28 million in insurance claims, commissions and changes in policy benefit liabilities for the year ended October 31, 2018 (decrease of $41 million in 2017 and an increase of $55 million in 2016). For the year ended October 31, 2018, a loss of $2 million was recorded in other comprehensive income related to changes in our credit spread (loss of $32 million in 2017 and $7 million in 2016). The impact of changes in our own credit spread is measured based on movements in our own credit spread year over year. Changes in the fair value of investments backing these investment contract liabilities are recorded in non-interest revenue, insurance revenue.

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy benefit liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions.

A reconciliation of the change in insurance-related liabilities is as follows:

(Canadian $ in millions)	2018			2017
Insurance-related liabilities, beginning of year		8,959			7,909
Increase (decrease) in life insurance policy benefit liabilities from:
New business		742			545
In-force policies		(400	)		66
Changes in actuarial assumptions and methodology		3			(52	)
Foreign currency		–			(1	)
Net increase in life insurance policy benefit liabilities		345			558
Change in other insurance-related liabilities		281			492
Insurance-related liabilities, end of year		9,585			8,959

Reinsurance

In the ordinary course of business, our insurance subsidiaries reinsure risks to other insurance and reinsurance companies in order to provide greater diversification, limit loss exposure to large risks, and provide additional capacity for future growth. These ceding reinsurance arrangements do not relieve our insurance subsidiaries of their direct obligation to the insured parties. We evaluate the financial condition of the reinsurers and monitor their credit ratings to minimize our exposure to losses from reinsurer insolvency.

Reinsurance premiums ceded are recorded net against direct premium income and are included in non-interest revenue, insurance revenue, in our Consolidated Statement of Income for the years ended October 31, 2018, 2017 and 2016, as shown in the table below:

(Canadian $ in millions)	2018			2017			2016
Direct premium income		1,976			1,750			1,561
Ceded premiums		(148	)		(157	)		(271	)
		1,828			1,593			1,290

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Subordinated Debt

12 Months Ended

Oct. 31, 2018

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Subordinated Debt

Note 15: Subordinated Debt

Subordinated debt represents our direct unsecured obligations to our debt holders, in the form of notes and debentures and forms part of our regulatory capital. Subordinated debt is recorded at amortized cost using the effective interest rate method. Where appropriate, we enter into fair value hedges to hedge the risks caused by changes in interest rates (see Note 8). The rights of the holders of our notes and debentures are subordinate to the claims of depositors and certain other creditors. We require approval from OSFI before we can redeem any part of our subordinated debt.

The face values, terms to maturity and carrying values of our subordinated debt are as follows:

(Canadian $ in millions, except as noted)	Face value	Maturity date	Interest rate (%)	Redeemable at our option	2018 Total	2017 Total
Debentures Series 20	150	December 2025 to 2040	8.25	Not redeemable	143	148
Series F Medium-Term Notes, First Tranche	900	March 2023	6.17	March 2018 (1)	–	905
Series H Medium-Term Notes, First Tranche (8)	1,000	September 2024	3.12	September 2019 (2)	1,003	1,016
Series H Medium-Term Notes, Second Tranche (8)	1,000	December 2025	3.34	December 2020 (3)	916	969
Series I Medium-Term Notes, First Tranche (8)	1,250	June 2026	3.32	June 2021 (4)	1,222	1,178
Series I Medium-Term Notes, Second Tranche (8)	850	June 2027	2.57	June 2022 (5)	813	813
3.803% Subordinated Notes due 2032 (8)(9)	US 1,250	December 2032	3.80	December 2027 (6)	1,573	–
4.338% Subordinated Notes due 2028 (8)(10)	US 850	October 2028	4.34	October 2023 (7)	1,112	–
Total (11)					6,782	5,029

(1) All $900 million Series F Medium-Term Notes, First Tranche were redeemed on March 28, 2018 for 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

(2) Redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing September 19, 2019.

(3) Redeemable at the greater of par and the Canada Yield Price prior to December 8, 2020, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing December 8, 2020.

(4) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2021, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2021.

(5) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2022, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2022.

(6) Redeemable at par on December 15, 2027 together with accrued and unpaid interest to, but excluding, the redemption date.

(7) Redeemable at par on October 5, 2023 together with accrued and unpaid interest to, but excluding, the redemption date.

(8) These notes include a non-viability contingent capital provision, which is necessary for notes issued after a certain date to qualify as regulatory capital under Basel III. As such, the notes are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each note is convertible into common shares pursuant to an automatic conversion formula with a multiplier and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the par value of the note (including accrued and unpaid interest on such note) by the conversion price and then times the multiplier.

(9) On December 12, 2017, we issued US$1,250 million of 3.803% subordinated notes.

(10) On October 5, 2018, we issued US$850 million of 4.338% subordinated notes.

(11) Certain amounts of subordinated debt were issued at a premium or discount and include fair value hedge adjustments, which together decreased their carrying value as at October 31, 2018 by $233 million ($121 million in 2017); see Note 8 for further details. The carrying value is also adjusted for the subordinated debt holdings, held for market making purposes.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

The aggregate remaining maturities of our subordinated debt, based on the maturity dates under the terms of issue, can be found in the blue-tinted font in the Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments section of Management’s Discussion and Analysis on pages 107 to 108 of this report.

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Equity

12 Months Ended

Oct. 31, 2018

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Equity

Note 16: Equity

Share Capital

(Canadian $ in millions, except as noted)	2018								2017
	Number of shares			Amount			Dividends declared per share		Number of shares			Amount			Dividends declared per share
Preferred Shares – Classified as Equity
Class B – Series 14 (1)		–			–			–		–			–			0.66
Class B – Series 15 (2)		–			–			–		–			–			0.73
Class B – Series 16 (3)		–			–			0.64		6,267,391			157			0.85
Class B – Series 17 (4)		–			–			0.52		5,732,609			143			0.55
Class B – Series 25		9,425,607			236			0.45		9,425,607			236			0.45
Class B – Series 26		2,174,393			54			0.59		2,174,393			54			0.43
Class B – Series 27		20,000,000			500			1.00		20,000,000			500			1.00
Class B – Series 29		16,000,000			400			0.98		16,000,000			400			0.98
Class B – Series 31		12,000,000			300			0.95		12,000,000			300			0.95
Class B – Series 33		8,000,000			200			0.95		8,000,000			200			0.95
Class B – Series 35		6,000,000			150			1.25		6,000,000			150			1.25
Class B – Series 36		600,000			600			58.50		600,000			600			58.50
Class B – Series 38		24,000,000			600			1.21		24,000,000			600			1.33
Class B – Series 40 (5)		20,000,000			500			1.13		20,000,000			500			0.80
Class B – Series 42 (6)		16,000,000			400			1.10		16,000,000			400			0.45
Class B – Series 44 (7)		16,000,000			400			–		–			–			–
					4,340								4,240
Common Shares
Balance at beginning of year		647,816,318			13,032					645,761,333			12,539
Issued under the Shareholder Dividend
Reinvestment and Share Purchase Plan		–			–					4,821,184			448
Issued/cancelled under the Stock Option Plan and other stock-based compensation plans (Note 20)		1,513,307			99					2,233,801			146
Repurchased for cancellation		(10,000,000	)		(202	)				(5,000,000	)		(101	)
Balance at End of Year		639,329,625			12,929			3.78		647,816,318			13,032			3.56
Share Capital					17,269								17,272

(1) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 14, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.66 per share and 10 million shares were outstanding at the time of the dividend declaration.

(2) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 15, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.73 per share and 10 million shares were outstanding at the time of the dividend declaration.

(3) On August 25, 2018, we redeemed all 6,267,391 Non-Cumulative Perpetual Class B Preferred Shares, Series 16, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.64 per share and 6,267,391 shares were outstanding at the time of the dividend declaration.

(4) On August 25, 2018, we redeemed all 5,732,609 Non-Cumulative Perpetual Class B Preferred Shares, Series 17, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.52 per share and 5,732,609 shares were outstanding at the time of the dividend declaration.

(5) On March 9, 2017, we issued 20 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 40, at a price of $25.00 cash per share for gross proceeds of $500 million.

(6) On June 29, 2017, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 42, at a price of $25.00 cash per share for gross proceeds of $400 million.

(7) On September 17, 2018, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44, at a price of $25.00 cash per share for gross proceeds of $400 million.

Preferred Share Rights and Privileges

(Canadian $, except as noted)
	Redemption amount		Quarterly non-cumulative dividend (1)			Reset premium		Date redeemable / convertible			Convertible to
Class B – Series 25		25.00		$0.112813	(2)		1.15%		August 25, 2021	(3)(4)		Class B – Series 26	(8)
Class B – Series 26		25.00		Floating	(7)		1.15%		August 25, 2021	(3)(5)		Class B – Series 25	(8)
Class B – Series 27		25.00		$    0.2500	(2)		2.33%		May 25, 2019	(3)(4)		Class B – Series 28	(8)
Class B – Series 29		25.00		$  0.24375	(2)		2.24%		August 25, 2019	(3)(4)		Class B – Series 30	(8)
Class B – Series 31		25.00		$    0.2375	(2)		2.22%		November 25, 2019	(3)(4)		Class B – Series 32	(8)
Class B – Series 33		25.00		$    0.2375	(2)		2.71%		August 25, 2020	(3)(4)		Class B – Series 34	(8)
Class B – Series 35		25.00		$    0.3125			Does not reset		August 25, 2020	(6)		Not convertible
Class B – Series 36		1,000.00		$  14.6250	(2)		4.97%		November 25, 2020	(3)(4)		Class B – Series 37	(8)
Class B – Series 38		25.00		$0.303125	(2)		4.06%		February 25, 2022	(3)(4)		Class B – Series 39	(8)
Class B – Series 40		25.00		$  0.28125	(2)		3.33%		May 25, 2022	(3)(4)		Class B – Series 41	(8)
Class B – Series 42		25.00		$    0.2750	(2)		3.17%		August 25, 2022	(3)(4)		Class B – Series 43	(8)
Class B – Series 44		25.00		$0.303125	(2)		2.68%		November 25, 2023	(3)(4)		Class B – Series 45	(8)

(1) Non-cumulative dividends are payable quarterly as and when declared by the Board of Directors.

(2) The dividend rate will reset on the date redeemable and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus the reset premium noted. If converted to a floating rate series, the rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus the reset premium noted.

(3) Redeemable on the date noted and every five years thereafter.

(4) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 26, 28, 30, 32, 34, 37, 39, 41, 43 and 45 are floating rate preferred shares.

(5) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 25 are fixed rate preferred shares.

(6) Series 35 is subject to a redemption premium if redeemed prior to August 25, 2024.

(7) Floating rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus a reset premium.

(8) If converted, the holders have the option to convert back to the original preferred shares on subsequent redemption dates.

Authorized Share Capital

We classify financial instruments that we issue as financial liabilities, equity instruments or compound instruments. Financial instruments that will be settled by a variable number of our common shares upon conversion by the holders are classified as liabilities on our Consolidated Balance Sheet. Dividends and interest payments on financial liabilities are classified as interest expense in our Consolidated Statement of Income. Financial instruments are classified as equity instruments when there is no contractual obligation to transfer cash or other financial assets. Further, issued instruments that are not mandatorily redeemable, or that are not convertible into a variable number of our common shares at the holder’s option, are classified as equity and presented in share capital. Dividend payments on equity instruments are recognized as a reduction in equity.

Common Shares

We are authorized by our shareholders to issue an unlimited number of our common shares, without par value, for unlimited consideration. Our common shares are not redeemable or convertible. Dividends are declared by our Board of Directors at their discretion. Historically, the Board of Directors has declared dividends on a quarterly basis and the amount can vary from quarter to quarter.

Preferred Shares

We are authorized by our shareholders to issue an unlimited number of Class A Preferred Shares and Class B Preferred Shares, without par value, in series, for unlimited consideration. Class B Preferred Shares may be issued in a foreign currency.

Treasury Shares

When we purchase our common shares as part of our trading business, we record the cost of those shares as a reduction in shareholders’ equity. If those shares are resold at a price higher than their cost, the premium is recorded as an increase in contributed surplus. If those shares are resold at a price below their cost, the discount is recorded as a reduction first to contributed surplus and then to retained earnings for any amount in excess of total contributed surplus related to treasury shares.

Non-Viability Contingent Capital

Class B – Series 27, Class B – Series 29, Class B – Series 31, Class B – Series 33, Class B – Series 35, Class B – Series 36, Class B – Series 38, Class B – Series 40, Class B – Series 42 and Class B – Series 44 preferred share issues include a non-viability contingent capital provision, which is necessary for the shares to qualify as regulatory capital under Basel III. As such, the shares are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each preferred share is convertible into common shares pursuant to an automatic conversion formula and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the share value of the preferred share issuance (including declared and unpaid dividends on such preferred share issuance) by the conversion price and then times the multiplier.

Normal Course Issuer Bid

We renewed our normal course issuer bid (“NCIB”), effective June 1, 2018 for one year. Under this NCIB, we may purchase up to 20 million of our common shares for cancellation. The timing and amount of purchases under the NCIB are subject to management discretion based on factors such as market conditions and capital levels. The bank will consult with OSFI before making purchases under the NCIB.

During the year ended October 31, 2018, we purchased for cancellation 10 million of our common shares.

During the year ended October 31, 2017, we purchased for cancellation 5 million of our common shares.

Share Redemption and Dividend Restrictions

OSFI must approve any plan to redeem any of our preferred share issues for cash.

We are prohibited from declaring dividends on our preferred or common shares when we would be, as a result of paying such a dividend, in contravention of the capital adequacy, liquidity or any other regulatory directive issued under the Bank Act (Canada). In addition, common share dividends cannot be paid unless all dividends declared and payable on our preferred shares have been paid or sufficient funds have been set aside to do so.

In addition, we have agreed that if BMO Capital Trust II (the “Trust”), an unconsolidated structured entity, fails to pay any required distribution on its capital trust securities, we will not declare dividends of any kind on any of our preferred or common shares for a period of time following the Trust’s failure to pay the required distribution (as defined in the applicable prospectuses) unless the Trust first pays such distribution to the holders of its capital trust securities.

Currently, these limitations do not restrict the payment of dividends on common or preferred shares.

Shareholder Dividend Reinvestment and Share Purchase Plan

We offer a Dividend Reinvestment and Share Purchase Plan (“DRIP”) for our shareholders. Participation in the plan is optional. Under the terms of the DRIP, cash dividends on common shares are reinvested to purchase additional common shares. Shareholders also have the opportunity to make optional cash payments to acquire additional common shares.

For dividends paid in fiscal 2018, common shares to supply the DRIP were purchased in the open market.

For the dividends paid in the first two quarters of 2017, common shares to supply the DRIP were issued from treasury with a two percent discount. For the dividends paid in the third quarter of 2017, common shares to supply the DRIP were issued from treasury without a discount. For the dividends paid in the fourth quarter, common shares to supply the DRIP were purchased on the open market.

During the year ended October 31, 2018, we did not issue any common shares from treasury (4,821,184 in 2017) and purchased 1,995,353 common shares in the open market (504,873 in 2017) for delivery to shareholders under the DRIP.

Potential Share Issuances

As at October 31, 2018, we had reserved 39,947,147 common shares (39,947,147 in 2017) for potential issuance in respect of the DRIP. We have also reserved 6,095,201 common shares (7,525,296 in 2017) for the potential exercise of stock options, as further described in Note 20.

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Fair Value of Financial Instruments and Trading-Related Revenue

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Fair Value of Financial Instruments and Trading-Related Revenue

Note 17: Fair Value of Financial Instruments and Trading-Related Revenue

We record trading assets and liabilities, derivatives, certain equity and debt securities and securities sold but not yet purchased at fair value, and other non-trading assets and liabilities at amortized cost less allowances or write-downs for impairment. The fair values presented in this note are based upon the amounts estimated for individual assets and liabilities and do not include an estimate of the fair value of any of the legal entities or underlying operations that comprise our business. For certain portfolios of financial instruments where we manage exposures to similar and offsetting risks, fair value is determined on the basis of our net exposure to that risk.

Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The fair value amounts disclosed represent point-in-time estimates that may change in subsequent reporting periods due to changes in market conditions or other factors. Some financial instruments are not typically exchangeable or exchanged and therefore it is difficult to determine their fair value. Where there is no quoted market price, we determine fair value using management’s best estimates based on a range of valuation techniques and assumptions; since these involve uncertainties, the fair values may not be realized in an actual sale or immediate settlement of the asset or liability.

Governance Over the Determination of Fair Value

Senior executive oversight of our valuation processes is provided through various valuation and risk committees. In order to ensure that all financial instruments carried at fair value are reasonably measured for risk management and financial reporting purposes, we have established governance structures and controls, such as model validation and approval, independent price verification (“IPV”) and profit or loss attribution analysis (“PAA”), consistent with industry practice. These controls are applied independently of the relevant operating groups.

We establish and regularly update valuation methodologies for each financial instrument that is required to be measured at fair value. The application of valuation models for products or portfolios is subject to independent approval to ensure only validated models are used. The impact of known limitations of models and data inputs is also monitored on an ongoing basis. IPV is a process that regularly and independently verifies the accuracy and appropriateness of market prices or model inputs used in the valuation of financial instruments. This process assesses fair values using a variety of different approaches to verify and validate the valuations. PAA is a daily process used by management to identify and explain changes in fair value positions across all operating lines of business within BMO Capital Markets. This process works in concert with other processes to ensure that the fair values being reported are reasonable and appropriate.

Securities

For traded securities, quoted market value is considered to be fair value. Quoted market value is based on bid or ask prices, depending on which is the most appropriate to measure fair value. Securities for which no active market exists are valued using all reasonably available market information. Our fair value methodologies are described below.

Government Securities

The fair value of government issued or guaranteed debt securities in active markets is determined by reference to recent transaction prices, broker quotes or third-party vendor prices. The fair value of securities that are not traded in an active market is modelled using implied yields derived from the prices of similar actively traded government securities and observable spreads. Market inputs to the model include coupon, maturity and duration.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

The fair value of mortgage-backed securities and collateralized mortgage obligations is determined using independent prices obtained from third-party vendor prices, broker quotes and relevant market indices, as applicable. If such prices are not available, fair value is determined using cash flow models that make maximum use of observable market inputs or benchmark prices for similar instruments. Valuation assumptions for mortgage-backed securities and collateralized mortgage obligations include discount rates, expected prepayments, credit spreads and recoveries.

Corporate Debt Securities

The fair value of corporate debt securities is determined using prices observed in the most recent transactions. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discounting curves and spreads obtained from independent dealers, brokers and multi-contributor pricing sources.

Corporate Equity Securities

The fair value of equity securities is based on quoted prices in active markets, where available. Where quoted prices in active markets are not readily available, fair value is determined using either quoted market prices for similar securities or using valuation techniques, which include discounted cash flow analysis and earnings multiples.

Privately Issued Securities

Privately issued debt and equity securities are valued using prices observed in recent market transactions, where available. Otherwise, fair value is derived from valuation models using a market or income approach. These models consider various factors, including projected cash flows, earnings, revenue and 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.

Prices from brokers and multi-contributor pricing sources are corroborated as part of our independent review process, which may include using valuation techniques or obtaining consensus or composite prices from other pricing services. We validate the estimates of fair value by independently obtaining multiple quotes for external market prices and input values. We review the approach taken by third-party vendors to ensure that the vendor employs a valuation model which maximizes the use of observable inputs such as benchmark yields, bid-ask spreads, underlying collateral, weighted-average terms to maturity and prepayment rate assumptions. Fair value estimates from internal valuation techniques are verified, where possible, by reference to prices obtained from third-party vendors.

Loans

In determining the fair value of our fixed rate performing loans, we discount the remaining contractual cash flows, adjusted for estimated prepayment, at market interest rates currently offered for loans with similar terms and risks. For floating rate performing loans, changes in interest rates have minimal impact on fair value since interest rates are repriced or reset frequently. On that basis, fair value is assumed to be equal to carrying value.

Derivative Instruments

A number of valuation techniques are employed to estimate fair value, including discounted cash flow analysis, the Black-Scholes model, Monte Carlo simulation and other accepted market models. These independently validated models incorporate current market data for interest rates, currency exchange rates, equity and commodity prices and indices, credit spreads, recovery rates, corresponding market volatility levels, spot prices, correlation levels and other market-based pricing factors. Option implied volatilities, an input into many valuation models, are either obtained directly from market sources or calculated from market prices. Multi-contributor pricing sources are used wherever possible.

In determining the fair value of complex and customized derivatives, we consider all reasonably available information, including dealer and broker quotations, multi-contributor pricing sources and any relevant observable market inputs. Our 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 volatilities.

We calculate a credit valuation adjustment (“CVA”) to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. The CVA is derived from market-observed credit spreads or proxy credit spreads and our assessment of the net counterparty credit risk exposure, taking into account credit mitigants such as collateral, master netting agreements and novation to central counterparties. We also calculate a funding valuation adjustment (“FVA”) to recognize the implicit funding costs associated with over-the-counter derivative positions. The FVA is determined by reference to market funding spreads.

Deposits

In determining the fair value of our deposits, we incorporate the following assumptions:

• For fixed rate, fixed maturity deposits, we discount the remaining contractual cash flows for these deposits, adjusted for expected redemptions, at market interest rates currently offered for deposits with similar terms and risks. Fair value of our senior note liabilities and covered bonds is determined by referring to current market prices for similar instruments or using valuation techniques, such as discounted cash flows that use market interest rate curves and funding spreads.

• For fixed rate deposits with no defined maturities, we consider fair value to equal carrying value, based on carrying value being equivalent to the amount payable on the reporting date.

• For floating rate deposits, changes in interest rates have minimal impact on fair value since deposits reprice to market frequently. On that basis, fair value is assumed to equal carrying value.

A portion of our structured note liabilities that have coupons or repayment terms linked to the performance of interest rates, foreign currencies, commodities or equity securities have been designated at fair value through profit or loss. The fair value of these structured notes is estimated using internally validated valuation models and incorporates observable market prices for identical or comparable securities, as well as other inputs, such as interest rate yield curves, option volatilities and foreign exchange rates, where appropriate. Where observable prices or inputs are not available, management judgment is required to determine the fair value by assessing other relevant sources of information, such as historical data and proxy information from similar transactions.

Securities Sold But Not Yet Purchased

The fair value of these obligations is based on the fair value of the underlying securities, which can be equity or debt securities. As these obligations are fully collateralized, the method used to determine fair value would be the same as that used for the relevant underlying equity or debt securities.

Securitization and Structured Entities’ Liabilities

The determination of the fair value of securitization and structured entities’ liabilities is based on quoted market prices or quoted market prices for similar financial instruments, where available. Where quoted prices are not available, fair value is determined using valuation techniques, such as discounted cash flow models that maximize the use of observable inputs.

Subordinated Debt

The fair value of our subordinated debt is determined by referring to current market prices for the same or similar instruments.

Financial Instruments with a Carrying Value Approximating Fair Value

Short-term and Other Financial Instruments

Carrying value is assumed to be a reasonable estimate of fair value for our cash and cash equivalents.

The carrying value of certain financial assets and liabilities, such as interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities, is a reasonable estimate of fair value due to their short-term nature or because they are frequently repriced to current market rates.

Certain assets, including premises and equipment, goodwill and intangible assets, as well as shareholders’ equity, are not considered financial instruments and therefore no fair value has been determined for these items.

Fair Value Hierarchy

We use a fair value hierarchy to categorize financial instruments according to the inputs we use in valuation techniques to measure fair value.

Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet

Set out in the following tables are the fair values of financial instruments not carried at fair value on our Consolidated Balance Sheet.

(Canadian $ in millions)									2018
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Amortized cost		6,485		6,288		429		5,795		64
Loans (1)
Residential mortgages		119,544		118,609		–		118,609		–
Consumer instalment and other personal		62,687		62,618		–		62,618		–
Credit cards		8,099		8,099		–		8,099		–
Business and government (2)		192,225		191,989		–		191,989		–
		382,555		381,315		–		381,315		–
Deposits (3)		506,742		506,581		–		506,581		–
Securitization and structured entities’ liabilities		25,051		24,838		–		24,838		–
Subordinated debt		6,782		6,834		–		6,834		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $1,450 million of loans classified as FVTPL upon adoption of IFRS 9 (refer to Note 28).

(3) Excludes $15,309 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

(Canadian $ in millions)									2017
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Held to maturity		9,094		9,096		2,522		6,574		–
Loans (1)
Residential mortgages		115,165		114,821		–		114,821		–
Consumer instalment and other personal		61,465		61,470		–		61,470		–
Credit cards		7,828		7,828		–		7,828		–
Business and government		174,084		174,105		–		174,105		–
		358,542		358,224		–		358,224		–
Deposits (2)		466,118		466,441		–		466,441		–
Securitization and structured entities’ liabilities		23,054		23,148		–		23,148		–
Subordinated debt		5,029		5,255		–		5,255		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $13,674 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Valuation Techniques and Significant Inputs

We determine the fair value of publicly traded fixed maturity debt and equity securities using quoted prices in active markets (Level 1) when these are available. When quoted prices in active markets are not available, we determine the fair value of financial instruments using models such as discounted cash flows, with observable market data for inputs, such as yield and prepayment rates or broker quotes and other third-party vendor quotes (Level 2). Fair value may also be determined using models where significant market inputs are not observable due to inactive markets or minimal market activity (Level 3). We maximize the use of observable market inputs to the extent possible.

Our Level 2 trading securities are primarily valued using discounted cash flow models with observable spreads or broker quotes. The fair value of Level 2 FVOCI securities, previously classified as available-for-sale securities, is determined using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry-standard models and observable market information.

The extent of our use of actively quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and models without observable market information as inputs (Level 3) in the valuation of securities, fair value liabilities, derivative assets and derivative liabilities is presented in the following tables:

Classified under IFRS 9

(Canadian $ in millions)	2018
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		9,107		1,213		–		10,320
Canadian provincial and municipal governments		4,013		4,689		–		8,702
U.S. federal government		9,465		52		–		9,517
U.S. states, municipalities and agencies		78		1,138		–		1,216
Other governments		1,210		201		–		1,411
NHA MBS and U.S. agency MBS and CMO		60		8,869		255		9,184
Corporate debt		2,973		6,218		7		9,198
Loans		–		199		–		199
Corporate equity		49,946		4		–		49,950
		76,852		22,583		262		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		103		–		431
Canadian provincial and municipal governments		219		727		–		946
U.S. federal government		69		–		–		69
NHA MBS and U.S. agency MBS and CMO		–		7		–		7
Corporate debt		178		6,643		–		6,821
Corporate equity		1,378		134		1,825		3,337
		2,172		7,614		1,825		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government		11,978		827		–		12,805
Canadian provincial and municipal governments		3,315		3,547		–		6,862
U.S. federal government		16,823		–		–		16,823
U.S. states, municipalities and agencies		14		3,640		1		3,655
Other governments		3,143		1,647		–		4,790
NHA MBS and U.S. agency MBS and CMO		–		13,687		–		13,687
Corporate debt		1,959		1,797		–		3,756
Corporate equity		–		–		62		62
		37,232		25,145		63		62,440
Business and Government Loans		–		–		1,450		1,450
Fair Value Liabilities
Securities sold but not yet purchased		26,336		2,468		–		28,804
Structured note liabilities and other note liabilities		–		15,309		–		15,309
Annuity liabilities		–		800		–		800
		26,336		18,577		–		44,913
Derivative Assets
Interest rate contracts		18		8,959		–		8,977
Foreign exchange contracts		16		12,983		–		12,999
Commodity contracts		166		1,894		–		2,060
Equity contracts		286		1,872		–		2,158
Credit default swaps		–		10		–		10
		486		25,718		–		26,204
Derivative Liabilities
Interest rate contracts		14		8,620		–		8,634
Foreign exchange contracts		2		11,852		–		11,854
Commodity contracts		295		1,161		–		1,456
Equity contracts		246		2,183		1		2,430
Credit default swaps		–		36		1		37
		557		23,852		2		24,411

Classified under IAS 39

(Canadian $ in millions)	2017
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		8,712		2,115		–		10,827
Canadian provincial and municipal governments		3,177		4,150		–		7,327
U.S. federal government		9,417		56		–		9,473
U.S. states, municipalities and agencies		189		1,942		–		2,131
Other governments		630		193		–		823
NHA MBS, U.S. agency MBS and CMO		–		931		–		931
Corporate debt		1,485		10,278		–		11,763
Loans		3		150		–		153
Corporate equity		55,640		1		–		55,641
		79,253		19,816		–		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government		8,283		897		–		9,180
Canadian provincial and municipal governments		920		2,707		–		3,627
U.S. federal government		14,269		–		–		14,269
U.S. states, municipalities and agencies		18		4,077		1		4,096
Other governments		2,290		1,268		–		3,558
NHA MBS, U.S. agency MBS and CMO		–		13,216		–		13,216
Corporate debt		1,551		2,972		2		4,525
Corporate equity		37		126		1,441		1,604
		27,368		25,263		1,444		54,075
Other Securities		–		–		333		333
Fair Value Liabilities
Securities sold but not yet purchased		22,992		2,171		–		25,163
Structured note liabilities and other note liabilities		–		13,674		–		13,674
Annuity liabilities		–		749		–		749
		22,992		16,594		–		39,586
Derivative Assets
Interest rate contracts		4		9,223		–		9,227
Foreign exchange contracts		17		17,196		–		17,213
Commodity contracts		232		846		–		1,078
Equity contracts		93		1,333		–		1,426
Credit default swaps		–		7		–		7
		346		28,605		–		28,951
Derivative Liabilities
Interest rate contracts		7		8,309		–		8,316
Foreign exchange contracts		6		14,967		–		14,973
Commodity contracts		239		835		–		1,074
Equity contracts		166		3,220		–		3,386
Credit default swaps		–		55		–		55
		418		27,386		–		27,804

Quantitative Information about Level 3 Fair Value Measurements

The table below presents the fair values of our significant Level 3 financial instruments, the valuation techniques used to determine their fair values and the value ranges of significant unobservable inputs used in the valuations. We have not applied any other reasonably possible alternative assumption to the significant Level 3 categories of private equity investments, as the net asset values are provided by the investment or fund managers.

As at October 31, 2018 (Canadian $ in millions, except as noted)

Reporting line in fair value hierarchy table

Fair value of assets

Valuation techniques

Significant unobservable inputs

Range of input values (1)

Change in fair value reasonably possible alternatives (2)

Low

High

Private equity (3)

Corporate equity

1,825

Net Asset Value EV/EBITDA

Net Asset Value Multiple

na 6x

na 18x

na na

Loans

Business and government loans

1,450

Discounted cash flows

Discount margin

50 bps

175 bps

3

(1) The low and high input values represent the highest and lowest actual level of inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the specific underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date.

(2) The impact of assuming a 10 basis point increase or decrease in discount margin for business and government loans.

(3) Included in private equity is $889 million of Federal Reserve Bank and U.S. Federal Home Loan Bank shares that we hold to meet regulatory requirements.

na – not applicable

Significant Unobservable Inputs in Level 3 Instrument Valuations

Net Asset Value

Net asset value represents the estimated value of a security based on valuations received from the investment or fund manager. The valuation of certain private equity securities is based on the economic benefit we derive from our investment.

EV/EBITDA Multiple

The fair value of private equity and merchant banking investments is derived by calculating an enterprise value (“EV”) using the EV/EBITDA multiple and then proceeding through a waterfall of the company’s capital structure to determine the value of the assets or securities we hold. The EV/EBITDA multiple is determined using judgment in considering factors such as multiples for comparable listed companies, recent transactions and company-specific factors, as well as liquidity discounts that account for the lack of active trading in these assets and securities.

Discount Margin

Loan and corporate debt yield is the interest rate used to discount expected future cash flows in the valuation model. The discount margin is the difference between an instrument’s yield and a benchmark instrument’s yield. Benchmark instruments have high credit quality ratings and similar maturities, such as government bonds. The discount margin therefore represents a market return required for uncertainty in future cash flows. Generally a higher or lower discount margin will result in a lower or higher fair value.

Significant Transfers

Our policy is to record transfers of assets and liabilities between fair value hierarchy levels at their fair values as at the end of each reporting period, consistent with the date of the determination of fair value. Transfers between the various fair value hierarchy levels reflect changes in the availability of quoted market prices or observable market inputs that result from changes in market conditions. The following is a discussion of the significant transfers between Level 1, Level 2 and Level 3 balances for the year ended October 31, 2018.

During the year ended October 31, 2018, $2,578 million of trading securities, $714 million of FVTPL securities and $2,266 million of FVOCI securities ($176 million of trading securities and $107 million of available-for-sale securities, respectively, in 2017) were transferred from Level 1 to Level 2 due to reduced observability of the inputs used to value these securities. During the year ended October 31, 2018, $4,122 million of trading securities, $742 million of FVTPL securities and $4,044 million of FVOCI securities ($156 million of trading securities and $56 million of available-for-sale securities, respectively, in 2017) were transferred from Level 2 to Level 1 due to increased availability of quoted prices in active markets.

During the year ended October 31, 2017, $33 million of available-for-sale securities were transferred from Level 3 to Level 1 due to the availability of observable prices used to value these securities. No such transfers happened in 2018.

Changes in Level 3 Fair Value Measurements

The tables below present a reconciliation of all changes in Level 3 financial instruments during the years ended October 31, 2018 and 2017, including realized and unrealized gains (losses) included in earnings and other comprehensive income.

			Change in fair value
For the year ended October 31, 2018 (Canadian $ in millions)	Balance November 1, 2017		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2018		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
NHA MBS and U.S. agency MBS and CMO		–		(1	)		4			306		(54	)		–			–		–			255		(5	)
Corporate debt		–		–			–			7		–			–			–		–			7		–
Total trading securities		–		(1	)		4			313		(54	)		–			–		–			262		(5	)
FVTPL Securities
Corporate debt (3)		73		–			(4	)		5		–			–			–		(74	)		–		–
Corporate equity (3)(4)		1,701		12			31			307		(161	)		(2	)		–		(63	)		1,825		5
Total FVTPL securities		1,774		12			27			312		(161	)		(2	)		–		(137	)		1,825		5
FVOCI Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		2		–			–			–		–			(2	)		–		–			–		na
Corporate equity		–		–			–			62		–			–			–		–			62		na
Total FVOCI securities		3		–			–			62		–			(2	)		–		–			63		na
Business and Government Loans (5)		2,372		(2	)		24			604		–			(1,548	)		–		–			1,450		–
Derivative Liabilities
Equity contracts		–		–			–			–		–			–			1		–			1		–
Credit default swaps		–		–			–			–		–			–			1		–			1		–
Total derivative liabilities		–		–			–			–		–			–			2		–			2		–

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on FVTPL securities still held on October 31, 2018 are included in earnings for the year.

(3) Includes $73 million of debt instruments and $260 million of equity instruments reclassified from other securities to FVTPL upon adoption of IFRS 9 (see Note 28).

(4) Includes $1,441 million of equity instruments reclassified from available-for-sale to FVTPL upon adoption of IFRS 9 (see Note 28).

(5) Business and government loans were reclassified from amortized cost to FVTPL upon adoption of IFRS 9 (see Note 28).

na – not applicable

			Change in fair value
For the year ended October 31, 2017 (Canadian $ in millions)	Balance October 31, 2016		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2017		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
Corporate debt		91		1			1			–		–			(93	)		–		–			–		–
Total trading securities		91		1			1			–		–			(93	)		–		–			–		–
Available-for-Sale Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		4		–			–			–		(1	)		(1	)		–		–			2		na
Corporate equity		1,456		(40	)		(15	)		190		(117	)		–			–		(33	)		1,441		na
Total available-for-sale securities		1,461		(40	)		(15	)		190		(118	)		(1	)		–		(33	)		1,444		na
Other Securities		320		(9	)		(7	)		134		(102	)		(3	)		–		–			333		(8	)

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on trading securities, derivative assets and derivative liabilities still held on October 31, 2017 are included in earnings for the year.

na – not applicable

Trading-Related Revenue

Trading assets and liabilities, including derivatives, securities and financial instruments designated at fair value through profit or loss, are measured at fair value, with gains and losses recognized in trading revenues, non-interest revenue, in the Consolidated Statement of Income. Trading-related revenue includes net interest income and non-interest revenue and excludes underwriting fees and commissions on securities transactions, which are shown separately in the Consolidated Statement of Income. Net interest income arises from interest and dividends related to trading assets and liabilities and is reported net of interest expense associated with funding these assets and liabilities in the following table.

(Canadian $ in millions)	2018			2017			2016
Interest rates		437			480			663
Foreign exchange		377			369			349
Equities		449			239			188
Commodities		63			84			66
Other		82			47			25
Total trading revenue		1,408			1,219			1,291
Reported as:
Net interest income (1)		(422	)		(133	)		99
Non-interest revenue – trading revenue		1,830			1,352			1,192
Total trading revenue		1,408			1,219			1,291

(1) Amounts in brackets denote net interest expense.

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Offsetting of Financial Assets and Financial Liabilities

12 Months Ended

Oct. 31, 2018

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Offsetting of Financial Assets and Financial Liabilities

Note 18: Offsetting of Financial Assets and Financial Liabilities

Financial assets and financial liabilities are offset and the net amount is reported in our Consolidated Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The following table presents the amounts that have been offset in our Consolidated Balance Sheet, including securities purchased under resale agreements, securities sold under repurchase agreements and derivative instruments, generally under a market settlement mechanism (e.g. an exchange or clearing house) where simultaneous net settlement can be achieved to eliminate credit and liquidity risk between counterparties. Also presented are amounts not offset in the Consolidated Balance Sheet related to transactions where a master netting agreement or similar arrangement is in place with a right to offset the amounts only in the event of default, insolvency or bankruptcy, or where the offset criteria are otherwise not met.

(Canadian $ in millions)													2018
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		86,635		1,584		85,051		13,355		70,640		–		1,056
Derivative instruments		52,810		26,606		26,204		15,575		505		3,576		6,548
		139,445		28,190		111,255		28,930		71,145		3,576		7,604
Financial Liabilities
Derivative instruments		51,017		26,606		24,411		15,575		555		1,492		6,789
Securities lent or sold under repurchase agreements		68,268		1,584		66,684		13,355		53,071		–		258
		119,285		28,190		91,095		28,930		53,626		1,492		7,047
(Canadian $ in millions)													2017
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		80,948		5,901		75,047		9,382		65,044		–		621
Derivative instruments		45,064		16,113		28,951		19,909		933		2,903		5,206
		126,012		22,014		103,998		29,291		65,977		2,903		5,827
Financial Liabilities
Derivative instruments		43,917		16,113		27,804		19,909		1,263		1,642		4,990
Securities lent or sold under repurchase agreements		61,020		5,901		55,119		9,382		45,436		–		301
		104,937		22,014		82,923		29,291		46,699		1,642		5,291

(1) Financial assets received/pledged as collateral are disclosed at fair value and are limited to the net balance sheet exposure (i.e. any over-collateralization is excluded from the table).

(2) Certain amounts of collateral are restricted from being sold or repledged except in the event of default or the occurrence of other predetermined events.

(3) Not intended to represent our actual exposure to credit risk.

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Capital Management

12 Months Ended

Oct. 31, 2018

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Capital Management

Note 19: Capital Management

Our objective is to maintain a strong capital position in a cost-effective structure that: is appropriate given our target regulatory capital ratios and internal assessment of required economic capital; is consistent with our target credit ratings; underpins our operating groups’ business strategies; and supports depositor, investor and regulator confidence, while building long-term shareholder value.

Our approach includes establishing limits, targets and performance measures that are used to manage balance sheet positions, risk levels and capital requirements, as well as issuing and redeeming capital instruments to achieve a cost-effective capital structure.

Regulatory capital requirements and risk-weighted assets for the consolidated entity are determined in accordance with OSFI’s Capital Adequacy Requirements Guideline.

Common Equity Tier 1 (CET1) capital is the most permanent form of capital. It is comprised of common shareholders’ equity less deductions for goodwill, intangible assets and certain other items. Tier 1 capital is primarily comprised of CET1, preferred shares and innovative hybrid instruments, less certain regulatory deductions.

Tier 2 capital is primarily comprised of subordinated debentures and may include certain loan loss allowances, less certain regulatory deductions. Total capital includes Tier 1 and Tier 2 capital. Details of the components of our capital position are presented in Notes 11, 12, 15 and 16.

CET1 Capital Ratio, Tier 1 Capital Ratio, Total Capital Ratio and Leverage Ratio are the primary regulatory capital measures.

• The CET1 Capital Ratio is defined as common shareholders’ equity, net of capital adjustments, divided by CET1 capital risk-weighted assets.

• The Tier 1 Capital Ratio is defined as Tier 1 capital divided by Tier 1 capital risk-weighted assets.

• The Total Capital Ratio is defined as Total capital divided by Total capital risk-weighted assets.

• The Leverage Ratio is defined as Tier 1 capital divided by the sum of on-balance sheet items and specified off-balance sheet items, net of specified adjustments.

As at October 31, 2018, we met OSFI’s required target capital ratios, which include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Tier 1 Surcharge for domestic systemically important banks, a Countercyclical Buffer and a 1.5% Domestic Stability Buffer.

Regulatory Capital Measures and Risk-Weighted Assets

(Canadian $ in millions, except as noted)	2018		2017
Common Equity Tier 1 Capital		32,721		30,633
Tier 1 Capital		37,220		35,108
Total Capital		44,116		40,596
Common Equity Tier 1 Capital Risk-Weighted Assets		289,237		269,466
Tier 1 Capital Risk-Weighted Assets		289,420		269,466
Total Capital Risk-Weighted Assets		289,604		269,466
Common Equity Tier 1 Capital Ratio		11.3%		11.4%
Tier 1 Capital Ratio		12.9%		13.0%
Total Capital Ratio		15.2%		15.1%
Leverage Ratio		4.2%		4.4%

All 2018 and 2017 balances above are on an “all-in” basis.

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Employee Compensation - Share-Based Compensation

12 Months Ended

Oct. 31, 2018

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Employee Compensation - Share-Based Compensation

Note 20: Employee Compensation – Share-Based Compensation

Stock Option Plan

We maintain a Stock Option Plan for designated officers and employees. Options are granted at an exercise price equal to the closing price of our common shares on the day before the grant date. Stock options granted on or after December 2013 vest in equal tranches of 50% on the third and fourth anniversaries of their grant date. Options granted prior to December 2013 vest in tranches over a four-year period starting from their grant date. Each tranche is treated as a separate award with a different vesting period. Certain options can only be exercised once certain performance targets are met. All options expire 10 years from their grant date.

We determine the fair value of stock options on their grant date and record this amount as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. When these stock options are exercised, we issue shares and record the amount of proceeds, together with the amount recorded in contributed surplus, in share capital. The estimated grant date fair value of stock options granted to employees who are eligible to retire is expensed at the date of grant.

The following table summarizes information about our Stock Option Plan:

(Canadian $, except as noted)			2018				2017				2016
	Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)
Outstanding at beginning of year		7,525,296		72.05		9,805,299		77.41		12,111,153		80.19
Granted		705,398		100.63		723,431		96.90		754,714		77.23
Exercised		1,513,307		58.40		2,233,801		57.80		2,103,391		55.32
Forfeited/cancelled		152,417		86.85		13,243		66.89		104,606		71.76
Expired		469,769		153.40		756,390		195.02		852,571		179.53
Outstanding at end of year		6,095,201		72.19		7,525,296		72.05		9,805,299		77.41
Exercisable at end of year		3,782,481		61.39		4,584,375		67.42		5,605,485		83.34
Available for grant		3,405,239				3,811,157				4,151,676

(1) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018, October 31, 2017 and October 31, 2016, respectively.

For foreign currency denominated options exercised or expired during the year, the weighted-average exercise prices are translated using the exchange rates as at the settlement date and expiry date respectively.

Employee compensation expense related to this plan for the years ended October 31, 2018, 2017 and 2016 was $7 million, $8 million and $6 million before tax, respectively ($7 million, $7 million and $6 million after tax, respectively).

The intrinsic value of a stock option grant is the difference between the current market price of our common shares and the strike price of the option. The aggregate intrinsic value of stock options outstanding at October 31, 2018, 2017 and 2016 was $162 million, $232 million and $211 million, respectively. The aggregate intrinsic value of stock options exercisable at October 31, 2018, 2017 and 2016 was $140 million, $174 million and $146 million, respectively.

Options outstanding and exercisable at October 31, 2018 by range of exercise price were as follows:

(Canadian $, except as noted)											2018
			Options outstanding						Options exercisable
Range of exercise prices	Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)		Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)
$30.01 to $40.00		13,690		0.1		34.13		13,690		0.1		34.13
$50.01 to $60.00		1,736,930		2.3		55.88		1,736,930		2.3		55.88
$60.01 to $70.00		1,798,219		4.7		64.68		1,798,219		4.7		64.68
$70.01 and over (1)		2,546,362		7.7		88.83		233,642		6.0		78.62

(1) Certain options were issued as part of the acquisition of M&I.

(2) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018.

The following table summarizes further information about our Stock Option Plan:

(Canadian $ in millions, except as noted)	2018		2017		2016
Unrecognized compensation cost for non-vested stock option awards		5		5		4
Weighted-average period over which this cost will be recognized (in years)		2.6		2.7		2.5
Total intrinsic value of stock options exercised		67		90		55
Cash proceeds from stock options exercised		88		129		116
Weighted-average share price for stock options exercised (in dollars)		102.55		98.05		81.41

The fair value of options granted was estimated using a binomial option pricing model. The weighted-average fair value of options granted during the years ended October 31, 2018, 2017 and 2016 was $11.30, $11.62 and $7.60, respectively. To determine the fair value of the stock option tranches on the grant date, the following ranges of values were used for each option pricing assumption:

	2018		2017		2016
Expected dividend yield		4.1%		4.3%		5.5%
Expected share price volatility		17.0% – 17.3%		18.4% – 18.8%		19.8% – 20.0%
Risk-free rate of return		2.1%		1.7% – 1.8%		1.3% – 1.4%
Expected period until exercise (in years)		6.5 – 7.0		6.5 – 7.0		6.5 – 7.0

Changes to the input assumptions can result in different fair value estimates.

Expected dividend yield is based on market expectations of future dividends on our common shares. Expected share price volatility is determined based on the market consensus implied volatility for traded options on our common shares. The risk-free rate is based on the yields of a Canadian swap curve with maturities similar to the expected period until exercise of the options. The weighted-average exercise price on the grant date for the years ended October 31, 2018, 2017 and 2016 was $100.63, $96.90 and $77.23, respectively.

Other Share-Based Compensation

Share Purchase Plans

We offer various employee share purchase plans. The largest of these plans provides employees with the option of directing a portion of their gross salary toward the purchase of our common shares. We match 50% of employee contributions up to 6% of their individual gross salary to a maximum of $100,000. Our contributions during the first two years vest after two years of participation in the plan, with subsequent contributions vesting immediately. The shares held in the employee share purchase plan are purchased on the open market and are considered outstanding for purposes of computing earnings per share. The dividends earned on our common shares held by the plan are used to purchase additional common shares on the open market.

We account for our contribution as employee compensation expense when it is contributed to the plan.

Employee compensation expense related to these plans for the years ended October 31, 2018, 2017 and 2016 was $51 million, $53 million and $51 million, respectively. There were 17.8 million, 18.3 million and 18.9 million common shares held in these plans for the years ended October 31, 2018, 2017 and 2016, respectively.

Compensation Trusts

We sponsor various share ownership arrangements, certain of which are administered through trusts into which our matching contributions are paid.

We are not required to consolidate our compensation trusts. The assets held by the trusts are not included in our consolidated financial statements.

Total assets held under our share ownership arrangements amounted to $1,752 million as at October 31, 2018 ($1,805 million in 2017).

Mid-Term Incentive Plans

We offer mid-term incentive plans for executives and certain senior employees. Payment amounts are adjusted to reflect reinvested dividends and changes in the market value of our common shares. Depending on the plan, the recipient receives either a single cash payment at the end of the three-year period of the plan, or cash payments over the three years of the plan. As the awards are cash settled, they are recorded as liabilities. Amounts payable under such awards are recorded as compensation expense over the vesting period. Amounts related to units granted to employees who are eligible to retire are expensed at the time of grant. Subsequent changes in the fair value of the liability are recorded in compensation expense in the period in which they arise.

Mid-term incentive plan units granted during the years ended October 31, 2018, 2017 and 2016 totalled 5.9 million, 5.9 million and 6.4 million, respectively.

Prior to 2015, we entered into agreements with third parties to assume our liabilities related to a portion of units granted for a fixed up-front payment. For units subject to such arrangements, we no longer have any obligation for future cash payments and as a result no liability is recorded related to these awards. All cash payments made under such arrangements are deferred in the Consolidated Balance Sheet as other assets and are recognized on a straight-line basis over the vesting period. Subsequent changes in the market value of our common shares do not affect the amount of compensation expense related to these awards. During the year ended October 31, 2017, all remaining deferred compensation related to these arrangements was recognized.

Employee compensation expense related to plans where we entered into agreements with third parties for the years ended October 31, 2018, 2017 and 2016 was $nil, $(7) million and $26 million before tax, respectively ($nil, $(5) million and $19 million after tax, respectively).

Mid-term incentive plan units for which we did not enter into agreements with third parties for the years ended October 31, 2018, 2017 and 2016 totalled 5.9 million, 5.9 million and 6.4 million units, respectively. The grant date fair value of these awards as at October 31, 2018, 2017 and 2016 was $581 million, $515 million and $492 million, respectively, for which we recorded employee compensation expense of $595 million, $703 million and $537 million before tax, respectively ($437 million, $516 million and $397 million after tax, respectively). We hedge the impact of the change in market value of our common shares by entering into total return swaps (equity contracts). We also enter into foreign currency swaps to manage the foreign exchange translation from our United States businesses. Gains on total return swaps and foreign currency swaps recognized for the years ended October 31, 2018, 2017 and 2016 were $51 million, $183 million and $111 million, respectively, resulting in net employee compensation expense of $544 million, $520 million and $426 million, respectively.

A total of 17.1 million, 17.0 million and 17.0 million mid-term incentive plan units were outstanding as at October 31, 2018, 2017 and 2016, respectively, and the intrinsic value of those awards which had vested was $1,269 million, $1,253 million and $883 million, respectively. Cash payments made in relation to these liabilities were $598 million, $343 million and $131 million, respectively.

Deferred Incentive Plans

We offer deferred incentive plans for members of our Board of Directors, executives and key employees in BMO Capital Markets and Wealth Management. Under these plans, fees, annual incentive payments and/or commissions can be deferred as share units of our common shares. These share units are either fully vested on the grant date or vest at the end of three years. The value of these share units is adjusted to reflect reinvested dividends and changes in the market value of our common shares.

Deferred incentive plan payments are paid in cash upon the participant’s departure from the bank.

Employee compensation expense for these plans is recorded in the year the fees, incentive payments and/or commissions are earned. Changes in the amount of the incentive plan payments as a result of dividends and share price movements are recorded as increases or decreases in employee compensation expense in the period of the change.

Deferred incentive plan units granted during the years ended October 31, 2018, 2017 and 2016 totalled 0.3 million, 0.3 million and 0.4 million, respectively, and the grant date fair value of these units was $33 million, $32 million and $28 million, respectively.

Liabilities related to these plans are recorded in other liabilities in our Consolidated Balance Sheet and totalled $485 million and $499 million as at October 31, 2018 and 2017, respectively. Payments made under these plans for the years ended October 31, 2018, 2017 and 2016 were $60 million, $32 million and $53 million, respectively.

Employee compensation expense related to these plans for the years ended October 31, 2018, 2017 and 2016 was $27 million, $91 million and $67 million before tax, respectively ($20 million, $67 million and $50 million after tax, respectively). We have entered into derivative instruments to hedge our exposure related to these plans. Changes in the fair value of these derivatives are recorded as employee compensation expense in the period in which they arise. Gains on these derivatives for the years ended October 31, 2018, 2017 and 2016 were $8 million, $78 million and $57 million before tax, respectively. These gains resulted in net employee compensation expense for the years ended October 31, 2018, 2017 and 2016 of $19 million, $13 million and $10 million before tax, respectively ($14 million, $10 million and $7 million after tax, respectively).

A total of 4.9 million, 5.0 million and 4.8 million deferred incentive plan units were outstanding as at October 31, 2018, 2017 and 2016, respectively.

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Employee Compensation - Pension and Other Employee Future Benefits

12 Months Ended

Oct. 31, 2018

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Employee Compensation - Pension and Other Employee Future Benefits

Note 21: Employee Compensation – Pension and Other Employee Future Benefits

Pension and Other Employee Future Benefit Plans

We sponsor a number of arrangements globally, that provide pension and other employee future benefits to our retired and current employees. The largest of these arrangements, by defined benefit obligation, are the primary defined benefit pension plans for employees in Canada and the United States and the primary other employee future benefit plan for employees in Canada.

Pension arrangements include defined benefit pension plans, as well as supplementary arrangements that provide pension benefits in excess of statutory limits. Generally, under these plans we provide retirement benefits based on an employee’s years of service and average annual earnings over a period of time prior to retirement. Our pension and other employee future benefit expenses, recorded in employee compensation expense, mainly comprise the current service cost plus or minus the interest on net defined benefit assets or liabilities. In addition, we provide defined contribution pension plans to employees in some of our subsidiaries. The costs of these plans, recorded in employee compensation expense, are equal to our contributions to the plans.

The defined benefit pension plans for our employees in the United States were closed to new members on April 1, 2016 and closed to future accruals on March 1, 2017. A defined contribution pension plan was made available for employees affected by the closure. As a result of the closure of these plans, we recorded a curtailment gain of $52 million in non-interest expense, employee compensation, in our Consolidated Statement of Income in 2016.

During the fourth quarter of 2018, we announced changes to our other employee future benefits plan for Canadian employees that will become mandatory for new retirees beginning January 1, 2021. Plan changes include an increase in the service requirement for eligibility and flexible benefits with employer premium caps. We recorded a $277 million benefit from the remeasurement of the benefit liability in non-interest expense, employee compensation, in our Consolidated Statement of Income.

We also provide other employee future benefits, including health and dental care benefits and life insurance, for eligible current and retired employees.

Short-term employee benefits, such as salaries, paid absences, bonuses and other benefits, are accounted for on an accrual basis over the period in which the employees provide the related services.

Investment Policy

The defined benefit pension plans are administered under a defined governance structure, with the oversight resting with the Board of Directors.

The plans are managed under a framework that considers both assets and liabilities in the development of an investment policy and in managing risk. Over the past several years, we have implemented a liability-driven investment strategy for the primary Canadian plan to enhance risk-adjusted returns while reducing the plan’s surplus volatility. This strategy has reduced the impact of the plan on our regulatory capital.

The plans invest in asset classes that include equities, fixed income and alternative strategies, under established investment guidelines. Plan assets are diversified across asset classes and by geographic exposure. They are managed by asset management firms that are responsible for the selection of investment securities. Derivative instruments are permitted under policy guidelines and are generally used to hedge foreign currency exposures, manage interest rate exposures or replicate the return of an asset.

Asset Allocations

The asset allocation ranges and weighted-average actual asset allocations of our primary pension plans, based on the fair market values at October 31, are as follows:

	Pension benefit plans
	Target range 2018		Actual 2018		Actual 2017
Equities		25% – 50%		37%		40%
Fixed income investments		25% – 55%		46%		46%
Other		10% – 40%		17%		14%

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis.

Risk Management

The defined benefit pension plans are exposed to various risks, including market risk (interest rate, equity and foreign currency risks), credit risk, operational risk, surplus risk and longevity risk. We follow a number of approaches to monitor and actively manage these risks, including:

• monitoring surplus-at-risk, which measures a plan’s risk in an asset-liability framework;

• stress testing and scenario analyses to evaluate the volatility of the plans’ financial positions and any potential impact on the bank;

• hedging of currency exposures and interest rate risk within policy limits;

• controls related to asset mix allocations, geographic allocations, portfolio duration, credit quality of debt securities, sector guidelines, issuer/counterparty limits and others; and

• ongoing monitoring of exposures, performance and risk levels.

Pension and Other Employee Future Benefit Liabilities

Our actuaries perform valuations of our defined benefit obligations for pension and other employee future benefits as at October 31 of each year using the projected unit credit method based on management’s assumptions about discount rates, rates of compensation increase, retirement age, mortality and health care cost trend rates.

The discount rates for the primary Canadian and U.S. pension and other employee future benefit plans were selected based on the yields of high-quality AA rated corporate bonds with terms matching the plans’ cash flows.

The fair value of plan assets is deducted from the defined benefit obligation to determine the net defined benefit asset or liability. For defined benefit pension plans that are in a net defined benefit asset position, 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”). Changes in the asset ceiling are recognized in other comprehensive income. Components of the change in our net defined benefit assets or liabilities and our pension and other employee future benefit expense are as follows:

Current service cost represents benefits earned in the current year. The cost is determined with reference to the current workforce and the amount of benefits to which employees will be entitled upon retirement, based on the provisions of our benefit plans.

Interest on net defined benefit asset or liability represents the increase in the net defined benefit asset or liability that results from the passage of time and is determined by applying the discount rate to the net defined benefit asset or liability.

Actuarial gains and losses may arise in two ways. First, each year our actuaries recalculate the defined benefit obligations and compare them to those estimated as at the previous year end. Any differences that result from changes in demographic and economic assumptions or from plan member experience being different from management’s expectations at the previous year end are considered actuarial gains or losses. Second, actuarial gains and losses arise when there are differences between the discount rate and actual returns on plan assets. Actuarial gains and losses are recognized immediately in other comprehensive income as they occur and are not subsequently reclassified to income in future periods.

Plan amendments are changes in our defined benefit obligations that result from changes to provisions of the plans. The effects of plan amendments are recognized immediately in income when a plan is amended.

Settlements occur when defined benefit obligations for plan participants are settled, usually through lump sum cash payments, and as a result we no longer have any obligation to provide such participants with benefit payments in the future.

Funding of Pension and Other Employee Future Benefit Plans

We fund our defined benefit pension plans in Canada and the United States in accordance with statutory requirements, and the assets in these plans are used to pay benefits to retirees and other employees. Some groups of employees are also eligible to make voluntary contributions in order to receive enhanced benefits. Our supplementary pension plan in Canada is funded, while in the United States the supplementary pension plan is unfunded.

Our other employee future benefit plans in Canada and the United States are either partially funded or unfunded. Benefit payments related to these plans are paid either through the respective plan or directly by us.

We measure the fair value of plan assets for our plans in Canada and the United States as at October 31. In addition to actuarial valuations for accounting purposes, we are required to prepare valuations for determining our minimum funding requirements for our pension arrangements in accordance with the relevant statutory framework (our “funding valuation”). An annual funding valuation is performed for our plans in Canada and the United States. The most recent funding valuation for our primary Canadian pension plan was performed as at October 31, 2018 and the most recent funding valuation for our primary U.S. pension plan was performed as at January 1, 2018. Benefit payments for fiscal 2019 are estimated to be $486 million.

A summary of plan information for the past three years is as follows:

(Canadian $ in millions)	Pension benefit plans									Other employee future benefit plans
	2018			2017			2016			2018			2017			2016
Defined benefit obligation		8,311			8,846			8,992			1,113			1,460			1,493
Fair value of plan assets		8,719			8,990			8,655			153			157			150
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)
Surplus (deficit) is comprised of:
Funded or partially funded plans		573			339			(127	)		37			28			7
Unfunded plans		(165	)		(195	)		(210	)		(997	)		(1,331	)		(1,350	)
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)

Pension and Other Employee Future Benefit Expenses

Pension and other employee future benefit expenses are determined as follows:

(Canadian $ in millions)	Pension benefit plans								Other employee future benefit plans
	2018			2017		2016			2018			2017			2016
Annual benefits expense
Current service cost		210			254		224			26			32			25
Net interest (income) expense on net defined benefit (asset) liability		(10	)		7		(10	)		45			47			52
Past service cost (income)		7			–		–			(277	)		–			–
Administrative expenses		5			5		5			–			–			–
Remeasurement of other long-term benefits		–			–		–			(10	)		(6	)		6
Benefits expense		212			266		219			(216	)		73			83
Canada and Quebec pension plan expense		76			75		73			–			–			–
Defined contribution expense		153			123		96			–			–			–
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income		441			464		388			(216	)		73			83

Weighted-average Assumptions Used to Determine Benefit Expenses

	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018			2017			2016
Discount rate at beginning of year (3)(4)		3.5%		3.4%		4.2%		3.6%			3.6%			4.4%
Rate of compensation increase		2.4%		2.8%		2.7%		2.0%			2.4%			2.4%
Assumed overall health care cost trend rate		na		na		na		4.9%	(1)		5.2%	(2)		5.3%	(2)

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

(3) The pension benefit current service cost was calculated using a separate discount rate of 3.70% and 3.68% for 2018 and 2017, respectively.

(4) The other employee future benefit plans current service cost was calculated using a separate discount rate of 3.76% and 3.78% for 2018 and 2017, respectively.

na – not applicable

Assumptions regarding future mortality are based on published statistics and mortality tables calibrated to plan experience, when applicable. The current life expectancies underlying the amounts of the defined benefit obligations for our primary plans are as follows:

(Years)	Canada				United States
	2018		2017		2018		2017
Life expectancy for those currently age 65
Males		23.7		23.6		21.9		22.0
Females		24.0		24.0		23.4		23.4
Life expectancy at age 65 for those currently age 45
Males		24.6		24.6		23.1		23.2
Females		25.0		24.9		24.5		24.6

Changes in the estimated financial positions of our defined benefit pension plans and other employee future benefit plans are as follows:

(Canadian $ in millions, except as noted)	Pension benefit plans						Other employee future benefit plans
	2018			2017			2018			2017
Defined benefit obligation
Defined benefit obligation at beginning of year		8,846			8,992			1,460			1,493
Current service cost		210			254			26			32
Past service cost (income)		7			–			(277	)		–
Interest cost		299			300			51			52
Benefits paid		(492	)		(448	)		(43	)		(45	)
Employee contributions		15			15			5			5
Actuarial (gains) losses due to:
Changes in demographic assumptions		(50	)		(127	)		(31	)		(107	)
Changes in financial assumptions		(562	)		(150	)		(77	)		(2	)
Plan member experience		16			45			(4	)		39
Foreign exchange and other		22			(35	)		3			(7	)
Defined benefit obligation at end of year		8,311			8,846			1,113			1,460
Wholly or partially funded defined benefit obligation		8,146			8,651			116			129
Unfunded defined benefit obligation		165			195			997			1,331
Total defined benefit obligation		8,311			8,846			1,113			1,460
Weighted-average assumptions used to determine the defined benefit obligation
Discount rate at end of year		4.0%			3.5%			4.1%			3.6%
Rate of compensation increase		2.4%			2.4%			2.0%			2.0%
Assumed overall health care cost trend rate		na			na			4.9%	(1)		5.2%	(2)
Fair value of plan assets
Fair value of plan assets at beginning of year		8,990			8,655			157			150
Interest income		309			293			6			5
Return on plan assets (excluding interest income)		(323	)		277			(10	)		8
Employer contributions		213			219			35			40
Employee contributions		15			15			5			5
Benefits paid		(492	)		(448	)		(43	)		(45	)
Administrative expenses		(5	)		(5	)		–			–
Foreign exchange and other		12			(16	)		3			(6	)
Fair value of plan assets at end of year		8,719			8,990			153			157
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Recorded in:
Other assets		664			508			–			–
Other liabilities		(256	)		(364	)		(960	)		(1,303	)
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Actuarial gains (losses) recognized in other comprehensive income
Net actuarial gains (losses) on plan assets		(323	)		277			(10	)		8
Actuarial gains (losses) on defined benefit obligation due to:
Changes in demographic assumptions		50			127			30			104
Changes in financial assumptions		562			150			72			–
Plan member experience		(16	)		(45	)		1			(41	)
Foreign exchange and other		6			(3	)		–			–
Actuarial gains recognized in other comprehensive income for the year		279			506			93			71

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

na – not applicable

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis. The fair values of plan assets held by our primary plans as at October 31 are as follows:

(Canadian $ in millions)	2018								2017
	Quoted		Unquoted			Total			Quoted		Unquoted			Total
Cash and money market funds		114		–			114			150		5			155
Securities issued or guaranteed by:
Canadian federal government		108		41			149			143		47			190
Canadian provincial and municipal governments		219		309			528			471		320			791
U.S. federal government		297		–			297			307		20			327
U.S. states, municipalities and agencies		–		12			12			–		16			16
Pooled funds		1,591		2,715			4,306			1,743		2,012			3,755
Derivative instruments		1		(14	)		(13	)		1		(29	)		(28	)
Corporate debt		6		1,055			1,061			9		1,251			1,260
Corporate equity		1,105		–			1,105			1,291		–			1,291
	3,441		4,118			7,559			4,115		3,642			7,757

Certain comparative figures have been reclassified to conform with the current year’s presentation.

No plan assets are directly invested in the bank’s or related parties’ securities as at October 31, 2018 and 2017. As at October 31, 2018, our primary Canadian plan indirectly held, through pooled funds, approximately $15 million ($3 million in 2017) of our common shares. The plans do not hold any property we occupy or other assets we use.

The plans paid $4 million in the year ended October 31, 2018 ($4 million in 2017) to the bank and certain of our subsidiaries for investment management, record-keeping, custodial and administrative services rendered.

Sensitivity of Assumptions

Key weighted-average assumptions used in measuring the defined benefit obligations for our primary plans are outlined in the following table. The sensitivity analysis provided in the table should be used with caution as it is hypothetical and the impact of changes in each key assumption may not be linear. The sensitivities to changes in each key variable have been calculated independently of the impact of changes in other key variables. Actual experience may result in simultaneous changes in a number of key assumptions, which would amplify or reduce certain sensitivities.

		Defined benefit obligation
(Canadian $ in millions, except as noted)		Pension benefit plans			Other employee future benefit plans
Discount rate (%)			4.0			4.1
Impact of:	1% increase ($)		(811	)		(102	)
	1% decrease ($)		1,016			126
Rate of compensation increase (%)			2.4			2.0
Impact of:	0.25% increase ($)		39			–	(1)
	0.25% decrease ($)		(38	)		–	(1)
Mortality
Impact of:	1 year shorter life expectancy ($)		(138	)		(23	)
	1 year longer life expectancy ($)		135			23
Assumed overall health care cost trend rate (%)			na			4.9	(2)
Impact of:	1% increase ($)		na			47
	1% decrease ($)		na			(48	)

(1) The change in this assumption is immaterial.

(2) Trending to 4.1% in 2040 and remaining at that level thereafter.

na – not applicable

Maturity Profile

The duration of the defined benefit obligation for our primary plans is as follows:

(Years)	2018		2017
Canadian pension plans		14.0		14.7
U.S. pension plans		7.2		8.0
Canadian other employee future benefit plans		14.3		16.5

Cash Flows

Cash payments we made during the year in connection with our employee future benefit plans are as follows:

(Canadian $ in millions)	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018		2017		2016
Contributions to defined benefit plans		154		187		192		–		–		–
Contributions to defined contribution plans		153		123		96		–		–		–
Benefits paid directly to pensioners		59		32		43		35		40		38
		366		342		331		35		40		38

Our best estimate of the contributions we expect to make for the year ending October 31, 2019 is approximately $246 million to our defined benefit pension plans and $41 million to our other employee future benefit plans.

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Income Taxes

12 Months Ended

Oct. 31, 2018

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Income Taxes

Note 22: Income Taxes

We report our provision for income taxes in our Consolidated Statement of Income based upon transactions recorded in our consolidated financial statements regardless of when they are recognized for income tax purposes, with the exception of repatriation of retained earnings from our subsidiaries, as noted below.

In addition, we record an income tax expense or benefit in other comprehensive income or directly in shareholders’ equity when the taxes relate to amounts recorded in other comprehensive income or shareholders’ equity. For example, income tax expense (recovery) on hedging gains (losses) related to our net investment in foreign operations is recorded in our Consolidated Statement of Comprehensive Income as part of unrealized gains (losses) on translation of net foreign operations.

Current tax is the amount of income tax recoverable (payable) in respect of the taxable loss (profit) for a period. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for accounting and tax purposes. Deferred income tax assets and liabilities are measured at the tax rates expected to apply when temporary differences reverse. Changes in deferred income tax assets and liabilities related to a change in tax rates are recorded in income in the period the tax rate is substantively enacted, except to the extent that the tax arises from a transaction or event which is recognized either in other comprehensive income or directly in shareholders’ equity. Current and deferred taxes are offset only when they are levied by the same taxing authority, levied on the same entity or group of entities and when there is a legal right to offset.

Included in deferred income tax assets is $42 million ($126 million in 2017) related to Canadian tax loss carryforwards that will expire in 2037, $962 million ($1,545 million in 2017) related to both U.S. tax loss carryforwards and tax credits that will expire in various amounts in U.S. taxation years from 2026 through 2038 and $17 million ($16 million in 2017) related to U.K. tax loss carryforwards that are available for use indefinitely against relevant profits generated in the U.K. On the evidence available, including management projections of income, we believe that it is probable there will be sufficient taxable income generated by our business operations to support these deferred tax assets. The amount of tax on temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognized in our Consolidated Balance Sheet as at October 31, 2018 is $132 million ($282 million in 2017), of which $8 million ($53 million in 2017) is scheduled to expire within five years. Deferred tax assets have not been recognized in respect of these items because it is not probable that realization of these assets will occur.

Income that we earn through our foreign subsidiaries is generally taxed in the foreign country in which they operate. Income that we earn through our foreign branches is also generally taxed in the foreign country in which they operate. Canada also taxes the income we earn through foreign branches and a credit is allowed for certain foreign taxes paid on such income. Repatriation of earnings from certain foreign subsidiaries would require us to pay tax on certain of these earnings. As repatriation of such earnings is not planned in the foreseeable future, we have not recorded a related deferred income tax liability. The taxable temporary differences associated with the repatriation of earnings from investments in certain subsidiaries, branches, associates and interests in joint ventures for which deferred tax liabilities have not been recognized totalled $13 billion as at October 31, 2018 ($12 billion in 2017).

Provision for Income Taxes

(Canadian $ in millions)	2018			2017			2016
Consolidated Statement of Income
Current
Provision for income taxes for the current period		1,331			1,254			927
Adjustments in respect of current tax for prior periods		20			18			8
Deferred
Origination and reversal of temporary differences		276			80			183
Effect of changes in tax rates		425			(2	)		(2	)
Previously unrecognized tax loss, tax credit or temporary difference for a prior period		(92	)		(54	)		(15	)
		1,960			1,296			1,101
Other Comprehensive Income and Shareholders’ Equity
Income tax expense (recovery) related to:
Unrealized gains (losses) on FVOCI securities (1)		(69	)		21			64
Reclassification to earnings of (gains) on FVOCI securities (1)		(23	)		(36	)		(11	)
Gains (losses) on derivatives designated as cash flow hedges		(432	)		(322	)		4
Reclassification to earnings of losses on derivatives designated as cash flow hedges		121			21			6
Hedging of unrealized (gains) losses on translation of net foreign operations		(56	)		8			10
Gains (losses) on remeasurement of pension and other employee future benefit plans		111			157			(156	)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value		(6	)		(53	)		(55	)
Share-based compensation		10			(12	)		–
Total provision for income taxes		1,616			1,080			963

(1) Fiscal 2017 and prior years represent available-for-sale securities (Note 3).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Components of Total Provision for Income Taxes (Canadian $ in millions)	2018			2017		2016
Canada: Current income taxes
Federal		501			470		434
Provincial		299			272		248
		800			742		682
Canada: Deferred income taxes
Federal		(45	)		2		(120	)
Provincial		(27	)		–		(67	)
		(72	)		2		(187	)
Total Canadian		728			744		495
Foreign: Current income taxes		224			281		220
Deferred income taxes		664			55		248
Total foreign		888			336		468
Total provision for income taxes		1,616			1,080		963

Set out below is a reconciliation of our statutory tax rates and income taxes that would be payable at these rates to the effective income tax rates and provision for income taxes that we have recorded in our Consolidated Statement of Income:

(Canadian $ in millions, except as noted)			2018					2017					2016
Combined Canadian federal and provincial income taxes at the statutory tax rate	1,971			26.6	%	1,768			26.6	%	1,525			26.6	%
Increase (decrease) resulting from:
Tax-exempt income from securities	(226	)		(3.0	)	(409	)		(6.2	)	(367	)		(6.4	)
Foreign operations subject to different tax rates	(110	)		(1.5	)	22			0.3		13			0.3
Change in tax rate for deferred income taxes	425			5.7		(2	)		–		(2	)		–
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(92	)		(1.2	)	(54	)		(0.8	)	(15	)		(0.3	)
Income attributable to investments in associates and joint ventures	(39	)		(0.5	)	(103	)		(1.5	)	(47	)		(0.8	)
Adjustments in respect of current tax for prior periods	20			0.3		18			0.2		8			0.1
Other	11			0.1		56			0.9		(14	)		(0.3	)
Provision for income taxes and effective tax rate	1,960			26.5	%	1,296			19.5	%	1,101			19.2	%

Components of Deferred Income Tax Balances

(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, November 1, 2017 (2)			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2018
Allowance for credit losses		684			(150	)		–			(50	)		484
Employee future benefits		416			(111	)		(23	)		–			282
Deferred compensation benefits		545			(50	)		–			(1	)		494
Other comprehensive income		50			–			138			7			195
Tax loss carryforwards		1,233			(628	)		–			1			606
Tax credits		454			(39	)		–			–			415
Premises and equipment		(664	)		148			–			1			(515	)
Pension benefits		(52	)		19			(88	)		–			(121	)
Goodwill and intangible assets		(261	)		60			–			–			(201	)
Securities		21			17			–			–			38
Other		180			125			(10	)		(9	)		286
Total		2,606			(609	)		17			(51	)		1,963
(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, October 31, 2016			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2017
Allowance for credit losses		883			(118	)		–			(55	)		710
Employee future benefits		424			12			(14	)		(6	)		416
Deferred compensation benefits		462			102			–			(19	)		545
Other comprehensive income		(82	)		–			112			(3	)		27
Tax loss carryforwards		1,343			(18	)		–			(92	)		1,233
Tax credits		407			64			–			(17	)		454
Premises and equipment		(613	)		(83	)		–			32			(664	)
Pension benefits		89			5			(143	)		(3	)		(52	)
Goodwill and intangible assets		(253	)		(23	)		–			15			(261	)
Securities		12			11			–			(2	)		21
Other		187			24			12			(20	)		203
Total		2,859			(24	)		(33	)		(170	)		2,632

(1) Deferred tax assets of $2,037 million and $2,865 million and deferred tax liabilities of $74 million and $233 million as at October 31, 2018 and 2017, respectively, are presented on the balance sheet net by legal jurisdiction.

(2) Includes IFRS 9 adoption (refer to Note 28)

Certain comparative figures have been reclassified to conform with the current year’s presentation.

In fiscal 2018, we were reassessed by the Canada Revenue Agency (“CRA”) for additional income taxes and interest in an amount of approximately $169 million in respect of certain 2013 Canadian corporate dividends. In prior fiscal years, we were reassessed for additional income taxes and interest of approximately $116 million and $76 million, respectively, for certain 2012 and 2011 Canadian corporate dividends. In its reassessments, the CRA denied dividend deductions on the basis that the dividends were received as part of a “dividend rental arrangement.” The tax rules raised by the CRA in the reassessments were prospectively addressed in the 2015 and 2018 Canadian federal budgets. In the future, it is possible that we may be reassessed for significant income tax for similar activities in 2014 and subsequent years. We remain of the view that our tax filing positions were appropriate and intend to challenge any reassessment.

On December 22, 2017, the U.S. government enacted new tax legislation that became effective on January 1, 2018. Under the new legislation, our U.S. net deferred tax asset was revalued by $483 million because of the lower income tax rate. The $483 million revaluation is comprised of a $425 million income tax expense recorded in our Consolidated Statement of Income, and a $58 million income tax charge recorded in other comprehensive income and shareholders’ equity for the year ended October 31, 2018.

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Earnings Per Share

12 Months Ended

Oct. 31, 2018

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Earnings Per Share

Note 23: Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to our shareholders, after deducting preferred share dividends, by the daily average number of fully paid common shares outstanding throughout the year.

Diluted earnings per share is calculated in the same manner, with further adjustments made to reflect the dilutive impact of instruments convertible into our common shares.

The following table presents our basic and diluted earnings per share:

Basic Earnings per Share (Canadian $ in millions, except as noted)	2018			2017			2016
Net income attributable to bank shareholders		5,450			5,348			4,622
Dividends on preferred shares		(184	)		(184	)		(150	)
Net income available to common shareholders		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Basic earnings per share (Canadian $)		8.19			7.95			6.94
Diluted Earnings per Share
Net income available to common shareholders adjusted for impact of dilutive instruments		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Effect of dilutive instruments
Stock options potentially exercisable (1)		5,876			6,859			8,706
Common shares potentially repurchased		(3,893	)		(4,548	)		(6,629	)
Weighted-average number of diluted common shares outstanding (in thousands)		644,913			651,961			646,126
Diluted earnings per share (Canadian $)		8.17			7.92			6.92

(1) In computing diluted earnings per share, we excluded average stock options outstanding of 1,101,938, 1,330,564 and 1,353,464 with weighted-average exercise prices of $127.45, $182.70 and $238.45 for the years ended October 31, 2018, 2017 and 2016, respectively, as the average share price for the period did not exceed the exercise price.

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities

12 Months Ended

Oct. 31, 2018

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities

Note 24: Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities

In the normal course of business, we enter into a variety of contracts under which we may be required to make payments to reimburse a counterparty for a loss if a third party does not perform according to the terms of a contract or does not make payments when due under the terms of a debt instrument, and contracts under which we provide indirect guarantees of the indebtedness of another party, all of which are considered guarantees.

Guarantees that qualify as derivatives are accounted for in accordance with the policy for derivative instruments (see Note 8). For guarantees that do not qualify as derivatives, the liability is initially recorded at fair value, which is generally the fee received. Subsequently, guarantees are recorded at the higher of the initial fair value, less amortization to recognize any fee income earned over the period, and our best estimate of the amount required to settle the obligation. Any change in the liability is reported in our Consolidated Statement of Income.

We enter into a variety of commitments, including off-balance sheet credit instruments, such as backstop liquidity facilities, securities lending, letters of credit, credit default swaps and commitments to extend credit, as a method of meeting the financial needs of our customers. These commitments include contracts where we may be required to make payments to a counterparty, based on changes in the value of an asset, liability or equity security that the counterparty holds, due to changes in an underlying interest rate, foreign exchange rate or other variable. The contractual amount of our commitments represents our maximum undiscounted potential exposure, before possible recoveries under recourse and collateral provisions. Collateral requirements for these instruments are consistent with collateral requirements for loans.

A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

We strive to limit credit risk by dealing only with counterparties that we believe are creditworthy, and we manage our credit risk for these instruments using the same credit risk process that is applied to loans and other credit assets.

The maximum amount payable related to our various commitments is as follows:

(Canadian $ in millions)	2018		2017
Financial Guarantees
Standby letters of credit		18,458		18,126
Credit default swaps (1)		443		448
Other Credit Instruments
Backstop liquidity facilities		5,627		5,044
Securities lending		4,939		5,336
Documentary and commercial letters of credit		1,263		1,030
Commitments to extend credit (2)		137,995		122,881
Other commitments		8,935		4,329
Total		177,660		157,194

(1) The fair value of the related derivatives included in our Consolidated Balance Sheet was $8 million as at October 31, 2018 ($6 million in 2017).

(2) Commitments to extend credit exclude personal lines of credit and credit cards that are unconditionally cancellable at our discretion.

Financial Guarantees

Standby letters of credit represent our obligation to make payments to third parties on behalf of customers if they are unable to make the required payments or meet other contractual requirements. The majority have a term of one year or less. Collateral requirements for standby letters of credit and guarantees are consistent with our collateral requirements for loans. Standby letters of credit and guarantees include our guarantee of a subsidiary’s debt directly provided to a third party.

Written credit default swaps require us to compensate a counterparty following the occurrence of a credit event in relation to a specified reference obligation, such as a bond or a loan. The terms of these contracts range from less than one year to 10 years. Refer to Note 8 for details.

Other Credit Instruments

Backstop liquidity facilities are provided to asset-backed commercial paper (“ABCP”) or commercial paper (“CP”) programs administered by either us or third parties as an alternative source of financing when ABCP or CP markets cannot be accessed and for ABCP programs when predetermined performance measures of the financial assets held by these programs are not met. The terms of the backstop liquidity facilities do not require us to advance money to these programs in the event of insolvency of the borrower. The facilities’ terms are generally no longer than one year, but can be several years.

We lend eligible customers’ securities to third-party borrowers who have been evaluated for credit risk using the same credit risk process that is applied to loans and other credit assets. In connection with these activities, we may provide indemnification to clients against losses resulting from the failure of the borrower to return loaned securities when due. All borrowings are fully collateralized with cash or marketable securities. As securities are loaned, we require borrowers to maintain collateral which is equal to or in excess of 100% of the fair value of the securities borrowed. The collateral is revalued on a daily basis.

Documentary and commercial letters of credit represent our agreement to honour drafts presented by a third party upon completion of specific activities.

Commitments to extend credit represent our commitment to our customers to grant them credit in the form of loans or other financings for specific amounts and maturities, subject to their meeting certain conditions.

Other commitments include commitments to fund external private equity funds and investments in equity and debt securities at market value at the time the commitments are drawn. In addition, we act as underwriter for certain new issuances under which we, alone or together with a syndicate of financial institutions, purchase the new issue for resale to investors.

Indemnification Agreements

In the normal course of operations, we enter into various agreements that provide general indemnifications. These indemnifications typically occur in connection with sales of assets, securities offerings, service contracts, membership agreements, clearing arrangements, derivative contracts and leasing transactions. Based on historical experience, we expect the risk of loss to be remote.

Exchange and Clearinghouse Guarantees

We are a member of several securities and futures exchanges and central counterparties. Membership in certain of these organizations may require us to pay a pro rata share of the losses incurred by the organization in the event of default of another member. It is difficult to estimate our maximum exposure under these membership agreements, since this would require an assessment of future claims that may be made against us that have not yet occurred. Based on historical experience, we expect the risk of loss to be remote.

Pledged Assets

In the normal course of business, we pledge assets as security for various liabilities that we incur.

The following tables summarize our pledged assets and collateral, and the activities to which they relate:

(Canadian $ in millions)	2018		2017
Bank Assets
Cash and securities (1)
Issued or guaranteed by the Government of Canada		7,784		11,904
Issued or guaranteed by a Canadian province, municipality or school corporation		7,143		6,170
Other		60,812		51,848
Mortgages, securities borrowed or purchased under resale agreements and other		115,256		99,474
		190,995		169,396
(Canadian $ in millions)	2018		2017
Assets pledged in relation to:
Central counterparties, payment systems and depositories		2,403		2,043
Bank of Canada		525		725
Foreign governments and central banks		3		3
Obligations related to securities sold under repurchase agreements		54,606		42,450
Securities borrowing and lending		50,388		51,120
Derivatives transactions		6,120		5,924
Securitization		28,710		27,632
Covered bonds		26,721		24,983
Other		21,519		14,516
Total pledged assets and collateral (1)		190,995		169,396

(1) Excludes cash pledged with central banks disclosed as restricted cash in Note 2.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Collateral

When entering into trading activities, such as purchases under resale agreements, securities borrowing and lending activities or financing for certain derivative transactions, we require our counterparties to provide us with collateral that will protect us from losses in the event of their default. Collateral transactions (received or pledged) are typically conducted under terms that are usual and customary in standard trading activities. If there is no default, the securities or their equivalents must be returned to, or returned by, the counterparty at the end of the contract.

The fair value of counterparty collateral that we are permitted to sell or repledge (in the absence of default by the owner of the collateral) was $123,782 million as at October 31, 2018 ($118,324 million as at October 31, 2017). The fair value of collateral that we have sold or repledged was $82,392 million as at October 31, 2018 ($76,909 million as at October 31, 2017).

Lease Commitments

We have entered into a number of non-cancellable leases for premises and equipment. Our computer and software leases are typically fixed for one term and our premises leases have various renewal options and rights. Our total contractual rental commitments as at October 31, 2018 were $2,742 million. The commitments for each of the next five years and thereafter are $404 million for 2019, $358 million for 2020, $301 million for 2021, $254 million for 2022, $215 million for 2023 and $1,210 million thereafter. Included in these amounts are commitments related to 1,130 leased branch locations as at October 31, 2018.

Provisions and Contingent Liabilities

Provisions are recognized when we have a legal or constructive obligation as a result of past events, such as contractual commitments, legal or other obligations where we can reliably estimate the obligation, and it is probable we will be required to settle the obligation. We recognize as a provision our best estimate of the amount required to settle the obligations as of the balance sheet date, taking into account the risks and uncertainties surrounding the obligations. Provisions are recorded in other liabilities on the Consolidated Balance Sheet. Contingent liabilities are potential obligations arising from past events, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more future events not wholly within our control and are not included in the table below.

Restructuring Charges

Included in provisions as at October 31, 2018 is $176 million ($98 million in 2017) of restructuring charges related to our ongoing enterprise-wide initiative to simplify how we work, drive increased efficiency, and invest in technology to move our business forward. This amount represents our best estimate of the amount that will be ultimately paid out.

Legal Proceedings

The bank and its subsidiaries are party to legal proceedings, including regulatory investigations, in the ordinary course of business. While there is inherent difficulty in predicting the outcome of these proceedings, management does not expect the outcome of any of these proceedings, individually or in the aggregate, to have a material adverse effect on the consolidated financial position or the results of operations of the bank.

Changes in the provision balance during the year were as follows:

(Canadian $ in millions)	2018			2017
Balance at beginning of year		170			268
Additional provisions/increase in provisions		375			153
Provisions utilized		(250	)		(172	)
Amounts reversed		(11	)		(75	)
Exchange differences and other movements		–			(4	)
Balance at end of year (1)		284			170

(1) Balance includes severance obligations, restructuring charges and legal provisions.

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Operating and Geographic Segmentation

12 Months Ended

Oct. 31, 2018

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Operating and Geographic Segmentation

Note 25: Operating and Geographic Segmentation

Operating Groups

We conduct our business through three operating groups, each of which has a distinct mandate. We determine our operating groups based on our management structure and therefore these groups, and the results attributed to them, may not be comparable with those of other financial services companies. We evaluate the performance of our groups using reported and adjusted measures, such as net income, revenue growth, return on equity, and non-interest expense-to-revenue (productivity) ratio, as well as operating leverage.

Effective with the adoption of IFRS 9, we allocate the provision for credit losses on performing loans and the related allowance to operating groups. In 2017 and prior years, the collective provision and allowance were held in Corporate Services.

Personal and Commercial Banking

Personal and Commercial Banking (“P&C”) is comprised of two operating segments: Canadian Personal and Commercial Banking and U.S. Personal and Commercial Banking.

Canadian Personal and Commercial Banking

Canadian Personal and Commercial Banking (“Canadian P&C”) provides a full range of financial products and services to eight million customers. Personal Banking provides financial solutions for everyday banking, financing, investing, credit card and creditor insurance needs. Commercial Banking provides our small business and commercial banking customers with a broad suite of integrated commercial and capital markets products, as well as financial advisory services.

U.S. Personal and Commercial Banking

U.S. Personal and Commercial Banking (“U.S. P&C”) offers a broad range of products and services. Our retail and small and mid-sized business banking customers are served through our branches, contact centres, online and mobile banking platforms and automated banking machines across eight states. Our commercial banking customers are offered in-depth specific industry knowledge, as well as strategic capital markets solutions.

BMO Wealth Management

BMO’s group of wealth management businesses serves a full range of client segments from mainstream to ultra high net worth and institutional, with a broad offering of wealth management products and services, including insurance products. Wealth Management (“BMO WM”) is a global business with an active presence in markets across Canada, the United States, Europe and Asia.

BMO Capital Markets

BMO Capital Markets (“BMO CM”) is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. Through our Investment and Corporate Banking and Trading Products lines of business, we operate in 33 locations around the world, including 19 offices in North America.

Corporate Services

Corporate Services consists of Corporate Units and Technology and Operations (“T&O”). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics, and innovation. T&O manages, maintains and provides governance of information technology, cyber security, and operations services for the bank.

The costs of these Corporate Units and T&O services are largely transferred to the three operating groups (P&C, BMO WM and BMO CM), with any remaining amounts retained in Corporate Services results. As such, Corporate Services results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, residual unallocated expenses and certain acquisition integration costs and restructuring costs.

Basis of Presentation

The results of these operating groups are based on our internal financial reporting systems. The accounting policies used in these segments are generally consistent with those followed in the preparation of our consolidated financial statements, as disclosed in Note 1 and throughout the consolidated financial statements. Income taxes presented below may not be reflective of taxes paid in each jurisdiction where we operate. Income taxes are generally applied to each segment based on a statutory tax rate and may be adjusted for items and activities specific to each segment. A notable accounting measurement difference is the taxable equivalent basis adjustment as described below.

Periodically, certain business lines and units within the business lines are transferred between client and corporate support groups to more closely align our organizational structure with our strategic priorities. In addition, revenue and expense allocations are updated to more accurately align with current experience. Results for prior periods are restated to conform with the current year’s presentation.

Taxable Equivalent Basis

We analyze revenue on a taxable equivalent basis (“teb”) at the operating group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the groups’ teb adjustments is reflected in Corporate Services revenue and provision for income taxes. The teb adjustment for the year ended October 31, 2018 was $313 million ($567 million in 2017 and $510 million in 2016).

Inter-Group Allocations

Various estimates and allocation methodologies are used in the preparation of the operating groups’ financial information. Overhead expenses are allocated to operating groups using allocation formulas applied on a consistent basis. Operating group net interest income reflects internal funding charges and credits on the groups’ assets, liabilities and capital, at market rates, taking into account relevant terms and currency considerations. The offset of the net impact of these charges and credits is reflected in Corporate Services. These inter-group allocations are also applied to the geographical segmentation.

Our results and average assets, grouped by operating segment, are as follows:

(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2018
Net interest income (2)		5,541		3,843			826		659			(556	)		10,313
Non-interest revenue		2,171		1,140			5,468		3,696			249			12,724
Total Revenue		7,712		4,983			6,294		4,355			(307	)		23,037
Provision for (recovery of) credit losses on impaired loans		466		258			6		(17	)		(13	)		700
Provision for (recovery of) credit losses on performing loans		3		(38	)		–		(1	)		(2	)		(38	)
Total provision for (recovery of) credit losses		469		220			6		(18	)		(15	)		662
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,352		–			–			1,352
Amortization		318		454			231		124			–			1,127
Non-interest expense		3,487		2,558			3,278		2,727			436			12,486
Income (loss) before taxes and non-controlling interest in subsidiaries		3,438		1,751			1,427		1,522			(728	)		7,410
Provision for (recovery of) income taxes		884		357			355		366			(2	)		1,960
Reported net income (loss)		2,554		1,394			1,072		1,156			(726	)		5,450
Non-controlling interest in subsidiaries		–		–			–		–			–			–
Net Income (loss) attributable to bank shareholders		2,554		1,394			1,072		1,156			(726	)		5,450
Average Assets		224,553		110,351			35,913		307,087			76,391			754,295
(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2017
Net interest income (2)		5,261		3,551			722		1,233			(760	)		10,007
Non-interest revenue		2,182		1,066			5,492		3,336			177			12,253
Total Revenue		7,443		4,617			6,214		4,569			(583	)		22,260
Provision for (recovery of) credit losses (3)		483		289			8		44			(78	)		746
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,538		–			–			1,538
Amortization		309		434			241		119			–			1,103
Non-interest expense		3,313		2,510			3,110		2,659			635			12,227
Income (loss) before taxes and non-controlling interest in subsidiaries		3,338		1,384			1,317		1,747			(1,140	)		6,646
Provision for (recovery of) income taxes		827		357			350		472			(710	)		1,296
Reported net income (loss)		2,511		1,027			967		1,275			(430	)		5,350
Non-controlling interest in subsidiaries		–		–			2		–			–			2
Net Income (loss) attributable to bank shareholders		2,511		1,027			965		1,275			(430	)		5,348
Average Assets		217,685		104,209			32,562		302,518			65,652			722,626
(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2016
Net interest income (2)		5,080		3,491			635		1,459			(793	)		9,872
Non-interest revenue		1,909		1,119			5,274		2,855			58			11,215
Total Revenue		6,989		4,610			5,909		4,314			(735	)		21,087
Provision for (recovery of) credit losses (3)		506		249			9		81			(74	)		771
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,543		–			–			1,543
Amortization		276		433			233		105			–			1,047
Non-interest expense		3,224		2,481			3,104		2,469			716			11,994
Income (loss) before taxes and non-controlling interest in subsidiaries		2,983		1,447			1,020		1,659			(1,377	)		5,732
Provision for (recovery of) income taxes		766		396			245		424			(730	)		1,101
Reported net income (loss)		2,217		1,051			775		1,235			(647	)		4,631
Non-controlling interest in subsidiaries		–		–			2		–			7			9
Net Income (loss) attributable to bank shareholders		2,217		1,051			773		1,235			(654	)		4,622
Average Assets		208,018		106,111			30,642		301,623			60,728			707,122

(1) Corporate Services includes Technology and Operations.

(2) Operating groups report on a taxable equivalent basis – see Basis of Presentation section.

(3) 2017 and 2016 have not been restated to reflect the adoption of IFRS 9.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Geographic Information

We operate primarily in Canada and the United States, but we also have operations in the United Kingdom, Europe, the Caribbean and Asia, which are grouped in other countries. We allocate our results by geographic region based on the location of the unit responsible for managing the related assets, liabilities, revenues and expenses.

Our results and average assets, grouped by geographic region, are as follows:

(Canadian $ in millions)	Canada		United States		Other countries		Total
2018
Total Revenue		13,733		7,315		1,989		23,037
Income before taxes and non-controlling interest in subsidiaries		4,838		1,870		702		7,410
Reported net income		3,795		1,099		556		5,450
Average Assets		441,376		277,764		35,155		754,295
(Canadian $ in millions)	Canada		United States		Other countries		Total
2017
Total Revenue		13,469		7,073		1,718		22,260
Income before taxes and non-controlling interest in subsidiaries		4,597		1,588		461		6,646
Reported net income		3,817		1,210		323		5,350
Average Assets		430,570		264,473		27,583		722,626
(Canadian $ in millions)	Canada		United States		Other countries		Total
2016
Total Revenue		12,868		6,796		1,423		21,087
Income before taxes and non-controlling interest in subsidiaries		3,902		1,499		331		5,732
Reported net income		3,286		1,105		240		4,631
Average Assets		420,155		260,018		26,949		707,122

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Significant Subsidiaries

12 Months Ended

Oct. 31, 2018

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Significant Subsidiaries

Note 26: Significant Subsidiaries

As at October 31, 2018, the bank, either directly or indirectly through its subsidiaries, controls the following significant operating subsidiaries.

Significant subsidiaries (1)(2)	Head or principal office		Book value of shares owned by the bank (Canadian $ in millions)
Bank of Montreal Capital Markets (Holdings) Limited and subsidiaries, including:		London, England		332
BMO Capital Markets Limited		London, England
Pyrford International Limited		London, England
Bank of Montreal (China) Co. Ltd.		Beijing, China		448
Bank of Montreal Holding Inc. and subsidiaries, including:		Toronto, Canada		29,028
Bank of Montreal Mortgage Corporation		Calgary, Canada
BMO Mortgage Corp.		Vancouver, Canada
BMO Investments Limited		Hamilton, Bermuda
BMO Reinsurance Limited		St. Michaels, Barbados
BMO Nesbitt Burns Holdings Corporation		Toronto, Canada
BMO Nesbitt Burns Inc.		Toronto, Canada
BMO Investments Inc.		Toronto, Canada
BMO InvestorLine Inc.		Toronto, Canada
Bank of Montreal Ireland plc		Dublin, Ireland		1,022
BMO Financial Corp. and subsidiaries, including:		Chicago, United States		21,893
BMO Asset Management Corp. and subsidiaries		Chicago, United States
BMO Capital Markets Corp.		New York, United States
BMO Harris Bank National Association and subsidiaries, including:		Chicago, United States
BMO Harris Investment Company LLC		Las Vegas, United States
BMO Harris Financial Advisors, Inc.		Chicago, United States
BMO Harris Financing, Inc. and subsidiaries		Chicago, United States
CTC myCFO, LLC		Palo Alto, United States
BMO Global Asset Management (Europe) Limited and subsidiaries, including:		London, England		692
BMO Asset Management (Holdings) plc and subsidiaries (3)		London, England
BMO Life Insurance Company and subsidiaries, including:		Toronto, Canada		1,195
BMO Life Holdings (Canada), ULC		Halifax, Canada
BMO Life Assurance Company		Toronto, Canada
BMO Trust Company		Toronto, Canada		768
BMO Trustee Asia Limited		Hong Kong, China		2
LGM (Bermuda) Limited and subsidiaries, including:		Hamilton, Bermuda		147
BMO Global Asset Management (Asia) Limited		Hong Kong, China
LGM Investments Limited		London, England

(1) Each subsidiary is incorporated or organized under the laws of the state or country in which the principal office is situated, except for BMO Financial Corp., BMO Asset Management Corp., BMO Capital Markets Corp., BMO Harris Financial Advisors, Inc., BMO Harris Financing, Inc., and CTC myCFO, LLC, which are incorporated under the laws of the state of Delaware, United States. BMO Asset Management (Holdings) plc is incorporated under the laws of Scotland.

(2) Unless otherwise noted, the bank, either directly or indirectly through its subsidiaries, owns 100% of the outstanding voting shares of each subsidiary.

(3) Effective October 31, 2018, F&C Asset Management plc changed its name to BMO Asset Management (Holdings) plc.

Significant Restrictions

Our ability to transfer funds between our subsidiaries may be restricted by statutory, contractual, capital and regulatory requirements. Restrictions include:

• Assets pledged as security for various liabilities we incur. Refer to Note 24 for details.

• Assets of our consolidated structured entities that are held for the benefit of the note holders. Refer to Note 7 for details.

• Assets held by our insurance subsidiaries. Refer to Note 12 for details.

• Regulatory and statutory requirements that reflect capital and liquidity requirements. Refer to Note 19 for details.

• Funds required to be held with central banks. Refer to Note 2 for details.

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Related Party Transactions

12 Months Ended

Oct. 31, 2018

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Related Party Transactions

Note 27: Related Party Transactions

Related parties include subsidiaries, associates, joint ventures, employee future benefit plans and key management personnel and their close family members. Close family members include spouses, common-law partners and dependent minors. Transactions with our subsidiaries are eliminated on consolidation, and are not disclosed as related party transactions.

Key Management Personnel Compensation

Key management personnel is defined as those persons having authority and responsibility for planning, directing and/or controlling the activities of an entity, being the members of our Board of Directors (“directors”) and certain senior executives.

The following table presents the compensation of our key management personnel:

(Canadian $ in millions)	2018		2017		2016
Base salary and incentives		21		23		22
Post-employment benefits		2		1		2
Share-based payments (1)		31		38		32
Total key management personnel compensation		54		62		56

(1) Amounts included in share-based payments are the fair values of awards granted in the year.

We offer senior executives market interest rates on credit card balances, a fee-based subsidy on annual credit card fees, and a select suite of customer loan and mortgage products at rates normally accorded to preferred customers. At October 31, 2018, loans to key management personnel totalled $16 million ($10 million in 2017).

Directors receive a specified amount of their annual retainer in deferred stock units. Until a director’s shareholdings (including deferred stock units) are eight times greater than their annual retainer, they are required to take 100% of their annual retainer and other fees in the form of either our common shares or deferred stock units. They may elect to receive the remainder of such retainer fees and other remuneration in cash, common shares or deferred stock units.

Directors of our wholly owned subsidiary, BMO Financial Corp., are required to take a specified minimum amount of their annual retainer and other fees in the form of deferred stock units.

Joint Ventures and Associates

We provide banking services to our joint ventures and associates on the same terms offered to our customers for these services. Our investments in joint ventures of which we own 50% totalled $231 million as at October 31, 2018 ($182 million in 2017). Our investments in associates over which we exert significant influence totalled $471 million as at October 31, 2018 ($444 million in 2017).

The following table presents transactions with our joint ventures and associates:

(Canadian $ in millions)	2018		2017
Loans		195		178
Deposits		114		132
Fees paid for services received		71		66

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Transition to IFRS 9

12 Months Ended

Oct. 31, 2018

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Transition to IFRS 9

Note 28: Transition to IFRS 9

The following table shows the pre-transition IAS 39 and corresponding IFRS 9 classification and measurement categories, and reconciles the IAS 39 and IFRS 9 carrying amounts for loans, securities and other financial assets as at November 1, 2017 as a result of adopting IFRS 9. There were no changes to the measurement basis of other financial asset categories or any financial liabilities.

(Canadian $ in millions)	IAS 39 measurement category		IFRS 9 measurement category		IAS 39 carrying amount			Reclassification			Remeasurement			IFRS 9 carrying amount
Financial Assets
Securities
		Trading		Trading		99,069			(8,534	)		–			90,535
				FVTPL		–			8,534			–			8,534
		Available-for-sale		na		54,075			(54,075	)		–			–
				FVOCI		–			51,909			–			51,909
				FVTPL		–			2,081			–			2,081
				Amortized cost		–			85			–			85
		Held-to-maturity		Amortized cost		9,094			–			(2	)		9,092
		Other		Other		960			(333	)		–			627
				FVTPL		–			333			–			333
Total Securities						163,198			–			(2	)		163,196
Loans
Residential mortgages		Amortized cost		Amortized cost		115,258			–			–			115,258
Consumer instalment and other		Amortized cost		Amortized cost		61,944			–			–			61,944
Credit cards		Amortized cost		Amortized cost		8,071			–			–			8,071
Business and government		Amortized cost		Amortized cost		175,067			(2,372	)		–			172,695
				FVTPL		–			2,372			–			2,372
Total Loans						360,340			–			–			360,340
Allowance for credit losses						(1,833	)		–			154			(1,679	)
						358,507			–			154			358,661
Remaining financial assets (1)						127,706			–			(6	)		127,700
Financial Liabilities
Allowance for credit losses on off-balance sheet exposures						163			–			76			239
Total pre-tax impact of IFRS 9 adoption						na			–			70			na
Total after-tax Accumulated Other Comprehensive Income						3,066			(55	)		–			3,011
Total after-tax Retained Earnings (2)(3)						23,709			55			44			23,808
Total after-tax Shareholders’ Equity						44,354			–			44			44,398

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements and other assets. Remeasurement represents the impact of the impairment provisions of IFRS 9 on these remaining financial assets.

(2) Reclassification amount represents the after-tax impact ($105 million pre-tax) that resulted from the reclassification of equity securities from available-for-sale under IAS 39 to fair value through profit or loss under IFRS 9.

(3) Remeasurement represents the after-tax impact ($70 million pre-tax) of the adoption of the impairment provisions of IFRS 9.

na – not applicable due to IFRS 9 adoption.

The securities balances by measurement category following the adoption of IFRS 9 as at November 1, 2017 were:

(Canadian $ in millions)	November 1, 2017
Trading		90,535
FVTPL		10,948
FVOCI		51,909
Amortized cost		9,177
Other		627
Total		163,196

The primary impact as a result of adopting the classification and measurement provisions of IFRS 9 relates to securities held by the bank.

On transition, our existing held-to-maturity securities continued to qualify for amortized cost treatment, as they are held with the intent to collect contractual cash flows and those cash flows represent solely payments of principal and interest.

Our available-for-sale portfolio was reclassified based on the result of the business model and contractual cash flow tests. All available-for-sale securities that represented equity instruments were reclassified as fair value through profit or loss. Available-for-sale securities that represented investments in debt instruments were generally classified as fair value through other comprehensive income. Certain available-for-sale debt securities were classified as fair value through profit or loss, as their contractual cash flows did not represent solely payments of principal and interest. Certain available-for-sale debt securities were classified as amortized cost, as they are held with the intent to collect contractual cash flows and those cash flows represent only payments of principal and interest. On transition, investments held in our merchant banking business are classified as fair value through profit or loss and no longer require designation under the fair value option.

Our lending portfolios continue to be recorded at amortized cost, with the exception of certain business and government loans, whose contractual cash flows did not represent only payments of principal and interest, and were classified as fair value through profit or loss.

The following table illustrates the impact of transition to IFRS 9 on the allowance for credit loss as of November 1, 2017.

(Canadian $ in millions)	IAS 39 collective allowance		IAS 39 specific allowance		IAS 39 allowance		Remeasurement			IFRS 9 allowance		IFRS 9 Stage 1		IFRS 9 Stage 2		IFRS 9 Stage 3
Loans
Residential mortgages		69		24		93		(20	)		73		16		33		24
Consumer instalment and other		343		136		479		71			550		70		344		136
Credit cards		243		–		243		41			284		63		221		–
Business and government		785		233		1,018		(246	)		772		205		334		233
Total allowance for credit losses		1,440		393		1,833		(154	)		1,679		354		932		393
Allowance for credit losses on remaining financial assets (1)		–		–		–		8			8		7		1		–
Allowance for credit losses on off-balance sheet exposures		136		27		163		76			239		89		123		27
Total		1,576		420		1,996		(70	)		1,926		450		1,056		420

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities, securities borrowed or purchased under resale agreements and other assets.

Accounting Policies for Financial Instruments under IAS 39, Financial Instruments: Recognition and Measurement

The following accounting policies apply to comparative information for 2017 and 2016 in our consolidated financial statements as we did not restate prior periods on adoption of IFRS 9.

Classification and Measurement of Securities

Securities are divided into four types: trading securities designated at FVTPL, available-for-sale securities, held-to-maturity and other securities.

Trading securities are securities that we purchase for resale over a short period of time. We classify trading securities and securities designated under the fair value option at fair value through profit or loss.

We record the transaction costs, gains and losses realized on disposal and unrealized gains and losses due to changes in fair value in our Consolidated Statement of Income in trading revenues. Securities designated at FVTPL are financial instruments that are accounted for at fair value, with changes in fair value recorded in income provided they meet certain criteria.

Available-for-sale securities consist of debt and equity securities that may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or in order to meet liquidity needs.

Available-for-sale securities are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in unrealized gains (losses) on available-for-sale securities in our Consolidated Statement of Comprehensive Income until the security is sold. Gains and losses on disposal and impairment losses (recoveries) are recorded in our Consolidated Statement of Income in non-interest revenue, securities gains, other than trading. Interest income earned and dividends received on available-for-sale securities are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

Held-to-maturity securities are debt securities that we have the intention and ability to hold to maturity and that do not meet the definition of a loan. These securities are initially recorded at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method. Impairment losses are recorded in our Consolidated Statement of Income in securities gains (losses), other than trading. Interest income earned and amortization of premiums or discounts on these debt securities are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

Other securities are investments in companies where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). We account for these other securities using the equity method of accounting. Other securities also include certain securities held by our merchant banking business.

Impairment of Securities

We review held-to-maturity, available-for-sale and other securities at each quarter-end reporting period to identify and evaluate investments that show indications of possible impairment.

For held-to-maturity, available-for-sale and other securities, impairment losses are recognized if there is objective evidence of impairment as a result of an event that reduces the estimated future cash flows from the security and the impact can be reliably estimated.

We do not record impairment write-downs on debt securities when impairment is due to changes in market interest rates if future contractual cash flows associated with the debt security are still expected to be recovered.

The impairment loss on available-for-sale securities is the difference between the security’s amortized cost and its current fair value, less any previously recognized impairment losses. If there is objective evidence of impairment, a write-down is transferred from our Consolidated Statement of Comprehensive Income, unrealized gains (losses) on available-for-sale securities, to our Consolidated Statement of Income in securities gains, other than trading.

The impairment loss on held-to-maturity securities is the difference between a security’s carrying amount and the present value of its estimated future cash flows discounted at the original effective interest rate. If there is objective evidence of impairment, a write-down is recorded in our Consolidated Statement of Income in securities gains, other than trading.

For available-for-sale debt securities, a previous impairment loss is reversed through net income if an event occurs after the impairment was recognized that can be objectively attributed to an increase in fair value, to a maximum of the original impairment charge. For available-for-sale equity securities, previous impairment losses are not reversed through net income, and any subsequent increases in fair value are recorded in other comprehensive income. Reversals of impairment losses on held-to-maturity securities are recorded to a maximum of the amortized cost of the investment before the original impairment charge.

Loans

Loans are initially measured at fair value plus directly attributable costs, and are subsequently measured at amortized cost using the effective interest method. The effective interest method allocates interest income over the expected term of the loan by applying the effective interest rate to the carrying amount of the loan. The effective interest rate is defined as the rate that exactly discounts future cash receipts through the expected term of the loan to the net carrying amount of the loan. Under the effective interest method, the amount recognized in interest, dividend and fee income, loans, varies over the term of the loan based on the principal outstanding.

Allowance for Credit Losses

The allowance for credit losses adjusts the value of loans to reflect their estimated realizable value. In assessing their estimated realizable value, we must rely on estimates and exercise judgment regarding matters for which the ultimate outcome is unknown. These include economic factors, developments affecting companies in particular industries, and specific issues with respect to single borrowers. Changes in circumstances may cause future assessments of credit risk to be materially different from current assessments, which could result in an increase or decrease in the allowance for credit losses.

The allowance is comprised of a specific allowance and a collective allowance.

Specific Allowance

These allowances are recorded for individually identified impaired loans to reduce their carrying value to the expected recoverable amount. We review our loans on an ongoing basis to assess whether any loans should be classified as impaired and whether an allowance or write-off should be recorded (excluding credit card loans, which are classified as impaired and written off when principal or interest payments are 180 days past due, as discussed under Impaired Loans). The review of individually significant problem loans is conducted at least quarterly by the account managers, each of whom assesses the ultimate collectability and estimated recoveries for a specific loan based on all events and conditions that are relevant to the loan. This assessment is then reviewed and approved by an independent credit officer.

Individually Significant Impaired Loans

To determine the amount we expect to recover from an individually significant impaired loan, we use the value of the estimated future cash flows discounted at the loan’s original effective interest rate. The determination of estimated future cash flows of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real estate properties, accounts receivable, guarantees, inventory or other capital assets.

Individually Insignificant Impaired Loans

Residential mortgages, consumer instalment and other personal loans are individually insignificant and may be individually assessed or collectively assessed for losses at the time of impairment, taking into account historical loss experience.

Collective Allowance

We maintain a collective allowance in order to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the collective allowance is based on the requirements of IAS 39, considering guidelines issued by OSFI.

The collective allowance methodology incorporates both quantitative and qualitative factors to determine an appropriate level for the collective allowance. For the purpose of calculating the collective allowance, we group loans on the basis of similarities in credit risk characteristics. The loss factors for groups of loans are determined based on a minimum of five years of historical data and a one-year loss emergence period, except for credit cards, where a seven-month loss emergence period is used. The loss factors are back-tested and calibrated on a regular basis to ensure that they continue to reflect our best estimate of losses that have been incurred but not yet identified, on an individual basis, within the pools of loans. Historical loss experience data is also reviewed in the determination of loss factors. Qualitative factors are based on current observable data, such as current macroeconomic and business conditions, portfolio-specific considerations and model risk factors.

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Basis of Presentation (Policies)

12 Months Ended

Oct. 31, 2018

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Basis of Consolidation

Basis of Consolidation

These consolidated financial statements are inclusive of the financial statements of our subsidiaries as at October 31, 2018. We conduct business through a variety of corporate structures, including subsidiaries, structured entities (“SEs”), associates and joint ventures. Subsidiaries are those entities where we exercise control through our ownership of the majority of the voting shares. We also hold interests in SEs, which we consolidate when we control the SEs. These are more fully described in Note 7. All of the assets, liabilities, revenues and expenses of our subsidiaries and consolidated SEs are included in our consolidated financial statements. All intercompany transactions and balances are eliminated on consolidation.

We hold investments in associates, where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method. The equity method is also applied to our investments in joint ventures. Joint ventures are those entities where we exercise joint control through an agreement with other shareholders. Under the equity method of accounting, investments are initially recorded at cost, and the carrying amount is increased or decreased to recognize our share of investee net income or loss, including other comprehensive income or loss. Our equity accounted investments are recorded as other securities and our share of the net income or loss is recorded in investments in associates and joint ventures, in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income. Additional information regarding accounting for other securities is included in Note 3.

Non-controlling interest in subsidiaries is presented in our Consolidated Balance Sheet as a separate component of equity that is distinct from our shareholders’ equity. The net income attributable to non-controlling interest in subsidiaries is presented separately in our Consolidated Statement of Income.

Translation of Foreign Currencies

Translation of Foreign Currencies

We conduct business in a variety of foreign currencies and present our consolidated financial statements in Canadian dollars, which is our functional currency. Monetary assets and liabilities, as well as non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies, are translated into Canadian dollars at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities not measured at fair value are translated into Canadian dollars at historical rates. Revenues and expenses denominated in foreign currencies are translated using the average exchange rate for the year.

Unrealized gains and losses arising from translating our net investment in foreign operations into Canadian dollars, net of related hedging activities and applicable income taxes, are included in our Consolidated Statement of Comprehensive Income within net gain (loss) on translation of net foreign operations. When we dispose of a foreign operation such that control, significant influence or joint control is lost, the cumulative amount of the translation gain (loss) and any applicable hedging activities and related income taxes is reclassified to our Consolidated Statement of Income as part of the gain or loss on disposition.

Foreign currency translation gains and losses on equity securities measured at FVOCI that are denominated in foreign currencies are included in accumulated other comprehensive income on FVOCI equity securities, net of taxes, in our Consolidated Statement of Changes in Equity. All other foreign currency translation gains and losses are included in foreign exchange, other than trading, in our Consolidated Statement of Income as they arise.

From time to time, we enter into foreign exchange hedge contracts to reduce our exposure to changes in the value of foreign currencies. Realized and unrealized gains and losses that arise on the mark-to-market of foreign exchange contracts related to economic hedges are included in non-interest revenue in our Consolidated Statement of Income. Changes in the fair value of derivative contracts that qualify as accounting hedges are recorded in our Consolidated Statement of Comprehensive Income within net change in unrealized gains (losses) on derivatives designated as cash flow hedges, with the spot/forward differential (the difference between the foreign currency exchange rate at the inception of the contract and the rate at the end of the contract) recorded in interest income (expense) over the term of the hedge.

Revenue

Revenue

Dividend Income

Dividend income is recognized when the right to receive payment is established. This is the ex-dividend date for listed equity securities.

Fee Income

Securities commissions and fees are earned in Wealth Management and Capital Markets on brokerage transactions executed for customers, generally as a fixed fee per share traded, where the commissions and related clearing expense are recognized on trade date. There are also fees based on a percentage of the customer’s portfolio holdings that entitle clients to investment advice and a certain number of trades which are recorded over the period to which they relate.

Deposit and payment service charges are primarily earned in Personal and Commercial Banking and include monthly account maintenance fees and other activity-based fees earned on deposit and cash management services. Fees are recognized over time or at a point in time, i.e. over the period that account maintenance and cash management services are provided, or when an income-generating activity is performed.

Card fees arise in Personal and Commercial Banking and primarily include interchange income, late fees and annual fees. Card fees are recorded when the related services are provided, except for annual fees, which are recorded evenly throughout the year. Interchange income is calculated as a percentage of the transaction amount and/or a fixed price per transaction as established by the payment network and is recognized when the card transaction is settled. Reward costs for certain of our cards are recorded as a reduction in card fees.

Investment management and custodial fees are earned in Wealth Management and are based primarily on the balance of assets under management or assets under administration, as at the period end, for investment management, custodial, estate and trustee services provided. Fees are recorded over the period the services are performed.

Mutual fund revenues arise in Wealth Management and are earned on fund management services which are primarily calculated and recorded based on a percentage of the fund’s net asset value. The fees are recorded over the period the services are performed.

Underwriting and advisory fees are earned in Capital Markets and arise from securities offerings in which we act as an underwriter or agent, structuring and administering loan syndications and fees earned from providing merger-and-acquisition services and structuring advice. Underwriting and advisory fees are generally recognized when the services or milestones are completed.

Leases

Leases

We are lessors in both financing leases and operating leases. Leases are classified as financing leases if they transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. Otherwise they are classified as operating leases, as we retain substantially all the risks and rewards of asset ownership.

As lessor in a financing lease, a loan is recognized equal to the investment in the lease, which is calculated as the present value of the minimum payments to be received from the lessee, discounted at the interest rate implicit in the lease, plus any unguaranteed residual value we expect to recover at the end of the lease. Finance lease income is recognized in interest, dividend and fee income, loans, in our Consolidated Statement of Income.

Assets under operating leases are recorded in other assets in our Consolidated Balance Sheet. Rental income is recognized on a straight-line basis over the term of the lease in non-interest revenue, other, in our Consolidated Statement of Income. Depreciation on these assets is recognized on a straight-line basis over the life of the lease in non-interest expense, other, in our Consolidated Statement of Income.

Assets Held-for-Sale

Assets Held-for-Sale

Non-current non-financial assets classified as held-for-sale are measured at the lower of their carrying amount and fair value less costs to sell and are presented within other assets in our Consolidated Balance Sheet. Subsequent to its initial classification, a non-current asset is no longer depreciated or amortized, and any subsequent write-down in fair value less costs to sell is recognized in non-interest revenue, other, in our Consolidated Statement of Income.

Changes in Accounting Policies

Changes in Accounting Policies

Financial Instruments

Effective November 1, 2017 we adopted IFRS 9 Financial Instruments (“IFRS 9”), which replaces IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 addresses impairment, classification and measurement, and hedge accounting. The impact to shareholders’ equity at November 1, 2017 was an increase of $70 million ($44 million after-tax) related to the impairment requirements of the standard. Prior periods have not been restated. Refer to Note 28, Transition to IFRS 9, for the impact on the opening balance sheet at November 1, 2017 and for accounting policies under IAS 39, which were applicable in prior periods.

Impairment

IFRS 9 introduces a new expected credit loss (“ECL”) impairment model for all financial assets and certain off-balance sheet loan commitments and guarantees. The new ECL model results in an allowance for credit losses being recorded on financial assets regardless of whether there has been an actual impairment. This differs from our previous approach where the allowance recorded on performing loans was designed to capture only incurred losses whether or not they have been specifically identified.

The ECL model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses on performing loans that have experienced a significant increase in credit risk since origination (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and will vary by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria such as 30-day past due and watchlist status. The allowance for assets in Stage 2 will be higher than for those in Stage 1 as a result of the longer time horizon associated with this stage. Stage 3 requires the recognition of lifetime losses for all credit impaired assets.

IFRS 9 requires consideration of past events, current market conditions and reasonable supportable information about future economic conditions, in determining whether there has been a significant increase in credit risk and in calculating the amount of expected losses. The standard also requires future economic conditions be based on an unbiased, probability-weighted assessment of possible future outcomes.

In considering the lifetime of an instrument, IFRS 9 generally requires the use of the contractual period, including pre-payment, extension and other options. For revolving instruments, such as credit cards, that may not have a defined contractual period, lifetime is based on historical behaviour.

Classification and Measurement

Debt instruments, including loans, are classified based on both our business model for managing the assets and the contractual cash flow characteristics of the assets. Debt instruments are measured at fair value through profit or loss (“FVTPL”) unless certain conditions are met that permit measurement at either fair value through other comprehensive income (“FVOCI”) or amortized cost.

FVOCI is permitted where debt instruments are held with the objective of selling the assets or collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs. Changes in fair value are recorded in other comprehensive income; gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

Amortized cost is permitted where debt instruments are held with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. Gains or losses on disposal and impairment losses are recorded in our Consolidated Statement of Income.

For both FVOCI and amortized cost instruments, premiums, discounts and transaction costs are amortized over the term of the instrument on an effective yield basis as an adjustment to interest income.

Equity instruments are measured at FVTPL unless we elect to measure at FVOCI, in which case gains and losses are never recognized in income.

As permitted by IFRS 9, in fiscal 2015, we have early adopted the provisions relating to the recognition of changes in own credit risk for financial liabilities designated at FVTPL.

Additional information regarding changes in own credit risk is included in Notes 13 and 14.

Hedge Accounting

IFRS 9 introduced a new hedge accounting model that expands the scope of hedged items and risks eligible for hedge accounting and aligns hedge accounting more closely with risk management. The new model no longer specifies quantitative measures for effectiveness testing and does not permit hedge de-designation. IFRS 9 includes a policy choice that allows us to continue to apply the existing hedge accounting rules, which we have elected to use. However, as required by the standard, we adopted the new hedge accounting disclosures. Refer to Note 8.

Use of Estimates and Judgments

Use of Estimates and Judgments

The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the carrying amounts of certain assets and liabilities, certain amounts reported in net income and other related disclosures.

The most significant assets and liabilities for which we must make estimates include allowance for credit losses; financial instruments measured at fair value; pension and other employee future benefits; impairment of securities; income taxes and deferred taxes; goodwill and intangible assets; insurance-related liabilities; and provisions. We make judgments in assessing whether substantially all risks and rewards have been transferred in respect of transfers of financial assets and whether we control SEs, as discussed in Notes 6 and 7, respectively. If actual results were to differ from the estimates, the impact would be recorded in future periods.

We have established detailed policies and control procedures that are intended to ensure these judgments are well controlled, independently reviewed and consistently applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate.

Allowance for Credit Losses

The expected credit loss model requires the recognition of credit losses based on up to 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability of default since origination, and certain other criteria, such as 30-day past due and watchlist status. The assessment of a significant increase in credit risk requires experienced credit judgment.

In determining whether there has been a significant increase in credit risk and in calculating the amount of expected credit losses, we must rely on estimates and exercise judgment regarding matters for which the ultimate outcome is unknown. These judgments include changes in circumstances that may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or decrease in the allowance for credit losses.

The calculation of expected credit losses includes the explicit incorporation of forecasts of future economic conditions. We have developed models incorporating specific macroeconomic variables that are relevant to each portfolio. Key economic variables for our retail portfolios include primary operating markets of Canada, the United States and regional markets where considered significant. Forecasts are developed internally by our Economics group, considering external data and our view of future economic conditions. We exercise experienced credit judgment to incorporate multiple economic forecasts which are probability-weighted in the determination of the final expected credit loss. The allowance is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario.

Additional information regarding the allowance for credit losses is included in Notes 4 and 28.

Financial Instruments Measured at Fair Value

Fair value measurement techniques are used to value various financial assets and financial liabilities and are used in performing impairment testing on certain non-financial assets. Detailed discussions of our fair value measurement techniques are included in Note 17.

Pension and Other Employee Future Benefits

Our pension and other employee future benefits expense is calculated by our independent actuaries using assumptions determined by management. If actual experience were to differ from the assumptions used, we would recognize this difference in other comprehensive income.

Pension and other employee future benefits expense, plan assets and defined benefit obligations are also sensitive to changes in discount rates. We determine discount rates for all of our plans using high-quality AA rated corporate bond yields with terms matching the plans’ specific cash flows.

Additional information regarding our accounting for pension and other employee future benefits is included in Note 21.

Impairment of Securities

We review other securities at each quarter-end reporting period to identify and evaluate investments that show indications of possible impairment. For these equity securities, a significant or prolonged decline in the fair value of a security below its cost is objective evidence of impairment.

Debt securities measured at amortized cost or FVOCI are assessed for impairment using the expected credit loss model. For securities determined to have low credit risk, the allowance for credit losses is measured at a 12 month expected credit loss.

Additional information regarding our accounting for debt securities measured at amortized cost or FVOCI and other securities, allowance for credit losses and the determination of fair value is included in Notes 3 and 17.

Income Taxes and Deferred Tax Assets

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in either our Consolidated Statement of Income or Consolidated Statement of Changes in Equity. In determining the provision for income taxes, we interpret tax legislation, case law and administrative positions in numerous jurisdictions and, based on our judgment, record our estimate of the amount required to settle tax obligations. We also make assumptions about the expected timing of the reversal of deferred tax assets and liabilities. If our interpretations differ from those of taxing authorities or if the timing of reversals is not as expected, our provision for income taxes could increase or decrease in future periods. The amount of any such increase or decrease cannot be reasonably estimated.

Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available in future periods against which deductible temporary differences may be utilized. We are required to assess whether it is probable that our deferred income tax assets will be realized prior to expiration and, based on all the available evidence, determine if any portion of our deferred income tax assets should not be recognized. The factors used to assess the probability of realization are our past experience of income and capital gains, our forecast of future net income before taxes, and the period remaining before the expiration of tax loss carryforwards. Changes in our assessment of these factors could increase or decrease our provision for income taxes in future periods.

Additional information regarding our accounting for income taxes is included in Note 22.

Goodwill and Intangible Assets

For the purpose of impairment testing, goodwill is allocated to our groups of cash-generating units (“CGUs”), which represent the lowest level within the bank at which goodwill is monitored for internal management purposes. Impairment testing is performed at least annually, by comparing the carrying values and the recoverable amounts of the CGUs to which goodwill has been allocated to determine whether the recoverable amount of each group is greater than its carrying value. If the carrying value of the group were to exceed its recoverable amount, an impairment calculation would be performed. The recoverable amount of a CGU is the higher of its fair value less costs to sell and the value in use.

In determining fair value less costs to sell, we employ a discounted cash flow model consistent with those used when we acquire businesses. This model is dependent on assumptions related to revenue growth, discount rates, synergies achieved on acquisition and the availability of comparable acquisition data. Changes in any of these assumptions would affect the determination of fair value for each of the business units in a different manner. Management must exercise judgment and make assumptions in determining fair value less costs to sell, and differences in judgment and assumptions could affect the determination of fair value and any resulting impairment write-down.

Intangible assets with a definite life are amortized to income on either a straight-line or an accelerated basis over a period not exceeding 15 years, depending on the nature of the asset. We test definite-life intangible assets for impairment when circumstances indicate the carrying value may not be recoverable. Indefinite-life intangible assets are tested annually for impairment. If any intangible assets are determined to be impaired, we write them down to their recoverable amount, the higher of value in use and fair value less costs to sell, when this is less than the carrying value.

Additional information regarding goodwill and intangible assets is included in Note 11.

Insurance-Related Liabilities

Insurance claims and policy benefit liabilities represent current claims and estimates of future insurance policy benefit liabilities. Liabilities for life insurance contracts are determined using the Canadian Asset Liability Method, which incorporates best-estimate assumptions for mortality, morbidity, policy lapses, surrenders, future investment yields, policy dividends, administration costs and margins for adverse deviation. These assumptions are reviewed at least annually and updated to reflect actual experience and market conditions. The most significant impact on the valuation of a liability would result from a change in the assumption for future investment yields.

Additional information regarding insurance-related liabilities is included in Note 14.

Provisions

The bank and its subsidiaries are involved in various legal actions in the ordinary course of business.

Provisions are recorded at the best estimate of the amounts required to settle any obligations related to these legal actions as at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. Factors considered in making the assessment include: a case-by-case assessment of specific facts and circumstances, our past experience and the opinions of legal experts. Management and external experts are involved in estimating any provisions. The actual costs of resolving these claims may be substantially higher or lower than the amounts of the provisions.

Additional information regarding provisions is included in Note 24.

Transfer of Financial Assets and Consolidation of Structured Entities

We enter into transactions in which we transfer assets, typically mortgage loans and credit cards, to a structured entity or third party to obtain alternate sources of funding. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition. Since we continue to be exposed to substantially all of the repayment, interest rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financings in our Consolidated Balance Sheet.

For securitization vehicles sponsored by the bank, the vehicles typically have limited decision-making authority. The structure of these vehicles limits the activities they can undertake, the types of assets they can hold and how activities are funded. We control and consolidate these vehicles when we have the key decision-making powers necessary to obtain the majority of the benefits of their activities.

For certain investments in limited partnerships, we exercise judgment in determining whether we control an entity. Based on an assessment of our interests and rights, we have determined that we do not control certain entities, even though we may have an ownership interest greater than 50%. This may be the case when we are not the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity. Additionally, we have determined that we control certain entities despite having an ownership interest less than 50%. This may be the case when we are the general partner in an arrangement and the general partner’s rights most significantly affect the returns of the entity.

Transferred assets are discussed in greater detail in Note 6 and structured entities are discussed in greater detail in Notes 7 and 20.

Trading and other securities

Trading securities are securities purchased for resale over a short period of time. Trading securities are recorded at fair value through profit or loss. Transaction costs and changes in fair value are recorded in our Consolidated Statement of Income in trading revenues.

Fair value through profit or loss securities are measured at fair value with changes in fair value and related transaction costs recorded in our Consolidated Statement of Income in securities gains and losses, other than trading, except as noted below. This category includes the following:

Securities Designated at FVTPL

In order to qualify for this designation, the security must have reliably measurable fair values and the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the gains and losses on a different basis. Securities must be designated on initial recognition, and the designation is irrevocable. If these securities were not designated at FVTPL, they would be accounted for as either FVOCI or amortized cost.

We designate certain securities held by our insurance subsidiaries that support our insurance liabilities at fair value through profit or loss since the actuarial calculation of insurance liabilities is based on the fair value of the investments supporting them. This designation aligns the accounting result with the way the portfolio is managed on a fair value basis. The change in fair value of the securities is recorded in non-interest revenue, insurance revenue and the change in fair value of the liabilities is recorded in insurance claims, commissions and changes in policy benefit liabilities. The fair value of these investments as at October 31, 2018 of $8,783 million ($8,465 million as at October 31, 2017) is recorded in securities in our Consolidated Balance Sheet. The impact of recording these investments at fair value through profit or loss was a decrease of $372 million in non-interest revenue, insurance revenue, for the year ended October 31, 2018 (increase of $39 million for the year ended October 31, 2017).

Securities Mandatorily Measured at FVTPL

Securities managed on a fair value basis, but not held for trading, or debt securities whose cash flows do not represent solely payments of principal and interest and equity securities not held for trading are classified as FVTPL.

Debt securities measured at amortized cost are debt securities purchased with the objective of collecting contractual cash flows and those cash flows represent solely payments of principal and interest. These securities are initially recorded at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method. Impairment losses (recoveries) are recorded in our Consolidated Statement of Income in securities gains, other than trading. Interest income earned and amortization of premiums, discounts and transaction costs are recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities.

Debt securities measured at FVOCI are debt securities purchased with the objective of both collecting contractual cash flows and selling the securities. The securities’ cash flows represent solely payments of principal and interest. These securities may be sold in response to or in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs.

Debt securities measured at FVOCI are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value, with unrealized gains and losses recorded in our Consolidated Statement of Comprehensive Income until the security is sold or impaired. Gains and losses on disposal and impairment losses (recoveries) are recorded in our Consolidated Statement of Income in non-interest revenue, securities gains, other than trading. Interest income earned is recorded in our Consolidated Statement of Income in interest, dividend and fee income, securities using the effective interest method.

Equity securities measured at FVOCI are equity securities where we have elected to record changes in the fair value of the instrument in other comprehensive income as opposed to fair value through profit or loss. Gains or losses recorded on these instruments will never be recognized in profit or loss. Equity securities measured at FVOCI are not subject to an impairment assessment.

Other securities are investments in associates and joint ventures where we exert significant influence over operating, investing and financing decisions (generally companies in which we own between 20% and 50% of the voting shares). These are accounted for using the equity method of accounting. Our share of the net income or loss is recorded in investments in associates and joint ventures in our Consolidated Statement of Income. Any other comprehensive income amounts are reflected in the relevant section of our Consolidated Statement of Comprehensive Income.

We account for all of our securities transactions using settlement date accounting in our Consolidated Balance Sheet. Changes in fair value between the trade date and settlement date are recorded in net income, except for those related to securities measured at FVOCI, which are recorded in other comprehensive income.

Impairment Review

Impairment Review

Debt securities classified as amortized cost or FVOCI are assessed for impairment using the ECL model, with the exception of securities determined to have low credit risk where the allowance for credit losses is measured at a 12-month expected credit loss. A financial asset is considered to have low credit risk if the financial asset has a low risk of default, the borrower has a strong capacity to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower to fulfill its contractual cash flow obligations.

Loans and Allowances

Securities Borrowed or Purchased Under Resale Agreements

Securities borrowed or purchased under resale agreements represent the amounts we will receive as a result of our commitment to return or resell securities that we have borrowed or purchased, back to the original lender or seller, on a specified date at a specified price. We account for these instruments as if they were loans.

Lending Fees

Lending fees arise in Personal and Commercial Banking and Capital Markets. The accounting treatment for lending fees varies depending on the transaction. Some loan origination, restructuring and renegotiation fees are recorded as interest income over the term of the loan, while other lending fees are taken into income at the time of loan origination. Commitment fees are calculated as a percentage of the facility balance at the end

of the period. The fees are recorded as interest income over the term of the loan, unless we believe the loan commitment will not be used. In the latter case, commitment fees are recorded as lending fees earned over the commitment period. Loan syndication fees are payable and included in lending fees at the time the syndication is completed, unless the yield on any loans we retain is less than that of other comparable lenders involved in the financing. In the latter case, an appropriate portion of the syndication fee is recorded as interest income over the term of the loan.

Impaired Loans

We classify a loan as impaired when one or more loss events have occurred, such as bankruptcy, default or delinquency. Generally, consumer loans in both Canada and the U.S. are classified as impaired when payment is contractually 90 days past due, or one year past due for residential mortgages if guaranteed by the Government of Canada. Credit card loans are immediately written off when principal or interest payments are 180 days past due, and are not reported as impaired. In Canada, consumer instalment loans, other personal loans and some small business loans are normally written off when they are one year past due. In the U.S., all consumer loans are generally written off when they are 180 days past due, except for non-real estate term loans, which are generally written off when they are 120 days past due. For the purpose of measuring the amount to be written off, the determination of the recoverable amount includes an estimate of future recoveries.

Corporate and commercial loans are classified as impaired when we determine there is no longer reasonable assurance that principal or interest will be collected in their entirety on a timely basis. Generally, we consider corporate and commercial loans to be impaired when payments are 90 days past due. Corporate and commercial loans are written off following a review on an individual loan basis that confirms all recovery attempts have been exhausted.

A loan will be reclassified to performing status when we determine that there is reasonable assurance of full and timely repayment of interest and principal in accordance with the terms and conditions of the loan, and that none of the criteria for classification of the loan as impaired continue to apply.

Loans are in default when the borrower is unlikely to pay its credit obligations in full without recourse by the bank, such as realizing security, or when the borrower’s payments are past due more than 90 days (180 days for credit card loans). Overdrafts are considered to be past due once the customer has breached an advised limit or been advised of a limit smaller than currently outstanding or, in the case of retail overdrafts, has not brought the overdraft down to a $nil balance within a specified time period.

Our average gross impaired loans were $2,115 million for the year ended October 31, 2018 ($2,248 million in 2017). Our average impaired loans, net of the specific allowance, were $1,706 million for the year ended October 31, 2018 ($1,838 million in 2017).

Once a loan is identified as impaired, we continue to recognize interest income based on the original effective interest rate on the loan amount net of its related allowance. In the periods following the recognition of impairment, adjustments to the allowance for these loans reflecting the time value of money are recognized and presented as interest income. Interest income on impaired loans of $67 million was recognized for the year ended October 31, 2018 ($75 million in 2017 and $74 million in 2016).

During the year ended October 31, 2018, we recorded a net gain of $4 million before tax ($28 million in 2017 and $5 million in 2016) on the sale of impaired and written-off loans.

Allowance for Credit Losses (“ACL”)

The allowance for credit losses recorded in our Consolidated Balance Sheet is maintained at a level that we consider adequate to absorb credit-related losses on our loans and other credit instruments. The allowance for credit losses amounted to $1,870 million as at October 31, 2018, of which $1,639 million was recorded in loans and $231 million was recorded in other liabilities in our Consolidated Balance Sheet.

Allowance on Performing Loans

We maintain an allowance in order to cover impairment in the existing portfolio for loans that have not yet been individually identified as impaired. Our approach to establishing and maintaining the allowance on performing loans is based on the requirements of IFRS, considering guidelines issued by OSFI.

Under the IFRS 9 ECL methodology, an allowance is recorded for expected credit losses on financial assets regardless of whether there has been an actual impairment. We recognize a loss allowance at an amount equal to 12 month expected credit losses, if the credit risk at the reporting date has not increased significantly since initial recognition (Stage 1). We will record expected credit losses over the remaining life of performing financial assets which are considered to have experienced a significant increase in credit risk (Stage 2).

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The main factors considered in making this determination are relative changes in probability-weighted probability of default since origination and certain other criteria, such as 30-day past due and watchlist status.

For each exposure, ECL is a function of the probability of default (“PD”), exposure at default (“EAD”) and loss given default (“LGD”), with the timing of the loss also considered, and is estimated by incorporating forward-looking economic information and through the use of experienced credit judgment to reflect factors not captured in ECL models.

PD represents the likelihood that a loan will not be repaid and will go into default in either a 12 month horizon for Stage 1 or a lifetime horizon for Stage 2. The PD for each individual instrument is modelled based on historical data and is estimated based on current market conditions and reasonable and supportable information about future economic conditions.

EAD is modelled on historical data and represents an estimate of the outstanding amount of credit exposure at the time a default may occur. For off-balance sheet and undrawn amounts, EAD includes an estimate of any further amounts to be drawn at the time of default.

LGD is the amount that may not be recovered in the event of default and is modelled based on historical data and reasonable and supportable information about future economic conditions, where appropriate. LGD takes into consideration the amount and quality of any collateral held.

We consider past events, current market conditions and reasonable forward-looking supportable information about future economic conditions in calculating the amount of expected losses. In assessing information about possible future economic conditions, we utilize multiple economic scenarios including our base case, which represents, in our view, the most probable outcome, as well as benign and adverse forecasts, all of which are developed by our Economics group. Key economic variables used in the determination of the allowance for credit losses reflect the geographic diversity of our portfolios, where appropriate.

In considering the lifetime of a loan, the contractual period of the loan, including prepayment, extension and other options, is generally used. For revolving instruments, such as credit cards, which may not have a defined contractual period, the lifetime is based on historical behaviour.

Our ECL methodology also requires the use of experienced credit judgment to incorporate the estimated impact of factors that are not captured in the modelled ECL results.

Allowance on Impaired Loans

We maintain an allowance on individually identified impaired loans (Stage 3) of $370 million on our gross impaired loans of $1,936 million, to reduce their carrying value to an expected recoverable amount of $1,566 million as at October 31, 2018 ($1,827 million as at October 31, 2017). We review our loans on an ongoing basis to assess whether any loans should be classified as impaired and whether an allowance or write-off should be recorded (excluding credit card loans, which are classified as impaired and written off when principal or interest payments are 180 days past due). The review of individually significant problem loans is conducted at least quarterly by the account managers, each of whom assesses the ultimate collectability and estimated recoveries for a specific loan based on all events and conditions that are relevant to the loan. This assessment is then reviewed and approved by an independent credit officer.

Individually Significant Impaired Loans

To determine the amount we expect to recover from an individually significant impaired loan, we use the value of the estimated future cash flows discounted at the loan’s original effective interest rate. The determination of estimated future cash flows of a collateralized impaired loan reflects the expected realization of the underlying security, net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real estate properties, accounts receivable, guarantees, inventory or other capital assets.

Individually Insignificant Impaired Loans

Residential mortgages, consumer instalment and other personal loans are individually insignificant and may be individually assessed or collectively assessed for losses at the time of impairment, taking into account historical loss experience and expectations of future economic conditions.

Collectively assessed loans are grouped together by similar risk characteristics, such as type of instrument, geographic location, industry, type of collateral and term to maturity.

Loan Securitization

Loan Securitization

We sell Canadian mortgage loans to third-party Canadian securitization programs, including the Canada Mortgage Bond program, directly to third-party investors under the National Housing Act Mortgage-Backed Securities program and under our own program. We assess whether substantially all of the risks and rewards of the loans have been transferred to determine if they qualify for derecognition.

Under these programs, we are entitled to the payment over time of the excess of the sum of interest and fees collected from customers, in connection with the loans that were sold, over the yield paid to investors, less credit losses and other costs. Since we continue to be exposed to substantially all of the prepayment, interest rate and credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financing in our Consolidated Balance Sheet. The interest and fees collected, net of the yield paid to investors, is recorded in net interest income using the effective interest method over the term of the securitization. Credit losses associated with the loans are recorded in the provision for credit losses. During the year ended October 31, 2018, we sold $8,062 million of mortgage loans to these programs ($8,707 million in 2017).

Securities lent or sold under repurchase agreements

Securities lent or sold under repurchase agreements represent short-term funding transactions in which we sell securities that we own and simultaneously commit to repurchase the same securities at a specified price on a specified date in the future. We retain substantially all of the risks and rewards associated with the securities and we continue to recognize them in our Consolidated Balance Sheet, with the obligation to repurchase these securities recorded as secured borrowing transactions at the amount owing. The interest expense related to these liabilities is recorded on an accrual basis. Additional information on securities lent or sold under repurchase agreements is provided in Note 14.

Structured Entities

We enter into certain transactions in the ordinary course of business which involve the establishment of structured entities (“SEs”) to facilitate or secure customer transactions and to obtain alternate sources of funding. We are required to consolidate an SE if we control the entity. We control an SE when we have power over the SE, exposure to variable returns as a result of our involvement, and the ability to exercise power to affect the amount of our returns.

In assessing whether we control an SE, we consider the entire arrangement to determine the purpose and design of the SE, the nature of any rights held through contractual arrangements and whether we are acting as a principal or agent.

We perform a reassessment of consolidation if facts and circumstances indicate that there have been changes to one or more of the elements of control over the SE. See Note 1 for more information on our basis of consolidation.

Derivative instruments

Derivative instruments are financial contracts that derive their value from underlying changes in interest rates, foreign exchange rates or other financial or commodity prices or indices.

Derivative instruments are either regulated exchange-traded contracts or negotiated over-the-counter contracts. We use these instruments for trading purposes, as well as to manage our exposures, mainly to foreign currency and interest rate fluctuations, as part of our asset/liability management program.

Types of Derivatives

Swaps

Swaps are contractual agreements between two parties to exchange a series of cash flows. The various swap agreements that we enter into are as follows:

Interest rate swaps – counterparties generally exchange fixed and floating rate interest payments based on a notional value in a single currency.

Cross-currency swaps – fixed rate interest payments and principal amounts are exchanged in different currencies.

Cross-currency interest rate swaps – fixed and/or floating rate interest payments and principal amounts are exchanged in different currencies.

Commodity swaps – counterparties generally exchange fixed and floating rate payments based on a notional value of a single commodity.

Equity swaps – counterparties exchange the return on an equity security or a group of equity securities for the return based on a fixed or floating interest rate or the return on another equity security or group of equity securities.

Credit default swaps – one counterparty pays the other a fee in exchange for that other counterparty agreeing to make a payment if a credit event occurs, such as bankruptcy or failure to pay.

Total return swaps – one counterparty agrees to pay or receive from the other cash amounts based on changes in the value of a reference asset or group of assets, including any returns such as interest earned on these assets, in exchange for amounts that are based on prevailing market funding rates.

Forwards and Futures

Forwards and futures are contractual agreements to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a specified price and date in the future.

Forwards are customized contracts transacted in the over-the-counter market. Futures are transacted in standardized amounts on regulated exchanges and are subject to daily cash margining.

Options

Options are contractual agreements that convey to the purchaser the right but not the obligation to either buy or sell a specified amount of a currency, commodity, interest-rate-sensitive financial instrument or security at a fixed future date or at any time within a fixed future period.

For options written by us, we receive a premium from the purchaser for accepting market risk.

For options purchased by us, we pay a premium for the right to exercise the option. Since we have no obligation to exercise the option, our primary exposure to risk is the potential credit risk if the writer of an over-the-counter contract fails to meet the terms of the contract.

Caps, collars and floors are specialized types of written and purchased options. They are contractual agreements in which the writer agrees to pay the purchaser, based on a specified notional amount, the difference between the market rate and the prescribed rate of the cap, collar or floor. The writer receives a premium for selling this instrument.

A swaption is an option granting its owner the right but not the obligation to enter into an underlying swap.

A future option is an option contract in which the underlying instrument is a single futures contract.

The main risks associated with these derivative instruments are related to exposure to movements in interest rates, foreign exchange rates, credit quality, value of the underlying financial instrument or commodity, as applicable, and the possible inability of counterparties to meet the terms of the contracts.

Embedded Derivatives

From time to time, we purchase or issue financial instruments containing embedded derivatives. The embedded derivative in financial liabilities is separated from the host contract and carried at fair value if the economic characteristics of the derivative are not closely related to those of the host contract, the terms of the embedded derivative are the same as those of a stand-alone derivative, and the combined contract is not measured at fair

value. To the extent that we cannot reliably identify and measure the embedded derivative, the entire contract is carried at fair value, with changes in fair value reflected in income. Embedded derivatives in certain of our equity linked notes are accounted for separately from the host instrument.

Contingent Features

Certain over-the-counter derivative instruments contain provisions that link the amount of collateral we are required to post or pay to our credit ratings (as determined by the major credit rating agencies). If our credit ratings were to be downgraded, certain counterparties to these derivative instruments could demand immediate and ongoing collateralization on derivative liability positions or request immediate payment. The aggregate fair value of all derivative instruments with collateral posting requirements that were in a liability position on October 31, 2018 was $2,860 million ($3,866 million in 2017), for which we have posted collateral of $2,963 million ($4,223 million in 2017).

Risks Hedged

Interest Rate Risk

We manage interest rate risk through interest rate futures, interest rate swaps and options, which are linked to and adjust the interest rate sensitivity of a specific asset, liability, forecasted transaction or firm commitment, or a specific pool of transactions with similar risk characteristics.

Foreign Currency Risk

We manage foreign currency risk through currency futures, foreign currency options, cross-currency swaps, foreign exchange spot transactions, forward contracts and deposits denominated in foreign currencies.

Equity Price Risk

We manage equity price risk through total return swaps.

Trading Derivatives

Trading derivatives include derivatives entered into with customers to accommodate their risk management needs, market-making to facilitate customer-driven demand for derivatives, derivatives transacted on a limited basis to generate trading income from our principal trading positions and certain derivatives that are executed as part of our risk management strategy that do not qualify as hedges for accounting purposes (“economic hedges”).

We structure and market derivative products to enable customers to transfer, modify or reduce current or expected risks.

Principal trading activities include market-making and positioning activities. Market-making involves quoting bid and offer prices to other market participants with the intention of generating revenues based on spread and volume. Positioning activities involve managing market risk positions with the expectation of profiting from favourable movements in prices, rates or indices.

Trading derivatives are recorded at fair value. Realized and unrealized gains and losses are recorded in trading revenues in our Consolidated Statement of Income. Unrealized gains on trading derivatives are recorded as derivative instrument assets and unrealized losses are recorded as derivative instrument liabilities in our Consolidated Balance Sheet.

We may also economically hedge a portion of our U.S. dollar earnings through forward foreign exchange contracts and/or options to minimize fluctuations in our consolidated net income due to the translation of our U.S. dollar earnings. These contracts are recorded at fair value, with changes in fair value recorded in non-interest revenue, trading revenues, in our Consolidated Statement of Income.

Fair Value of Trading and Hedging Derivatives

Fair value represents point-in-time estimates that may change in subsequent reporting periods due to market conditions or other factors. A discussion of the fair value measurement of derivatives is included in Note 17.

Premises and equipment

We record all premises and equipment at cost less accumulated amortization, and less any accumulated impairment, except land, which is recorded at cost. Buildings, computer equipment and operating system software, other equipment and leasehold improvements are amortized on a straight-line basis over their estimated useful lives. When the major components of a building have different useful lives, they are accounted for separately and amortized over each component’s estimated useful life.

The maximum estimated useful lives we use to amortize our assets are as follows:

Buildings	10 to 40 years
Computer equipment and operating system software	5 years
Other equipment	10 years
Leasehold improvements	Lease term to a maximum of 10 years

Amortization methods, useful lives and the residual values of premises and equipment are reviewed annually for any change in circumstances and are adjusted if appropriate. At each reporting period, we review whether there are any indications that premises and equipment need to be tested for impairment. If there is an indication that an asset may be impaired, we test for impairment by comparing the asset’s carrying value to its recoverable amount. The recoverable amount is calculated as the higher of the value in use and the fair value less costs to sell. Value in use is the present value of the future cash flows expected to be derived from the asset. An impairment charge is recorded when the recoverable amount is less than the carrying value. There were no significant write-downs of premises and equipment due to impairment during the years ended October 31, 2018 and 2017. Gains and losses on disposal are included in non-interest expense, premises and equipment, in our Consolidated Statement of Income.

Acquisitions

The cost of an acquisition is measured at the fair value of the consideration transferred, including contingent consideration. Acquisition-related costs are recognized as an expense in the period in which they are incurred. The identifiable assets acquired and liabilities assumed and contingent consideration are measured at their fair values at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred over the net of the fair value of identifiable assets acquired and liabilities assumed. The results of operations of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition.

Goodwill

Goodwill

When we complete an acquisition, we allocate the purchase price paid to the assets acquired, including identifiable intangible assets, and the liabilities assumed. Any portion of the consideration transferred that is in excess of the fair value of those net assets is considered to be goodwill. Goodwill is not amortized and is instead tested for impairment annually.

In performing the impairment test, we utilize the fair value less costs to sell for each group of CGUs based on discounted cash flow projections. Cash flows were projected for the first 10 years based on actual operating results, expected future business performance and past experience. Beyond 10 years, cash flows were assumed to grow at perpetual annual rates of up to 2% (3% in 2017). The discount rates we applied in determining the recoverable amounts in 2018 ranged from 8.6% to 11.4% (8.3% to 12.2% in 2017), and were based on our estimate of the cost of capital for each CGU. The cost of capital for each CGU was estimated using the Capital Asset Pricing Model, based on the historical betas of publicly traded peer companies that are comparable to the CGU.

There were no write-downs of goodwill due to impairment during the years ended October 31, 2018 and 2017.

The key assumptions described above may change as market and economic conditions change. However, we estimate that reasonably possible changes in these assumptions are not expected to cause recoverable amounts of our CGUs to decline below their carrying amounts.

Intangible Assets

Intangible Assets

Intangible assets related to our acquisitions are initially recorded at their fair value at the acquisition date and subsequently at cost less accumulated amortization. Software is recorded at cost less accumulated amortization. Amortization expense is recorded in amortization of intangible assets in our Consolidated Statement of Income.

Customers' Liability under Acceptances

Acceptances represent a form of negotiable short-term debt that is issued by our customers, which we guarantee for a fee. The fees earned are recorded in lending fees in our Consolidated Statement of Income over the term of the acceptance. The amount potentially due under the acceptances is recorded in other liabilities on our Consolidated Balance Sheet. We record the bank’s equivalent claim against our customers in the event of a call on these commitments in other assets on our Consolidated Balance Sheet.

Securities Lending and Borrowing

Securities Lending and Borrowing

Securities lending and borrowing transactions are generally collateralized by securities or cash. Cash advanced or received as collateral is recorded in other assets or other liabilities, respectively. Interest earned on cash collateral is recorded in interest, dividend and fee income in our Consolidated Statement of Income, and interest expense on cash collateral is recorded in interest expense, other liabilities, in our Consolidated Statement of Income. The transfer of the securities to counterparties is only reflected in our Consolidated Balance Sheet if the risks and rewards of ownership have also been transferred. Securities borrowed are not recognized in our Consolidated Balance Sheet unless they are then sold to third parties, in which case the obligation to return the securities is recorded in Securities sold but not yet purchased at fair value, with any gains or losses recorded in non-interest revenue, trading revenues.

Securities Sold but not yet Purchased

Securities Sold but not yet Purchased

Securities sold but not yet purchased represent our obligations to deliver securities that we did not own at the time of sale. These obligations are recorded at their fair value. Adjustments to the fair value as at the balance sheet date and gains and losses on the settlement of these obligations are recorded in trading revenues in our Consolidated Statement of Income.

Subordinated debt

Subordinated debt represents our direct unsecured obligations to our debt holders, in the form of notes and debentures and forms part of our regulatory capital. Subordinated debt is recorded at amortized cost using the effective interest rate method. Where appropriate, we enter into fair value hedges to hedge the risks caused by changes in interest rates (see Note 8). The rights of the holders of our notes and debentures are subordinate to the claims of depositors and certain other creditors. We require approval from OSFI before we can redeem any part of our subordinated debt.

Authorized Share Capital

Authorized Share Capital

We classify financial instruments that we issue as financial liabilities, equity instruments or compound instruments. Financial instruments that will be settled by a variable number of our common shares upon conversion by the holders are classified as liabilities on our Consolidated Balance Sheet. Dividends and interest payments on financial liabilities are classified as interest expense in our Consolidated Statement of Income. Financial instruments are classified as equity instruments when there is no contractual obligation to transfer cash or other financial assets. Further, issued instruments that are not mandatorily redeemable, or that are not convertible into a variable number of our common shares at the holder’s option, are classified as equity and presented in share capital. Dividend payments on equity instruments are recognized as a reduction in equity.

Common Shares

We are authorized by our shareholders to issue an unlimited number of our common shares, without par value, for unlimited consideration. Our common shares are not redeemable or convertible. Dividends are declared by our Board of Directors at their discretion. Historically, the Board of Directors has declared dividends on a quarterly basis and the amount can vary from quarter to quarter.

Preferred Shares

We are authorized by our shareholders to issue an unlimited number of Class A Preferred Shares and Class B Preferred Shares, without par value, in series, for unlimited consideration. Class B Preferred Shares may be issued in a foreign currency.

Treasury Shares

When we purchase our common shares as part of our trading business, we record the cost of those shares as a reduction in shareholders’ equity. If those shares are resold at a price higher than their cost, the premium is recorded as an increase in contributed surplus. If those shares are resold at a price below their cost, the discount is recorded as a reduction first to contributed surplus and then to retained earnings for any amount in excess of total contributed surplus related to treasury shares.

Fair Value of Financial Instruments and Trading-Related Revenue

We record trading assets and liabilities, derivatives, certain equity and debt securities and securities sold but not yet purchased at fair value, and other non-trading assets and liabilities at amortized cost less allowances or write-downs for impairment. The fair values presented in this note are based upon the amounts estimated for individual assets and liabilities and do not include an estimate of the fair value of any of the legal entities or underlying operations that comprise our business. For certain portfolios of financial instruments where we manage exposures to similar and offsetting risks, fair value is determined on the basis of our net exposure to that risk.

Fair value represents the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants at the measurement date. The fair value amounts disclosed represent point-in-time estimates that may change in subsequent reporting periods due to changes in market conditions or other factors. Some financial instruments are not typically exchangeable or exchanged and therefore it is difficult to determine their fair value. Where there is no quoted market price, we determine fair value using management’s best estimates based on a range of valuation techniques and assumptions; since these involve uncertainties, the fair values may not be realized in an actual sale or immediate settlement of the asset or liability.

Governance Over the Determination of Fair Value

Senior executive oversight of our valuation processes is provided through various valuation and risk committees. In order to ensure that all financial instruments carried at fair value are reasonably measured for risk management and financial reporting purposes, we have established governance structures and controls, such as model validation and approval, independent price verification (“IPV”) and profit or loss attribution analysis (“PAA”), consistent with industry practice. These controls are applied independently of the relevant operating groups.

We establish and regularly update valuation methodologies for each financial instrument that is required to be measured at fair value. The application of valuation models for products or portfolios is subject to independent approval to ensure only validated models are used. The impact of known limitations of models and data inputs is also monitored on an ongoing basis. IPV is a process that regularly and independently verifies the accuracy and appropriateness of market prices or model inputs used in the valuation of financial instruments. This process assesses fair values using a variety of different approaches to verify and validate the valuations. PAA is a daily process used by management to identify and explain changes in fair value positions across all operating lines of business within BMO Capital Markets. This process works in concert with other processes to ensure that the fair values being reported are reasonable and appropriate.

Securities

For traded securities, quoted market value is considered to be fair value. Quoted market value is based on bid or ask prices, depending on which is the most appropriate to measure fair value. Securities for which no active market exists are valued using all reasonably available market information. Our fair value methodologies are described below.

Government Securities

The fair value of government issued or guaranteed debt securities in active markets is determined by reference to recent transaction prices, broker quotes or third-party vendor prices. The fair value of securities that are not traded in an active market is modelled using implied yields derived from the prices of similar actively traded government securities and observable spreads. Market inputs to the model include coupon, maturity and duration.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

The fair value of mortgage-backed securities and collateralized mortgage obligations is determined using independent prices obtained from third-party vendor prices, broker quotes and relevant market indices, as applicable. If such prices are not available, fair value is determined using cash flow models that make maximum use of observable market inputs or benchmark prices for similar instruments. Valuation assumptions for mortgage-backed securities and collateralized mortgage obligations include discount rates, expected prepayments, credit spreads and recoveries.

Corporate Debt Securities

The fair value of corporate debt securities is determined using prices observed in the most recent transactions. When observable price quotations are not available, fair value is determined based on discounted cash flow models using discounting curves and spreads obtained from independent dealers, brokers and multi-contributor pricing sources.

Corporate Equity Securities

The fair value of equity securities is based on quoted prices in active markets, where available. Where quoted prices in active markets are not readily available, fair value is determined using either quoted market prices for similar securities or using valuation techniques, which include discounted cash flow analysis and earnings multiples.

Privately Issued Securities

Privately issued debt and equity securities are valued using prices observed in recent market transactions, where available. Otherwise, fair value is derived from valuation models using a market or income approach. These models consider various factors, including projected cash flows, earnings, revenue and 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.

Prices from brokers and multi-contributor pricing sources are corroborated as part of our independent review process, which may include using valuation techniques or obtaining consensus or composite prices from other pricing services. We validate the estimates of fair value by independently obtaining multiple quotes for external market prices and input values. We review the approach taken by third-party vendors to ensure that the vendor employs a valuation model which maximizes the use of observable inputs such as benchmark yields, bid-ask spreads, underlying collateral, weighted-average terms to maturity and prepayment rate assumptions. Fair value estimates from internal valuation techniques are verified, where possible, by reference to prices obtained from third-party vendors.

Loans

In determining the fair value of our fixed rate performing loans, we discount the remaining contractual cash flows, adjusted for estimated prepayment, at market interest rates currently offered for loans with similar terms and risks. For floating rate performing loans, changes in interest rates have minimal impact on fair value since interest rates are repriced or reset frequently. On that basis, fair value is assumed to be equal to carrying value.

Derivative Instruments

A number of valuation techniques are employed to estimate fair value, including discounted cash flow analysis, the Black-Scholes model, Monte Carlo simulation and other accepted market models. These independently validated models incorporate current market data for interest rates, currency exchange rates, equity and commodity prices and indices, credit spreads, recovery rates, corresponding market volatility levels, spot prices, correlation levels and other market-based pricing factors. Option implied volatilities, an input into many valuation models, are either obtained directly from market sources or calculated from market prices. Multi-contributor pricing sources are used wherever possible.

In determining the fair value of complex and customized derivatives, we consider all reasonably available information, including dealer and broker quotations, multi-contributor pricing sources and any relevant observable market inputs. Our 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 volatilities.

We calculate a credit valuation adjustment (“CVA”) to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. The CVA is derived from market-observed credit spreads or proxy credit spreads and our assessment of the net counterparty credit risk exposure, taking into account credit mitigants such as collateral, master netting agreements and novation to central counterparties. We also calculate a funding valuation adjustment (“FVA”) to recognize the implicit funding costs associated with over-the-counter derivative positions. The FVA is determined by reference to market funding spreads.

Deposits

In determining the fair value of our deposits, we incorporate the following assumptions:

• For fixed rate, fixed maturity deposits, we discount the remaining contractual cash flows for these deposits, adjusted for expected redemptions, at market interest rates currently offered for deposits with similar terms and risks. Fair value of our senior note liabilities and covered bonds is determined by referring to current market prices for similar instruments or using valuation techniques, such as discounted cash flows that use market interest rate curves and funding spreads.

• For fixed rate deposits with no defined maturities, we consider fair value to equal carrying value, based on carrying value being equivalent to the amount payable on the reporting date.

• For floating rate deposits, changes in interest rates have minimal impact on fair value since deposits reprice to market frequently. On that basis, fair value is assumed to equal carrying value.

A portion of our structured note liabilities that have coupons or repayment terms linked to the performance of interest rates, foreign currencies, commodities or equity securities have been designated at fair value through profit or loss. The fair value of these structured notes is estimated using internally validated valuation models and incorporates observable market prices for identical or comparable securities, as well as other inputs, such as interest rate yield curves, option volatilities and foreign exchange rates, where appropriate. Where observable prices or inputs are not available, management judgment is required to determine the fair value by assessing other relevant sources of information, such as historical data and proxy information from similar transactions.

Securities Sold But Not Yet Purchased

The fair value of these obligations is based on the fair value of the underlying securities, which can be equity or debt securities. As these obligations are fully collateralized, the method used to determine fair value would be the same as that used for the relevant underlying equity or debt securities.

Securitization and Structured Entities’ Liabilities

The determination of the fair value of securitization and structured entities’ liabilities is based on quoted market prices or quoted market prices for similar financial instruments, where available. Where quoted prices are not available, fair value is determined using valuation techniques, such as discounted cash flow models that maximize the use of observable inputs.

Subordinated Debt

The fair value of our subordinated debt is determined by referring to current market prices for the same or similar instruments.

Financial Instruments with a Carrying Value Approximating Fair Value

Short-term and Other Financial Instruments

Carrying value is assumed to be a reasonable estimate of fair value for our cash and cash equivalents.

The carrying value of certain financial assets and liabilities, such as interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities, is a reasonable estimate of fair value due to their short-term nature or because they are frequently repriced to current market rates.

Certain assets, including premises and equipment, goodwill and intangible assets, as well as shareholders’ equity, are not considered financial instruments and therefore no fair value has been determined for these items.

Offsetting of Financial Assets and Financial Liabilities

Financial assets and financial liabilities are offset and the net amount is reported in our Consolidated Balance Sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. The following table presents the amounts that have been offset in our Consolidated Balance Sheet, including securities purchased under resale agreements, securities sold under repurchase agreements and derivative instruments, generally under a market settlement mechanism (e.g. an exchange or clearing house) where simultaneous net settlement can be achieved to eliminate credit and liquidity risk between counterparties. Also presented are amounts not offset in the Consolidated Balance Sheet related to transactions where a master netting agreement or similar arrangement is in place with a right to offset the amounts only in the event of default, insolvency or bankruptcy, or where the offset criteria are otherwise not met.

Stock Option Plan

Stock Option Plan

We maintain a Stock Option Plan for designated officers and employees. Options are granted at an exercise price equal to the closing price of our common shares on the day before the grant date. Stock options granted on or after December 2013 vest in equal tranches of 50% on the third and fourth anniversaries of their grant date. Options granted prior to December 2013 vest in tranches over a four-year period starting from their grant date. Each tranche is treated as a separate award with a different vesting period. Certain options can only be exercised once certain performance targets are met. All options expire 10 years from their grant date.

We determine the fair value of stock options on their grant date and record this amount as compensation expense over the period that the stock options vest, with a corresponding increase to contributed surplus. When these stock options are exercised, we issue shares and record the amount of proceeds, together with the amount recorded in contributed surplus, in share capital. The estimated grant date fair value of stock options granted to employees who are eligible to retire is expensed at the date of grant.

Pension and Other Employee Future Benefit Plans

Pension and Other Employee Future Benefit Plans

We sponsor a number of arrangements globally, that provide pension and other employee future benefits to our retired and current employees. The largest of these arrangements, by defined benefit obligation, are the primary defined benefit pension plans for employees in Canada and the United States and the primary other employee future benefit plan for employees in Canada.

Pension arrangements include defined benefit pension plans, as well as supplementary arrangements that provide pension benefits in excess of statutory limits. Generally, under these plans we provide retirement benefits based on an employee’s years of service and average annual earnings over a period of time prior to retirement. Our pension and other employee future benefit expenses, recorded in employee compensation expense, mainly comprise the current service cost plus or minus the interest on net defined benefit assets or liabilities. In addition, we provide defined contribution pension plans to employees in some of our subsidiaries. The costs of these plans, recorded in employee compensation expense, are equal to our contributions to the plans.

The defined benefit pension plans for our employees in the United States were closed to new members on April 1, 2016 and closed to future accruals on March 1, 2017. A defined contribution pension plan was made available for employees affected by the closure. As a result of the closure of these plans, we recorded a curtailment gain of $52 million in non-interest expense, employee compensation, in our Consolidated Statement of Income in 2016.

During the fourth quarter of 2018, we announced changes to our other employee future benefits plan for Canadian employees that will become mandatory for new retirees beginning January 1, 2021. Plan changes include an increase in the service requirement for eligibility and flexible benefits with employer premium caps. We recorded a $277 million benefit from the remeasurement of the benefit liability in non-interest expense, employee compensation, in our Consolidated Statement of Income.

We also provide other employee future benefits, including health and dental care benefits and life insurance, for eligible current and retired employees.

Short-term employee benefits, such as salaries, paid absences, bonuses and other benefits, are accounted for on an accrual basis over the period in which the employees provide the related services.

Investment Policy

The defined benefit pension plans are administered under a defined governance structure, with the oversight resting with the Board of Directors.

The plans are managed under a framework that considers both assets and liabilities in the development of an investment policy and in managing risk. Over the past several years, we have implemented a liability-driven investment strategy for the primary Canadian plan to enhance risk-adjusted returns while reducing the plan’s surplus volatility. This strategy has reduced the impact of the plan on our regulatory capital.

The plans invest in asset classes that include equities, fixed income and alternative strategies, under established investment guidelines. Plan assets are diversified across asset classes and by geographic exposure. They are managed by asset management firms that are responsible for the selection of investment securities. Derivative instruments are permitted under policy guidelines and are generally used to hedge foreign currency exposures, manage interest rate exposures or replicate the return of an asset.

Asset Allocations

The asset allocation ranges and weighted-average actual asset allocations of our primary pension plans, based on the fair market values at October 31, are as follows:

	Pension benefit plans
	Target range 2018		Actual 2018		Actual 2017
Equities		25% – 50%		37%		40%
Fixed income investments		25% – 55%		46%		46%
Other		10% – 40%		17%		14%

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis.

Risk Management

The defined benefit pension plans are exposed to various risks, including market risk (interest rate, equity and foreign currency risks), credit risk, operational risk, surplus risk and longevity risk. We follow a number of approaches to monitor and actively manage these risks, including:

• monitoring surplus-at-risk, which measures a plan’s risk in an asset-liability framework;

• stress testing and scenario analyses to evaluate the volatility of the plans’ financial positions and any potential impact on the bank;

• hedging of currency exposures and interest rate risk within policy limits;

• controls related to asset mix allocations, geographic allocations, portfolio duration, credit quality of debt securities, sector guidelines, issuer/counterparty limits and others; and

• ongoing monitoring of exposures, performance and risk levels.

Pension and Other Employee Future Benefit Liabilities

Our actuaries perform valuations of our defined benefit obligations for pension and other employee future benefits as at October 31 of each year using the projected unit credit method based on management’s assumptions about discount rates, rates of compensation increase, retirement age, mortality and health care cost trend rates.

The discount rates for the primary Canadian and U.S. pension and other employee future benefit plans were selected based on the yields of high-quality AA rated corporate bonds with terms matching the plans’ cash flows.

The fair value of plan assets is deducted from the defined benefit obligation to determine the net defined benefit asset or liability. For defined benefit pension plans that are in a net defined benefit asset position, 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”). Changes in the asset ceiling are recognized in other comprehensive income. Components of the change in our net defined benefit assets or liabilities and our pension and other employee future benefit expense are as follows:

Current service cost represents benefits earned in the current year. The cost is determined with reference to the current workforce and the amount of benefits to which employees will be entitled upon retirement, based on the provisions of our benefit plans.

Interest on net defined benefit asset or liability represents the increase in the net defined benefit asset or liability that results from the passage of time and is determined by applying the discount rate to the net defined benefit asset or liability.

Actuarial gains and losses may arise in two ways. First, each year our actuaries recalculate the defined benefit obligations and compare them to those estimated as at the previous year end. Any differences that result from changes in demographic and economic assumptions or from plan member experience being different from management’s expectations at the previous year end are considered actuarial gains or losses. Second, actuarial gains and losses arise when there are differences between the discount rate and actual returns on plan assets. Actuarial gains and losses are recognized immediately in other comprehensive income as they occur and are not subsequently reclassified to income in future periods.

Plan amendments are changes in our defined benefit obligations that result from changes to provisions of the plans. The effects of plan amendments are recognized immediately in income when a plan is amended.

Settlements occur when defined benefit obligations for plan participants are settled, usually through lump sum cash payments, and as a result we no longer have any obligation to provide such participants with benefit payments in the future.

Funding of Pension and Other Employee Future Benefit Plans

We fund our defined benefit pension plans in Canada and the United States in accordance with statutory requirements, and the assets in these plans are used to pay benefits to retirees and other employees. Some groups of employees are also eligible to make voluntary contributions in order to receive enhanced benefits. Our supplementary pension plan in Canada is funded, while in the United States the supplementary pension plan is unfunded.

Our other employee future benefit plans in Canada and the United States are either partially funded or unfunded. Benefit payments related to these plans are paid either through the respective plan or directly by us.

We measure the fair value of plan assets for our plans in Canada and the United States as at October 31. In addition to actuarial valuations for accounting purposes, we are required to prepare valuations for determining our minimum funding requirements for our pension arrangements in accordance with the relevant statutory framework (our “funding valuation”). An annual funding valuation is performed for our plans in Canada and the United States. The most recent funding valuation for our primary Canadian pension plan was performed as at October 31, 2018 and the most recent funding valuation for our primary U.S. pension plan was performed as at January 1, 2018. Benefit payments for fiscal 2019 are estimated to be $486 million.

Income Taxes

We report our provision for income taxes in our Consolidated Statement of Income based upon transactions recorded in our consolidated financial statements regardless of when they are recognized for income tax purposes, with the exception of repatriation of retained earnings from our subsidiaries, as noted below.

In addition, we record an income tax expense or benefit in other comprehensive income or directly in shareholders’ equity when the taxes relate to amounts recorded in other comprehensive income or shareholders’ equity. For example, income tax expense (recovery) on hedging gains (losses) related to our net investment in foreign operations is recorded in our Consolidated Statement of Comprehensive Income as part of unrealized gains (losses) on translation of net foreign operations.

Current tax is the amount of income tax recoverable (payable) in respect of the taxable loss (profit) for a period. Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities for accounting and tax purposes. Deferred income tax assets and liabilities are measured at the tax rates expected to apply when temporary differences reverse. Changes in deferred income tax assets and liabilities related to a change in tax rates are recorded in income in the period the tax rate is substantively enacted, except to the extent that the tax arises from a transaction or event which is recognized either in other comprehensive income or directly in shareholders’ equity. Current and deferred taxes are offset only when they are levied by the same taxing authority, levied on the same entity or group of entities and when there is a legal right to offset.

Included in deferred income tax assets is $42 million ($126 million in 2017) related to Canadian tax loss carryforwards that will expire in 2037, $962 million ($1,545 million in 2017) related to both U.S. tax loss carryforwards and tax credits that will expire in various amounts in U.S. taxation years from 2026 through 2038 and $17 million ($16 million in 2017) related to U.K. tax loss carryforwards that are available for use indefinitely against relevant profits generated in the U.K. On the evidence available, including management projections of income, we believe that it is probable there will be sufficient taxable income generated by our business operations to support these deferred tax assets. The amount of tax on temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognized in our Consolidated Balance Sheet as at October 31, 2018 is $132 million ($282 million in 2017), of which $8 million ($53 million in 2017) is scheduled to expire within five years. Deferred tax assets have not been recognized in respect of these items because it is not probable that realization of these assets will occur.

Income that we earn through our foreign subsidiaries is generally taxed in the foreign country in which they operate. Income that we earn through our foreign branches is also generally taxed in the foreign country in which they operate. Canada also taxes the income we earn through foreign branches and a credit is allowed for certain foreign taxes paid on such income. Repatriation of earnings from certain foreign subsidiaries would require us to pay tax on certain of these earnings. As repatriation of such earnings is not planned in the foreseeable future, we have not recorded a related deferred income tax liability. The taxable temporary differences associated with the repatration of earnings from investments in certain subsidiaries, branches, associates and interests in joint ventures for which deferred tax liabilities have not been recognized totalled $13 billion as at October 31, 2018 ($12 billion in 2017).

Earnings per share

Basic earnings per share is calculated by dividing net income attributable to our shareholders, after deducting preferred share dividends, by the daily average number of fully paid common shares outstanding throughout the year.

Diluted earnings per share is calculated in the same manner, with further adjustments made to reflect the dilutive impact of instruments convertible into our common shares.

Provisions and Contingent Liabilities

Provisions and Contingent Liabilities

Provisions are recognized when we have a legal or constructive obligation as a result of past events, such as contractual commitments, legal or other obligations where we can reliably estimate the obligation, and it is probable we will be required to settle the obligation. We recognize as a provision our best estimate of the amount required to settle the obligations as of the balance sheet date, taking into account the risks and uncertainties surrounding the obligations.

Operating Groups

Operating Groups

We conduct our business through three operating groups, each of which has a distinct mandate. We determine our operating groups based on our management structure and therefore these groups, and the results attributed to them, may not be comparable with those of other financial services companies. We evaluate the performance of our groups using reported and adjusted measures, such as net income, revenue growth, return on equity, and non-interest expense-to-revenue (productivity) ratio, as well as operating leverage.

Effective with the adoption of IFRS 9, we allocate the provision for credit losses on performing loans and the related allowance to operating groups. In 2017 and prior years, the collective provision and allowance were held in Corporate Services.

Personal and Commercial Banking

Personal and Commercial Banking (“P&C”) is comprised of two operating segments: Canadian Personal and Commercial Banking and U.S. Personal and Commercial Banking.

Canadian Personal and Commercial Banking

Canadian Personal and Commercial Banking (“Canadian P&C”) provides a full range of financial products and services to eight million customers. Personal Banking provides financial solutions for everyday banking, financing, investing, credit card and creditor insurance needs. Commercial Banking provides our small business and commercial banking customers with a broad suite of integrated commercial and capital markets products, as well as financial advisory services.

U.S. Personal and Commercial Banking

U.S. Personal and Commercial Banking (“U.S. P&C”) offers a broad range of products and services. Our retail and small and mid-sized business banking customers are served through our branches, contact centres, online and mobile banking platforms and automated banking machines across eight states. Our commercial banking customers are offered in-depth specific industry knowledge, as well as strategic capital markets solutions.

BMO Wealth Management

BMO’s group of wealth management businesses serves a full range of client segments from mainstream to ultra high net worth and institutional, with a broad offering of wealth management products and services, including insurance products. Wealth Management (“BMO WM”) is a global business with an active presence in markets across Canada, the United States, Europe and Asia.

BMO Capital Markets

BMO Capital Markets (“BMO CM”) is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. Through our Investment and Corporate Banking and Trading Products lines of business, we operate in 33 locations around the world, including 19 offices in North America.

Corporate Services

Corporate Services consists of Corporate Units and Technology and Operations (“T&O”). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, procurement, data and analytics, and innovation. T&O manages, maintains and provides governance of information technology, cyber security, and operations services for the bank.

The costs of these Corporate Units and T&O services are largely transferred to the three operating groups (P&C, BMO WM and BMO CM), with any remaining amounts retained in Corporate Services results. As such, Corporate Services results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, residual unallocated expenses and certain acquisition integration costs and restructuring costs.

Basis of Presentation

The results of these operating groups are based on our internal financial reporting systems. The accounting policies used in these segments are generally consistent with those followed in the preparation of our consolidated financial statements, as disclosed in Note 1 and throughout the consolidated financial statements. Income taxes presented below may not be reflective of taxes paid in each jurisdiction where we operate. Income taxes are generally applied to each segment based on a statutory tax rate and may be adjusted for items and activities specific to each segment. A notable accounting measurement difference is the taxable equivalent basis adjustment as described below.

Periodically, certain business lines and units within the business lines are transferred between client and corporate support groups to more closely align our organizational structure with our strategic priorities. In addition, revenue and expense allocations are updated to more accurately align with current experience. Results for prior periods are restated to conform with the current year’s presentation.

Taxable Equivalent Basis

We analyze revenue on a taxable equivalent basis (“teb”) at the operating group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the groups’ teb adjustments is reflected in Corporate Services revenue and provision for income taxes. The teb adjustment for the year ended October 31, 2018 was $313 million ($567 million in 2017 and $510 million in 2016).

Inter-Group Allocations

Various estimates and allocation methodologies are used in the preparation of the operating groups’ financial information. Overhead expenses are allocated to operating groups using allocation formulas applied on a consistent basis. Operating group net interest income reflects internal funding charges and credits on the groups’ assets, liabilities and capital, at market rates, taking into account relevant terms and currency considerations. The offset of the net impact of these charges and credits is reflected in Corporate Services. These inter-group allocations are also applied to the geographical segmentation.

Related Party Transactions

Related parties include subsidiaries, associates, joint ventures, employee future benefit plans and key management personnel and their close family members. Close family members include spouses, common-law partners and dependent minors. Transactions with our subsidiaries are eliminated on consolidation, and are not disclosed as related party transactions.

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IFRS 7 Disclosure (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Schedule of Total Non Trading Credit Risk Exposures

Total non-trading exposures at default by industry sector, as at October 31, 2018 and 2017, based on the Basel III classifications are as follows:

(Canadian $ in millions)	Drawn				Commitments (undrawn)				OTC derivatives				Other off-balance sheet items				Repo-style transactions				Total (1)
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Financial institutions		102,552		89,681		21,741		19,457		1,649		1,474		5,016		4,137		177,094		139,187		308,052		253,936
Governments		44,552		36,829		2,118		2,243		1		–		667		682		8,401		10,626		55,739		50,380
Manufacturing		22,580		19,737		13,490		12,258		10		9		1,396		1,360		–		–		37,476		33,364
Real estate		31,534		26,991		8,170		6,472		1		–		820		829		–		–		40,525		34,292
Retail trade		19,961		18,242		3,617		3,410		–		–		559		523		–		–		24,137		22,175
Service industries		39,067		34,723		12,666		11,207		1		1		2,389		2,831		–		–		54,123		48,762
Wholesale trade		14,659		11,440		4,531		4,675		2		1		436		481		–		–		19,628		16,597
Oil and gas		9,131		8,185		10,410		7,706		–		–		1,804		1,496		–		–		21,345		17,387
Individual		190,688		180,612		47,586		43,223		–		–		126		127		–		–		238,400		223,962
Others (2)		35,617		35,523		18,197		15,709		88		3		6,474		6,617		–		–		60,376		57,852
Total exposure at default		510,341		461,963		142,526		126,360		1,752		1,488		19,687		19,083		185,495		149,813		859,801		758,707

(1) Credit exposure excluding equity, securitization, trading book and other assets such as non-significant investments, goodwill, deferred tax asset and intangibles.

(2) Includes industries having a total exposure of less than 2%.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Loan Maturities and Interest Rate Sensitivity

The following table presents gross loans and acceptances by contractual maturity and by country of ultimate risk:

(Canadian $ in millions)	1 year or less				Over 1 year to 5 years				Over 5 years				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Canada
Consumer		54,375		55,568		109,991		106,023		4,199		4,349		168,565		165,940
Commercial and corporate (excluding real estate)		57,530		49,693		16,438		14,699		1,750		1,367		75,718		65,759
Commercial real estate		7,397		6,226		10,143		8,997		1,275		1,453		18,815		16,676
United States		33,688		33,382		71,928		61,394		25,955		20,947		131,571		115,723
Other countries		8,628		11,184		624		920		294		684		9,546		12,788
Total		161,618		156,053		209,124		192,033		33,473		28,800		404,215		376,886

Summary of Loan Maturities and Interest Rate Sensitivity

The following table presents net loans and acceptances by interest rate sensitivity:

(Canadian $ in millions)	2018		2017
Fixed rate		193,661		190,254
Floating rate		190,330		168,253
Non-interest sensitive (1)		18,585		16,546
Total		402,576		375,053

(1) Non-interest sensitive is comprised of customers’ liability under acceptances.

Summary Total Trading Value at Risk (VaR) Summary

As at or for the year ended October 31 (pre-tax Canadian $ equivalent in millions)	2018										2017
	Year-end			Average			High		Low		Year-end			Average			High		Low
Commodity VaR		0.7			0.9			13.6		0.3		0.9			0.9			1.7		0.4
Equity VaR		4.4			4.4			7.8		2.9		3.3			3.1			8.5		2.2
Foreign exchange VaR		0.5			0.6			2.2		0.1		0.3			0.8			3.1		0.1
Interest rate VaR		6.1			5.9			8.7		3.6		5.0			6.1			11.4		3.9
Credit VaR		7.4			2.6			7.4		1.5		1.9			2.3			4.1		1.5
Diversification		(8.3	)		(6.8	)		nm		nm		(5.9	)		(7.0	)		nm		nm
Total Trading VaR		10.8			7.6			17.5		4.7		5.5			6.2			10.0		4.3
Total Trading SVaR		56.3			26.8			56.3		16.6		24.6			20.5			34.6		13.4

(1) One-day measure using a 99% confidence interval. Benefits are presented in brackets and losses are presented as positive numbers.

(2) Stressed VaR is produced weekly and at month end.

nm – not meaningful

Structural Interest Rate Sensitivity

Structural Interest Rate Sensitivity (1)

	As at October 31, 2018						As at October 31, 2017
(Pre-tax Canadian $ equivalent in millions)	Economic value sensitivity			Earnings sensitivity over the next 12 months			Economic value sensitivity			Earnings sensitivity over the next 12 months
100 basis point increase		(1,079.2	)		136.5			(957.8	)		136.9
100 basis point decrease		626.5			(304.1	)		78.6			(433.4	)

(1) Losses are presented in brackets and benefits are presented as positive numbers.

Summary of Remaining Contractual Maturity

The tables below show the remaining contractual maturity of on-balance sheet assets and liabilities and off-balance sheet commitments. The contractual maturity of financial assets and liabilities is an input to, but is not necessarily consistent with, the expected maturity of assets and liabilities that is used in the management of liquidity and funding risk. We forecast asset and liability cash flows, both under normal market conditions and under a number of stress scenarios, to manage liquidity and funding risk. Stress scenarios include assumptions for loan repayments, deposit withdrawals, and credit commitment and liquidity facility drawdowns by counterparty and product type. Stress scenarios also consider the time horizon over which liquid assets can be monetized and the related haircuts and potential collateral requirements that may result from both market volatility and credit rating downgrades, among other assumptions.

																				2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		41,162		–		–		–		–		–		–		–		980			42,142
Interest bearing deposits with banks		4,964		1,717		1,037		457		112		18		–		–		–			8,305
Securities		4,522		4,283		5,049		7,749		4,943		11,854		32,480		56,004		54,051			180,935
Securities borrowed or purchased under resale agreements		67,804		12,732		2,490		1,781		191		53		–		–		–			85,051
Loans
Residential mortgages		1,782		1,848		4,343		6,306		4,769		24,522		64,636		11,414		–			119,620
Consumer instalment and other personal		607		440		1,026		1,143		943		5,414		19,910		9,812		23,930			63,225
Credit cards		–		–		–		–		–		–		–		–		8,329			8,329
Business and government		13,088		5,921		7,126		6,779		6,218		19,543		75,099		12,247		48,435			194,456
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,639	)		(1,639	)
Total loans and acceptances, net of allowance		15,477		8,209		12,495		14,228		11,930		49,479		159,645		33,473		79,055			383,991
Other Assets
Derivative instruments		2,040		3,385		1,645		1,012		807		3,407		6,074		7,834		–			26,204
Customers’ liability under acceptances		16,529		1,988		65		3		–		–		–		–		–			18,585
Other		1,740		506		189		26		6		17		20		4,824		21,507			28,835
Total other assets		20,309		5,879		1,899		1,041		813		3,424		6,094		12,658		21,507			73,624
Total Assets		154,238		32,820		22,970		25,256		17,989		64,828		198,219		102,135		155,593			774,048

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		16,966		6,032		1,200		227		106		–		–		–		3,376		27,907
Business and government		23,524		32,231		22,713		15,893		8,629		22,418		48,684		12,932		126,276		313,300
Individuals		2,582		6,455		7,953		7,619		10,536		11,736		16,327		2,582		115,054		180,844
Total deposits		43,072		44,718		31,866		23,739		19,271		34,154		65,011		15,514		244,706		522,051
Other liabilities
Derivative instruments		1,499		2,456		1,616		913		639		3,831		6,335		7,122		–		24,411
Acceptances		16,529		1,988		65		3		–		–		–		–		–		18,585
Securities sold but not yet purchased		28,804		–		–		–		–		–		–		–		–		28,804
Securities lent or sold under repurchase agreements		63,496		2,249		8		931		–		–		–		–		–		66,684
Current tax liabilities		–		–		–		–		–		–		–		–		50		50
Deferred tax liabilities		–		–		–		–		–		–		–		–		74		74
Securitization and structured entities’ liabilities		1,044		1,084		475		512		588		4,912		13,398		3,038		–		25,051
Other		8,548		5,568		44		34		184		789		4,455		1,905		14,302		35,829
Total other liabilities		119,920		13,345		2,208		2,393		1,411		9,532		24,188		12,065		14,426		199,488
Subordinated debt		–		–		–		–		–		–		–		6,782		–		6,782
Total Equity		–		–		–		–		–		–		–		–		45,727		45,727
Total Liabilities and Equity		162,992		58,063		34,074		26,132		20,682		43,686		89,199		34,361		304,859		774,048

(1) Deposits payable on demand and payable after notice have been included under no maturity.

																			2018
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,472		3,610		6,892		9,620		11,345		21,056		84,295		3,144		–		141,434
Backstop liquidity facilities		–		–		–		–		–		–		5,627		–		–		5,627
Operating leases		34		70		99		101		100		358		770		1,210		–		2,742
Securities lending		4,939		–		–		–		–		–		–		–		–		4,939
Purchase obligations		56		388		153		155		158		615		186		82		–		1,793

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

Material presented in a blue-tinted font above is an integral part of the 2018 annual consolidated financial statements (see page 78).

																				2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity			Total
On-Balance Sheet Financial Instruments
Assets
Cash and cash equivalents		31,641		–		–		–		–		–		–		–		958			32,599
Interest bearing deposits with banks		3,784		1,579		626		319		182		–		–		–		–			6,490
Securities		3,620		2,917		5,933		5,845		3,625		7,675		22,842		52,615		58,126			163,198
Securities borrowed or purchased under resale agreements		57,919		13,236		2,353		1,241		249		49		–		–		–			75,047
Loans
Residential mortgages		1,045		1,551		4,531		7,687		6,201		19,866		65,547		8,830		–			115,258
Consumer instalment and other personal		517		371		1,084		1,374		1,285		4,211		20,845		8,590		23,667			61,944
Credit cards		–		–		–		–		–		–		–		–		8,071			8,071
Business and government		13,379		7,352		6,454		6,169		5,059		17,948		63,614		11,380		43,712			175,067
Allowance for credit losses		–		–		–		–		–		–		–		–		(1,833	)		(1,833	)
Total loans and acceptances, net of allowance		14,941		9,274		12,069		15,230		12,545		42,025		150,006		28,800		73,617			358,507
Other Assets
Derivative instruments		1,701		3,748		1,580		1,229		1,306		3,272		7,426		8,689		–			28,951
Customers’ liability under acceptances		14,179		2,263		104		–		–		–		–		–		–			16,546
Other		1,340		475		129		17		11		11		131		4,431		21,697			28,242
Total other assets		17,220		6,486		1,813		1,246		1,317		3,283		7,557		13,120		21,697			73,739
Total Assets		129,125		33,492		22,794		23,881		17,918		53,032		180,405		94,535		154,398			709,580

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Liabilities and Equity
Deposits (1)
Banks		12,462		9,321		2,633		496		25		–		–		–		3,268		28,205
Business and government		23,917		25,224		19,112		12,897		10,806		16,522		42,707		15,712		116,379		283,276
Individuals		3,835		5,081		5,569		5,662		7,999		9,098		15,811		2,075		113,181		168,311
Total deposits		40,214		39,626		27,314		19,055		18,830		25,620		58,518		17,787		232,828		479,792
Other liabilities
Derivative instruments		1,876		3,227		1,512		1,510		1,206		3,477		6,885		8,111		–		27,804
Acceptances		14,179		2,263		104		–		–		–		–		–		–		16,546
Securities sold but not yet purchased		25,163		–		–		–		–		–		–		–		–		25,163
Securities lent or sold under repurchase agreements		53,165		1,644		290		20		–		–		–		–		–		55,119
Current tax liabilities		–		–		–		–		–		–		–		–		125		125
Deferred tax liabilities		–		–		–		–		–		–		–		–		233		233
Securitization and structured entities’ liabilities		10		709		1,523		556		845		3,931		11,812		3,668		–		23,054
Other		12,616		2,536		517		43		239		752		154		2,361		13,143		32,361
Total other liabilities		107,009		10,379		3,946		2,129		2,290		8,160		18,851		14,140		13,501		180,405
Subordinated debt		–		–		–		–		–		–		–		5,029		–		5,029
Total Equity		–		–		–		–		–		–		–		–		44,354		44,354
Total Liabilities and Equity		147,223		50,005		31,260		21,184		21,120		33,780		77,369		36,956		290,683		709,580

(1) Deposits payable on demand and payable after notice have been included under no maturity.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

																			2017
(Canadian $ in millions)	0 to 1 month		1 to 3 months		3 to 6 months		6 to 9 months		9 to 12 months		1 to 2 years		2 to 5 years		Over 5 years		No maturity		Total
Off-Balance Sheet Commitments
Commitments to extend credit (1)		1,377		2,302		4,755		8,312		14,560		21,985		71,481		2,283		–		127,055
Backstop liquidity facilities		–		–		–		–		–		–		5,044		–		–		5,044
Operating leases		31		62		91		89		87		329		712		1,032		–		2,433
Securities lending		5,336		–		–		–		–		–		–		–		–		5,336
Purchase obligations		42		83		128		124		129		519		577		157		–		1,759

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

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Cash and Interest Bearing Deposits with Banks (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Disclosure of Cash and Interest Bearing Deposits with Banks

(Canadian $ in millions)	2018		2017
Cash and deposits with banks (1)		40,738		30,002
Cheques and other items in transit, net		1,404		2,597
Total cash and cash equivalents		42,142		32,599

(1) Includes deposits with the Bank of Canada, the U.S. Federal Reserve and other central banks.

XML

Transition to IFRS 9 (Tables)

12 Months Ended

Oct. 31, 2018

Summary of Classification of Securities

Our securities are classified as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 as follows:

(Canadian $ in millions)	2018		2017
Trading		99,697		99,069
FVTPL (1)		11,611		na
FVOCI - Debt and Equity (2)		62,440		na
Available-for-sale		na		54,075
Amortized cost (3)		6,485		na
Held-to-maturity		na		9,094
Other		702		960
		180,935		163,198

(1) Comprised of $2,828 million mandatorily measured at fair value and $8,783 million designated at fair value.

(2) Includes allowances for credit losses on FVOCI debt securities of $2 million (na at October 31, 2017).

(3) Net of allowances for credit losses of $1 million (na at October 31, 2017).

na – not applicable due to IFRS 9 adoption.

Summary of Pre-transition IAS 39 and Corresponding IFRS 9 Classification and Measurement Categories, and Reconciles Carrying Amounts for Loans, Securities and Other Financial Assets

The following table shows the pre-transition IAS 39 and corresponding IFRS 9 classification and measurement categories, and reconciles the IAS 39 and IFRS 9 carrying amounts for loans, securities and other financial assets as at November 1, 2017 as a result of adopting IFRS 9. There were no changes to the measurement basis of other financial asset categories or any financial liabilities.

(Canadian $ in millions)	IAS 39 measurement category		IFRS 9 measurement category		IAS 39 carrying amount			Reclassification			Remeasurement			IFRS 9 carrying amount
Financial Assets
Securities
		Trading		Trading		99,069			(8,534	)		–			90,535
				FVTPL		–			8,534			–			8,534
		Available-for-sale		na		54,075			(54,075	)		–			–
				FVOCI		–			51,909			–			51,909
				FVTPL		–			2,081			–			2,081
				Amortized cost		–			85			–			85
		Held-to-maturity		Amortized cost		9,094			–			(2	)		9,092
		Other		Other		960			(333	)		–			627
				FVTPL		–			333			–			333
Total Securities						163,198			–			(2	)		163,196
Loans
Residential mortgages		Amortized cost		Amortized cost		115,258			–			–			115,258
Consumer instalment and other		Amortized cost		Amortized cost		61,944			–			–			61,944
Credit cards		Amortized cost		Amortized cost		8,071			–			–			8,071
Business and government		Amortized cost		Amortized cost		175,067			(2,372	)		–			172,695
				FVTPL		–			2,372			–			2,372
Total Loans						360,340			–			–			360,340
Allowance for credit losses						(1,833	)		–			154			(1,679	)
						358,507			–			154			358,661
Remaining financial assets (1)						127,706			–			(6	)		127,700
Financial Liabilities
Allowance for credit losses on off-balance sheet exposures						163			–			76			239
Total pre-tax impact of IFRS 9 adoption						na			–			70			na
Total after-tax Accumulated Other Comprehensive Income						3,066			(55	)		–			3,011
Total after-tax Retained Earnings (2)(3)						23,709			55			44			23,808
Total after-tax Shareholders’ Equity						44,354			–			44			44,398

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements and other assets. Remeasurement represents the impact of the impairment provisions of IFRS 9 on these remaining financial assets.

(2) Reclassification amount represents the after-tax impact ($105 million pre-tax) that resulted from the reclassification of equity securities from available-for-sale under IAS 39 to fair value through profit or loss under IFRS 9.

(3) Remeasurement represents the after-tax impact ($70 million pre-tax) of the adoption of the impairment provisions of IFRS 9.

na – not applicable due to IFRS 9 adoption.

Schedule of Impact on Transition to IFRS 9 on Allowance for Credit Loss

The following table illustrates the impact of transition to IFRS 9 on the allowance for credit loss as of November 1, 2017.

(Canadian $ in millions)	IAS 39 collective allowance		IAS 39 specific allowance		IAS 39 allowance		Remeasurement			IFRS 9 allowance		IFRS 9 Stage 1		IFRS 9 Stage 2		IFRS 9 Stage 3
Loans
Residential mortgages		69		24		93		(20	)		73		16		33		24
Consumer instalment and other		343		136		479		71			550		70		344		136
Credit cards		243		–		243		41			284		63		221		–
Business and government		785		233		1,018		(246	)		772		205		334		233
Total allowance for credit losses		1,440		393		1,833		(154	)		1,679		354		932		393
Allowance for credit losses on remaining financial assets (1)		–		–		–		8			8		7		1		–
Allowance for credit losses on off-balance sheet exposures		136		27		163		76			239		89		123		27
Total		1,576		420		1,996		(70	)		1,926		450		1,056		420

(1) Represents cash and cash equivalents, interest bearing deposits with banks, securities, securities borrowed or purchased under resale agreements and other assets.

IFRS9 [member]

Summary of Classification of Securities

The securities balances by measurement category following the adoption of IFRS 9 as at November 1, 2017 were:

(Canadian $ in millions)	November 1, 2017
Trading		90,535
FVTPL		10,948
FVOCI		51,909
Amortized cost		9,177
Other		627
Total		163,196

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Securities (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Fair Value Measurement

(Canadian $ in millions, except as noted)	Term to maturity										2018
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,103		2,195		2,038		1,077		907		10,320
Canadian provincial and municipal governments		1,293		2,029		1,235		1,355		2,790		8,702
U.S. federal government		2,684		2,835		1,260		1,895		843		9,517
U.S. states, municipalities and agencies		756		135		29		114		182		1,216
Other governments		485		557		330		40		–		1,412
NHA MBS, U.S. agency MBS and CMO (1)		382		497		477		346		7,482		9,184
Corporate debt		2,635		1,821		1,295		1,413		2,034		9,198
Loans		14		82		55		48		–		199
Corporate equity		–		–		–		–		49,949		49,949
Total trading securities		12,352		10,151		6,719		6,288		64,187		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		–		4		2		97		431
Canadian provincial and municipal governments		–		23		5		22		896		946
U.S. federal government		69		–		–		–		–		69
NHA MBS, U.S. agency MBS and CMO (1)		–		3		4		–		–		7
Corporate debt		616		56		125		692		5,331		6,820
Corporate equity		–		–		–		–		3,338		3,338
Total FVTPL securities		1,013		82		138		716		9,662		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		6,600		4,036		1,711		537		–		12,884
Fair value		6,592		4,006		1,688		519		–		12,805
Yield (%)		1.52		1.58		2.09		2.14		–		1.64
Canadian provincial and municipal governments
Amortized cost		3,200		1,229		1,742		713		12		6,896
Fair value		3,204		1,227		1,726		693		12		6,862
Yield (%)		1.36		1.81		2.67		2.59		3.58		1.90
U.S. federal government
Amortized cost		462		1,604		7,116		8,221		–		17,403
Fair value		454		1,595		6,858		7,916		–		16,823
Yield (%)		2.39		2.61		1.98		2.35		–		2.22
U.S. states, municipalities and agencies
Amortized cost		356		684		542		1,177		935		3,694
Fair value		355		678		540		1,158		924		3,655
Yield (%)		1.69		2.07		2.59		2.59		2.66		2.42
Other governments
Amortized cost		1,193		1,187		2,135		303		–		4,818
Fair value		1,192		1,183		2,113		302		–		4,790
Yield (%)		1.82		2.21		2.74		2.87		–		2.39
NHA MBS (1)
Amortized cost		306		62		2,014		–		–		2,382
Fair value		310		62		1,998		–		–		2,370
Yield (%)		1.95		1.32		2.00		–		–		1.98
U.S. agency MBS and CMO (1)
Amortized cost		–		13		109		1,819		9,870		11,811
Fair value		–		13		106		1,761		9,437		11,317
Yield (%)		–		2.31		2.50		2.51		2.29		2.33
Corporate debt
Amortized cost		672		1,992		569		509		41		3,783
Fair value		671		1,980		566		498		41		3,756
Yield (%)		1.45		2.86		2.87		3.24		4.02		2.67
Corporate equity
Amortized cost		–		–		–		–		62		62
Fair value		–		–		–		–		62		62
Yield (%)		–		–		–		–		–		–
Total cost or amortized cost		12,789		10,807		15,938		13,279		10,920		63,733
Total fair value		12,778		10,744		15,595		12,847		10,476		62,440
Yield (%)		1.55		2.09		2.23		2.44		2.32		2.13
Amortized Cost Securities
Issued or guaranteed by:
Canadian provincial and municipal governments
Amortized cost		230		280		143		179		–		832
Fair value		230		282		145		184		–		841
Other governments
Amortized cost		–		3		7		–		–		10
Fair value		–		3		7		–		–		10
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		171		452		–		1,884		3,045		5,552
Fair value		171		454		–		1,808		2,913		5,346
Corporate debt
Amortized cost		1		10		10		5		65		91
Fair value		1		10		10		5		65		91
Total cost or amortized cost		402		745		160		2,068		3,110		6,485
Total fair value		402		749		162		1,997		2,978		6,288
Other Securities
Carrying value		–		–		–		–		702		702
Total carrying value or amortized cost of securities		26,556		21,785		22,955		22,351		88,581		182,228
Total value of securities		26,545		21,722		22,612		21,919		88,137		180,935
Total by Currency (in Canadian $ equivalent)
Canadian dollar		18,091		12,284		9,782		5,475		37,135		82,767
U.S. dollar		7,799		9,423		12,718		16,404		49,922		96,266
Other currencies		655		15		112		40		1,080		1,902
Total securities		26,545		21,722		22,612		21,919		88,137		180,935

Classified under IAS 39

(Canadian $ in millions, except as noted)	Term to maturity										2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		4,862		1,527		2,021		1,313		1,104		10,827
Canadian provincial and municipal governments		812		1,343		714		1,991		2,467		7,327
U.S. federal government		1,332		1,758		2,000		1,906		2,477		9,473
U.S. states, municipalities and agencies		642		222		86		100		1,081		2,131
Other governments		85		438		266		34		–		823
NHA MBS, U.S. agency MBS and CMO (1)		147		571		203		8		2		931
Corporate debt		1,298		1,375		795		1,281		7,014		11,763
Loans		–		28		7		118		–		153
Corporate equity		–		–		–		–		55,641		55,641
Total trading securities		9,178		7,262		6,092		6,751		69,786		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		5,585		1,764		1,266		597		–		9,212
Fair value		5,578		1,749		1,262		591		–		9,180
Yield (%)		0.66		1.48		1.46		1.57		–		0.99
Canadian provincial and municipal governments
Amortized cost		1,157		265		1,293		860		38		3,613
Fair value		1,156		266		1,310		855		40		3,627
Yield (%)		0.85		1.45		2.24		2.32		3.27		1.77
U.S. federal government
Amortized cost		15		–		3,128		11,338		–		14,481
Fair value		17		–		3,115		11,137		–		14,269
Yield (%)		0.88		–		1.81		1.80		–		1.80
U.S. states, municipalities and agencies
Amortized cost		370		563		463		1,329		1,333		4,058
Fair value		370		566		467		1,357		1,336		4,096
Yield (%)		1.63		1.78		2.26		2.40		1.71		2.00
Other governments
Amortized cost		1,592		1,231		725		19		–		3,567
Fair value		1,593		1,225		722		18		–		3,558
Yield (%)		1.44		1.34		1.52		2.72		–		1.43
NHA MBS (1)
Amortized cost		255		1,143		1,059		–		–		2,457
Fair value		262		1,141		1,052		–		–		2,455
Yield (%)		2.05		1.83		1.56		–		–		1.74
U.S. agency MBS and CMO – U.S. (1)
Amortized cost		1		20		62		658		10,161		10,902
Fair value		1		19		62		659		10,020		10,761
Yield (%)		1.83		3.12		2.25		2.31		1.97		1.99
Corporate debt
Amortized cost		995		2,082		737		607		93		4,514
Fair value		997		2,080		734		619		95		4,525
Yield (%)		0.75		2.08		2.48		3.08		3.64		2.02
Corporate equity
Amortized cost		–		–		–		–		1,499		1,499
Fair value		–		–		–		–		1,604		1,604
Yield (%)		–		–		–		–		2.37		2.37
Total cost or amortized cost		9,970		7,068		8,733		15,408		13,124		54,303
Total fair value		9,974		7,046		8,724		15,236		13,095		54,075
Yield (%)		0.89		1.72		1.85		1.95		2.00		1.72
Held-to-Maturity Securities
Issued or guaranteed by:
Canadian federal government
Amortized cost		1,855		–		–		–		–		1,855
Fair value		1,857		–		–		–		–		1,857
Canadian provincial and municipal governments
Amortized cost		735		510		–		322		–		1,567
Fair value		737		512		–		341		–		1,590
NHA MBS, U.S. agency MBS and CMO (1)
Amortized cost		191		485		364		999		3,633		5,672
Fair value		191		486		366		997		3,609		5,649
Total cost or amortized cost		2,781		995		364		1,321		3,633		9,094
Total fair value		2,785		998		366		1,338		3,609		9,096
Other Securities
Carrying value		7		21		13		38		881		960
Total carrying value or amortized cost of securities		21,936		15,346		15,202		23,518		87,424		163,426
Total value of securities		21,940		15,324		15,193		23,346		87,395		163,198
Total by Currency (in Canadian $ equivalent)
Canadian dollar		16,959		8,546		7,222		6,235		41,261		80,223
U.S. dollar		3,948		6,662		7,916		17,087		44,384		79,997
Other currencies		1,033		116		55		24		1,750		2,978
Total securities		21,940		15,324		15,193		23,346		87,395		163,198

(1) These amounts are supported by insured mortgages or issued by U.S. agencies and government-sponsored enterprises. NHA refers to the National Housing Act, MBS refers to mortgage-backed securities and CMO refers to collateralized mortgage obligations.

Yields in the tables above are calculated using the cost of the security and the contractual interest rate associated with each security, adjusted for any amortization of premiums and discounts. Tax effects are not taken into consideration. The term to maturity included in the table above is based on the contractual maturity date of the security. Actual maturities could differ, as issuers may have the right to call or prepay obligations. Equity securities with no maturity date are included in the over 10 years category.

Schedule of Unrealized Gains and Losses on Available-for-Sale Securities

Unrealized Gains and Losses

The following table summarizes the unrealized gains and losses on FVOCI securities as at October 31, 2018 under IFRS 9 and the unrealized gains and losses on available-for-sale securities as at October 31, 2017 under IAS 39.

(Canadian $ in millions)							2018								2017
	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
Issued or guaranteed by:
Canadian federal government		12,884		1		80		12,805		9,212		6		38		9,180
Canadian provincial and municipal governments		6,896		8		42		6,862		3,613		29		15		3,627
U.S. federal government		17,403		4		584		16,823		14,481		12		224		14,269
U.S. states, municipalities and agencies		3,694		16		55		3,655		4,058		43		5		4,096
Other governments		4,818		2		30		4,790		3,567		3		12		3,558
NHA MBS		2,382		6		18		2,370		2,457		9		11		2,455
U.S. agency MBS and CMO		11,811		2		496		11,317		10,902		6		147		10,761
Corporate debt		3,783		6		33		3,756		4,514		23		12		4,525
Corporate equity		62		–		–		62		1,499		121		16		1,604
Total		63,733		45		1,338		62,440		54,303		252		480		54,075

Summary of Interest, Dividend and Fee Income

Interest, dividend and fee income has been included in our consolidated financial statements as follows, excluding other securities and trading securities. Related income for trading securities is included in Note 17 Trading-Related Revenue.

(Canadian $ in millions)	2018		2017		2016
FVTPL		16		na		na
FVOCI		1,118		na		na
Amortized cost		172		na		na
Available-for-sale securities		na		662		509
Held-to-maturity securities		na		150		143
Total		1,306		812		652

na – not applicable due to IFRS 9 adoption.

Summary of Non Interest Revenue

Net gains and losses from securities, excluding net realized and unrealized gains on trading securities, have been included in our Consolidated Statement of Income as follows:

(Canadian $ in millions)	2018			2017			2016
Non-Interest Revenue
FVTPL securities		106			na			na
FVOCI securities (1)
Gross realized gains		363			228			59
Gross realized (losses)		(216	)		(99	)		(16	)
Unrealized gains on investments reclassified from available-for-sale to other		na			–			7
Other securities, net realized and unrealized gains		–			49			51
Impairment write-downs		(14	)		(7	)		(17	)
Securities gains, other than trading (2)		239			171			84

(1) Realized gains (losses) are net of unrealized gains (losses) on related hedge contracts. Fiscal 2017 and prior years represent available-for-sale securities (Note 1).

(2) The following amounts of income related to our insurance operations were included in non-interest revenue, insurance revenue, in our Consolidated Statement of Income: Interest, dividend and fee income of $354 million for the year ended October 31, 2018 ($325 million in 2017); and securities gains, other than trading, of $1 million for the year ended October 31, 2018 ($nil in 2017).

Unrealized gains and losses on trading securities are included in trading-related revenue in Note 17.

na – not applicable due to IFRS 9 adoption.

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Loans and Allowance for Credit Losses (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Credit Risk Exposures for Loans Carried at Amortized Cost or FVOCI

The following table sets out our credit risk exposure for all loans carried at amortized cost or FVTPL as at October 31, 2018. Stage 1 represents those performing loans carried with a 12 month expected credit loss, Stage 2 represents those performing loans carried with a lifetime expected credit loss, and Stage 3 represents those loans with a lifetime credit loss that are credit impaired.

(Canadian $ in millions)							2018
	Stage 1		Stage 2		Stage 3		Total
Loans: Residential mortgages
Exceptionally low		–		–		–		–
Very low		76,314		125		–		76,439
Low		18,975		2,479		–		21,454
Medium		12,621		3,765		–		16,386
High		90		445		–		535
Not rated		4,250		181		–		4,431
Impaired		–		–		375		375
Allowance for credit losses		20		37		19		76
Carrying amount		112,230		6,958		356		119,544
Loans: Consumer instalment and other personal
Exceptionally low		20,236		20		–		20,256
Very low		13,364		222		–		13,586
Low		12,581		364		–		12,945
Medium		7,707		4,153		–		11,860
High		127		1,657		–		1,784
Not rated		2,105		168		–		2,273
Impaired		–		–		521		521
Allowance for credit losses		83		312		143		538
Carrying amount		56,037		6,272		378		62,687
Loans: Credit cards
Exceptionally low		2,403		4		–		2,407
Very low		1,140		11		–		1,151
Low		943		107		–		1,050
Medium		1,742		874		–		2,616
High		108		428		–		536
Not rated		568		1		–		569
Impaired		–		–		–		–
Allowance for credit losses		39		191		–		230
Carrying amount		6,865		1,234		–		8,099
Loans: Business and government (1)
Acceptable
Investment grade		109,774		2,148		–		111,922
Sub-investment grade		88,348		7,308		–		95,656
Watchlist		–		4,423		–		4,423
Impaired		–		–		1,040		1,040
Allowance for credit losses		232		355		208		795
Carrying amount		197,890		13,524		832		212,246
Commitments and financial guarantee contracts
Acceptable
Investment grade		116,108		1,722		–		117,830
Sub-investment grade		44,895		3,426		–		48,321
Watchlist		–		1,650		–		1,650
Impaired		–		–		242		242
Allowance for credit losses		108		96		27		231
Carrying amount		160,895		6,702		215		167,812

(1) Includes customers’ liability under acceptances.

Summary of Continuity in Loss Allowance by Each Product Type

The following table shows the continuity in the loss allowance by each product type as at October 31, 2018.

(Canadian $ in millions)
For the twelve months ended	Stage 1			Stage 2			Stage 3			Total
Loans: Residential mortgages
Balance as at November 1, 2017		16			34			49			99
Transfer to Stage 1		34			(31	)		(3	)		–
Transfer to Stage 2		(1	)		7			(6	)		–
Transfer to Stage 3		–			(9	)		9			–
Net remeasurement of loss allowance		(37	)		42			19			24
Loan originations		10			–			–			10
Derecognitions and maturities		(2	)		(6	)		–			(8	)
Total provision for credit losses (“PCL”) (1)		4			3			19			26
Write-offs		–			–			(20	)		(20	)
Recoveries of previous write-offs		–			–			7			7
Foreign exchange and other		–			1			(11	)		(10	)
Balance as at October 31, 2018		20			38			44			102
Loans: Consumer instalment and other personal
Balance as at November 1, 2017		76			357			137			570
Transfer to Stage 1		214			(200	)		(14	)		–
Transfer to Stage 2		(22	)		105			(83	)		–
Transfer to Stage 3		(4	)		(162	)		166			–
Net remeasurement of loss allowance		(196	)		272			162			238
Loan originations		39			–			–			39
Derecognitions and maturities		(18	)		(50	)		–			(68	)
Total PCL (1)		13			(35	)		231			209
Write-offs		–			–			(301	)		(301	)
Recoveries of previous write-offs		–			–			92			92
Foreign exchange and other		1			4			(15	)		(10	)
Balance as at October 31, 2018		90			326			144			560
Loans: Credit cards
Balance as at November 1, 2017		83			254			–			337
Transfer to Stage 1		177			(177	)		–			–
Transfer to Stage 2		(37	)		37			–			–
Transfer to Stage 3		(1	)		(195	)		196			–
Net remeasurement of loss allowance		(164	)		342			20			198
Loan originations		19			–			–			19
Derecognitions and maturities		(3	)		(42	)		–			(45	)
Total PCL (1)		(9	)		(35	)		216			172
Write-offs		–			–			(319	)		(319	)
Recoveries of previous write-offs		–			–			103			103
Balance as at October 31, 2018		74			219			–			293
Loans: Business and government
Balance as at November 1, 2017		268			410			234			912
Transfer to Stage 1		136			(128	)		(8	)		–
Transfer to Stage 2		(31	)		66			(35	)		–
Transfer to Stage 3		(1	)		(61	)		62			–
Net remeasurement of loss allowance		(155	)		203			215			263
Loan originations		163			–			–			163
Derecognitions and maturities		(80	)		(86	)		–			(166	)
Model changes		(7	)		(3	)		–			(10	)
Total PCL (1)		25			(9	)		234			250
Write-offs		–			–			(297	)		(297	)
Recoveries of previous write-offs		–			–			59			59
Foreign exchange and other		5			7			(21	)		(9	)
Balance as at October 31, 2018		298			408			209			915
Total as at October 31, 2018		482			991			397			1,870
Comprised of: Loans		374			895			370			1,639
Other credit instruments (2)		108			96			27			231

(1) Excludes provision for credit losses on other assets of $5 million.

(2) Recorded in other liabilities on the Consolidated Balance Sheet.

Summary of Allowance for Credit Losses under IAS 39

The following table shows the continuity of our allowance for credit losses under IAS 39 as at October 31, 2017:

(Canadian $ in millions)	Residential mortgages						Credit card, consumer instalment and other personal loans						Business and   government loans						Total
	2017			2016			2017			2016			2017			2016			2017			2016
Impairment allowances (specific ACL), beginning of year		59			69			123			113			250			210			432			392
Amounts written off		(27	)		(38	)		(631	)		(616	)		(296	)		(349	)		(954	)		(1,003	)
Recoveries of amounts written off in previous years		16			16			199			173			50			154			265			343
Charge to income statement (specific PCL)		11			24			464			478			347			269			822			771
Foreign exchange and other movements		(10	)		(12	)		(18	)		(25	)		(117	)		(34	)		(145	)		(71	)
Specific ACL, end of year		49			59			137			123			234			250			420			432
Collective ACL, beginning of year		71			111			596			714			1,015			835			1,682			1,660
Charge (recovery) to income statement (collective PCL)		(1	)		(42	)		(6	)		(120	)		(69	)		162			(76	)		–
Foreign exchange and other movements		(1	)		2			(4	)		2			(25	)		18			(30	)		22
Collective ACL, end of year		69			71			586			596			921			1,015			1,576			1,682
Total ACL		118			130			723			719			1,155			1,265			1,996			2,114
Comprised of: Loans		93			104			722			719			1,018			1,102			1,833			1,925
Other credit instruments (1)		25			26			1			–			137			163			163			189

(1) The total specific and collective allowances related to other credit instruments are included in other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Schedule of Loans and Allowance for Credit Losses by Geographic Region

Loans and allowance for credit losses by geographic region as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	2018								2017
	Gross amount		Allowance on impaired loans (2)		Allowance on performing loans (3)		Net amount		Gross amount		Specific allowance (2)		Collective allowance (3)		Net amount
By geographic region: (1)
Canada		244,837		189		689		243,959		233,672		212		799		232,661
United States		131,247		181		574		130,492		115,029		161		641		114,227
Other countries		9,546		–		6		9,540		11,639		20		–		11,619
Total		385,630		370		1,269		383,991		360,340		393		1,440		358,507

(1) Geographic region is based upon the country of ultimate risk.

(2) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

(3) Excludes allowance for credit losses on performing loans of $204 million for other credit instruments, which is included in other liabilities ($136 million in 2017).

Schedule of Impaired Loans, Including the Related Allowances

Impaired loans, including the related allowances, as at October 31, 2018 under IFRS 9 and as at October 31, 2017 under IAS 39 are as follows:

(Canadian $ in millions)	Gross impaired amount (1)				Allowance on impaired loans (3)		Specific allowance (3)		Net		Net impaired amount
	2018		2017		2018		2017		2018		2017
Residential mortgages		375		391		19		24		356		367
Consumer instalment and other personal loans		521		556		143		136		378		420
Business and government loans		1,040		1,273		208		233		832		1,040
Total		1,936		2,220		370		393		1,566		1,827
By geographic region: (2)
Canada		735		793		189		212		546		581
United States		1,201		1,377		181		161		1,020		1,216
Other countries		–		50		–		20		–		30
Total		1,936		2,220		370		393		1,566		1,827

(1) Excludes purchased credit impaired loans.

(2) Geographic region is based upon the country of ultimate risk.

(3) Excludes allowance for credit losses on impaired loans of $27 million for other credit instruments, which is included in other liabilities ($27 million in 2017).

Fully secured loans with amounts past due between 90 and 180 days that we have not classified as impaired totalled $49 million and $62 million as at October 31, 2018 and 2017, respectively.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Loans that are Past Due but not Classified as Impaired

The following table presents loans that are past due but not classified as impaired as at October 31, 2018 and 2017.

(Canadian $ in millions)	1 to 29 days				30 to 89 days				90 days or more				Total
	2018		2017		2018		2017		2018		2017		2018		2017
Residential mortgages (1)		660		649		513		438		21		19		1,194		1,106
Credit card, consumer instalment and other personal loans		1,431		1,480		415		466		88		94		1,934		2,040
Business and government loans		611		589		268		297		55		72		934		958
Total		2,702		2,718		1,196		1,201		164		185		4,062		4,104

(1) The percentage of loans 90 days or more past due but not impaired that were guaranteed by the Government of Canada is 66% for 2018 and 67% for 2017.

Summary of Key Economic Variables Used in Base Case

The following table shows the key economic variables we use to estimate our allowance on performing loans during the forecast period. The values shown represent the end of period national average values for the first 12 months and then the national average for the remaining horizon. While the values disclosed below are national variables, in our underlying models we use regional variables where considered appropriate.

	Benign scenario					Base scenario					Adverse scenario
As at October 31, 2018	First 12 months		Remaining horizon (1)			First 12 months		Remaining horizon (1)			First 12 months			Remaining horizon (1)
Real gross domestic product (2)
Canada		3.1%		2.4	%		1.8%		1.6	%		(3.2	)%		0.8	%
U.S.		2.9%		1.9	%		2.4%		1.6	%		(2.9	)%		0.9	%
Corporate BBB 10-year spread
Canada		2.0%		2.1	%		2.3%		2.3	%		4.7	%		3.9	%
U.S.		1.8%		2.0	%		2.2%		2.3	%		4.3	%		3.5	%
Unemployment rates
Canada		5.4%		5.2	%		5.6%		5.6	%		9.3	%		9.3	%
U.S.		3.2%		3.1	%		3.6%		3.7	%		6.7	%		6.8	%
Housing Price Index
Canada (3)		2.4%		2.6	%		1.4%		1.8	%		(12.8	)%		(3.2	)%
U.S. (4)		5.1%		4.3	%		3.6%		3.0	%		(7.3	)%		(1.2	)%

(1) The remaining forecast period is two years.

(2) Real gross domestic product is based on year over year growth.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the U.S., we use the National Case-Shiller House Price Index.

XML

Structured Entities (Tables)

12 Months Ended

Oct. 31, 2018

Summary of Carrying Amount and Fair Value of Transferred Assets That Did Not Qualify for Derecognition and Associated Liabilities

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Residential mortgages		5,569				4,797
Other related assets (2)		11,640				12,091
Total (3)		17,209		16,925		16,888		16,621

(1) Carrying amount of loans is net of allowance.

(2) Other related assets represent payments received on account of loans pledged under securitization programs that have not yet been applied against the associated liabilities. The payments received are held on behalf of the investors in the securitization vehicles until principal payments are required to be made on the associated liabilities. In order to compare all assets supporting the associated liabilities, this amount is added to the carrying amount of the securitized assets in the table above.

(3) The fair values of assets and associated liabilities are $17,105 million and $16,763 million, respectively, as at October 31, 2018 ($16,847 million and $16,746 million, respectively, in 2017).

Summary of Unconsolidated Structured Entities

The table below presents amounts related to our interests in unconsolidated SEs:

(Canadian $ in millions)					2018						2017
	Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles		Capital vehicles		Canadian customer securitization vehicles (1)		Structured finance vehicles
Interests recorded on the balance sheet
Cash and cash equivalents		118		53		–		8		50		–
Trading securities		–		12		–		–		6		209
FVTPL securities		–		582		–		na		na		na
FVOCI securities		2		242		–		na		na		na
Available-for-sale securities		na		na		na		2		725		–
Loans		7		–		–		7		–		–
Other		3		13		–		–		6		–
		130		902		–		17		787		209
Deposits		570		53		–		460		50		146
Derivatives		–		–		–		–		–		63
Other		17		–		–		16		–		–
		587		53		–		476		50		209
Exposure to loss (2)		28		7,135		–		57		6,425		209
Total assets of the entities		587		5,033		–		476		4,592		209

(1) Securities held that are issued by our Canadian customer securitization vehicles are comprised of asset-backed commercial paper and are classified as trading securities, FVTPL securities and FVOCI securities (trading securities and available-for-sale securities in 2017 under IAS 39). All assets held by these vehicles relate to assets in Canada.

(2) Exposure to loss represents securities held, undrawn liquidity facilities, total committed amounts of the BMO funded vehicle, derivative assets and loans.

na – not applicable due to IFRS 9 adoption.

Consolidated structured entities [member]

Summary of Carrying Amount and Fair Value of Transferred Assets That Did Not Qualify for Derecognition and Associated Liabilities

The following table presents the carrying amount and fair value of transferred assets that did not qualify for derecognition and the associated liabilities issued by our bank securitization vehicles:

(Canadian $ in millions)			2018				2017
	Carrying amount of assets (1)		Carrying amount of associated liabilities		Carrying amount of assets (1)		Carrying amount of associated liabilities
Credit card receivables		7,246		5,096		7,058		4,115
Consumer instalment and other personal (2)		6,827		3,083		5,699		2,295
Total (3)		14,073		8,179		12,757		6,410

(1) Carrying amount of loans is net of allowance.

(2) Includes Canadian real estate lines of credit and Canadian auto loans.

(3) The fair values of assets and associated liabilities are $14,045 million and $8,134 million, respectively, as at October 31, 2018 ($12,753 million and $6,403 million, respectively, in 2017).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

XML

Derivative Instruments (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Schedule of Fair Value of Derivative Instruments

Fair values of our derivative instruments are as follows:

(Canadian $ in millions)							2018									2017
	Gross assets			Gross liabilities			Net			Gross assets			Gross liabilities			Net
Trading
Interest Rate Contracts
Swaps		7,795			(6,419	)		1,376			8,390			(7,027	)		1,363
Forward rate agreements		36			(10	)		26			41			–			41
Futures		2			(3	)		(1	)		–			–			–
Purchased options		425			–			425			444			–			444
Written options		–			(273	)		(273	)		–			(329	)		(329	)
Foreign Exchange Contracts
Cross-currency swaps		2,362			(1,678	)		684			2,687			(1,752	)		935
Cross-currency interest rate swaps		4,977			(6,057	)		(1,080	)		8,103			(9,051	)		(948	)
Forward foreign exchange contracts		4,335			(2,817	)		1,518			4,954			(3,178	)		1,776
Purchased options		241			–			241			267			–			267
Written options		–			(228	)		(228	)		–			(270	)		(270	)
Commodity Contracts
Swaps		1,559			(1,084	)		475			726			(717	)		9
Futures		17			–			17			–			–			–
Purchased options		484			–			484			352			–			352
Written options		–			(372	)		(372	)		–			(357	)		(357	)
Equity Contracts		2,158			(2,402	)		(244	)		1,388			(3,386	)		(1,998	)
Credit Default Swaps
Purchased		1			(36	)		(35	)		–			(54	)		(54	)
Written		9			(1	)		8			7			(1	)		6
Total fair value – trading derivatives		24,401			(21,380	)		3,021			27,359			(26,122	)		1,237
Hedging
Interest Rate Contracts
Cash flow hedges – swaps		18			(1,261	)		(1,243	)		78			(558	)		(480	)
Fair value hedges – swaps		701			(668	)		33			274			(402	)		(128	)
Total swaps		719			(1,929	)		(1,210	)		352			(960	)		(608	)
Foreign Exchange Contracts
Cash flow hedges		1,084			(1,074	)		10			1,202			(722	)		480
Total foreign exchange contracts		1,084			(1,074	)		10			1,202			(722	)		480
Equity Contracts
Cash flow hedges		–			(28	)		(28	)		38			–			38
Total equity contracts		–			(28	)		(28	)		38			–			38
Total fair value – hedging derivatives (1)		1,803			(3,031	)		(1,228	)		1,592			(1,682	)		(90	)
Total fair value – trading and hedging derivatives		26,204			(24,411	)		1,793			28,951			(27,804	)		1,147
Less: impact of master netting agreements		(15,575	)		15,575			–			(19,909	)		19,909			–
Total		10,629			(8,836	)		1,793			9,042			(7,895	)		1,147

(1) The fair values of hedging derivatives wholly or partially offset the changes in fair values of the related on-balance sheet financial instruments.

Schedule of Notional Amounts of Trading Derivatives

(Canadian $ in millions)					2018						2017
	Exchange traded		Over-the-counter		Total		Exchange traded		Over-the-counter		Total
Interest Rate Contracts
Swaps		–		3,684,763		3,684,763		–		3,073,490		3,073,490
Forward rate agreements		–		411,573		411,573		–		195,142		195,142
Purchased options		26,629		35,023		61,652		10,407		29,107		39,514
Written options		16,511		48,721		65,232		9,284		37,247		46,531
Futures		192,482		–		192,482		89,053		–		89,053
Total interest rate contracts		235,622		4,180,080		4,415,702		108,744		3,334,986		3,443,730
Foreign Exchange Contracts
Cross-currency swaps		–		57,226		57,226		–		50,534		50,534
Cross-currency interest rate swaps		–		449,187		449,187		–		430,808		430,808
Forward foreign exchange contracts		–		463,743		463,743		–		392,924		392,924
Purchased options		2,625		21,468		24,093		6,001		23,812		29,813
Written options		1,420		24,018		25,438		1,249		29,101		30,350
Futures		739		–		739		794		–		794
Total foreign exchange contracts		4,784		1,015,642		1,020,426		8,044		927,179		935,223
Commodity Contracts
Swaps		–		24,366		24,366		–		18,713		18,713
Purchased options		3,303		6,182		9,485		5,031		7,080		12,111
Written options		4,909		4,233		9,142		6,896		4,905		11,801
Futures		33,104		–		33,104		28,139		–		28,139
Total commodity contracts		41,316		34,781		76,097		40,066		30,698		70,764
Equity Contracts		33,687		52,725		86,412		14,253		63,184		77,437
Credit Default Swaps
Purchased		–		3,047		3,047		–		2,658		2,658
Written		–		443		443		–		448		448
Total		315,409		5,286,718		5,602,127		171,107		4,359,153		4,530,260

Schedule of Notional Amount and Average Rates of Derivatives and the Carrying Amount of Deposits Designated as Hedging Instruments, by Term to Maturity

The following table outlines the notional amounts and average rates of derivatives and the carrying amount of deposits designated as hedging instruments, by term to maturity, hedge type, and risk type, where applicable.

(Canadian $ in millions, except as noted)													2018
		Remaining term to maturity											Total
		Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years			Over 10 years
Cash Flow Hedges
Interest rate risk – Interest rate swaps
Notional amount			5,252		22,976		30,790		14,751			–		73,769
Average fixed interest rate			1.66%		1.67%		2.60%		2.42%			–		2.21%
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards (1)
CAD-USD pair	Notional amount		3,939		10,572		11,781		2,576			251		29,119
	Average fixed interest rate		1.31%		1.20%		2.01%		1.27%			3.02%		1.57%
	Average exchange rate: CAD-USD		1.3347		1.3035		1.2923		1.1871			1.3122		1.2930
CAD-EUR pair	Notional amount		3,804		8,726		8,618		–			201		21,349
	Average fixed interest rate		1.74%		2.10%		2.26%		–			2.97%		2.11%
	Average exchange rate: CAD-EUR		1.5217		1.4685		1.4999		–			1.4870		1.4908
Other currency pairs (2)	Notional amount		–		1,817		4,427		109			–		6,353
	Average fixed interest rate		–		2.05%		2.80%		2.98%			–		2.59%
	Average exchange rate: CAD-Non USD/EUR		–		1.4361		1.3338		0.1696	(3)		–		1.3430
Equity price risk – Total return swap
Notional amount			381		–		–		–			–		381
Fair Value Hedges
Interest rate risk – Interest rate swaps
Notional amount			14,516		21,919		22,928		14,101			–		73,464
Average fixed interest rate			1.81%		2.16%		2.29%		2.36%			–		2.17%
Net Investment Hedges
Foreign exchange risk
USD denominated deposit – carrying amount			6,596		–		–		–			–		6,596
GBP denominated deposit – carrying amount			473		–		–		–			–		473

(1) Under certain hedge strategies using cross-currency swaps, a CAD leg is inserted to create two swaps designated as separate hedges (for example, a EURO-USD cross-currency swap split into EURO-CAD and CAD-USD cross-currency swaps). The relevant notional amount is grossed up in this table as the cross-currency swaps are disclosed by CAD-foreign currency pair.

(2) Includes CAD-AUD, CAD-CHF, CAD-CNH, CAD-GBP or CAD-HKD cross-currency swaps where applicable.

(3) Includes one CAD-HKD cross-currency swap.

Schedule of Hedging Instrument Impacts on Cash Flow Hedge Ineffectiveness

For cash flow hedges and net investment hedges, the following table contains information related to items designated as hedging instruments, hedged items and hedge ineffectiveness for the year ended October 31, 2018.

												2018
	Carrying amount of hedging instruments (1)								Hedge ineffectiveness
(Canadian $ in millions)	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other
Cash flow hedges
Interest rate risk – Interest rate swaps		18		(1,261	)		(1,685	)		1,687			(4	)
Foreign exchange risk – Cross-currency swaps and foreign exchange forwards		1,084		(1,074	)		(459	)		459			–
Equity price risk – Total return swaps		–		(28	)		24			(24	)		–
		1,102		(2,363	)		(2,120	)		2,122			(4	)
Net investment hedges
Foreign exchange risk – Deposit liabilities				(7,069	)		(211	)		211			–
Total		1,102		(9,432	)		(2,331	)		2,333			(4	)

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

Schedule of Hedging Instrument Impacts on Consolidated Statement of Other Comprehensive Income on Pre-Tax Basis

For cash flow hedges and net investment hedges, the following table contains information related to impacts on the Consolidated Statement of Other Comprehensive Income, on a pre-tax basis for the year ended October 31, 2018.

																2018
													Balance in cash flow hedge AOCI / net foreign operations AOCI
(Canadian $ in millions)	AOCI as at November 1, 2017			Gains / (losses) recognized in OCI			Amount reclassified to net income as the hedged item affects net income			AOCI as at October 31, 2018			Active hedges			Discontinued hedges
Cash flow hedges
Interest rate risk		(597	)		(1,681	)		67			(2,211	)		(1,348	)		(863	)
Foreign exchange risk		298			(3	)		456			751			751			–
Equity price risk		72			24			(66	)		30			30			–
		(227	)		(1,660	)		457			(1,430	) (1)		(567	)		(863	)
Net investment hedges
Foreign exchange risk		(1,580	)		(211	)		–			(1,791	)		(1,791	)		–
Total		(1,807	)		(1,871	)		457			(3,221	)		(2,358	)		(863	)

(1) Tax balance related to cash flow hedge AOCI is $356 million as at October 31, 2018.

Schedule of Hedging Instrument Impacts on Fair Value Hedge Ineffectiveness

The amounts relating to derivatives designated as fair value hedging instruments, hedged items and hedge ineffectiveness for the year are as follows:

(Canadian $ in millions )																					2018
	Carrying amount of hedging derivatives (1)					Hedge ineffectiveness												Accumulated amount of fair value hedge gains (losses) on hedged  items
	Asset		Liability			Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness			Gains (Losses) on hedged item used to calculate  hedge ineffectiveness			Ineffectiveness recorded in non-interest revenue – other			Carrying amount of the hedged item (2)			Active hedges			Discontinued hedges
Fair value hedge
Interest rate swaps		701		(668	)
FVOCI securities and loans		–		–			850			(843	)		7			36,722			(1,160	)		–
Deposits and subordinated debt		–		–			(764	)		761			(3	)		(34,375	)		719			436
Total		701		(668	)		86			(82	)		4			2,347			(441	)		436

(1) Represents the unrealized gains (losses) within derivative financial instruments in assets and liabilities, respectively, in the Consolidated Balance Sheet.

(2) Represents the carrying value on the Consolidated Balance Sheet and includes amortized cost, before allowance for credit losses, plus fair value hedge adjustments, except for FVOCI securities that are carried at fair value.

Schedule of Derivative-Related Credit Risk

(Canadian $ in millions)							2018								2017
	Replacement cost			Credit risk equivalent			Risk-weighted assets		Replacement cost			Credit risk equivalent			Risk-weighted assets
Interest Rate Contracts
Swaps		8,514			10,699			–		8,742			11,603			–
Forward rate agreements		36			34			–		41			42			–
Purchased options		409			393			–		440			381			–
Total interest rate contracts		8,959			11,126			704		9,223			12,026			1,537
Foreign Exchange Contracts
Cross-currency swaps		3,270			7,832			–		3,727			8,345			–
Cross-currency interest rate swaps		5,035			14,909			–		8,157			17,210			–
Forward foreign exchange contracts		4,453			8,373			–		5,062			8,389			–
Purchased options		225			424			–		250			420			–
Total foreign exchange contracts		12,983			31,538			2,544		17,196			34,364			2,701
Commodity Contracts
Swaps		1,559			4,450			–		726			2,971			–
Purchased options		335			1,108			–		120			1,034			–
Total commodity contracts		1,894			5,558			1,188		846			4,005			971
Equity Contracts		1,585			4,332			431		1,322			4,750			461
Credit Default Swaps		10			55			83		7			46			27
Total derivatives		25,431			52,609			4,950		28,594			55,191			5,697
Less: impact of master netting agreements		(15,575	)		(29,170	)		–		(19,909	)		(33,025	)		–
Total		9,856			23,439			4,950		8,685			22,166			5,697

The total derivatives and the impact of master netting agreements for replacement cost do not include exchange-traded derivatives with a fair value of $773 million as at October 31, 2018 ($357 million in 2017).

Schedule of Replacement Cost of Contracts with Customers Based on Country of Ultimate Risk

Transactions are conducted with counterparties in various geographic locations and industry sectors. Set out below is the replacement cost of contracts with customers located in the following countries, based on country of ultimate risk:

(Canadian $ in millions, except as noted)	Before master netting agreements								After master netting agreements
	2018				2017				2018				2017
Canada		13,449	53	%		15,447	54	%		4,901	50	%		5,045	58	%
United States		5,446	21	%		7,149	25	%		2,102	21	%		1,940	22	%
United Kingdom		1,181	5	%		1,079	4	%		315	3	%		182	2	%
Other countries (1)		5,355	21	%		4,919	17	%		2,538	26	%		1,518	18	%
Total		25,431	100	%		28,594	100	%		9,856	100	%		8,685	100	%

(1) No other country represented 15% or more of our replacement cost in 2018 or 2017.

Schedule of Replacement Cost of Contracts with Customers

Transactions are conducted with various counterparties. Set out below is the replacement cost of contracts (before the impact of master netting agreements) with customers in the following industries:

As at October 31, 2018 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,509		10,238		360		1,219		10		18,336
Governments		1,694		1,478		56		–		–		3,228
Natural resources		3		27		432		–		–		462
Energy		93		641		727		–		–		1,461
Other		660		599		319		366		–		1,944
Total		8,959		12,983		1,894		1,585		10		25,431
As at October 31, 2017 (Canadian $ in millions)	Interest rate contracts		Foreign exchange contracts		Commodity contracts		Equity contracts		Credit default swaps		Total
Financial institutions		6,063		13,898		227		1,141		7		21,336
Governments		1,895		1,202		66		–		–		3,163
Natural resources		–		22		74		–		–		96
Energy		155		479		226		–		–		860
Other		1,110		1,595		253		181		–		3,139
Total		9,223		17,196		846		1,322		7		28,594

Schedule of Remaining Contractual Terms to Maturity for Notional Amounts of Derivative Contracts

Our derivative contracts have varying maturity dates. The remaining contractual terms to maturity for the notional amounts of our derivative contracts are set out below:

(Canadian $ in millions)	Term to maturity										2018		2017
	Within 1 year		1 to 3 years		3 to 5 years		5 to 10 years		Over 10 years		Total notional amounts		Total notional amounts
Interest Rate Contracts
Swaps		1,404,557		707,683		1,167,568		514,392		37,797		3,831,997		3,202,365
Forward rate agreements, futures and options		608,132		100,756		13,885		7,897		269		730,939		370,240
Total interest rate contracts		2,012,689		808,439		1,181,453		522,289		38,066		4,562,936		3,572,605
Foreign Exchange Contracts
Cross-currency swaps		12,466		36,718		24,980		15,413		3,339		92,916		85,586
Cross-currency interest rate swaps		118,783		147,231		97,828		72,857		18,533		455,232		434,210
Forward foreign exchange contracts, futures and options		512,002		9,283		1,148		134		26		522,593		463,665
Total foreign exchange contracts		643,251		193,232		123,956		88,404		21,898		1,070,741		983,461
Commodity Contracts
Swaps		6,234		14,885		2,875		372		–		24,366		18,713
Futures and options		21,910		25,587		3,530		704		–		51,731		52,051
Total commodity contracts		28,144		40,472		6,405		1,076		–		76,097		70,764
Equity Contracts		72,922		7,953		3,873		1,680		366		86,794		77,781
Credit Contracts		746		248		1,262		1,083		151		3,490		3,106
Total notional amount		2,757,752		1,050,344		1,316,949		614,532		60,481		5,800,058		4,707,717

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Premises and Equipment (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Maximum Estimated Useful Lives to Amortize Assets

The maximum estimated useful lives we use to amortize our assets are as follows:

Buildings	10 to 40 years
Computer equipment and operating system software	5 years
Other equipment	10 years
Leasehold improvements	Lease term to a maximum of 10 years

Summary of Net Rent Expense for Premises and Equipment

(Canadian $ in millions)																2018																		2017
	Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total			Land			Buildings			Computer equipment			Other equipment			Leasehold improvements			Total
Cost
Balance at beginning of year		174			1,726			1,994			913			1,429			6,236			207			1,784			1,844			902			1,347			6,084
Additions		4			66			236			40			87			433			–			72			156			69			105			402
Disposals (1)		(32	)		(163	)		(11	)		(27	)		(20	)		(253	)		(28	)		(95	)		(13	)		(13	)		(10	)		(159	)
Foreign exchange and other		(1	)		(2	)		10			7			18			32			(5	)		(35	)		7			(45	)		(13	)		(91	)
Balance at end of year		145			1,627			2,229			933			1,514			6,448			174			1,726			1,994			913			1,429			6,236
Accumulated Depreciation and Impairment
Balance at beginning of year		–			1,063			1,465			674			1,001			4,203			–			1,055			1,306			649			927			3,937
Disposals (1)		–			(116	)		(9	)		(24	)		(15	)		(164	)		–			(32	)		(11	)		(8	)		(8	)		(59	)
Amortization		–			60			201			48			91			400			–			63			185			49			94			391
Foreign exchange and other		–			9			5			6			3			23			–			(23	)		(15	)		(16	)		(12	)		(66	)
Balance at end of year		–			1,016			1,662			704			1,080			4,462			–			1,063			1,465			674			1,001			4,203
Net carrying value		145			611			567			229			434			1,986			174			663			529			239			428			2,033

(1) Includes fully depreciated assets written off.

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Acquisitions (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Fair Value of Assets Acquired and Liabilities Assumed at The Date of Acquisition

The fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows:

(Canadian $ in millions)
	KGS
Securities – trading		5,193
Securities borrowed or purchased under resale agreements		5,669
Goodwill and intangible assets		103
Other assets		584
Total assets		11,549
Securities lent or sold under repurchase agreements		9,563
Securities sold but not yet purchased		1,431
Other liabilities		158
Purchase price		397

The purchase price allocation for KGS is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Continuity of Goodwill By Group of CGUs

A continuity of our goodwill by group of CGUs for the years ended October 31, 2018 and 2017 is as follows:

(Canadian $ in millions)							Personal and Commercial Banking									Wealth Management			BMO Capital Markets			Total
	Canadian P&C			U.S. P&C			Total			Traditional Wealth Management			Insurance			Total
Balance – October 31, 2016		97			3,861			3,958			2,117			2			2,119			304			6,381
Acquisitions (disposals) during the year		–			–			–			(4	)		–			(4	)		–			(4	)
Foreign exchange and other (1)		–			(142	)		(142	)		24			–			24			(15	)		(133	)
Balance – October 31, 2017		97			3,719			3,816			2,137			2			2,139			289			6,244
Acquisitions (disposals) during the year		–			–			–			–			–			–			54			54
Foreign exchange and other (1)		–			78			78			(8	)		–			(8	)		5			75
Balance – October 31, 2018		97	(2)		3,797	(3)		3,894			2,129	(4)		2	(5)		2,131			348	(6)		6,373

(1) Other changes in goodwill included the effects of translating goodwill denominated in foreign currencies into Canadian dollars and purchase accounting adjustments related to prior-year purchases.

(2) Relates primarily to bcpbank Canada, Diners Club, Aver Media LP and GE Transportation Finance.

(3) Relates primarily to First National Bank & Trust, Ozaukee Bank, Merchants and Manufacturers Bancorporation, Inc., Diners Club, AMCORE, M&I and GE Transportation Finance.

(4) Relates to BMO Nesbitt Burns Inc., Guardian Group of Funds Ltd., Pyrford International plc, LGM Investments Limited, M&I, myCFO, Inc., Stoker Ostler Wealth Advisors, Inc., CTC Consulting LLC, AWMB and F&C Asset Management plc.

(5) Relates to AIG.

(6) Relates to Gerard Klauer Mattison, BMO Nesbitt Burns Inc., Paloma Securities L.L.C., M&I, Greene Holcomb Fisher and KGS.

Summary of Intangible Assets

The following table presents the changes in the balance of these intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development			Other			Total
Cost as at October 31, 2016		704			968			194			3,189			476			365			5,896
Additions (disposals)		(33	)		–			–			546			(67	)		–			446
Foreign exchange and other		(17	)		(37	)		(7	)		(39	)		(11	)		11			(100	)
Cost as at October 31, 2017		654			931			187			3,696			398			376			6,242
Additions (disposals)		35			–			–			422			94			12			563
Foreign exchange and other		(1	)		20			4			9			4			(4	)		32
Cost as at October 31, 2018		688			951			191			4,127			496			384			6,837

Certain comparative figures have been reclassified to conform with the current year’s presentation.

The following table presents the accumulated amortization of our intangible assets:

(Canadian $ in millions)	Customer relationships			Core deposits			Branch distribution networks			Software – amortizing			Software under development		Other			Total
Accumulated amortization at October 31, 2016		398			735			194			2,329			–		62			3,718
Amortization		68			56			–			336			–		25			485
Disposals		(22	)		–			–			(11	)		–		–			(33	)
Foreign exchange and other		(13	)		(29	)		(7	)		(36	)		–		(2	)		(87	)
Accumulated amortization at October 31, 2017		431			762			187			2,618			–		85			4,083
Amortization		46			51			–			387			–		19			503
Disposals		–			–			–			(20	)		–		–			(20	)
Foreign exchange and other		(2	)		17			4			(15	)		–		(5	)		(1	)
Accumulated amortization at October 31, 2018		475			830			191			2,970			–		99			4,565
Carrying value at October 31, 2018		213			121			–			1,157			496		285			2,272
Carrying value at October 31, 2017		223			169			–			1,078			398		291			2,159

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Other Assets (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Components of Other within Other Assts

The components of other within other assets are as follows:

(Canadian $ in millions)	2018		2017
Accounts receivable, prepaid expenses and other items		6,910		6,508
Accrued interest receivable		1,461		1,079
BMO Transportation Finance – leased vehicles		937		928
Cash collateral		2,019		3,165
Due from clients, dealers and brokers		236		156
Insurance-related assets		822		644
Pension asset (Note 21)		664		508
Precious metals		1,603		582
Total		14,652		13,570

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Deposits (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Deposits

	Payable on demand
(Canadian $ in millions)	Interest bearing				Non-interest bearing				Payable       after notice				Payable on       a fixed date				Total
	2018		2017		2018		2017		2018		2017		2018		2017		2018		2017
Deposits by:
Banks (1)		1,450		818		1,400		1,864		526		586		24,531		24,937		27,907		28,205
Business and government		25,266		20,621		33,984		33,968		67,026		61,790		187,024		166,897		313,300		283,276
Individuals		3,476		3,278		21,345		20,044		90,233		89,859		65,790		55,130		180,844		168,311
Total (2)(3)		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792
Booked in:
Canada		21,735		21,557		47,231		44,380		82,091		81,590		161,192		145,648		312,249		293,175
United States		7,395		2,259		9,477		11,496		74,476		69,555		86,805		75,517		178,153		158,827
Other countries		1,062		901		21		–		1,218		1,090		29,348		25,799		31,649		27,790
Total		30,192		24,717		56,729		55,876		157,785		152,235		277,345		246,964		522,051		479,792

(1) Includes regulated and central banks.

(2) Includes structured notes designated at fair value through profit or loss.

(3) As at October 31, 2018 and 2017, total deposits payable on a fixed date included $29,673 million and $30,419 million, respectively, of federal funds purchased, commercial paper issued and other deposit liabilities. Included in deposits as at October 31, 2018 and 2017 are $259,747 million and $237,127 million, respectively, of deposits denominated in U.S. dollars, and $37,427 million and $27,686 million, respectively, of deposits denominated in other foreign currencies.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Schedule for our Deposits Payable on a Fixed Date

The following table presents the maturity schedule for our deposits payable on a fixed date:

(Canadian $ in millions)	2018		2017
Within 1 year		162,666		145,039
1 to 2 years		34,154		25,620
2 to 3 years		26,107		23,323
3 to 4 years		16,708		19,345
4 to 5 years		22,196		15,850
Over 5 years		15,514		17,787
Total (1)		277,345		246,964

(1) Includes $247,808 million of deposits, each greater than one hundred thousand dollars, of which $146,697 million were booked in Canada, $71,770 million were booked in the United States and $29,341 million were booked in other countries ($221,954 million, $130,197 million, $65,963 million and $25,794 million, respectively, in 2017). Of the $146,697 million of deposits booked in Canada, $55,190 million mature in less than three months, $3,836 million mature in three to six months, $12,909 million mature in six to twelve months and $74,762 million mature after 12 months ($130,197 million, $41,418 million, $7,922 million, $10,574 million and $70,283 million, respectively, in 2017). We have unencumbered liquid assets of $242,612 million to support these and other deposit liabilities ($213,757 million in 2017).

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Other Liabilities (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Components of Other within Other Liablities

The components of other within other liabilities are as follows:

(Canadian $ in millions)	2018		2017
Accounts payable, accrued expenses and other items		8,119		7,894
Accrued interest payable		1,385		1,037
Cash collateral		4,343		3,696
Insurance-related liabilities		9,585		8,959
Liabilities of subsidiaries, other than deposits		9,283		6,931
Other employee future benefits liability (Note 21)		960		1,303
Payable to brokers, dealers and clients		1,898		2,177
Pension liability (Note 21)		256		364
Total		35,829		32,361

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Reconciliation of the Change in Insurance Related Liabilities

A reconciliation of the change in insurance-related liabilities is as follows:

(Canadian $ in millions)	2018			2017
Insurance-related liabilities, beginning of year		8,959			7,909
Increase (decrease) in life insurance policy benefit liabilities from:
New business		742			545
In-force policies		(400	)		66
Changes in actuarial assumptions and methodology		3			(52	)
Foreign currency		–			(1	)
Net increase in life insurance policy benefit liabilities		345			558
Change in other insurance-related liabilities		281			492
Insurance-related liabilities, end of year		9,585			8,959

Summary of Reinsurance Premiums Ceded

Statement of Income for the years ended October 31, 2018, 2017 and 2016, as shown in the table below:

(Canadian $ in millions)	2018			2017			2016
Direct premium income		1,976			1,750			1,561
Ceded premiums		(148	)		(157	)		(271	)
		1,828			1,593			1,290

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Subordinated Debt (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Maturities of Subordinated Debt and Repayment

The face values, terms to maturity and carrying values of our subordinated debt are as follows:

(Canadian $ in millions, except as noted)	Face value	Maturity date	Interest rate (%)	Redeemable at our option	2018 Total	2017 Total
Debentures Series 20	150	December 2025 to 2040	8.25	Not redeemable	143	148
Series F Medium-Term Notes, First Tranche	900	March 2023	6.17	March 2018 (1)	–	905
Series H Medium-Term Notes, First Tranche (8)	1,000	September 2024	3.12	September 2019 (2)	1,003	1,016
Series H Medium-Term Notes, Second Tranche (8)	1,000	December 2025	3.34	December 2020 (3)	916	969
Series I Medium-Term Notes, First Tranche (8)	1,250	June 2026	3.32	June 2021 (4)	1,222	1,178
Series I Medium-Term Notes, Second Tranche (8)	850	June 2027	2.57	June 2022 (5)	813	813
3.803% Subordinated Notes due 2032 (8)(9)	US 1,250	December 2032	3.80	December 2027 (6)	1,573	–
4.338% Subordinated Notes due 2028 (8)(10)	US 850	October 2028	4.34	October 2023 (7)	1,112	–
Total (11)					6,782	5,029

(1) All $900 million Series F Medium-Term Notes, First Tranche were redeemed on March 28, 2018 for 100% of the principal amount plus accrued and unpaid interest to, but excluding, the redemption date.

(2) Redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing September 19, 2019.

(3) Redeemable at the greater of par and the Canada Yield Price prior to December 8, 2020, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing December 8, 2020.

(4) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2021, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2021.

(5) Redeemable at the greater of par and the Canada Yield Price prior to June 1, 2022, and redeemable at par together with accrued and unpaid interest to, but excluding, their redemption date commencing June 1, 2022.

(6) Redeemable at par on December 15, 2027 together with accrued and unpaid interest to, but excluding, the redemption date.

(7) Redeemable at par on October 5, 2023 together with accrued and unpaid interest to, but excluding, the redemption date.

(8) These notes include a non-viability contingent capital provision, which is necessary for notes issued after a certain date to qualify as regulatory capital under Basel III. As such, the notes are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each note is convertible into common shares pursuant to an automatic conversion formula with a multiplier and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the par value of the note (including accrued and unpaid interest on such note) by the conversion price and then times the multiplier.

(9) On December 12, 2017, we issued US$1,250 million of 3.803% subordinated notes.

(10) On October 5, 2018, we issued US$850 million of 4.338% subordinated notes.

(11) Certain amounts of subordinated debt were issued at a premium or discount and include fair value hedge adjustments, which together decreased their carrying value as at October 31, 2018 by $233 million ($121 million in 2017); see Note 8 for further details. The carrying value is also adjusted for the subordinated debt holdings, held for market making purposes.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Equity (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Classes of Share Capital

Share Capital

(Canadian $ in millions, except as noted)	2018								2017
	Number of shares			Amount			Dividends declared per share		Number of shares			Amount			Dividends declared per share
Preferred Shares – Classified as Equity
Class B – Series 14 (1)		–			–			–		–			–			0.66
Class B – Series 15 (2)		–			–			–		–			–			0.73
Class B – Series 16 (3)		–			–			0.64		6,267,391			157			0.85
Class B – Series 17 (4)		–			–			0.52		5,732,609			143			0.55
Class B – Series 25		9,425,607			236			0.45		9,425,607			236			0.45
Class B – Series 26		2,174,393			54			0.59		2,174,393			54			0.43
Class B – Series 27		20,000,000			500			1.00		20,000,000			500			1.00
Class B – Series 29		16,000,000			400			0.98		16,000,000			400			0.98
Class B – Series 31		12,000,000			300			0.95		12,000,000			300			0.95
Class B – Series 33		8,000,000			200			0.95		8,000,000			200			0.95
Class B – Series 35		6,000,000			150			1.25		6,000,000			150			1.25
Class B – Series 36		600,000			600			58.50		600,000			600			58.50
Class B – Series 38		24,000,000			600			1.21		24,000,000			600			1.33
Class B – Series 40 (5)		20,000,000			500			1.13		20,000,000			500			0.80
Class B – Series 42 (6)		16,000,000			400			1.10		16,000,000			400			0.45
Class B – Series 44 (7)		16,000,000			400			–		–			–			–
					4,340								4,240
Common Shares
Balance at beginning of year		647,816,318			13,032					645,761,333			12,539
Issued under the Shareholder Dividend
Reinvestment and Share Purchase Plan		–			–					4,821,184			448
Issued/cancelled under the Stock Option Plan and other stock-based compensation plans (Note 20)		1,513,307			99					2,233,801			146
Repurchased for cancellation		(10,000,000	)		(202	)				(5,000,000	)		(101	)
Balance at End of Year		639,329,625			12,929			3.78		647,816,318			13,032			3.56
Share Capital					17,269								17,272

(1) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 14, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.66 per share and 10 million shares were outstanding at the time of the dividend declaration.

(2) On May 25, 2017, we redeemed all 10 million Non-Cumulative Perpetual Class B Preferred Shares, Series 15, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2017 were $0.73 per share and 10 million shares were outstanding at the time of the dividend declaration.

(3) On August 25, 2018, we redeemed all 6,267,391 Non-Cumulative Perpetual Class B Preferred Shares, Series 16, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.64 per share and 6,267,391 shares were outstanding at the time of the dividend declaration.

(4) On August 25, 2018, we redeemed all 5,732,609 Non-Cumulative Perpetual Class B Preferred Shares, Series 17, at a price of $25.00 cash per share plus all declared and unpaid dividends. Dividends declared for the year ended October 31, 2018 were $0.52 per share and 5,732,609 shares were outstanding at the time of the dividend declaration.

(5) On March 9, 2017, we issued 20 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 40, at a price of $25.00 cash per share for gross proceeds of $500 million.

(6) On June 29, 2017, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 42, at a price of $25.00 cash per share for gross proceeds of $400 million.

(7) On September 17, 2018, we issued 16 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 44, at a price of $25.00 cash per share for gross proceeds of $400 million.

Summary Of Preferred Share Rights And Privileges

Preferred Share Rights and Privileges

(Canadian $, except as noted)
	Redemption amount		Quarterly non-cumulative dividend (1)			Reset premium		Date redeemable / convertible			Convertible to
Class B – Series 25		25.00		$0.112813	(2)		1.15%		August 25, 2021	(3)(4)		Class B – Series 26	(8)
Class B – Series 26		25.00		Floating	(7)		1.15%		August 25, 2021	(3)(5)		Class B – Series 25	(8)
Class B – Series 27		25.00		$    0.2500	(2)		2.33%		May 25, 2019	(3)(4)		Class B – Series 28	(8)
Class B – Series 29		25.00		$  0.24375	(2)		2.24%		August 25, 2019	(3)(4)		Class B – Series 30	(8)
Class B – Series 31		25.00		$    0.2375	(2)		2.22%		November 25, 2019	(3)(4)		Class B – Series 32	(8)
Class B – Series 33		25.00		$    0.2375	(2)		2.71%		August 25, 2020	(3)(4)		Class B – Series 34	(8)
Class B – Series 35		25.00		$    0.3125			Does not reset		August 25, 2020	(6)		Not convertible
Class B – Series 36		1,000.00		$  14.6250	(2)		4.97%		November 25, 2020	(3)(4)		Class B – Series 37	(8)
Class B – Series 38		25.00		$0.303125	(2)		4.06%		February 25, 2022	(3)(4)		Class B – Series 39	(8)
Class B – Series 40		25.00		$  0.28125	(2)		3.33%		May 25, 2022	(3)(4)		Class B – Series 41	(8)
Class B – Series 42		25.00		$    0.2750	(2)		3.17%		August 25, 2022	(3)(4)		Class B – Series 43	(8)
Class B – Series 44		25.00		$0.303125	(2)		2.68%		November 25, 2023	(3)(4)		Class B – Series 45	(8)

(1) Non-cumulative dividends are payable quarterly as and when declared by the Board of Directors.

(2) The dividend rate will reset on the date redeemable and every five years thereafter at a rate equal to the 5-year Government of Canada bond yield plus the reset premium noted. If converted to a floating rate series, the rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus the reset premium noted.

(3) Redeemable on the date noted and every five years thereafter.

(4) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 26, 28, 30, 32, 34, 37, 39, 41, 43 and 45 are floating rate preferred shares.

(5) Convertible on the date noted and every five years thereafter if not redeemed. If converted, Series 25 are fixed rate preferred shares.

(6) Series 35 is subject to a redemption premium if redeemed prior to August 25, 2024.

(7) Floating rate will be set as and when declared at the 3-month Government of Canada treasury bill yield plus a reset premium.

(8) If converted, the holders have the option to convert back to the original preferred shares on subsequent redemption dates.

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Fair Value of Financial Instruments and Trading-Related Revenue (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet

Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet

Set out in the following tables are the fair values of financial instruments not carried at fair value on our Consolidated Balance Sheet.

(Canadian $ in millions)									2018
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Amortized cost		6,485		6,288		429		5,795		64
Loans (1)
Residential mortgages		119,544		118,609		–		118,609		–
Consumer instalment and other personal		62,687		62,618		–		62,618		–
Credit cards		8,099		8,099		–		8,099		–
Business and government (2)		192,225		191,989		–		191,989		–
		382,555		381,315		–		381,315		–
Deposits (3)		506,742		506,581		–		506,581		–
Securitization and structured entities’ liabilities		25,051		24,838		–		24,838		–
Subordinated debt		6,782		6,834		–		6,834		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $1,450 million of loans classified as FVTPL upon adoption of IFRS 9 (refer to Note 28).

(3) Excludes $15,309 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

(Canadian $ in millions)									2017
	Carrying value		Fair value		Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)
Securities
Held to maturity		9,094		9,096		2,522		6,574		–
Loans (1)
Residential mortgages		115,165		114,821		–		114,821		–
Consumer instalment and other personal		61,465		61,470		–		61,470		–
Credit cards		7,828		7,828		–		7,828		–
Business and government		174,084		174,105		–		174,105		–
		358,542		358,224		–		358,224		–
Deposits (2)		466,118		466,441		–		466,441		–
Securitization and structured entities’ liabilities		23,054		23,148		–		23,148		–
Subordinated debt		5,029		5,255		–		5,255		–

(1) Carrying value of loans is net of allowance.

(2) Excludes $13,674 million of structured note liabilities designated at FVTPL and accounted for at fair value.

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Recurring Fair Value Measurement of Assets and Liabilities

The extent of our use of actively quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and models without observable market information as inputs (Level 3) in the valuation of securities, fair value liabilities, derivative assets and derivative liabilities is presented in the following tables:

Classified under IFRS 9

(Canadian $ in millions)	2018
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		9,107		1,213		–		10,320
Canadian provincial and municipal governments		4,013		4,689		–		8,702
U.S. federal government		9,465		52		–		9,517
U.S. states, municipalities and agencies		78		1,138		–		1,216
Other governments		1,210		201		–		1,411
NHA MBS and U.S. agency MBS and CMO		60		8,869		255		9,184
Corporate debt		2,973		6,218		7		9,198
Loans		–		199		–		199
Corporate equity		49,946		4		–		49,950
		76,852		22,583		262		99,697
FVTPL Securities
Issued or guaranteed by:
Canadian federal government		328		103		–		431
Canadian provincial and municipal governments		219		727		–		946
U.S. federal government		69		–		–		69
NHA MBS and U.S. agency MBS and CMO		–		7		–		7
Corporate debt		178		6,643		–		6,821
Corporate equity		1,378		134		1,825		3,337
		2,172		7,614		1,825		11,611
FVOCI Securities
Issued or guaranteed by:
Canadian federal government		11,978		827		–		12,805
Canadian provincial and municipal governments		3,315		3,547		–		6,862
U.S. federal government		16,823		–		–		16,823
U.S. states, municipalities and agencies		14		3,640		1		3,655
Other governments		3,143		1,647		–		4,790
NHA MBS and U.S. agency MBS and CMO		–		13,687		–		13,687
Corporate debt		1,959		1,797		–		3,756
Corporate equity		–		–		62		62
		37,232		25,145		63		62,440
Business and Government Loans		–		–		1,450		1,450
Fair Value Liabilities
Securities sold but not yet purchased		26,336		2,468		–		28,804
Structured note liabilities and other note liabilities		–		15,309		–		15,309
Annuity liabilities		–		800		–		800
		26,336		18,577		–		44,913
Derivative Assets
Interest rate contracts		18		8,959		–		8,977
Foreign exchange contracts		16		12,983		–		12,999
Commodity contracts		166		1,894		–		2,060
Equity contracts		286		1,872		–		2,158
Credit default swaps		–		10		–		10
		486		25,718		–		26,204
Derivative Liabilities
Interest rate contracts		14		8,620		–		8,634
Foreign exchange contracts		2		11,852		–		11,854
Commodity contracts		295		1,161		–		1,456
Equity contracts		246		2,183		1		2,430
Credit default swaps		–		36		1		37
		557		23,852		2		24,411

Classified under IAS 39

(Canadian $ in millions)	2017
	Valued using quoted market prices		Valued using models (with observable inputs)		Valued using models (without observable inputs)		Total
Trading Securities
Issued or guaranteed by:
Canadian federal government		8,712		2,115		–		10,827
Canadian provincial and municipal governments		3,177		4,150		–		7,327
U.S. federal government		9,417		56		–		9,473
U.S. states, municipalities and agencies		189		1,942		–		2,131
Other governments		630		193		–		823
NHA MBS, U.S. agency MBS and CMO		–		931		–		931
Corporate debt		1,485		10,278		–		11,763
Loans		3		150		–		153
Corporate equity		55,640		1		–		55,641
		79,253		19,816		–		99,069
Available-for-Sale Securities
Issued or guaranteed by:
Canadian federal government		8,283		897		–		9,180
Canadian provincial and municipal governments		920		2,707		–		3,627
U.S. federal government		14,269		–		–		14,269
U.S. states, municipalities and agencies		18		4,077		1		4,096
Other governments		2,290		1,268		–		3,558
NHA MBS, U.S. agency MBS and CMO		–		13,216		–		13,216
Corporate debt		1,551		2,972		2		4,525
Corporate equity		37		126		1,441		1,604
		27,368		25,263		1,444		54,075
Other Securities		–		–		333		333
Fair Value Liabilities
Securities sold but not yet purchased		22,992		2,171		–		25,163
Structured note liabilities and other note liabilities		–		13,674		–		13,674
Annuity liabilities		–		749		–		749
		22,992		16,594		–		39,586
Derivative Assets
Interest rate contracts		4		9,223		–		9,227
Foreign exchange contracts		17		17,196		–		17,213
Commodity contracts		232		846		–		1,078
Equity contracts		93		1,333		–		1,426
Credit default swaps		–		7		–		7
		346		28,605		–		28,951
Derivative Liabilities
Interest rate contracts		7		8,309		–		8,316
Foreign exchange contracts		6		14,967		–		14,973
Commodity contracts		239		835		–		1,074
Equity contracts		166		3,220		–		3,386
Credit default swaps		–		55		–		55
		418		27,386		–		27,804

Significant Unobservable Inputs in Level 3 Instrument Valuations

The table below presents the fair values of our significant Level 3 financial instruments, the valuation techniques used to determine their fair values and the value ranges of significant unobservable inputs used in the valuations. We have not applied any other reasonably possible alternative assumption to the significant Level 3 categories of private equity investments, as the net asset values are provided by the investment or fund managers.

As at October 31, 2018 (Canadian $ in millions, except as noted)

Reporting line in fair value hierarchy table

Fair value of assets

Valuation techniques

Significant unobservable inputs

Range of input values (1)

Change in fair value reasonably possible alternatives (2)

Low

High

Private equity (3)

Corporate equity

1,825

Net Asset Value EV/EBITDA

Net Asset Value Multiple

na 6x

na 18x

na na

Loans

Business and government loans

1,450

Discounted cash flows

Discount margin

50 bps

175 bps

3

(1) The low and high input values represent the highest and lowest actual level of inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the specific underlying instruments within the product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date.

(2) The impact of assuming a 10 basis point increase or decrease in discount margin for business and government loans.

(3) Included in private equity is $889 million of Federal Reserve Bank and U.S. Federal Home Loan Bank shares that we hold to meet regulatory requirements.

na – not applicable

Summary of Changes in Level 3 Instruments Carried At Fair Value

The tables below present a reconciliation of all changes in Level 3 financial instruments during the years ended October 31, 2018 and 2017, including realized and unrealized gains (losses) included in earnings and other comprehensive income.

			Change in fair value
For the year ended October 31, 2018 (Canadian $ in millions)	Balance November 1, 2017		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2018		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
NHA MBS and U.S. agency MBS and CMO		–		(1	)		4			306		(54	)		–			–		–			255		(5	)
Corporate debt		–		–			–			7		–			–			–		–			7		–
Total trading securities		–		(1	)		4			313		(54	)		–			–		–			262		(5	)
FVTPL Securities
Corporate debt (3)		73		–			(4	)		5		–			–			–		(74	)		–		–
Corporate equity (3)(4)		1,701		12			31			307		(161	)		(2	)		–		(63	)		1,825		5
Total FVTPL securities		1,774		12			27			312		(161	)		(2	)		–		(137	)		1,825		5
FVOCI Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		2		–			–			–		–			(2	)		–		–			–		na
Corporate equity		–		–			–			62		–			–			–		–			62		na
Total FVOCI securities		3		–			–			62		–			(2	)		–		–			63		na
Business and Government Loans (5)		2,372		(2	)		24			604		–			(1,548	)		–		–			1,450		–
Derivative Liabilities
Equity contracts		–		–			–			–		–			–			1		–			1		–
Credit default swaps		–		–			–			–		–			–			1		–			1		–
Total derivative liabilities		–		–			–			–		–			–			2		–			2		–

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on FVTPL securities still held on October 31, 2018 are included in earnings for the year.

(3) Includes $73 million of debt instruments and $260 million of equity instruments reclassified from other securities to FVTPL upon adoption of IFRS 9 (see Note 28).

(4) Includes $1,441 million of equity instruments reclassified from available-for-sale to FVTPL upon adoption of IFRS 9 (see Note 28).

(5) Business and government loans were reclassified from amortized cost to FVTPL upon adoption of IFRS 9 (see Note 28).

na – not applicable

			Change in fair value
For the year ended October 31, 2017 (Canadian $ in millions)	Balance October 31, 2016		Included in earnings			Included in other compre- hensive income (1)			Purchases		Sales			Maturities/ Settlement			Transfers into Level 3		Transfers out of Level 3			Fair value as at October 31, 2017		Change in unrealized gains (losses) recorded in income for instruments still held (2)
Trading Securities
Corporate debt		91		1			1			–		–			(93	)		–		–			–		–
Total trading securities		91		1			1			–		–			(93	)		–		–			–		–
Available-for-Sale Securities
Issued or guaranteed by:
U.S. states, municipalities and agencies		1		–			–			–		–			–			–		–			1		na
Corporate debt		4		–			–			–		(1	)		(1	)		–		–			2		na
Corporate equity		1,456		(40	)		(15	)		190		(117	)		–			–		(33	)		1,441		na
Total available-for-sale securities		1,461		(40	)		(15	)		190		(118	)		(1	)		–		(33	)		1,444		na
Other Securities		320		(9	)		(7	)		134		(102	)		(3	)		–		–			333		(8	)

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Changes in unrealized gains (losses) on trading securities, derivative assets and derivative liabilities still held on October 31, 2017 are included in earnings for the year.

na – not applicable

Summary Of Trading Revenue

Net interest income arises from interest and dividends related to trading assets and liabilities and is reported net of interest expense associated with funding these assets and liabilities in the following table.

(Canadian $ in millions)	2018			2017			2016
Interest rates		437			480			663
Foreign exchange		377			369			349
Equities		449			239			188
Commodities		63			84			66
Other		82			47			25
Total trading revenue		1,408			1,219			1,291
Reported as:
Net interest income (1)		(422	)		(133	)		99
Non-interest revenue – trading revenue		1,830			1,352			1,192
Total trading revenue		1,408			1,219			1,291

(1) Amounts in brackets denote net interest expense.

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Offsetting of Financial Assets and Financial Liabilities (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Amounts Not Offset in the Consolidated Balance Sheet

(Canadian $ in millions)													2018
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		86,635		1,584		85,051		13,355		70,640		–		1,056
Derivative instruments		52,810		26,606		26,204		15,575		505		3,576		6,548
		139,445		28,190		111,255		28,930		71,145		3,576		7,604
Financial Liabilities
Derivative instruments		51,017		26,606		24,411		15,575		555		1,492		6,789
Securities lent or sold under repurchase agreements		68,268		1,584		66,684		13,355		53,071		–		258
		119,285		28,190		91,095		28,930		53,626		1,492		7,047
(Canadian $ in millions)													2017
							Amounts not offset in the balance sheet
	Gross amounts		Amounts offset in the balance sheet		Net amounts presented in the balance sheet		Impact of master netting agreements		Securities received/pledged as collateral (1)(2)		Cash collateral		Net amount (3)
Financial Assets
Securities borrowed or purchased under resale agreements		80,948		5,901		75,047		9,382		65,044		–		621
Derivative instruments		45,064		16,113		28,951		19,909		933		2,903		5,206
		126,012		22,014		103,998		29,291		65,977		2,903		5,827
Financial Liabilities
Derivative instruments		43,917		16,113		27,804		19,909		1,263		1,642		4,990
Securities lent or sold under repurchase agreements		61,020		5,901		55,119		9,382		45,436		–		301
		104,937		22,014		82,923		29,291		46,699		1,642		5,291

(1) Financial assets received/pledged as collateral are disclosed at fair value and are limited to the net balance sheet exposure (i.e. any over-collateralization is excluded from the table).

(2) Certain amounts of collateral are restricted from being sold or repledged except in the event of default or the occurrence of other predetermined events.

(3) Not intended to represent our actual exposure to credit risk.

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Capital Management (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Regulatory Capital Measure and Risk-Weighted Assets

Regulatory Capital Measures and Risk-Weighted Assets

(Canadian $ in millions, except as noted)	2018		2017
Common Equity Tier 1 Capital		32,721		30,633
Tier 1 Capital		37,220		35,108
Total Capital		44,116		40,596
Common Equity Tier 1 Capital Risk-Weighted Assets		289,237		269,466
Tier 1 Capital Risk-Weighted Assets		289,420		269,466
Total Capital Risk-Weighted Assets		289,604		269,466
Common Equity Tier 1 Capital Ratio		11.3%		11.4%
Tier 1 Capital Ratio		12.9%		13.0%
Total Capital Ratio		15.2%		15.1%
Leverage Ratio		4.2%		4.4%

All 2018 and 2017 balances above are on an “all-in” basis.

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Employee Compensation - Share-Based Compensation (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Information about our Stock Option Plan

The following table summarizes information about our Stock Option Plan:

(Canadian $, except as noted)			2018				2017				2016
	Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)		Number of stock options		Weighted- average exercise price (1)
Outstanding at beginning of year		7,525,296		72.05		9,805,299		77.41		12,111,153		80.19
Granted		705,398		100.63		723,431		96.90		754,714		77.23
Exercised		1,513,307		58.40		2,233,801		57.80		2,103,391		55.32
Forfeited/cancelled		152,417		86.85		13,243		66.89		104,606		71.76
Expired		469,769		153.40		756,390		195.02		852,571		179.53
Outstanding at end of year		6,095,201		72.19		7,525,296		72.05		9,805,299		77.41
Exercisable at end of year		3,782,481		61.39		4,584,375		67.42		5,605,485		83.34
Available for grant		3,405,239				3,811,157				4,151,676

(1) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018, October 31, 2017 and October 31, 2016, respectively.

For foreign currency denominated options exercised or expired during the year, the weighted-average exercise prices are translated using the exchange rates as at the settlement date and expiry date respectively.

Summary of Options Outstanding and Exercisable by Range of Exercise Price

Options outstanding and exercisable at October 31, 2018 by range of exercise price were as follows:

(Canadian $, except as noted)											2018
			Options outstanding						Options exercisable
Range of exercise prices	Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)		Number of stock options		Weighted- average remaining contractual life (years)		Weighted-average exercise price (2)
$30.01 to $40.00		13,690		0.1		34.13		13,690		0.1		34.13
$50.01 to $60.00		1,736,930		2.3		55.88		1,736,930		2.3		55.88
$60.01 to $70.00		1,798,219		4.7		64.68		1,798,219		4.7		64.68
$70.01 and over (1)		2,546,362		7.7		88.83		233,642		6.0		78.62

(1) Certain options were issued as part of the acquisition of M&I.

(2) The weighted-average exercise prices reflect the conversion of foreign currency denominated options at the exchange rate as at October 31, 2018.

Summary of Further Information about our Stock Option Plan

The following table summarizes further information about our Stock Option Plan:

(Canadian $ in millions, except as noted)	2018		2017		2016
Unrecognized compensation cost for non-vested stock option awards		5		5		4
Weighted-average period over which this cost will be recognized (in years)		2.6		2.7		2.5
Total intrinsic value of stock options exercised		67		90		55
Cash proceeds from stock options exercised		88		129		116
Weighted-average share price for stock options exercised (in dollars)		102.55		98.05		81.41

Summary of Ranges of Values used for each Option Pricing Assumption

October 31, 2018, 2017 and 2016 was $11.30, $11.62 and $7.60, respectively. To determine the fair value of the stock option tranches on the grant date, the following ranges of values were used for each option pricing assumption:

	2018		2017		2016
Expected dividend yield		4.1%		4.3%		5.5%
Expected share price volatility		17.0% – 17.3%		18.4% – 18.8%		19.8% – 20.0%
Risk-free rate of return		2.1%		1.7% – 1.8%		1.3% – 1.4%
Expected period until exercise (in years)		6.5 – 7.0		6.5 – 7.0		6.5 – 7.0

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Employee Compensation - Pension and Other Employee Future Benefits (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Asset Allocation Ranges and Weighted-average Actual Asset Allocations

The asset allocation ranges and weighted-average actual asset allocations of our primary pension plans, based on the fair market values at October 31, are as follows:

	Pension benefit plans
	Target range 2018		Actual 2018		Actual 2017
Equities		25% – 50%		37%		40%
Fixed income investments		25% – 55%		46%		46%
Other		10% – 40%		17%		14%

Our pension and other employee future benefit plan assets are measured at fair value on a recurring basis.

Summary of Plan Information for Past Three Years

A summary of plan information for the past three years is as follows:

(Canadian $ in millions)	Pension benefit plans									Other employee future benefit plans
	2018			2017			2016			2018			2017			2016
Defined benefit obligation		8,311			8,846			8,992			1,113			1,460			1,493
Fair value of plan assets		8,719			8,990			8,655			153			157			150
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)
Surplus (deficit) is comprised of:
Funded or partially funded plans		573			339			(127	)		37			28			7
Unfunded plans		(165	)		(195	)		(210	)		(997	)		(1,331	)		(1,350	)
Surplus (deficit) and net defined benefit asset (liability)		408			144			(337	)		(960	)		(1,303	)		(1,343	)

Summary of Pension and Other Employee Future Benefit Expenses

Pension and Other Employee Future Benefit Expenses

Pension and other employee future benefit expenses are determined as follows:

(Canadian $ in millions)	Pension benefit plans								Other employee future benefit plans
	2018			2017		2016			2018			2017			2016
Annual benefits expense
Current service cost		210			254		224			26			32			25
Net interest (income) expense on net defined benefit (asset) liability		(10	)		7		(10	)		45			47			52
Past service cost (income)		7			–		–			(277	)		–			–
Administrative expenses		5			5		5			–			–			–
Remeasurement of other long-term benefits		–			–		–			(10	)		(6	)		6
Benefits expense		212			266		219			(216	)		73			83
Canada and Quebec pension plan expense		76			75		73			–			–			–
Defined contribution expense		153			123		96			–			–			–
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income		441			464		388			(216	)		73			83

Summary of Weighted-average Assumptions Used to Determine Benefit Expenses

Weighted-average Assumptions Used to Determine Benefit Expenses

	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018			2017			2016
Discount rate at beginning of year (3)(4)		3.5%		3.4%		4.2%		3.6%			3.6%			4.4%
Rate of compensation increase		2.4%		2.8%		2.7%		2.0%			2.4%			2.4%
Assumed overall health care cost trend rate		na		na		na		4.9%	(1)		5.2%	(2)		5.3%	(2)

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

(3) The pension benefit current service cost was calculated using a separate discount rate of 3.70% and 3.68% for 2018 and 2017, respectively.

(4) The other employee future benefit plans current service cost was calculated using a separate discount rate of 3.76% and 3.78% for 2018 and 2017, respectively.

na – not applicable

Summary of Current Life Expectancies Underlying the Amounts of the Defined Benefit Obligations

The current life expectancies underlying the amounts of the defined benefit obligations for our primary plans are as follows:

(Years)	Canada				United States
	2018		2017		2018		2017
Life expectancy for those currently age 65
Males		23.7		23.6		21.9		22.0
Females		24.0		24.0		23.4		23.4
Life expectancy at age 65 for those currently age 45
Males		24.6		24.6		23.1		23.2
Females		25.0		24.9		24.5		24.6

Summary of Changes in Estimated Financial Positions of Defined Benefit Pension Plans and Other Employee Future Benefit Plans

Changes in the estimated financial positions of our defined benefit pension plans and other employee future benefit plans are as follows:

(Canadian $ in millions, except as noted)	Pension benefit plans						Other employee future benefit plans
	2018			2017			2018			2017
Defined benefit obligation
Defined benefit obligation at beginning of year		8,846			8,992			1,460			1,493
Current service cost		210			254			26			32
Past service cost (income)		7			–			(277	)		–
Interest cost		299			300			51			52
Benefits paid		(492	)		(448	)		(43	)		(45	)
Employee contributions		15			15			5			5
Actuarial (gains) losses due to:
Changes in demographic assumptions		(50	)		(127	)		(31	)		(107	)
Changes in financial assumptions		(562	)		(150	)		(77	)		(2	)
Plan member experience		16			45			(4	)		39
Foreign exchange and other		22			(35	)		3			(7	)
Defined benefit obligation at end of year		8,311			8,846			1,113			1,460
Wholly or partially funded defined benefit obligation		8,146			8,651			116			129
Unfunded defined benefit obligation		165			195			997			1,331
Total defined benefit obligation		8,311			8,846			1,113			1,460
Weighted-average assumptions used to determine the defined benefit obligation
Discount rate at end of year		4.0%			3.5%			4.1%			3.6%
Rate of compensation increase		2.4%			2.4%			2.0%			2.0%
Assumed overall health care cost trend rate		na			na			4.9%	(1)		5.2%	(2)
Fair value of plan assets
Fair value of plan assets at beginning of year		8,990			8,655			157			150
Interest income		309			293			6			5
Return on plan assets (excluding interest income)		(323	)		277			(10	)		8
Employer contributions		213			219			35			40
Employee contributions		15			15			5			5
Benefits paid		(492	)		(448	)		(43	)		(45	)
Administrative expenses		(5	)		(5	)		–			–
Foreign exchange and other		12			(16	)		3			(6	)
Fair value of plan assets at end of year		8,719			8,990			153			157
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Recorded in:
Other assets		664			508			–			–
Other liabilities		(256	)		(364	)		(960	)		(1,303	)
Surplus (deficit) and net defined benefit asset (liability) at end of year		408			144			(960	)		(1,303	)
Actuarial gains (losses) recognized in other comprehensive income
Net actuarial gains (losses) on plan assets		(323	)		277			(10	)		8
Actuarial gains (losses) on defined benefit obligation due to:
Changes in demographic assumptions		50			127			30			104
Changes in financial assumptions		562			150			72			–
Plan member experience		(16	)		(45	)		1			(41	)
Foreign exchange and other		6			(3	)		–			–
Actuarial gains recognized in other comprehensive income for the year		279			506			93			71

(1) Trending to 4.1% in 2040 and remaining at that level thereafter.

(2) Trending to 4.5% in 2031 and remaining at that level thereafter.

na – not applicable

Summary of Fair Values of Plan Assets Held

The fair values of plan assets held by our primary plans as at October 31 are as follows:

(Canadian $ in millions)	2018								2017
	Quoted		Unquoted			Total			Quoted		Unquoted			Total
Cash and money market funds		114		–			114			150		5			155
Securities issued or guaranteed by:
Canadian federal government		108		41			149			143		47			190
Canadian provincial and municipal governments		219		309			528			471		320			791
U.S. federal government		297		–			297			307		20			327
U.S. states, municipalities and agencies		–		12			12			–		16			16
Pooled funds		1,591		2,715			4,306			1,743		2,012			3,755
Derivative instruments		1		(14	)		(13	)		1		(29	)		(28	)
Corporate debt		6		1,055			1,061			9		1,251			1,260
Corporate equity		1,105		–			1,105			1,291		–			1,291
	3,441		4,118			7,559			4,115		3,642			7,757

Summary of Changes in Number of Key Assumption

		Defined benefit obligation
(Canadian $ in millions, except as noted)		Pension benefit plans			Other employee future benefit plans
Discount rate (%)			4.0			4.1
Impact of:	1% increase ($)		(811	)		(102	)
	1% decrease ($)		1,016			126
Rate of compensation increase (%)			2.4			2.0
Impact of:	0.25% increase ($)		39			–	(1)
	0.25% decrease ($)		(38	)		–	(1)
Mortality
Impact of:	1 year shorter life expectancy ($)		(138	)		(23	)
	1 year longer life expectancy ($)		135			23
Assumed overall health care cost trend rate (%)			na			4.9	(2)
Impact of:	1% increase ($)		na			47
	1% decrease ($)		na			(48	)

(1) The change in this assumption is immaterial.

(2) Trending to 4.1% in 2040 and remaining at that level thereafter.

na – not applicable

Summary of Duration of Defined Benefit Obligation

The duration of the defined benefit obligation for our primary plans is as follows:

(Years)	2018		2017
Canadian pension plans		14.0		14.7
U.S. pension plans		7.2		8.0
Canadian other employee future benefit plans		14.3		16.5

Summary of Cash Payments in Connection with Employee Future Benefit Plans

Cash payments we made during the year in connection with our employee future benefit plans are as follows:

(Canadian $ in millions)	Pension benefit plans						Other employee future benefit plans
	2018		2017		2016		2018		2017		2016
Contributions to defined benefit plans		154		187		192		–		–		–
Contributions to defined contribution plans		153		123		96		–		–		–
Benefits paid directly to pensioners		59		32		43		35		40		38
		366		342		331		35		40		38

Our best estimate of the contributions we expect to make for the year ending October 31, 2019 is approximately $246 million to our defined benefit pension plans and $41 million to our other employee future benefit plans.

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Income Taxes (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Provision for Income Taxes

Provision for Income Taxes

(Canadian $ in millions)	2018			2017			2016
Consolidated Statement of Income
Current
Provision for income taxes for the current period		1,331			1,254			927
Adjustments in respect of current tax for prior periods		20			18			8
Deferred
Origination and reversal of temporary differences		276			80			183
Effect of changes in tax rates		425			(2	)		(2	)
Previously unrecognized tax loss, tax credit or temporary difference for a prior period		(92	)		(54	)		(15	)
		1,960			1,296			1,101
Other Comprehensive Income and Shareholders’ Equity
Income tax expense (recovery) related to:
Unrealized gains (losses) on FVOCI securities (1)		(69	)		21			64
Reclassification to earnings of (gains) on FVOCI securities (1)		(23	)		(36	)		(11	)
Gains (losses) on derivatives designated as cash flow hedges		(432	)		(322	)		4
Reclassification to earnings of losses on derivatives designated as cash flow hedges		121			21			6
Hedging of unrealized (gains) losses on translation of net foreign operations		(56	)		8			10
Gains (losses) on remeasurement of pension and other employee future benefit plans		111			157			(156	)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value		(6	)		(53	)		(55	)
Share-based compensation		10			(12	)		–
Total provision for income taxes		1,616			1,080			963

(1) Fiscal 2017 and prior years represent available-for-sale securities (Note 3).

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Components of Total Provision for Income Taxes (Canadian $ in millions)	2018			2017		2016
Canada: Current income taxes
Federal		501			470		434
Provincial		299			272		248
		800			742		682
Canada: Deferred income taxes
Federal		(45	)		2		(120	)
Provincial		(27	)		–		(67	)
		(72	)		2		(187	)
Total Canadian		728			744		495
Foreign: Current income taxes		224			281		220
Deferred income taxes		664			55		248
Total foreign		888			336		468
Total provision for income taxes		1,616			1,080		963

Summary of Reconciliation of Effective Tax Rates

Set out below is a reconciliation of our statutory tax rates and income taxes that would be payable at these rates to the effective income tax rates and provision for income taxes that we have recorded in our Consolidated Statement of Income:

(Canadian $ in millions, except as noted)			2018					2017					2016
Combined Canadian federal and provincial income taxes at the statutory tax rate	1,971			26.6	%	1,768			26.6	%	1,525			26.6	%
Increase (decrease) resulting from:
Tax-exempt income from securities	(226	)		(3.0	)	(409	)		(6.2	)	(367	)		(6.4	)
Foreign operations subject to different tax rates	(110	)		(1.5	)	22			0.3		13			0.3
Change in tax rate for deferred income taxes	425			5.7		(2	)		–		(2	)		–
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(92	)		(1.2	)	(54	)		(0.8	)	(15	)		(0.3	)
Income attributable to investments in associates and joint ventures	(39	)		(0.5	)	(103	)		(1.5	)	(47	)		(0.8	)
Adjustments in respect of current tax for prior periods	20			0.3		18			0.2		8			0.1
Other	11			0.1		56			0.9		(14	)		(0.3	)
Provision for income taxes and effective tax rate	1,960			26.5	%	1,296			19.5	%	1,101			19.2	%

Summary of Components of Deferred Income Tax Balances

Components of Deferred Income Tax Balances

(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, November 1, 2017 (2)			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2018
Allowance for credit losses		684			(150	)		–			(50	)		484
Employee future benefits		416			(111	)		(23	)		–			282
Deferred compensation benefits		545			(50	)		–			(1	)		494
Other comprehensive income		50			–			138			7			195
Tax loss carryforwards		1,233			(628	)		–			1			606
Tax credits		454			(39	)		–			–			415
Premises and equipment		(664	)		148			–			1			(515	)
Pension benefits		(52	)		19			(88	)		–			(121	)
Goodwill and intangible assets		(261	)		60			–			–			(201	)
Securities		21			17			–			–			38
Other		180			125			(10	)		(9	)		286
Total		2,606			(609	)		17			(51	)		1,963
(Canadian $ in millions)
Deferred Income Tax Asset (Liability) (1)	Net asset, October 31, 2016			Benefit (expense) to income statement			Benefit (expense) to equity			Translation and other			Net asset, October 31, 2017
Allowance for credit losses		883			(118	)		–			(55	)		710
Employee future benefits		424			12			(14	)		(6	)		416
Deferred compensation benefits		462			102			–			(19	)		545
Other comprehensive income		(82	)		–			112			(3	)		27
Tax loss carryforwards		1,343			(18	)		–			(92	)		1,233
Tax credits		407			64			–			(17	)		454
Premises and equipment		(613	)		(83	)		–			32			(664	)
Pension benefits		89			5			(143	)		(3	)		(52	)
Goodwill and intangible assets		(253	)		(23	)		–			15			(261	)
Securities		12			11			–			(2	)		21
Other		187			24			12			(20	)		203
Total		2,859			(24	)		(33	)		(170	)		2,632

(1) Deferred tax assets of $2,037 million and $2,865 million and deferred tax liabilities of $74 million and $233 million as at October 31, 2018 and 2017, respectively, are presented on the balance sheet net by legal jurisdiction.

(2) Includes IFRS 9 adoption (refer to Note 28)

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Earnings Per Share (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Basic and Diluted Earnings Per Share

The following table presents our basic and diluted earnings per share:

Basic Earnings per Share (Canadian $ in millions, except as noted)	2018			2017			2016
Net income attributable to bank shareholders		5,450			5,348			4,622
Dividends on preferred shares		(184	)		(184	)		(150	)
Net income available to common shareholders		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Basic earnings per share (Canadian $)		8.19			7.95			6.94
Diluted Earnings per Share
Net income available to common shareholders adjusted for impact of dilutive instruments		5,266			5,164			4,472
Weighted-average number of common shares outstanding (in thousands)		642,930			649,650			644,049
Effect of dilutive instruments
Stock options potentially exercisable (1)		5,876			6,859			8,706
Common shares potentially repurchased		(3,893	)		(4,548	)		(6,629	)
Weighted-average number of diluted common shares outstanding (in thousands)		644,913			651,961			646,126
Diluted earnings per share (Canadian $)		8.17			7.92			6.92

(1) In computing diluted earnings per share, we excluded average stock options outstanding of 1,101,938, 1,330,564 and 1,353,464 with weighted-average exercise prices of $127.45, $182.70 and $238.45 for the years ended October 31, 2018, 2017 and 2016, respectively, as the average share price for the period did not exceed the exercise price.

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Maximum Amount Payable Under Various Commitments

The maximum amount payable related to our various commitments is as follows:

(Canadian $ in millions)	2018		2017
Financial Guarantees
Standby letters of credit		18,458		18,126
Credit default swaps (1)		443		448
Other Credit Instruments
Backstop liquidity facilities		5,627		5,044
Securities lending		4,939		5,336
Documentary and commercial letters of credit		1,263		1,030
Commitments to extend credit (2)		137,995		122,881
Other commitments		8,935		4,329
Total		177,660		157,194

(1) The fair value of the related derivatives included in our Consolidated Balance Sheet was $8 million as at October 31, 2018 ($6 million in 2017).

(2) Commitments to extend credit exclude personal lines of credit and credit cards that are unconditionally cancellable at our discretion.

Summary of Maximum Amount Payable Under Various Commitments

The following tables summarize our pledged assets and collateral, and the activities to which they relate:

(Canadian $ in millions)	2018		2017
Bank Assets
Cash and securities (1)
Issued or guaranteed by the Government of Canada		7,784		11,904
Issued or guaranteed by a Canadian province, municipality or school corporation		7,143		6,170
Other		60,812		51,848
Mortgages, securities borrowed or purchased under resale agreements and other		115,256		99,474
		190,995		169,396
(Canadian $ in millions)	2018		2017
Assets pledged in relation to:
Central counterparties, payment systems and depositories		2,403		2,043
Bank of Canada		525		725
Foreign governments and central banks		3		3
Obligations related to securities sold under repurchase agreements		54,606		42,450
Securities borrowing and lending		50,388		51,120
Derivatives transactions		6,120		5,924
Securitization		28,710		27,632
Covered bonds		26,721		24,983
Other		21,519		14,516
Total pledged assets and collateral (1)		190,995		169,396

(1) Excludes cash pledged with central banks disclosed as restricted cash in Note 2.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Changes In Provision Balance

Changes in the provision balance during the year were as follows:

(Canadian $ in millions)	2018			2017
Balance at beginning of year		170			268
Additional provisions/increase in provisions		375			153
Provisions utilized		(250	)		(172	)
Amounts reversed		(11	)		(75	)
Exchange differences and other movements		–			(4	)
Balance at end of year (1)		284			170

(1) Balance includes severance obligations, restructuring charges and legal provisions.

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Operating and Geographic Segmentation (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Schedule of Operating Segments

Our results and average assets, grouped by operating segment, are as follows:

(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2018
Net interest income (2)		5,541		3,843			826		659			(556	)		10,313
Non-interest revenue		2,171		1,140			5,468		3,696			249			12,724
Total Revenue		7,712		4,983			6,294		4,355			(307	)		23,037
Provision for (recovery of) credit losses on impaired loans		466		258			6		(17	)		(13	)		700
Provision for (recovery of) credit losses on performing loans		3		(38	)		–		(1	)		(2	)		(38	)
Total provision for (recovery of) credit losses		469		220			6		(18	)		(15	)		662
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,352		–			–			1,352
Amortization		318		454			231		124			–			1,127
Non-interest expense		3,487		2,558			3,278		2,727			436			12,486
Income (loss) before taxes and non-controlling interest in subsidiaries		3,438		1,751			1,427		1,522			(728	)		7,410
Provision for (recovery of) income taxes		884		357			355		366			(2	)		1,960
Reported net income (loss)		2,554		1,394			1,072		1,156			(726	)		5,450
Non-controlling interest in subsidiaries		–		–			–		–			–			–
Net Income (loss) attributable to bank shareholders		2,554		1,394			1,072		1,156			(726	)		5,450
Average Assets		224,553		110,351			35,913		307,087			76,391			754,295
(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2017
Net interest income (2)		5,261		3,551			722		1,233			(760	)		10,007
Non-interest revenue		2,182		1,066			5,492		3,336			177			12,253
Total Revenue		7,443		4,617			6,214		4,569			(583	)		22,260
Provision for (recovery of) credit losses (3)		483		289			8		44			(78	)		746
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,538		–			–			1,538
Amortization		309		434			241		119			–			1,103
Non-interest expense		3,313		2,510			3,110		2,659			635			12,227
Income (loss) before taxes and non-controlling interest in subsidiaries		3,338		1,384			1,317		1,747			(1,140	)		6,646
Provision for (recovery of) income taxes		827		357			350		472			(710	)		1,296
Reported net income (loss)		2,511		1,027			967		1,275			(430	)		5,350
Non-controlling interest in subsidiaries		–		–			2		–			–			2
Net Income (loss) attributable to bank shareholders		2,511		1,027			965		1,275			(430	)		5,348
Average Assets		217,685		104,209			32,562		302,518			65,652			722,626
(Canadian $ in millions)	Canadian P&C		U.S. P&C			Wealth Management		BMO CM			Corporate Services (1)			Total
2016
Net interest income (2)		5,080		3,491			635		1,459			(793	)		9,872
Non-interest revenue		1,909		1,119			5,274		2,855			58			11,215
Total Revenue		6,989		4,610			5,909		4,314			(735	)		21,087
Provision for (recovery of) credit losses (3)		506		249			9		81			(74	)		771
Insurance claims, commissions and changes in policy benefit liabilities		–		–			1,543		–			–			1,543
Amortization		276		433			233		105			–			1,047
Non-interest expense		3,224		2,481			3,104		2,469			716			11,994
Income (loss) before taxes and non-controlling interest in subsidiaries		2,983		1,447			1,020		1,659			(1,377	)		5,732
Provision for (recovery of) income taxes		766		396			245		424			(730	)		1,101
Reported net income (loss)		2,217		1,051			775		1,235			(647	)		4,631
Non-controlling interest in subsidiaries		–		–			2		–			7			9
Net Income (loss) attributable to bank shareholders		2,217		1,051			773		1,235			(654	)		4,622
Average Assets		208,018		106,111			30,642		301,623			60,728			707,122

(1) Corporate Services includes Technology and Operations.

(2) Operating groups report on a taxable equivalent basis – see Basis of Presentation section.

(3) 2017 and 2016 have not been restated to reflect the adoption of IFRS 9.

Certain comparative figures have been reclassified to conform with the current year’s presentation.

Summary of Bank's Financial Results by Geographic Region

Our results and average assets, grouped by geographic region, are as follows:

(Canadian $ in millions)	Canada		United States		Other countries		Total
2018
Total Revenue		13,733		7,315		1,989		23,037
Income before taxes and non-controlling interest in subsidiaries		4,838		1,870		702		7,410
Reported net income		3,795		1,099		556		5,450
Average Assets		441,376		277,764		35,155		754,295
(Canadian $ in millions)	Canada		United States		Other countries		Total
2017
Total Revenue		13,469		7,073		1,718		22,260
Income before taxes and non-controlling interest in subsidiaries		4,597		1,588		461		6,646
Reported net income		3,817		1,210		323		5,350
Average Assets		430,570		264,473		27,583		722,626
(Canadian $ in millions)	Canada		United States		Other countries		Total
2016
Total Revenue		12,868		6,796		1,423		21,087
Income before taxes and non-controlling interest in subsidiaries		3,902		1,499		331		5,732
Reported net income		3,286		1,105		240		4,631
Average Assets		420,155		260,018		26,949		707,122

Certain comparative figures have been reclassified to conform with the current year’s presentation.

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Significant Subsidiaries (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Significant Operating Subsidiaries

As at October 31, 2018, the bank, either directly or indirectly through its subsidiaries, controls the following significant operating subsidiaries.

Significant subsidiaries (1)(2)	Head or principal office		Book value of shares owned by the bank (Canadian $ in millions)
Bank of Montreal Capital Markets (Holdings) Limited and subsidiaries, including:		London, England		332
BMO Capital Markets Limited		London, England
Pyrford International Limited		London, England
Bank of Montreal (China) Co. Ltd.		Beijing, China		448
Bank of Montreal Holding Inc. and subsidiaries, including:		Toronto, Canada		29,028
Bank of Montreal Mortgage Corporation		Calgary, Canada
BMO Mortgage Corp.		Vancouver, Canada
BMO Investments Limited		Hamilton, Bermuda
BMO Reinsurance Limited		St. Michaels, Barbados
BMO Nesbitt Burns Holdings Corporation		Toronto, Canada
BMO Nesbitt Burns Inc.		Toronto, Canada
BMO Investments Inc.		Toronto, Canada
BMO InvestorLine Inc.		Toronto, Canada
Bank of Montreal Ireland plc		Dublin, Ireland		1,022
BMO Financial Corp. and subsidiaries, including:		Chicago, United States		21,893
BMO Asset Management Corp. and subsidiaries		Chicago, United States
BMO Capital Markets Corp.		New York, United States
BMO Harris Bank National Association and subsidiaries, including:		Chicago, United States
BMO Harris Investment Company LLC		Las Vegas, United States
BMO Harris Financial Advisors, Inc.		Chicago, United States
BMO Harris Financing, Inc. and subsidiaries		Chicago, United States
CTC myCFO, LLC		Palo Alto, United States
BMO Global Asset Management (Europe) Limited and subsidiaries, including:		London, England		692
BMO Asset Management (Holdings) plc and subsidiaries (3)		London, England
BMO Life Insurance Company and subsidiaries, including:		Toronto, Canada		1,195
BMO Life Holdings (Canada), ULC		Halifax, Canada
BMO Life Assurance Company		Toronto, Canada
BMO Trust Company		Toronto, Canada		768
BMO Trustee Asia Limited		Hong Kong, China		2
LGM (Bermuda) Limited and subsidiaries, including:		Hamilton, Bermuda		147
BMO Global Asset Management (Asia) Limited		Hong Kong, China
LGM Investments Limited		London, England

(1) Each subsidiary is incorporated or organized under the laws of the state or country in which the principal office is situated, except for BMO Financial Corp., BMO Asset Management Corp., BMO Capital Markets Corp., BMO Harris Financial Advisors, Inc., BMO Harris Financing, Inc., and CTC myCFO, LLC, which are incorporated under the laws of the state of Delaware, United States. BMO Asset Management (Holdings) plc is incorporated under the laws of Scotland.

(2) Unless otherwise noted, the bank, either directly or indirectly through its subsidiaries, owns 100% of the outstanding voting shares of each subsidiary.

(3) Effective October 31, 2018, F&C Asset Management plc changed its name to BMO Asset Management (Holdings) plc.

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Related Party Transactions (Tables)

12 Months Ended

Oct. 31, 2018

Text block1 [abstract]

Summary of Compensation of Key Management Personnel

The following table presents the compensation of our key management personnel:

(Canadian $ in millions)	2018		2017		2016
Base salary and incentives		21		23		22
Post-employment benefits		2		1		2
Share-based payments (1)		31		38		32
Total key management personnel compensation		54		62		56

(1) Amounts included in share-based payments are the fair values of awards granted in the year.

Summary of Transaction With Joint Ventures and Associates

The following table presents transactions with our joint ventures and associates:

(Canadian $ in millions)	2018		2017
Loans		195		178
Deposits		114		132
Fees paid for services received		71		66

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IFRS 7 Disclosure - Credit and Counterparty Risk - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of credit risk exposure [line items]
Credit assets exposure value	$ 238,400	$ 223,962
Outstanding credit exposures	860,000
Canada [member]
Disclosure of credit risk exposure [line items]
Outstanding credit exposures	445,000
United States [member]
Disclosure of credit risk exposure [line items]
Outstanding credit exposures	347,000
Other Jurisdications [member]
Disclosure of credit risk exposure [line items]
Outstanding credit exposures	$ 68,000
Credit risk [member] | Residential real estate loan [member]
Disclosure of credit risk exposure [line items]
Loan to value ratio	80.00%

XML

IFRS 7 Disclosure - Credit and Counterparty Risk - Schedule of Total Non Trading Exposures (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of credit risk exposure [line items]
Total exposure at default	$ 859,801	$ 758,707
Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	308,052	253,936
Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	55,739	50,380
Manufacturing sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	37,476	33,364
Real estate sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	40,525	34,292
Retail trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	24,137	22,175
Service industries sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	54,123	48,762
Wholesale trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	19,628	16,597
Oil and gas sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	21,345	17,387
Individual sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	238,400	223,962
Other sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	60,376	57,852
Drawn [Member]
Disclosure of credit risk exposure [line items]
Total exposure at default	510,341	461,963
Drawn [Member] | Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	102,552	89,681
Drawn [Member] | Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	44,552	36,829
Drawn [Member] | Manufacturing sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	22,580	19,737
Drawn [Member] | Real estate sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	31,534	26,991
Drawn [Member] | Retail trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	19,961	18,242
Drawn [Member] | Service industries sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	39,067	34,723
Drawn [Member] | Wholesale trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	14,659	11,440
Drawn [Member] | Oil and gas sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	9,131	8,185
Drawn [Member] | Individual sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	190,688	180,612
Drawn [Member] | Other sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	35,617	35,523
Undrawn commitments [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	142,526	126,360
Undrawn commitments [member] | Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	21,741	19,457
Undrawn commitments [member] | Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	2,118	2,243
Undrawn commitments [member] | Manufacturing sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	13,490	12,258
Undrawn commitments [member] | Real estate sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	8,170	6,472
Undrawn commitments [member] | Retail trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	3,617	3,410
Undrawn commitments [member] | Service industries sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	12,666	11,207
Undrawn commitments [member] | Wholesale trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	4,531	4,675
Undrawn commitments [member] | Oil and gas sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	10,410	7,706
Undrawn commitments [member] | Individual sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	47,586	43,223
Undrawn commitments [member] | Other sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	18,197	15,709
Over the counter derivatives [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1,752	1,488
Over the counter derivatives [member] | Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1,649	1,474
Over the counter derivatives [member] | Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1
Over the counter derivatives [member] | Manufacturing sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	10	9
Over the counter derivatives [member] | Real estate sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1
Over the counter derivatives [member] | Service industries sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1	1
Over the counter derivatives [member] | Wholesale trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	2	1
Over the counter derivatives [member] | Other sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	88	3
Other off balance sheet items [Member]
Disclosure of credit risk exposure [line items]
Total exposure at default	19,687	19,083
Other off balance sheet items [Member] | Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	5,016	4,137
Other off balance sheet items [Member] | Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	667	682
Other off balance sheet items [Member] | Manufacturing sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1,396	1,360
Other off balance sheet items [Member] | Real estate sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	820	829
Other off balance sheet items [Member] | Retail trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	559	523
Other off balance sheet items [Member] | Service industries sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	2,389	2,831
Other off balance sheet items [Member] | Wholesale trade sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	436	481
Other off balance sheet items [Member] | Oil and gas sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	1,804	1,496
Other off balance sheet items [Member] | Individual sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	126	127
Other off balance sheet items [Member] | Other sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	6,474	6,617
Repo style transactions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	185,495	149,813
Repo style transactions [member] | Financial institutions [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	177,094	139,187
Repo style transactions [member] | Government sector [member]
Disclosure of credit risk exposure [line items]
Total exposure at default	$ 8,401	$ 10,626

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IFRS 7 Disclosure - Credit and Counterparty Risk - Schedule of Total Non Trading Exposures (Parenthetical) (Detail)	12 Months Ended
	Oct. 31, 2018
Other sector [member]
Disclosure of credit risk exposure [line items]
Credit exposure ratio	2.00%

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IFRS 7 Disclosure - Credit and Counterparty Risk - Summary of Gross Loans and Acceptances by Contractual Maturity and Country of Ultimate Risk (Detail) - Credit risk [member] - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	$ 404,215	$ 376,886
Canada [member] | Loans to consumers [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	168,565	165,940
Canada [member] | Commercial and corporate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	75,718	65,759
Canada [member] | Commercial real estate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	18,815	16,676
United States [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	131,571	115,723
Other countries [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	9,546	12,788
Within 1 year [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	161,618	156,053
Within 1 year [member] | Canada [member] | Loans to consumers [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	54,375	55,568
Within 1 year [member] | Canada [member] | Commercial and corporate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	57,530	49,693
Within 1 year [member] | Canada [member] | Commercial real estate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	7,397	6,226
Within 1 year [member] | United States [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	33,688	33,382
Within 1 year [member] | Other countries [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	8,628	11,184
1 to 5 years [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	209,124	192,033
1 to 5 years [member] | Canada [member] | Loans to consumers [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	109,991	106,023
1 to 5 years [member] | Canada [member] | Commercial and corporate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	16,438	14,699
1 to 5 years [member] | Canada [member] | Commercial real estate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	10,143	8,997
1 to 5 years [member] | United States [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	71,928	61,394
1 to 5 years [member] | Other countries [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	624	920
Over 5 years [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	33,473	28,800
Over 5 years [member] | Canada [member] | Loans to consumers [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	4,199	4,349
Over 5 years [member] | Canada [member] | Commercial and corporate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	1,750	1,367
Over 5 years [member] | Canada [member] | Commercial real estate [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	1,275	1,453
Over 5 years [member] | United States [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	25,955	20,947
Over 5 years [member] | Other countries [member]
Disclosure of credit risk exposure [line items]
Gross loans and acceptances	$ 294	$ 684

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IFRS 7 Disclosure - Credit and Counterparty Risk - Summary of Net Loans and Acceptances by Interest Rate Sensitivity (Detail) - Credit risk [member] - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of credit risk exposure [line items]
Net loans and acceptances	$ 402,576	$ 375,053
Fixed interest rate [member]
Disclosure of credit risk exposure [line items]
Net loans and acceptances	193,661	190,254
Floating interest rate [member]
Disclosure of credit risk exposure [line items]
Net loans and acceptances	190,330	168,253
Non interest sensitive [member]
Disclosure of credit risk exposure [line items]
Net loans and acceptances	$ 18,585	$ 16,546

XML

IFRS 7 Disclosure - Market Risk - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Hundred basis point increase [member]
Market Risk [Line Items]
Increase in earnings before tax	$ 37	$ 52
Hundred basis point decrease [member]
Market Risk [Line Items]
Decrease in earnings before tax	37	50
10% decrease in equity market values
Market Risk [Line Items]
Decrease in earnings before tax	44	40
10% increase in equity market values
Market Risk [Line Items]
Increase in earnings before tax	42	$ 40
Decreases In Equity Market Values | Maximum [Member]
Market Risk [Line Items]
Decrease in earnings before tax	$ 34
Market risk [member] | Value at risk [member]
Market Risk [Line Items]
Percentage of trading and underwriting portfolios	99.00%
Value at risk holding period	1 day
Market risk [member] | Stressed value at risk [member]
Market Risk [Line Items]
Percentage of trading and underwriting portfolios	99.00%
Value at risk holding period	1 day
Foreign exchange risk [member]
Market Risk [Line Items]
Increase (decrease) adjusted net income before income taxes	$ 14

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IFRS 7 Disclosure - Market Risk - Summary Total Trading Value at Risk (VaR) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Market Risk [Line Items]
Market risk VaR	$ 56.3	$ 24.6
Commodity price risk [member]
Market Risk [Line Items]
Market risk VaR	0.7	0.9
Equity price risk [member]
Market Risk [Line Items]
Market risk VaR	4.4	3.3
Foreign exchange risk [member]
Market Risk [Line Items]
Market risk VaR	0.5	0.3
Interest rate risk [member]
Market Risk [Line Items]
Market risk VaR	6.1	5.0
Credit specific [member]
Market Risk [Line Items]
Market risk VaR	7.4	1.9
Risk diversification effect [member]
Market Risk [Line Items]
Market risk VaR	(8.3)	(5.9)
Market risk [member]
Market Risk [Line Items]
Market risk VaR	10.8	5.5
Average [Member]
Market Risk [Line Items]
Market risk VaR	26.8	20.5
Average [Member] | Commodity price risk [member]
Market Risk [Line Items]
Market risk VaR	0.9	0.9
Average [Member] | Equity price risk [member]
Market Risk [Line Items]
Market risk VaR	4.4	3.1
Average [Member] | Foreign exchange risk [member]
Market Risk [Line Items]
Market risk VaR	0.6	0.8
Average [Member] | Interest rate risk [member]
Market Risk [Line Items]
Market risk VaR	5.9	6.1
Average [Member] | Credit specific [member]
Market Risk [Line Items]
Market risk VaR	2.6	2.3
Average [Member] | Risk diversification effect [member]
Market Risk [Line Items]
Market risk VaR	(6.8)	(7.0)
Average [Member] | Market risk [member]
Market Risk [Line Items]
Market risk VaR	7.6	6.2
Top of range [member]
Market Risk [Line Items]
Market risk VaR	56.3	34.6
Top of range [member] | Commodity price risk [member]
Market Risk [Line Items]
Market risk VaR	13.6	1.7
Top of range [member] | Equity price risk [member]
Market Risk [Line Items]
Market risk VaR	7.8	8.5
Top of range [member] | Foreign exchange risk [member]
Market Risk [Line Items]
Market risk VaR	2.2	3.1
Top of range [member] | Interest rate risk [member]
Market Risk [Line Items]
Market risk VaR	8.7	11.4
Top of range [member] | Credit specific [member]
Market Risk [Line Items]
Market risk VaR	7.4	4.1
Top of range [member] | Market risk [member]
Market Risk [Line Items]
Market risk VaR	17.5	10.0
Bottom of range [member]
Market Risk [Line Items]
Market risk VaR	16.6	13.4
Bottom of range [member] | Commodity price risk [member]
Market Risk [Line Items]
Market risk VaR	0.3	0.4
Bottom of range [member] | Equity price risk [member]
Market Risk [Line Items]
Market risk VaR	2.9	2.2
Bottom of range [member] | Foreign exchange risk [member]
Market Risk [Line Items]
Market risk VaR	0.1	0.1
Bottom of range [member] | Interest rate risk [member]
Market Risk [Line Items]
Market risk VaR	3.6	3.9
Bottom of range [member] | Credit specific [member]
Market Risk [Line Items]
Market risk VaR	1.5	1.5
Bottom of range [member] | Market risk [member]
Market Risk [Line Items]
Market risk VaR	$ 4.7	$ 4.3

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IFRS 7 Disclosure - Market Risk - Structural Balance Sheet Interest Rate Sensitivity (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Hundred basis point increase [member]
Market Risk [Line Items]
Pre tax economic value sensitivity	$ (1,079.2)	$ (957.8)
Pre tax earnings sensitivity over the next twelve month	136.5	136.9
Hundred basis point decrease [member]
Market Risk [Line Items]
Pre tax economic value sensitivity	626.5	78.6
Pre tax earnings sensitivity over the next twelve month	$ (304.1)	$ (433.4)

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Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments - Summary of Remaining Contractual Maturity (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016	Oct. 31, 2015
Assets
Cash and cash equivalents	$ 42,142	$ 32,599	$ 31,653	$ 40,295
Interest bearing deposits with banks	8,305	6,490
Securities	180,935	163,198
Securities borrowed or purchased under resale agreements	85,051	75,047
Loans
Residential mortgages	119,620	115,258
Consumer instalment and other personal	63,225	61,944
Credit cards	8,329	8,071
Business and government	194,456	175,067
Allowance for credit losses	(1,639)	(1,833)
Loans,net	383,991	358,507
Other Assets
Derivative instruments	26,204	28,951
Customers' liability under acceptances	18,585	16,546
Other	28,835	28,242
Other assets	73,624	73,739
Total Assets	774,048	709,580
Deposits
Deposits	522,051	479,792
Other liabilities
Derivative instruments	24,411	27,804
Acceptances	18,585	16,546
Securities sold but not yet purchased	28,804	25,163
Securities lent or sold under repurchase agreements	66,684	55,119
Current tax liabilities	50	125
Deferred tax liabilities	74	233
Securitization and structured entities' liabilities	25,051	23,054
Other	35,829	32,361
Total other liabilities	199,488	180,405
Subordinated debt	6,782	5,029
Total Equity	45,727	44,354	$ 42,328
Total Liabilities and Equity	774,048	709,580
Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	141,434	127,055
Backstop liquidity facilities [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	5,627	5,044
Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	2,742	2,433
Securities lending [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	4,939	5,336
Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	1,793	1,759
Banks [Member]
Deposits
Deposits	27,907	28,205
Business and governments [member]
Deposits
Deposits	313,300	283,276
Individuals [Member]
Deposits
Deposits	180,844	168,311
0 -1 month [member]
Assets
Cash and cash equivalents	41,162	31,641
Interest bearing deposits with banks	4,964	3,784
Securities	4,522	3,620
Securities borrowed or purchased under resale agreements	67,804	57,919
Loans
Residential mortgages	1,782	1,045
Consumer instalment and other personal	607	517
Business and government	13,088	13,379
Loans,net	15,477	14,941
Other Assets
Derivative instruments	2,040	1,701
Customers' liability under acceptances	16,529	14,179
Other	1,740	1,340
Other assets	20,309	17,220
Total Assets	154,238	129,125
Deposits
Deposits	43,072	40,214
Other liabilities
Derivative instruments	1,499	1,876
Acceptances	16,529	14,179
Securities sold but not yet purchased	28,804	25,163
Securities lent or sold under repurchase agreements	63,496	53,165
Securitization and structured entities' liabilities	1,044	10
Other	8,548	12,616
Total other liabilities	119,920	107,009
Total Liabilities and Equity	162,992	147,223
0 -1 month [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	1,472	1,377
0 -1 month [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	34	31
0 -1 month [member] | Securities lending [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	4,939	5,336
0 -1 month [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	56	42
0 -1 month [member] | Banks [Member]
Deposits
Deposits	16,966	12,462
0 -1 month [member] | Business and governments [member]
Deposits
Deposits	23,524	23,917
0 -1 month [member] | Individuals [Member]
Deposits
Deposits	2,582	3,835
1 - 3 Months [member]
Assets
Interest bearing deposits with banks	1,717	1,579
Securities	4,283	2,917
Securities borrowed or purchased under resale agreements	12,732	13,236
Loans
Residential mortgages	1,848	1,551
Consumer instalment and other personal	440	371
Business and government	5,921	7,352
Loans,net	8,209	9,274
Other Assets
Derivative instruments	3,385	3,748
Customers' liability under acceptances	1,988	2,263
Other	506	475
Other assets	5,879	6,486
Total Assets	32,820	33,492
Deposits
Deposits	44,718	39,626
Other liabilities
Derivative instruments	2,456	3,227
Acceptances	1,988	2,263
Securities lent or sold under repurchase agreements	2,249	1,644
Securitization and structured entities' liabilities	1,084	709
Other	5,568	2,536
Total other liabilities	13,345	10,379
Total Liabilities and Equity	58,063	50,005
1 - 3 Months [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	3,610	2,302
1 - 3 Months [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	70	62
1 - 3 Months [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	388	83
1 - 3 Months [member] | Banks [Member]
Deposits
Deposits	6,032	9,321
1 - 3 Months [member] | Business and governments [member]
Deposits
Deposits	32,231	25,224
1 - 3 Months [member] | Individuals [Member]
Deposits
Deposits	6,455	5,081
3-6 month [member]
Assets
Interest bearing deposits with banks	1,037	626
Securities	5,049	5,933
Securities borrowed or purchased under resale agreements	2,490	2,353
Loans
Residential mortgages	4,343	4,531
Consumer instalment and other personal	1,026	1,084
Business and government	7,126	6,454
Loans,net	12,495	12,069
Other Assets
Derivative instruments	1,645	1,580
Customers' liability under acceptances	65	104
Other	189	129
Other assets	1,899	1,813
Total Assets	22,970	22,794
Deposits
Deposits	31,866	27,314
Other liabilities
Derivative instruments	1,616	1,512
Acceptances	65	104
Securities lent or sold under repurchase agreements	8	290
Securitization and structured entities' liabilities	475	1,523
Other	44	517
Total other liabilities	2,208	3,946
Total Liabilities and Equity	34,074	31,260
3-6 month [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	6,892	4,755
3-6 month [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	99	91
3-6 month [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	153	128
3-6 month [member] | Banks [Member]
Deposits
Deposits	1,200	2,633
3-6 month [member] | Business and governments [member]
Deposits
Deposits	22,713	19,112
3-6 month [member] | Individuals [Member]
Deposits
Deposits	7,953	5,569
6-9 month [member]
Assets
Interest bearing deposits with banks	457	319
Securities	7,749	5,845
Securities borrowed or purchased under resale agreements	1,781	1,241
Loans
Residential mortgages	6,306	7,687
Consumer instalment and other personal	1,143	1,374
Business and government	6,779	6,169
Loans,net	14,228	15,230
Other Assets
Derivative instruments	1,012	1,229
Customers' liability under acceptances	3
Other	26	17
Other assets	1,041	1,246
Total Assets	25,256	23,881
Deposits
Deposits	23,739	19,055
Other liabilities
Derivative instruments	913	1,510
Acceptances	3
Securities lent or sold under repurchase agreements	931	20
Securitization and structured entities' liabilities	512	556
Other	34	43
Total other liabilities	2,393	2,129
Total Liabilities and Equity	26,132	21,184
6-9 month [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	9,620	8,312
6-9 month [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	101	89
6-9 month [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	155	124
6-9 month [member] | Banks [Member]
Deposits
Deposits	227	496
6-9 month [member] | Business and governments [member]
Deposits
Deposits	15,893	12,897
6-9 month [member] | Individuals [Member]
Deposits
Deposits	7,619	5,662
9-12 month [Member]
Assets
Interest bearing deposits with banks	112	182
Securities	4,943	3,625
Securities borrowed or purchased under resale agreements	191	249
Loans
Residential mortgages	4,769	6,201
Consumer instalment and other personal	943	1,285
Business and government	6,218	5,059
Loans,net	11,930	12,545
Other Assets
Derivative instruments	807	1,306
Other	6	11
Other assets	813	1,317
Total Assets	17,989	17,918
Deposits
Deposits	19,271	18,830
Other liabilities
Derivative instruments	639	1,206
Securitization and structured entities' liabilities	588	845
Other	184	239
Total other liabilities	1,411	2,290
Total Liabilities and Equity	20,682	21,120
9-12 month [Member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	11,345	14,560
9-12 month [Member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	100	87
9-12 month [Member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	158	129
9-12 month [Member] | Banks [Member]
Deposits
Deposits	106	25
9-12 month [Member] | Business and governments [member]
Deposits
Deposits	8,629	10,806
9-12 month [Member] | Individuals [Member]
Deposits
Deposits	10,536	7,999
1-2 years [member]
Assets
Interest bearing deposits with banks	18
Securities	11,854	7,675
Securities borrowed or purchased under resale agreements	53	49
Loans
Residential mortgages	24,522	19,866
Consumer instalment and other personal	5,414	4,211
Business and government	19,543	17,948
Loans,net	49,479	42,025
Other Assets
Derivative instruments	3,407	3,272
Other	17	11
Other assets	3,424	3,283
Total Assets	64,828	53,032
Deposits
Deposits	34,154	25,620
Other liabilities
Derivative instruments	3,831	3,477
Securitization and structured entities' liabilities	4,912	3,931
Other	789	752
Total other liabilities	9,532	8,160
Total Liabilities and Equity	43,686	33,780
1-2 years [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	21,056	21,985
1-2 years [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	358	329
1-2 years [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	615	519
1-2 years [member] | Business and governments [member]
Deposits
Deposits	22,418	16,522
1-2 years [member] | Individuals [Member]
Deposits
Deposits	11,736	9,098
2-5 years [member]
Assets
Securities	32,480	22,842
Loans
Residential mortgages	64,636	65,547
Consumer instalment and other personal	19,910	20,845
Business and government	75,099	63,614
Loans,net	159,645	150,006
Other Assets
Derivative instruments	6,074	7,426
Other	20	131
Other assets	6,094	7,557
Total Assets	198,219	180,405
Deposits
Deposits	65,011	58,518
Other liabilities
Derivative instruments	6,335	6,885
Securitization and structured entities' liabilities	13,398	11,812
Other	4,455	154
Total other liabilities	24,188	18,851
Total Liabilities and Equity	89,199	77,369
2-5 years [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	84,295	71,481
2-5 years [member] | Backstop liquidity facilities [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	5,627	5,044
2-5 years [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	770	712
2-5 years [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	186	577
2-5 years [member] | Business and governments [member]
Deposits
Deposits	48,684	42,707
2-5 years [member] | Individuals [Member]
Deposits
Deposits	16,327	15,811
Over 5 years [member]
Assets
Securities	56,004	52,615
Loans
Residential mortgages	11,414	8,830
Consumer instalment and other personal	9,812	8,590
Business and government	12,247	11,380
Loans,net	33,473	28,800
Other Assets
Derivative instruments	7,834	8,689
Other	4,824	4,431
Other assets	12,658	13,120
Total Assets	102,135	94,535
Deposits
Deposits	15,514	17,787
Other liabilities
Derivative instruments	7,122	8,111
Securitization and structured entities' liabilities	3,038	3,668
Other	1,905	2,361
Total other liabilities	12,065	14,140
Subordinated debt	6,782	5,029
Total Liabilities and Equity	34,361	36,956
Over 5 years [member] | Commitments to extend credit [Member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	3,144	2,283
Over 5 years [member] | Operating lease commitments [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	1,210	1,032
Over 5 years [member] | Purchase obligations [member]
Off-Balance Sheet Commitments
Off-Balance Sheet Commitments	82	157
Over 5 years [member] | Business and governments [member]
Deposits
Deposits	12,932	15,712
Over 5 years [member] | Individuals [Member]
Deposits
Deposits	2,582	2,075
No maturity [member]
Assets
Cash and cash equivalents	980	958
Securities	54,051	58,126
Loans
Consumer instalment and other personal	23,930	23,667
Credit cards	8,329	8,071
Business and government	48,435	43,712
Allowance for credit losses	(1,639)	(1,833)
Loans,net	79,055	73,617
Other Assets
Other	21,507	21,697
Other assets	21,507	21,697
Total Assets	155,593	154,398
Deposits
Deposits	244,706	232,828
Other liabilities
Current tax liabilities	50	125
Deferred tax liabilities	74	233
Other	14,302	13,143
Total other liabilities	14,426	13,501
Total Equity	45,727	44,354
Total Liabilities and Equity	304,859	290,683
No maturity [member] | Banks [Member]
Deposits
Deposits	3,376	3,268
No maturity [member] | Business and governments [member]
Deposits
Deposits	126,276	116,379
No maturity [member] | Individuals [Member]
Deposits
Deposits	$ 115,054	$ 113,181

XML

Basis of Presentation - Additional Information (Detail) - CAD ($) $ in Millions		12 Months Ended
	Nov. 01, 2017	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Basis of presentation [line items]
Increase in shareholders' equity before tax	$ 70
Increase in shareholders' equity after tax	$ 44
Non-Interest revenue		$ 12,724	$ 12,253	$ 11,215
Non-interest expense		13,613	13,330	13,041
Net Income		5,450	5,350	$ 4,631
Increase (decrease) due to application of IFRS 15 [member]
Basis of presentation [line items]
Non-Interest revenue		(132)	(153)
Non-interest expense		(136)	(138)
Net Income		$ 3	$ (11)
Bottom of range [member]
Basis of presentation [line items]
Proportion of voting rights held in associate		20.00%
Top of range [member]
Basis of presentation [line items]
Proportion of voting rights held in associate		50.00%
Useful lives of intangible assets other than goodwill		15 years

XML

Cash and Interest Bearing Deposits with Banks - Disclosure of Cash and Interest Bearing Deposits with Banks (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016	Oct. 31, 2015
Cash and interest bearing deposits with banks [abstract]
Cash and deposits with banks	$ 40,738	$ 30,002
Cheques and other items in transit, net	1,404	2,597
Total cash and cash equivalents	$ 42,142	$ 32,599	$ 31,653	$ 40,295

XML

Cash and Interest Bearing Deposits with Banks - Additional Information (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of cash and interest bearing deposits with banks [abstract]
Reserves or minimum balances with central banks	$ 1,655	$ 1,435

XML

Securities - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of financial assets [line items]
Fair value of investment	$ 11,611
Fair value of investment		$ 99,069
Fair value of investment through profit loss decrease in non-interest revenue, insurance revenue	1,879	2,070	$ 2,023
Related to securities held by insurance subsidiaries [member]
Disclosure of financial assets [line items]
Fair value of investment	8,783
Fair value of investment		8,465
Unrealized gain loss through profit or loss from securities held by insurance subsidiary [member]
Disclosure of financial assets [line items]
Fair value of investment through profit loss decrease in non-interest revenue, insurance revenue	$ (372)	$ 39

XML

Securities - Summary of Classification of Securities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of financial assets [abstract]
Trading	$ 99,697
Trading		$ 99,069
FVTPL	11,611
FVOCI - Debt and Equity	62,440
Available-for-sale		54,075
Amortized cost	6,485
Held-to-maturity		9,094
Other	702	960
Classification of securities	$ 180,935	$ 163,198

XML

Securities - Summary of Classification of Securities (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of financial assets [line items]
Financial assets mandatorily measured and designated at fair value	$ 11,611
Allowances for credit losses on amortized cost	6,485
Mandatorily Measured at Fair Value [Member]
Disclosure of financial assets [line items]
Financial assets mandatorily measured and designated at fair value	2,828
Designated at Fair Value [Member]
Disclosure of financial assets [line items]
Financial assets mandatorily measured and designated at fair value	8,783
Allowance for Credit Losses on Securities [Member]
Disclosure of financial assets [line items]
Allowances for credit losses on FVOCI	2	$ 0
Allowances for credit losses on amortized cost	$ 1	$ 0

XML

Securities - Schedule of Fair Value Measurement (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of financial assets [line items]
Trading Securities	$ 99,697
FVTPL Securities	11,611
FVOCI securities	62,440
Amortized Cost Securities	6,485
Other Securities	702	$ 960
Total securities	180,935	163,198
Trading Securities		99,069
Available-for-sale securities		54,075
Held-to-Maturity Securities		9,094
Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	62,440
Amortized Cost Securities	6,288
Available-for-sale securities		54,075
Held-to-Maturity Securities		9,096
Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities	702	960
Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	182,228	163,426
Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	180,935	163,198
Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	82,767	80,223
United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	96,266	79,997
Other Currency [member]
Disclosure of financial assets [line items]
Total securities	1,902	2,978
Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	63,733
Amortized Cost Securities	$ 6,485
Available-for-sale securities		54,303
Held-to-Maturity Securities		$ 9,094
Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.72%
Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.13%
Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 10,320
FVTPL Securities	431
Trading Securities		$ 10,827
Canadian federal government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	12,805
Available-for-sale securities		9,180
Held-to-Maturity Securities		1,857
Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 12,884
Available-for-sale securities		9,212
Held-to-Maturity Securities		$ 1,855
Canadian federal government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.99%
Canadian federal government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.64%
Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	$ 8,702
FVTPL Securities	946
Trading Securities		$ 7,327
Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	6,862
Amortized Cost Securities	841
Available-for-sale securities		3,627
Held-to-Maturity Securities		1,590
Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	6,896
Amortized Cost Securities	$ 832
Available-for-sale securities		3,613
Held-to-Maturity Securities		$ 1,567
Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.77%
Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.90%
US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 9,517
FVTPL Securities	69
Trading Securities		$ 9,473
US federal Government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	16,823
Available-for-sale securities		14,269
US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 17,403
Available-for-sale securities		$ 14,481
US federal Government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.80%
US federal Government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.22%
US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,216
Trading Securities		$ 2,131
US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,655
Available-for-sale securities		4,096
US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 3,694
Available-for-sale securities		$ 4,058
US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.00%
US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.42%
Other governments member [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,412
Trading Securities		$ 823
Other governments member [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	4,790
Amortized Cost Securities	10
Available-for-sale securities		3,558
Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	4,818
Amortized Cost Securities	$ 10
Available-for-sale securities		$ 3,567
Other governments member [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.43%
Other governments member [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.39%
NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 9,184
FVTPL Securities	7
Trading Securities		$ 931
NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	5,346
Held-to-Maturity Securities		5,649
NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	5,552
Held-to-Maturity Securities		5,672
Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	9,198
FVTPL Securities	6,820
Trading Securities		11,763
Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,756
Amortized Cost Securities	91
Available-for-sale securities		4,525
Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,783
Amortized Cost Securities	$ 91
Available-for-sale securities		$ 4,514
Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.02%
Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.67%
Loan [Member]
Disclosure of financial assets [line items]
Trading Securities	$ 199
Trading Securities		$ 153
Corporate equity [member]
Disclosure of financial assets [line items]
Trading Securities	49,949
FVTPL Securities	3,338
Trading Securities		55,641
Corporate equity [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		1,604
Corporate equity [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		$ 1,499
Corporate equity [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.37%
National Housing Act Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	2,382
Available-for-sale securities		$ 2,457
National Housing Act and Mortgage Backed Securities [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	2,370
Available-for-sale securities		$ 2,455
National Housing Act and Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 2,382
National Housing Act and Mortgage Backed Securities [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.74%
National Housing Act and Mortgage Backed Securities [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.98%
Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 10,761
Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 10,902
Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.99%
US Agency MBS and CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 11,317
US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 11,811
Available-for-sale securities		$ 10,902
US Agency MBS and CMO [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.33%
Within 1 year [member]
Disclosure of financial assets [line items]
Trading Securities	$ 12,352
FVTPL Securities	1,013
Trading Securities		9,178
Within 1 year [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	12,778
Amortized Cost Securities	402
Available-for-sale securities		9,974
Held-to-Maturity Securities		2,785
Within 1 year [member] | Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities		7
Within 1 year [member] | Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	26,556	21,936
Within 1 year [member] | Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	26,545	21,940
Within 1 year [member] | Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	18,091	16,959
Within 1 year [member] | United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	7,799	3,948
Within 1 year [member] | Other Currency [member]
Disclosure of financial assets [line items]
Total securities	655	1,033
Within 1 year [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	12,789
Amortized Cost Securities	$ 402
Available-for-sale securities		9,970
Held-to-Maturity Securities		$ 2,781
Within 1 year [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.89%
Within 1 year [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.55%
Within 1 year [member] | Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 4,103
FVTPL Securities	328
Trading Securities		$ 4,862
Within 1 year [member] | Canadian federal government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	6,592
Available-for-sale securities		5,578
Held-to-Maturity Securities		1,857
Within 1 year [member] | Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 6,600
Available-for-sale securities		5,585
Held-to-Maturity Securities		$ 1,855
Within 1 year [member] | Canadian federal government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.66%
Within 1 year [member] | Canadian federal government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.52%
Within 1 year [member] | Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,293
Trading Securities		$ 812
Within 1 year [member] | Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,204
Amortized Cost Securities	230
Available-for-sale securities		1,156
Held-to-Maturity Securities		737
Within 1 year [member] | Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,200
Amortized Cost Securities	$ 230
Available-for-sale securities		1,157
Held-to-Maturity Securities		$ 735
Within 1 year [member] | Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.85%
Within 1 year [member] | Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.36%
Within 1 year [member] | US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 2,684
FVTPL Securities	69
Trading Securities		$ 1,332
Within 1 year [member] | US federal Government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	454
Available-for-sale securities		17
Within 1 year [member] | US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 462
Available-for-sale securities		$ 15
Within 1 year [member] | US federal Government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.88%
Within 1 year [member] | US federal Government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.39%
Within 1 year [member] | US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	$ 756
Trading Securities		$ 642
Within 1 year [member] | US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	355
Available-for-sale securities		370
Within 1 year [member] | US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 356
Available-for-sale securities		$ 370
Within 1 year [member] | US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.63%
Within 1 year [member] | US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.69%
Within 1 year [member] | Other governments member [member]
Disclosure of financial assets [line items]
Trading Securities	$ 485
Trading Securities		$ 85
Within 1 year [member] | Other governments member [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,192
Available-for-sale securities		1,593
Within 1 year [member] | Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 1,193
Available-for-sale securities		$ 1,592
Within 1 year [member] | Other governments member [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.44%
Within 1 year [member] | Other governments member [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.82%
Within 1 year [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 382
Trading Securities		$ 147
Within 1 year [member] | NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	171
Held-to-Maturity Securities		191
Within 1 year [member] | NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	171
Held-to-Maturity Securities		191
Within 1 year [member] | Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	2,635
FVTPL Securities	616
Trading Securities		1,298
Within 1 year [member] | Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	671
Amortized Cost Securities	1
Available-for-sale securities		997
Within 1 year [member] | Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	672
Amortized Cost Securities	$ 1
Available-for-sale securities		$ 995
Within 1 year [member] | Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		0.75%
Within 1 year [member] | Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.45%
Within 1 year [member] | Loan [Member]
Disclosure of financial assets [line items]
Trading Securities	$ 14
Within 1 year [member] | National Housing Act Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 255
Within 1 year [member] | National Housing Act and Mortgage Backed Securities [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	310
Available-for-sale securities		$ 262
Within 1 year [member] | National Housing Act and Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 306
Within 1 year [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.05%
Within 1 year [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.95%
Within 1 year [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 1
Within 1 year [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 1
Within 1 year [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.83%
1 to 3 years [member]
Disclosure of financial assets [line items]
Trading Securities	$ 10,151
FVTPL Securities	82
Trading Securities		$ 7,262
1 to 3 years [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	10,744
Amortized Cost Securities	749
Available-for-sale securities		7,046
Held-to-Maturity Securities		998
1 to 3 years [member] | Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities		21
1 to 3 years [member] | Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	21,785	15,346
1 to 3 years [member] | Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	21,722	15,324
1 to 3 years [member] | Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	12,284	8,546
1 to 3 years [member] | United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	9,423	6,662
1 to 3 years [member] | Other Currency [member]
Disclosure of financial assets [line items]
Total securities	15	116
1 to 3 years [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	10,807
Amortized Cost Securities	$ 745
Available-for-sale securities		7,068
Held-to-Maturity Securities		$ 995
1 to 3 years [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.72%
1 to 3 years [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.09%
1 to 3 years [member] | Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 2,195
Trading Securities		$ 1,527
1 to 3 years [member] | Canadian federal government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	4,006
Available-for-sale securities		1,749
1 to 3 years [member] | Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 4,036
Available-for-sale securities		$ 1,764
1 to 3 years [member] | Canadian federal government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.48%
1 to 3 years [member] | Canadian federal government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.58%
1 to 3 years [member] | Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	$ 2,029
FVTPL Securities	23
Trading Securities		$ 1,343
1 to 3 years [member] | Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,227
Amortized Cost Securities	282
Available-for-sale securities		266
Held-to-Maturity Securities		512
1 to 3 years [member] | Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,229
Amortized Cost Securities	$ 280
Available-for-sale securities		265
Held-to-Maturity Securities		$ 510
1 to 3 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.45%
1 to 3 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.81%
1 to 3 years [member] | US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 2,835
Trading Securities		$ 1,758
1 to 3 years [member] | US federal Government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,595
1 to 3 years [member] | US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 1,604
1 to 3 years [member] | US federal Government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.61%
1 to 3 years [member] | US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	$ 135
Trading Securities		222
1 to 3 years [member] | US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	678
Available-for-sale securities		566
1 to 3 years [member] | US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 684
Available-for-sale securities		$ 563
1 to 3 years [member] | US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.78%
1 to 3 years [member] | US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.07%
1 to 3 years [member] | Other governments member [member]
Disclosure of financial assets [line items]
Trading Securities	$ 557
Trading Securities		$ 438
1 to 3 years [member] | Other governments member [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,183
Amortized Cost Securities	3
Available-for-sale securities		1,225
1 to 3 years [member] | Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,187
Amortized Cost Securities	$ 3
Available-for-sale securities		$ 1,231
1 to 3 years [member] | Other governments member [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.34%
1 to 3 years [member] | Other governments member [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.21%
1 to 3 years [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 497
FVTPL Securities	3
Trading Securities		$ 571
1 to 3 years [member] | NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	454
Held-to-Maturity Securities		486
1 to 3 years [member] | NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	452
Held-to-Maturity Securities		485
1 to 3 years [member] | Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	1,821
FVTPL Securities	56
Trading Securities		1,375
1 to 3 years [member] | Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,980
Amortized Cost Securities	10
Available-for-sale securities		2,080
1 to 3 years [member] | Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,992
Amortized Cost Securities	$ 10
Available-for-sale securities		$ 2,082
1 to 3 years [member] | Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.08%
1 to 3 years [member] | Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.86%
1 to 3 years [member] | Loan [Member]
Disclosure of financial assets [line items]
Trading Securities	$ 82
Trading Securities		$ 28
1 to 3 years [member] | National Housing Act Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		1,143
1 to 3 years [member] | National Housing Act and Mortgage Backed Securities [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		$ 1,141
1 to 3 years [member] | National Housing Act and Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 62
1 to 3 years [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.83%
1 to 3 years [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.32%
1 to 3 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 19
1 to 3 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 20
1 to 3 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		3.12%
1 to 3 years [member] | US Agency MBS and CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 13
1 to 3 years [member] | US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 13
1 to 3 years [member] | US Agency MBS and CMO [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.31%
3 to 5 years [member]
Disclosure of financial assets [line items]
Trading Securities	$ 6,719
FVTPL Securities	138
Trading Securities		$ 6,092
3 to 5 years [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	15,595
Amortized Cost Securities	162
Available-for-sale securities		8,724
Held-to-Maturity Securities		366
3 to 5 years [member] | Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities		13
3 to 5 years [member] | Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	22,955	15,202
3 to 5 years [member] | Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	22,612	15,193
3 to 5 years [member] | Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	9,782	7,222
3 to 5 years [member] | United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	12,718	7,916
3 to 5 years [member] | Other Currency [member]
Disclosure of financial assets [line items]
Total securities	112	55
3 to 5 years [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	15,938
Amortized Cost Securities	$ 160
Available-for-sale securities		8,733
Held-to-Maturity Securities		$ 364
3 to 5 years [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.85%
3 to 5 years [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.23%
3 to 5 years [member] | Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 2,038
FVTPL Securities	4
Trading Securities		$ 2,021
3 to 5 years [member] | Canadian federal government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,688
Available-for-sale securities		1,262
3 to 5 years [member] | Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 1,711
Available-for-sale securities		$ 1,266
3 to 5 years [member] | Canadian federal government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.46%
3 to 5 years [member] | Canadian federal government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.09%
3 to 5 years [member] | Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,235
FVTPL Securities	5
Trading Securities		$ 714
3 to 5 years [member] | Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,726
Amortized Cost Securities	145
Available-for-sale securities		1,310
3 to 5 years [member] | Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,742
Amortized Cost Securities	$ 143
Available-for-sale securities		$ 1,293
3 to 5 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.24%
3 to 5 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.67%
3 to 5 years [member] | US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,260
Trading Securities		$ 2,000
3 to 5 years [member] | US federal Government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	6,858
Available-for-sale securities		3,115
3 to 5 years [member] | US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 7,116
Available-for-sale securities		$ 3,128
3 to 5 years [member] | US federal Government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.81%
3 to 5 years [member] | US federal Government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	1.98%
3 to 5 years [member] | US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	$ 29
Trading Securities		$ 86
3 to 5 years [member] | US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	540
Available-for-sale securities		467
3 to 5 years [member] | US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 542
Available-for-sale securities		$ 463
3 to 5 years [member] | US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.26%
3 to 5 years [member] | US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.59%
3 to 5 years [member] | Other governments member [member]
Disclosure of financial assets [line items]
Trading Securities	$ 330
Trading Securities		$ 266
3 to 5 years [member] | Other governments member [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	2,113
Amortized Cost Securities	7
Available-for-sale securities		722
3 to 5 years [member] | Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	2,135
Amortized Cost Securities	$ 7
Available-for-sale securities		$ 725
3 to 5 years [member] | Other governments member [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.52%
3 to 5 years [member] | Other governments member [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.74%
3 to 5 years [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 477
FVTPL Securities	4
Trading Securities		$ 203
3 to 5 years [member] | NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Held-to-Maturity Securities		366
3 to 5 years [member] | NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Held-to-Maturity Securities		364
3 to 5 years [member] | Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	1,295
FVTPL Securities	125
Trading Securities		795
3 to 5 years [member] | Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	566
Amortized Cost Securities	10
Available-for-sale securities		734
3 to 5 years [member] | Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	569
Amortized Cost Securities	$ 10
Available-for-sale securities		$ 737
3 to 5 years [member] | Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.48%
3 to 5 years [member] | Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.87%
3 to 5 years [member] | Loan [Member]
Disclosure of financial assets [line items]
Trading Securities	$ 55
Trading Securities		$ 7
3 to 5 years [member] | National Housing Act Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		1,059
3 to 5 years [member] | National Housing Act and Mortgage Backed Securities [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,998
Available-for-sale securities		$ 1,052
3 to 5 years [member] | National Housing Act and Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 2,014
3 to 5 years [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.56%
3 to 5 years [member] | National Housing Act and Mortgage Backed Securities [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.00%
3 to 5 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 62
3 to 5 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 62
3 to 5 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.25%
3 to 5 years [member] | US Agency MBS and CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 106
3 to 5 years [member] | US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 109
3 to 5 years [member] | US Agency MBS and CMO [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.50%
5 to 10 years [member]
Disclosure of financial assets [line items]
Trading Securities	$ 6,288
FVTPL Securities	716
Trading Securities		$ 6,751
5 to 10 years [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	12,847
Amortized Cost Securities	1,997
Available-for-sale securities		15,236
Held-to-Maturity Securities		1,338
5 to 10 years [member] | Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities		38
5 to 10 years [member] | Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	22,351	23,518
5 to 10 years [member] | Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	21,919	23,346
5 to 10 years [member] | Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	5,475	6,235
5 to 10 years [member] | United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	16,404	17,087
5 to 10 years [member] | Other Currency [member]
Disclosure of financial assets [line items]
Total securities	40	24
5 to 10 years [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	13,279
Amortized Cost Securities	$ 2,068
Available-for-sale securities		15,408
Held-to-Maturity Securities		$ 1,321
5 to 10 years [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.95%
5 to 10 years [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.44%
5 to 10 years [member] | Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,077
FVTPL Securities	2
Trading Securities		$ 1,313
5 to 10 years [member] | Canadian federal government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	519
Available-for-sale securities		591
5 to 10 years [member] | Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 537
Available-for-sale securities		$ 597
5 to 10 years [member] | Canadian federal government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.57%
5 to 10 years [member] | Canadian federal government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.14%
5 to 10 years [member] | Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,355
FVTPL Securities	22
Trading Securities		$ 1,991
5 to 10 years [member] | Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	693
Amortized Cost Securities	184
Available-for-sale securities		855
Held-to-Maturity Securities		341
5 to 10 years [member] | Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	713
Amortized Cost Securities	$ 179
Available-for-sale securities		860
Held-to-Maturity Securities		$ 322
5 to 10 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.32%
5 to 10 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.59%
5 to 10 years [member] | US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 1,895
Trading Securities		$ 1,906
5 to 10 years [member] | US federal Government [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	7,916
Available-for-sale securities		11,137
5 to 10 years [member] | US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 8,221
Available-for-sale securities		$ 11,338
5 to 10 years [member] | US federal Government [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.80%
5 to 10 years [member] | US federal Government [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.35%
5 to 10 years [member] | US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	$ 114
Trading Securities		$ 100
5 to 10 years [member] | US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,158
Available-for-sale securities		1,357
5 to 10 years [member] | US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 1,177
Available-for-sale securities		$ 1,329
5 to 10 years [member] | US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.40%
5 to 10 years [member] | US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.59%
5 to 10 years [member] | Other governments member [member]
Disclosure of financial assets [line items]
Trading Securities	$ 40
Trading Securities		$ 34
5 to 10 years [member] | Other governments member [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	302
Available-for-sale securities		18
5 to 10 years [member] | Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 303
Available-for-sale securities		$ 19
5 to 10 years [member] | Other governments member [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.72%
5 to 10 years [member] | Other governments member [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.87%
5 to 10 years [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 346
Trading Securities		$ 8
5 to 10 years [member] | NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	1,808
Held-to-Maturity Securities		997
5 to 10 years [member] | NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	1,884
Held-to-Maturity Securities		999
5 to 10 years [member] | Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	1,413
FVTPL Securities	692
Trading Securities		1,281
5 to 10 years [member] | Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	498
Amortized Cost Securities	5
Available-for-sale securities		619
5 to 10 years [member] | Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	509
Amortized Cost Securities	$ 5
Available-for-sale securities		$ 607
5 to 10 years [member] | Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		3.08%
5 to 10 years [member] | Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	3.24%
5 to 10 years [member] | Loan [Member]
Disclosure of financial assets [line items]
Trading Securities	$ 48
Trading Securities		$ 118
5 to 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		659
5 to 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 658
5 to 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.31%
5 to 10 years [member] | US Agency MBS and CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	1,761
5 to 10 years [member] | US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 1,819
5 to 10 years [member] | US Agency MBS and CMO [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.51%
Over 10 years [member]
Disclosure of financial assets [line items]
Trading Securities	$ 64,187
FVTPL Securities	9,662
Trading Securities		$ 69,786
Over 10 years [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	10,476
Amortized Cost Securities	2,978
Available-for-sale securities		13,095
Held-to-Maturity Securities		3,609
Over 10 years [member] | Carrying Amount [Member]
Disclosure of financial assets [line items]
Other Securities	702	881
Over 10 years [member] | Total carrying value or amortized cost of securities [member]
Disclosure of financial assets [line items]
Total securities	88,581	87,424
Over 10 years [member] | Total value of securities [member]
Disclosure of financial assets [line items]
Total securities	88,137	87,395
Over 10 years [member] | Canadian Dollar [member]
Disclosure of financial assets [line items]
Total securities	37,135	41,261
Over 10 years [member] | United States of America, Dollar
Disclosure of financial assets [line items]
Total securities	49,922	44,384
Over 10 years [member] | Other Currency [member]
Disclosure of financial assets [line items]
Total securities	1,080	1,750
Over 10 years [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	10,920
Amortized Cost Securities	$ 3,110
Available-for-sale securities		13,124
Held-to-Maturity Securities		$ 3,633
Over 10 years [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.00%
Over 10 years [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.32%
Over 10 years [member] | Canadian federal government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 907
FVTPL Securities	97
Trading Securities		$ 1,104
Over 10 years [member] | Canadian Provincial And Municipal Governments [member]
Disclosure of financial assets [line items]
Trading Securities	2,790
FVTPL Securities	896
Trading Securities		2,467
Over 10 years [member] | Canadian Provincial And Municipal Governments [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	12
Available-for-sale securities		40
Over 10 years [member] | Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 12
Available-for-sale securities		$ 38
Over 10 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		3.27%
Over 10 years [member] | Canadian Provincial And Municipal Governments [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	3.58%
Over 10 years [member] | US federal Government [member]
Disclosure of financial assets [line items]
Trading Securities	$ 843
Trading Securities		$ 2,477
Over 10 years [member] | US State Municipal And Agencies Debt [member]
Disclosure of financial assets [line items]
Trading Securities	182
Trading Securities		1,081
Over 10 years [member] | US State Municipal And Agencies Debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	924
Available-for-sale securities		1,336
Over 10 years [member] | US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 935
Available-for-sale securities		$ 1,333
Over 10 years [member] | US State Municipal And Agencies Debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.71%
Over 10 years [member] | US State Municipal And Agencies Debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.66%
Over 10 years [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of financial assets [line items]
Trading Securities	$ 7,482
Trading Securities		$ 2
Over 10 years [member] | NHA MBS US Agency MBS And CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	2,913
Held-to-Maturity Securities		3,609
Over 10 years [member] | NHA MBS US Agency MBS And CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Amortized Cost Securities	3,045
Held-to-Maturity Securities		3,633
Over 10 years [member] | Corporate debt [member]
Disclosure of financial assets [line items]
Trading Securities	2,034
FVTPL Securities	5,331
Trading Securities		7,014
Over 10 years [member] | Corporate debt [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	41
Amortized Cost Securities	65
Available-for-sale securities		95
Over 10 years [member] | Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	41
Amortized Cost Securities	$ 65
Available-for-sale securities		$ 93
Over 10 years [member] | Corporate debt [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		3.64%
Over 10 years [member] | Corporate debt [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	4.02%
Over 10 years [member] | Corporate equity [member]
Disclosure of financial assets [line items]
Trading Securities	$ 49,949
FVTPL Securities	3,338
Trading Securities		$ 55,641
Over 10 years [member] | Corporate equity [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		1,604
Over 10 years [member] | Corporate equity [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		$ 1,499
Over 10 years [member] | Corporate equity [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		2.37%
Over 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Fair Value [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 10,020
Over 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		$ 10,161
Over 10 years [member] | Us Agency Mortgage Backed Securities and Collateralized Mortgage Obligations [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets [line items]
Yield (%)		1.97%
Over 10 years [member] | US Agency MBS and CMO [member] | Fair Value [Member]
Disclosure of financial assets [line items]
FVOCI securities	9,437
Over 10 years [member] | US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	$ 9,870
Over 10 years [member] | US Agency MBS and CMO [member] | Financial assets at fair value through other comprehensive income [member]
Disclosure of financial assets [line items]
Yield (%)	2.29%

XML

Securities - Schedule of Unrealized Gains and Losses (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of financial assets [line items]
FVOCI securities	$ 62,440
Available-for-sale securities		$ 54,075
Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	63,733
Available-for-sale securities		54,303
Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	45
Available-for-sale securities		252
Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(1,338)
Available-for-sale securities		(480)
Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	62,440
Available-for-sale securities		54,075
Canadian federal government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	12,884
Available-for-sale securities		9,212
Canadian federal government [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	1
Available-for-sale securities		6
Canadian federal government [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(80)
Available-for-sale securities		(38)
Canadian federal government [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	12,805
Available-for-sale securities		9,180
Canadian Provincial And Municipal Governments [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	6,896
Available-for-sale securities		3,613
Canadian Provincial And Municipal Governments [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	8
Available-for-sale securities		29
Canadian Provincial And Municipal Governments [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(42)
Available-for-sale securities		(15)
Canadian Provincial And Municipal Governments [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	6,862
Available-for-sale securities		3,627
US federal Government [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	17,403
Available-for-sale securities		14,481
US federal Government [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	4
Available-for-sale securities		12
US federal Government [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(584)
Available-for-sale securities		(224)
US federal Government [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	16,823
Available-for-sale securities		14,269
US State Municipal And Agencies Debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,694
Available-for-sale securities		4,058
US State Municipal And Agencies Debt [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	16
Available-for-sale securities		43
US State Municipal And Agencies Debt [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(55)
Available-for-sale securities		(5)
US State Municipal And Agencies Debt [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	3,655
Available-for-sale securities		4,096
Other governments member [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	4,818
Available-for-sale securities		3,567
Other governments member [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	2
Available-for-sale securities		3
Other governments member [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(30)
Available-for-sale securities		(12)
Other governments member [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	4,790
Available-for-sale securities		3,558
National Housing Act Mortgage Backed Securities [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	2,382
Available-for-sale securities		2,457
National Housing Act Mortgage Backed Securities [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	6
Available-for-sale securities		9
National Housing Act Mortgage Backed Securities [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(18)
Available-for-sale securities		(11)
National Housing Act Mortgage Backed Securities [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	2,370
Available-for-sale securities		2,455
US Agency MBS and CMO [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	11,811
Available-for-sale securities		10,902
US Agency MBS and CMO [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	2
Available-for-sale securities		6
US Agency MBS and CMO [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(496)
Available-for-sale securities		(147)
US Agency MBS and CMO [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	11,317
Available-for-sale securities		10,761
Corporate debt [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	3,783
Available-for-sale securities		4,514
Corporate debt [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
FVOCI securities	6
Available-for-sale securities		23
Corporate debt [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
FVOCI securities	(33)
Available-for-sale securities		(12)
Corporate debt [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	3,756
Available-for-sale securities		4,525
Corporate equity [member] | Amortized Cost [Member]
Disclosure of financial assets [line items]
FVOCI securities	62
Available-for-sale securities		1,499
Corporate equity [member] | Gross Unrealized Gains [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		121
Corporate equity [member] | Gross Unrealized Losses [Member]
Disclosure of financial assets [line items]
Available-for-sale securities		(16)
Corporate equity [member] | Financial assets at fair value, class [member]
Disclosure of financial assets [line items]
FVOCI securities	$ 62
Available-for-sale securities		$ 1,604

XML

Securities - Summary of Interest, Dividend and Fee Income (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 30, 2016
Disclosure Of interest, dividend and fee income [Line Items]
Total	$ 1,306	$ 812	$ 652
Financial assets at fair value through profit or loss [member]
Disclosure Of interest, dividend and fee income [Line Items]
Total	16
Financial assets at fair value through other comprehensive income, category [member]
Disclosure Of interest, dividend and fee income [Line Items]
Total	1,118
Financial assets at amortised cost, category [member]
Disclosure Of interest, dividend and fee income [Line Items]
Total	$ 172
Financial assets available-for-sale, category [member]
Disclosure Of interest, dividend and fee income [Line Items]
Total		662	509
Held-to-maturity investments, category [member]
Disclosure Of interest, dividend and fee income [Line Items]
Total		$ 150	$ 143

XML

Securities - Summary of Non-Interest Revenue (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Interest Dividend and Fee Income [abstract]
FVTPL securities	$ 106
Gross realized gains		$ 228	$ 59
Gross realized gains	363
Gross realized (losses)		(99)	(16)
Gross realized (losses)	(216)
Unrealized gains on investments reclassified from available-for-sale to other			7
Other securities, net realized and unrealized gains		49	51
Impairment write-downs	(14)	(7)	(17)
Securities gains, other than trading	$ 239	$ 171	$ 84

XML

Securities - Summary of Non-Interest Revenue (Parenthetical) (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure Of Non interest, dividend and fee income [Line Items]
Insurance revenue	$ 1,879	$ 2,070	$ 2,023
Interest,dividend and fee income [Member]
Disclosure Of Non interest, dividend and fee income [Line Items]
Insurance revenue	354	325
Securities gains other than trading [Member]
Disclosure Of Non interest, dividend and fee income [Line Items]
Insurance revenue	$ 1	$ 0

XML

Loans and Allowance for Credit Losses - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of detailed information about financial instruments [line items]
Average gross impaired loans	$ 2,115	$ 2,248
Average impaired loans, net of the specific allowance	1,706	1,838
Interest income on impaired loans	67	75	$ 74
Net gain of sale of impaired and written-off loans	4	28	5
Allowances for credit losses	1,870	1,996	2,114
Impaired loans	383,991	358,507
Carrying value of renegotiated loans	1,129	1,064
Renegotiated loans classified as performing	541	509
Renegotiated loans written off	53	36
Real estate properties held for sale	58	55
Impairment loss on real estate properties classified as held for sale	10	10	$ 18
Allowance for credit losses related to loans [Member]
Disclosure of detailed information about financial instruments [line items]
Allowances for credit losses	1,639
Allowance for credit losses related to other credit instruments [Member]
Disclosure of detailed information about financial instruments [line items]
Allowances for credit losses	231
Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Impaired loans	1,566	1,827
Allowance on Individually identified impaired loans	370
Gross impaired loans	1,936
Loans past due but not classified as impaired	1,566	1,827
Real estate properties held for sale received on foreclosed impaired loan	117	62
Financial assets past due but not impaired [member] | 3-6 month [member]
Disclosure of detailed information about financial instruments [line items]
Loans past due but not classified as impaired	49	$ 62
Related to performing loans, assuming 100% base case scenario [member]
Disclosure of detailed information about financial instruments [line items]
Allowances for credit losses	1,473
Modelled allowance account for credit losses of financial assets based on assumptions	1,250
Related to performing loans, assuming 100% adverse scenario [member]
Disclosure of detailed information about financial instruments [line items]
Allowances for credit losses	1,473
Modelled allowance account for credit losses of financial assets based on assumptions	2,650
Performing loans, stage one scenario [member]
Disclosure of detailed information about financial instruments [line items]
Allowances for credit losses	1,473
Modelled allowance account for credit losses of financial assets based on assumptions	$ 1,000
Expected credit loss period	12 months

XML

Loans and Allowance for Credit Losses - Summary of Credit Risk Exposures for Loans Carried at Amortized Cost or FVOCI (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	$ 860,000
Allowance for credit losses	1,870	$ 1,996	$ 2,114
Commitments and financial guarantee contracts	859,801	758,707
Residential mortgages [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	119,544
Allowance for credit losses		118	130
Residential mortgages [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	76
Residential mortgages [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	375
Residential mortgages [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	76,439
Residential mortgages [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	21,454
Residential mortgages [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	16,386
Residential mortgages [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	535
Residential mortgages [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4,431
Consumer installment and other personal loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	62,687
Consumer installment and other personal loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	538
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	521
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	20,256
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	13,586
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	12,945
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	11,860
Consumer installment and other personal loans [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,784
Consumer installment and other personal loans [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,273
Credit Card Loans [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	8,099
Credit Card Loans [Member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	230
Credit Card Loans [Member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,407
Credit Card Loans [Member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,151
Credit Card Loans [Member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,050
Credit Card Loans [Member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,616
Credit Card Loans [Member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	536
Credit Card Loans [Member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	569
Business and government loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	212,246
Allowance for credit losses		$ 1,155	$ 1,265
Business and government loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	795
Business and government loans [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,040
Business and government loans [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	111,922
Business and government loans [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	95,656
Business and government loans [member] | Gross carrying amount [member] | Watch list [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4,423
Loan commitments and financial guarantee contracts issued [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	167,812
Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	231
Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	242
Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	117,830
Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	48,321
Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Watch list [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	1,650
Stage One [member] | Residential mortgages [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	112,230
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	20
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	76,314
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	18,975
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	12,621
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	90
Stage One [member] | Residential mortgages [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4,250
Stage One [member] | Consumer installment and other personal loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	56,037
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	83
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	20,236
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	13,364
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	12,581
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	7,707
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	127
Stage One [member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,105
Stage One [member] | Credit Card Loans [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	6,865
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	39
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,403
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,140
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	943
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,742
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	108
Stage One [member] | Credit Card Loans [Member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	568
Stage One [member] | Business and government loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	197,890
Stage One [member] | Business and government loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	232
Stage One [member] | Business and government loans [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	109,774
Stage One [member] | Business and government loans [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	88,348
Stage One [member] | Loan commitments and financial guarantee contracts issued [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	160,895
Stage One [member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	108
Stage One [member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	116,108
Stage One [member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	44,895
Stage Two [Member] | Residential mortgages [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	6,958
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	37
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	125
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,479
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	3,765
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	445
Stage Two [Member] | Residential mortgages [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	181
Stage Two [Member] | Consumer installment and other personal loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	6,272
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	312
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	20
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	222
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	364
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4,153
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,657
Stage Two [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	168
Stage Two [Member] | Credit Card Loans [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,234
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	191
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | Exceptionally low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | Very low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	11
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | Low probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	107
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | Medium probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	874
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | High probability of default [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	428
Stage Two [Member] | Credit Card Loans [Member] | Gross carrying amount [member] | Not Rated [Member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1
Stage Two [Member] | Business and government loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	13,524
Stage Two [Member] | Business and government loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	355
Stage Two [Member] | Business and government loans [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	2,148
Stage Two [Member] | Business and government loans [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	7,308
Stage Two [Member] | Business and government loans [member] | Gross carrying amount [member] | Watch list [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	4,423
Stage Two [Member] | Loan commitments and financial guarantee contracts issued [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	6,702
Stage Two [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	96
Stage Two [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	1,722
Stage Two [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Sub investment grade [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	3,426
Stage Two [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Watch list [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	1,650
Stage three [Member] | Residential mortgages [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	356
Stage three [Member] | Residential mortgages [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	19
Stage three [Member] | Residential mortgages [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	375
Stage three [Member] | Consumer installment and other personal loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	378
Stage three [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	143
Stage three [Member] | Consumer installment and other personal loans [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	521
Stage three [Member] | Business and government loans [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	832
Stage three [Member] | Business and government loans [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	208
Stage three [Member] | Business and government loans [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Credit risk exposure for loans	1,040
Stage three [Member] | Loan commitments and financial guarantee contracts issued [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	215
Stage three [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member]
Disclosure of credit risk exposure [line items]
Allowance for credit losses	27
Stage three [Member] | Loan commitments and financial guarantee contracts issued [member] | Gross carrying amount [member] | Default and impaired [member]
Disclosure of credit risk exposure [line items]
Commitments and financial guarantee contracts	$ 242

XML

Loans and Allowance for Credit Losses - Summary of Continuity in Loss Allowance by Each Product Type (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of credit risk exposure [line items]
ACL, beginning of year	$ 1,996	$ 2,114
ACL, end of year	1,870	1,996
Allowance for credit losses related to loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	1,833	1,925
ACL, end of year		1,833
Allowance for credit losses related to other credit instruments [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	163	189
ACL, end of year		163
Residential mortgages [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	118	130
ACL, end of year		118
Residential mortgages [member] | Allowance for credit losses related to loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	93	104
ACL, end of year		93
Residential mortgages [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	25	26
ACL, end of year		25
Business and government loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	1,155	1,265
ACL, end of year		1,155
Business and government loans [member] | Allowance for credit losses related to loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	1,018	1,102
ACL, end of year		1,018
Business and government loans [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	137	163
ACL, end of year		137
IFRS9 [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	1,870
IFRS9 [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	482
IFRS9 [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	991
IFRS9 [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	397
IFRS9 [member] | Allowance for credit losses related to loans [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	1,639
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	374
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	895
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	370
IFRS9 [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	231
IFRS9 [member] | Allowance for credit losses related to other credit instruments [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, end of year	108
IFRS9 [member] | Allowance for credit losses related to other credit instruments [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	96
IFRS9 [member] | Allowance for credit losses related to other credit instruments [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, end of year	27
IFRS9 [member] | Residential mortgages [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	99
Net remeasurement of loss allowance	24
Loan originations	10
Derecognitions and maturities	(8)
Total PCL	26
Write-offs	(20)
Recoveries of previous write-offs	7
Foreign exchange and other	(10)
ACL, end of year	102	99
IFRS9 [member] | Residential mortgages [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	16
Transfer to Stage 1	34
Transfer to Stage 2	(1)
Net remeasurement of loss allowance	(37)
Loan originations	10
Derecognitions and maturities	(2)
Total PCL	4
ACL, end of year	20	16
IFRS9 [member] | Residential mortgages [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	34
Transfer to Stage 1	(31)
Transfer to Stage 2	7
Transfer to Stage 3	(9)
Net remeasurement of loss allowance	42
Derecognitions and maturities	(6)
Total PCL	3
Foreign exchange and other	1
ACL, end of year	38	34
IFRS9 [member] | Residential mortgages [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	49
Transfer to Stage 1	(3)
Transfer to Stage 2	(6)
Transfer to Stage 3	9
Net remeasurement of loss allowance	19
Total PCL	19
Write-offs	(20)
Recoveries of previous write-offs	7
Foreign exchange and other	(11)
ACL, end of year	44	49
IFRS9 [member] | Consumer installment and other personal loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	570
Net remeasurement of loss allowance	238
Loan originations	39
Derecognitions and maturities	(68)
Total PCL	209
Write-offs	(301)
Recoveries of previous write-offs	92
Foreign exchange and other	(10)
ACL, end of year	560	570
IFRS9 [member] | Consumer installment and other personal loans [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	76
Transfer to Stage 1	214
Transfer to Stage 2	(22)
Transfer to Stage 3	(4)
Net remeasurement of loss allowance	(196)
Loan originations	39
Derecognitions and maturities	(18)
Total PCL	13
Foreign exchange and other	1
ACL, end of year	90	76
IFRS9 [member] | Consumer installment and other personal loans [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	357
Transfer to Stage 1	(200)
Transfer to Stage 2	105
Transfer to Stage 3	(162)
Net remeasurement of loss allowance	272
Derecognitions and maturities	(50)
Total PCL	(35)
Foreign exchange and other	4
ACL, end of year	326	357
IFRS9 [member] | Consumer installment and other personal loans [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	137
Transfer to Stage 1	(14)
Transfer to Stage 2	(83)
Transfer to Stage 3	166
Net remeasurement of loss allowance	162
Total PCL	231
Write-offs	(301)
Recoveries of previous write-offs	92
Foreign exchange and other	(15)
ACL, end of year	144	137
IFRS9 [member] | Credit Card Loans [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	337
Net remeasurement of loss allowance	198
Loan originations	19
Derecognitions and maturities	(45)
Total PCL	172
Write-offs	(319)
Recoveries of previous write-offs	103
ACL, end of year	293	337
IFRS9 [member] | Credit Card Loans [Member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	83
Transfer to Stage 1	177
Transfer to Stage 2	(37)
Transfer to Stage 3	(1)
Net remeasurement of loss allowance	(164)
Loan originations	19
Derecognitions and maturities	(3)
Total PCL	(9)
ACL, end of year	74	83
IFRS9 [member] | Credit Card Loans [Member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	254
Transfer to Stage 1	(177)
Transfer to Stage 2	37
Transfer to Stage 3	(195)
Net remeasurement of loss allowance	342
Derecognitions and maturities	(42)
Total PCL	(35)
ACL, end of year	219	254
IFRS9 [member] | Credit Card Loans [Member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
Transfer to Stage 3	196
Net remeasurement of loss allowance	20
Total PCL	216
Write-offs	(319)
Recoveries of previous write-offs	103
IFRS9 [member] | Business and government loans [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	912
Net remeasurement of loss allowance	263
Loan originations	163
Derecognitions and maturities	(166)
Model changes	(10)
Total PCL	250
Write-offs	(297)
Recoveries of previous write-offs	59
Foreign exchange and other	(9)
ACL, end of year	915	912
IFRS9 [member] | Business and government loans [member] | Stage One [member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	268
Transfer to Stage 1	136
Transfer to Stage 2	(31)
Transfer to Stage 3	(1)
Net remeasurement of loss allowance	(155)
Loan originations	163
Derecognitions and maturities	(80)
Model changes	(7)
Total PCL	25
Foreign exchange and other	5
ACL, end of year	298	268
IFRS9 [member] | Business and government loans [member] | Stage Two [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	410
Transfer to Stage 1	(128)
Transfer to Stage 2	66
Transfer to Stage 3	(61)
Net remeasurement of loss allowance	203
Derecognitions and maturities	(86)
Model changes	(3)
Total PCL	(9)
Foreign exchange and other	7
ACL, end of year	408	410
IFRS9 [member] | Business and government loans [member] | Stage three [Member]
Disclosure of credit risk exposure [line items]
ACL, beginning of year	234
Transfer to Stage 1	(8)
Transfer to Stage 2	(35)
Transfer to Stage 3	62
Net remeasurement of loss allowance	215
Total PCL	234
Write-offs	(297)
Recoveries of previous write-offs	59
Foreign exchange and other	(21)
ACL, end of year	$ 209	$ 234

XML

Loans and Allowance for Credit Losses - Summary of Continuity in Loss Allowance by Each Product Type (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Other assets [member]
Disclosure of credit risk exposure [line items]
Provision for credit losses	$ 5

XML

Loans and Allowance for Credit Losses - Schedule of Loans and Allowance for Credit Losses by Category (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of financial assets [line items]
ACL, beginning of year	$ 1,996	$ 2,114
ACL, end of year	1,870	1,996	$ 2,114
Allowance for credit losses related to loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	1,833	1,925
ACL, end of year		1,833	1,925
Allowance for credit losses related to other credit instruments [member]
Disclosure of financial assets [line items]
ACL, beginning of year	163	189
ACL, end of year		163	189
Related to specific allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	420	432	392
Amounts written off		(954)	(1,003)
Recoveries of amounts written off in previous years		265	343
Charge to income statement		822	771
Foreign exchange and other movements		(145)	(71)
ACL, end of year		420	432
Related to collective allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	1,576	1,682	1,660
Charge to income statement		(76)
Foreign exchange and other movements		(30)	22
ACL, end of year		1,576	1,682
Residential mortgages [member]
Disclosure of financial assets [line items]
ACL, beginning of year	118	130
ACL, end of year		118	130
Residential mortgages [member] | Allowance for credit losses related to loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	93	104
ACL, end of year		93	104
Residential mortgages [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of financial assets [line items]
ACL, beginning of year	25	26
ACL, end of year		25	26
Residential mortgages [member] | Related to specific allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	49	59	69
Amounts written off		(27)	(38)
Recoveries of amounts written off in previous years		16	16
Charge to income statement		11	24
Foreign exchange and other movements		(10)	(12)
ACL, end of year		49	59
Residential mortgages [member] | Related to collective allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	69	71	111
Charge to income statement		(1)	(42)
Foreign exchange and other movements		(1)	2
ACL, end of year		69	71
Credit card, consumer installment and other personal loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	723	719
ACL, end of year		723	719
Credit card, consumer installment and other personal loans [member] | Allowance for credit losses related to loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	722	719
ACL, end of year		722	719
Credit card, consumer installment and other personal loans [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of financial assets [line items]
ACL, beginning of year	1
ACL, end of year		1
Credit card, consumer installment and other personal loans [member] | Related to specific allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	137	123	113
Amounts written off		(631)	(616)
Recoveries of amounts written off in previous years		199	173
Charge to income statement		464	478
Foreign exchange and other movements		(18)	(25)
ACL, end of year		137	123
Credit card, consumer installment and other personal loans [member] | Related to collective allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	586	596	714
Charge to income statement		(6)	(120)
Foreign exchange and other movements		(4)	2
ACL, end of year		586	596
Business and government loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	1,155	1,265
ACL, end of year		1,155	1,265
Business and government loans [member] | Allowance for credit losses related to loans [member]
Disclosure of financial assets [line items]
ACL, beginning of year	1,018	1,102
ACL, end of year		1,018	1,102
Business and government loans [member] | Allowance for credit losses related to other credit instruments [member]
Disclosure of financial assets [line items]
ACL, beginning of year	137	163
ACL, end of year		137	163
Business and government loans [member] | Related to specific allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	234	250	210
Amounts written off		(296)	(349)
Recoveries of amounts written off in previous years		50	154
Charge to income statement		347	269
Foreign exchange and other movements		(117)	(34)
ACL, end of year		234	250
Business and government loans [member] | Related to collective allowances [member]
Disclosure of financial assets [line items]
ACL, beginning of year	$ 921	1,015	835
Charge to income statement		(69)	162
Foreign exchange and other movements		(25)	18
ACL, end of year		$ 921	$ 1,015

XML

Loans and Allowance for Credit Losses - Schedule of Loans and Allowance for Credit Losses by Geographic Region (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about financial instruments [line items]
Loans, Gross amount	$ 385,630	$ 360,340
Allowance for credit losses	1,639	1,833
Loans, Net amount	383,991	358,507
Allowance for credit losses related to loans [member]
Disclosure of detailed information about financial instruments [line items]
Loans, Gross amount	385,630	360,340
Loans, Net amount	383,991	358,507
Allowance for credit losses related to loans [member] | Related to impaired loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	370
Allowance for credit losses related to loans [member] | Related to performing loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	1,269
Allowance for credit losses related to loans [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		393
Allowance for credit losses related to loans [member] | Related to collective allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		1,440
Allowance for credit losses related to loans [member] | Canada [member]
Disclosure of detailed information about financial instruments [line items]
Loans, Gross amount	244,837	233,672
Loans, Net amount	243,959	232,661
Allowance for credit losses related to loans [member] | Canada [member] | Related to impaired loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	189
Allowance for credit losses related to loans [member] | Canada [member] | Related to performing loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	689
Allowance for credit losses related to loans [member] | Canada [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		212
Allowance for credit losses related to loans [member] | Canada [member] | Related to collective allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		799
Allowance for credit losses related to loans [member] | United States [member]
Disclosure of detailed information about financial instruments [line items]
Loans, Gross amount	131,247	115,029
Loans, Net amount	130,492	114,227
Allowance for credit losses related to loans [member] | United States [member] | Related to impaired loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	181
Allowance for credit losses related to loans [member] | United States [member] | Related to performing loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	574
Allowance for credit losses related to loans [member] | United States [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		161
Allowance for credit losses related to loans [member] | United States [member] | Related to collective allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		641
Allowance for credit losses related to loans [member] | Other countries [member]
Disclosure of detailed information about financial instruments [line items]
Loans, Gross amount	9,546	11,639
Loans, Net amount	9,540	11,619
Allowance for credit losses related to loans [member] | Other countries [member] | Related to performing loans [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses	$ 6
Allowance for credit losses related to loans [member] | Other countries [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Allowance for credit losses		$ 20

XML

Loans and Allowance for Credit Losses - Schedule of Loans and Allowance for Credit Losses by Geographic Region (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about financial instruments [line items]
Other liabilities	$ 35,829	$ 32,361
Allowance for credit losses on impaired loans, other credit instruments [Member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Other liabilities	27	27
Allowance for credit losses on performing loans, other credit instruments [member] | Related to collective allowances [member]
Disclosure of detailed information about financial instruments [line items]
Other liabilities	$ 204	$ 136

XML

Loans and Allowance for Credit Losses - Schedule of impaired loans, including the related allowances (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	$ 1,566	$ 1,827
Financial assets impaired [member] | Canada [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	546	581
Financial assets impaired [member] | United States [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,020	1,216
Financial assets impaired [member] | Other countries [member]
Disclosure of detailed information about financial instruments [line items]
Total loans		30
Residential mortgages [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	356	367
Consumer installment and other personal [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	378	420
Business and government loans [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	832	1,040
Accumulated impairment [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	370	393
Accumulated impairment [member] | Related to specific allowances [member] | Canada [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	189	212
Accumulated impairment [member] | Related to specific allowances [member] | United States [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	181	161
Accumulated impairment [member] | Related to specific allowances [member] | Other countries [member]
Disclosure of detailed information about financial instruments [line items]
Total loans		20
Accumulated impairment [member] | Residential mortgages [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	19	24
Accumulated impairment [member] | Consumer installment and other personal [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	143	136
Accumulated impairment [member] | Business and government loans [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	208	233
Gross carrying amount [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,936	2,220
Gross carrying amount [member] | Financial assets impaired [member] | Canada [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	735	793
Gross carrying amount [member] | Financial assets impaired [member] | United States [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,201	1,377
Gross carrying amount [member] | Financial assets impaired [member] | Other countries [member]
Disclosure of detailed information about financial instruments [line items]
Total loans		50
Gross carrying amount [member] | Residential mortgages [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	375	391
Gross carrying amount [member] | Consumer installment and other personal [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	521	556
Gross carrying amount [member] | Business and government loans [member] | Financial assets impaired [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	$ 1,040	$ 1,273

XML

Loans and Allowance for Credit Losses - Schedule of impaired loans, including the related allowances (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about financial instruments [line items]
Other liabilities	$ 35,829	$ 32,361
Accumulated impairment [member] | Allowance for credit losses related to other credit instruments [member] | Related to specific allowances [member]
Disclosure of detailed information about financial instruments [line items]
Other liabilities	$ 27	$ 27

XML

Loans and Allowance for Credit Losses - Summary of Loans that are Past Due but not Classified as Impaired (Detail) - Financial assets past due but not impaired [member] - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about financial instruments [line items]
Total loans	$ 4,062	$ 4,104
Residential mortgages [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,194	1,106
Credit card, consumer installment and other personal loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,934	2,040
Business and government loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	934	958
90 days or more [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	164	185
90 days or more [member] | Residential mortgages [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	21	19
90 days or more [member] | Credit card, consumer installment and other personal loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	88	94
90 days or more [member] | Business and government loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	55	72
1 - 29 days [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	2,702	2,718
1 - 29 days [member] | Residential mortgages [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	660	649
1 - 29 days [member] | Credit card, consumer installment and other personal loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,431	1,480
1 - 29 days [member] | Business and government loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	611	589
1 - 3 Months [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	1,196	1,201
1 - 3 Months [member] | Residential mortgages [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	513	438
1 - 3 Months [member] | Credit card, consumer installment and other personal loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	415	466
1 - 3 Months [member] | Business and government loans [member]
Disclosure of detailed information about financial instruments [line items]
Total loans	$ 268	$ 297

XML

Loans and Allowance for Credit Losses - Summary of Loans that are Past Due but not Classified as Impaired (Parenthetical) (Detail)	Oct. 31, 2018	Oct. 31, 2017
90 days or more [member]
Disclosure of detailed information about financial instruments [line items]
Percentage of loans past due but not impaired guaranteed	66.00%	67.00%

XML

Loans and Allowance for Credit Losses - Summary of Key Economic Variables Used in Base Case (Detail)	12 Months Ended
	Oct. 31, 2018
Base Scenario [member] | Canada [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	1.80%
BBB spread	2.30%
Unemployment rates	5.60%
Housing price index	1.40%
Base Scenario [member] | Canada [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	1.60%
BBB spread	2.30%
Unemployment rates	5.60%
Housing price index	1.80%
Base Scenario [member] | United States [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	2.40%
BBB spread	2.20%
Unemployment rates	3.60%
Housing price index	3.60%
Base Scenario [member] | United States [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	1.60%
BBB spread	2.30%
Unemployment rates	3.70%
Housing price index	3.00%
Benign scenario [member] | Canada [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	3.10%
BBB spread	2.00%
Unemployment rates	5.40%
Housing price index	2.40%
Benign scenario [member] | Canada [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	2.40%
BBB spread	2.10%
Unemployment rates	5.20%
Housing price index	2.60%
Benign scenario [member] | United States [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	2.90%
BBB spread	1.80%
Unemployment rates	3.20%
Housing price index	5.10%
Benign scenario [member] | United States [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	1.90%
BBB spread	2.00%
Unemployment rates	3.10%
Housing price index	4.30%
Adverse scenario [member] | Canada [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	(3.20%)
BBB spread	4.70%
Unemployment rates	9.30%
Housing price index	(12.80%)
Adverse scenario [member] | Canada [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	0.80%
BBB spread	3.90%
Unemployment rates	9.30%
Housing price index	(3.20%)
Adverse scenario [member] | United States [member] | First Twelve Months [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	(2.90%)
BBB spread	4.30%
Unemployment rates	6.70%
Housing price index	(7.30%)
Adverse scenario [member] | United States [member] | Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Real gross domestic product	0.90%
BBB spread	3.50%
Unemployment rates	6.80%
Housing price index	(1.20%)

XML

Loans and Allowance for Credit Losses - Summary of Key Economic Variables Used in Base Case (Parenthetical) (Detail)	12 Months Ended
	Oct. 31, 2018
Remaining horizon [member]
Disclosure of detailed information about financial instruments [line items]
Remaining forecast period	2 years

XML

Transfer of Assets - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of transferred financial assets that are not derecognised in their entirety [line items]
Sale of mortgage loans	$ 8,062	$ 8,707
United States [member]
Disclosure of transferred financial assets that are not derecognised in their entirety [line items]
Sale of mortgage loans	936	1,012
Mortgage servicing rights	$ 17	$ 17

XML

Transfer of Assets - Summary of Carrying Amount and Fair Value (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of transferred financial assets that are not derecognised in their entirety [line items]
Carrying amount of assets	$ 17,209	$ 16,888
Carrying amount of associated liabilities	16,925	16,621
Residential mortgages [member]
Disclosure of transferred financial assets that are not derecognised in their entirety [line items]
Carrying amount of assets	5,569	4,797
Other related assets [member]
Disclosure of transferred financial assets that are not derecognised in their entirety [line items]
Carrying amount of assets	$ 11,640	$ 12,091

XML

Transfer of Assets - Summary of Carrying Amount and Fair Value (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of transferred financial assets that are not derecognised in their entirety [abstract]
Fair value of assets	$ 17,105	$ 16,847
Associated liabilities	$ 16,763	$ 16,746

XML

Structured Entities - Summary of Carrying Amount and Fair Value (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of information about structured entities [Line Items]
Carrying amount of assets	$ 14,073	$ 12,757
Carrying amount of associated liabilities	8,179	6,410
Credit card receivables 1 [member] | Consolidated structured entities [member]
Disclosure of information about structured entities [Line Items]
Carrying amount of assets	7,246	7,058
Carrying amount of associated liabilities	5,096	4,115
Consumer installment and other personal [member] | Consolidated structured entities [member]
Disclosure of information about structured entities [Line Items]
Carrying amount of assets	6,827	5,699
Carrying amount of associated liabilities	$ 3,083	$ 2,295

XML

Structured Entities - Summary of Carrying Amount and Fair Value (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of information about structured entities [Line Items]
Fair value of associated liabilities	$ 16,763	$ 16,746
Consolidated structured entities [member]
Disclosure of information about structured entities [Line Items]
Fair value of assets	14,045	12,753
Fair value of associated liabilities	$ 8,134	$ 6,403

XML

Structured Entities - Additional Information (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Securities [member] | BMO managed funds [member]
Disclosure of information about structured entities [Line Items]
Assets recognised	$ 1,612	$ 1,750
U.S. customer securitization vehicle [member]
Disclosure of information about structured entities [Line Items]
Undrawn amount under liquidity facilities	7,100	6,765
Capital and funding vehicles [member]
Disclosure of information about structured entities [Line Items]
Credit-linked notes issued	325	318
Canadian customer securitization vehicles [member]
Disclosure of information about structured entities [Line Items]
Undrawn amount under liquidity facilities	$ 6,286	$ 5,688

XML

Structured Entities - Schedule of Unconsolidated Structured Entities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016	Oct. 31, 2015
Disclosure of unconsolidated structured entities [line items]
Cash and cash equivalents	$ 42,142	$ 32,599	$ 31,653	$ 40,295
Trading Securities	99,697
FVTPL Securities	11,611
FVOCI securities	62,440
Available-for-salesecurities		54,075
Other	14,652	13,570
Derivatives	24,411	27,804
Other	199,488	180,405
Total assets of the entities	774,048	709,580
Capital vehicles [member]
Disclosure of unconsolidated structured entities [line items]
Cash and cash equivalents	118	8
FVOCI securities	2
Available-for-salesecurities		2
Loans	7	7
Other	3
Total assets	130	17
Deposits	570	460
Other	17	16
Total liabilities	587	476
Exposure to loss	28	57
Total assets of the entities	587	476
Canadian customer securitization vehicles [member]
Disclosure of unconsolidated structured entities [line items]
Cash and cash equivalents	53	50
Trading Securities	12	6
FVTPL Securities	582
FVOCI securities	242
Available-for-salesecurities		725
Other	13	6
Total assets	902	787
Deposits	53	50
Total liabilities	53	50
Exposure to loss	7,135	6,425
Total assets of the entities	$ 5,033	4,592
Structured finance vehicles [member]
Disclosure of unconsolidated structured entities [line items]
Trading Securities		209
Total assets		209
Deposits		146
Derivatives		63
Total liabilities		209
Exposure to loss		209
Total assets of the entities		$ 209

XML

Derivative Instruments - Additional Information (Detail) - CAD ($)		12 Months Ended
		Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of detailed information about financial instruments [line items]
Obligation to exercise the option		$ 88,000,000	$ 129,000,000	$ 116,000,000
Derivative instruments in a liability position		2,860,000,000	3,866,000,000
Derivative instruments in a liability position, collateral posted		2,963,000,000	4,223,000,000
Net losses related to effective portion of cash flow hedges	[1]	(1,228,000,000)	(839,000,000)	(26,000,000)
Gain related to cash flow hedges reclassified to profit or loss	[2]	(336,000,000)	(61,000,000)	(10,000,000)
Gain on net increases in the fair value of the hedged item attributable to hedged risk		(2,331,000,000)
Derivative fair value		773,000,000	357,000,000
IAS 39 [member]
Disclosure of detailed information about financial instruments [line items]
Net losses related to effective portion of cash flow hedges			1,161,000,000
Gain related to cash flow hedges reclassified to profit or loss			188,000,000
Net ineffectiveness recognized on cash flow hedges				$ 7,000,000
Fair value loss on derivatives held in qualifying fair value hedging			200,000,000
Gain on net increases in the fair value of the hedged item attributable to hedged risk			$ 193,000,000
Credit risk [member]
Disclosure of detailed information about financial instruments [line items]
Obligation to exercise the option		$ 0

[1] Net of income tax (provision) recovery of $432 million, $322 million and $(4) million for the year ended, respectively.

[2] Net of income tax (recovery) of $(121) million, $(21) million and $(6) million for the year ended, respectively.

XML

Derivative Instruments - Schedule of Fair Value of Derivative Instruments (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Total	$ 24,411	$ 27,804
Total fair value - trading derivatives	3,021	1,237
Total fair value - hedging derivatives	(1,228)	(90)
Total fair value - trading and hedging derivatives	1,793	1,147
Less: impact of master netting agreements	0	0
Total	1,793	1,147
Trading Derivatives [Member] | Interest rate contracts [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	1,376	1,363
Trading Derivatives [Member] | Interest rate contracts [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	26	41
Trading Derivatives [Member] | Interest rate contracts [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(1)
Trading Derivatives [Member] | Interest rate contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	425	444
Trading Derivatives [Member] | Interest rate contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(273)	(329)
Trading Derivatives [Member] | Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	241	267
Trading Derivatives [Member] | Foreign exchange contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(228)	(270)
Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	684	935
Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(1,080)	(948)
Trading Derivatives [Member] | Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	1,518	1,776
Trading Derivatives [Member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	475	9
Trading Derivatives [Member] | Commodity contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	17
Trading Derivatives [Member] | Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	484	352
Trading Derivatives [Member] | Commodity contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	(372)	(357)
Trading Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts	(244)	(1,998)
Trading Derivatives [Member] | Credit default swaps [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	(35)	(54)
Trading Derivatives [Member] | Credit default swaps [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	8	6
Hedging Derivatives [Member] | Interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(1,243)	(480)
Interest rate contracts	33	(128)
Interest rate contracts	(1,210)	(608)
Hedging Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	10	480
Foreign exchange contracts	10	480
Hedging Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts	(28)	38
Equity contracts	(28)	38
Gross assets [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Less: impact of master netting agreements	(15,575)	(19,909)
Total	10,629	9,042
Gross assets [member] | Fair value trading and hedging derivatives assets [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - trading and hedging derivatives	26,204	28,951
Gross assets [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	7,795	8,390
Gross assets [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	36	41
Gross assets [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	2
Gross assets [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	425	444
Gross assets [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	241	267
Gross assets [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	2,362	2,687
Gross assets [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	4,977	8,103
Gross assets [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	4,335	4,954
Gross assets [member] | Trading Derivatives [Member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	1,559	726
Gross assets [member] | Trading Derivatives [Member] | Commodity contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	17
Gross assets [member] | Trading Derivatives [Member] | Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	484	352
Gross assets [member] | Trading Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts	2,158	1,388
Gross assets [member] | Trading Derivatives [Member] | Credit default swaps [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	1
Gross assets [member] | Trading Derivatives [Member] | Credit default swaps [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	9	7
Gross assets [member] | Trading Derivatives [Member] | Fair value trading derivatives assets [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - trading derivatives	24,401	27,359
Gross assets [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Cash flow hedge in swaps asset [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	18	78
Gross assets [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Fair value hedge in swaps asset [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	701	274
Gross assets [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Assets swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	719	352
Gross assets [member] | Hedging Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	1,084	1,202
Foreign exchange contracts	1,084	1,202
Gross assets [member] | Hedging Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts		38
Equity contracts		38
Gross assets [member] | Hedging Derivatives [Member] | Fair value hedging derivatives assets [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - hedging derivatives	1,803	1,592
Gross Liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Less: impact of master netting agreements	15,575	19,909
Total	(8,836)	(7,895)
Gross Liabilities [member] | Fair value trading and hedging derivatives liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - trading and hedging derivatives	24,411	27,804
Gross Liabilities [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(6,419)	(7,027)
Gross Liabilities [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(10)
Gross Liabilities [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(3)
Gross Liabilities [member] | Trading Derivatives [Member] | Interest rate contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	(273)	(329)
Gross Liabilities [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(228)	(270)
Gross Liabilities [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(1,678)	(1,752)
Gross Liabilities [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(6,057)	(9,051)
Gross Liabilities [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(2,817)	(3,178)
Gross Liabilities [member] | Trading Derivatives [Member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	(1,084)	(717)
Gross Liabilities [member] | Trading Derivatives [Member] | Commodity contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Commodity contracts	(372)	(357)
Gross Liabilities [member] | Trading Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts	(2,402)	(3,386)
Gross Liabilities [member] | Trading Derivatives [Member] | Credit default swaps [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	(36)	(54)
Gross Liabilities [member] | Trading Derivatives [Member] | Credit default swaps [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Credit default swaps	(1)	(1)
Gross Liabilities [member] | Trading Derivatives [Member] | Fair value trading derivatives liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - trading derivatives	21,380	26,122
Gross Liabilities [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Cash flow hedge in swaps liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	1,261	558
Gross Liabilities [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Fair value hedge in swaps liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	668	402
Gross Liabilities [member] | Hedging Derivatives [Member] | Interest rate contracts [member] | Liabilities swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Interest rate contracts	1,929	960
Gross Liabilities [member] | Hedging Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Foreign exchange contracts	(1,074)	(722)
Foreign exchange contracts	(1,074)	(722)
Gross Liabilities [member] | Hedging Derivatives [Member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Equity contracts	(28)
Equity contracts	(28)
Gross Liabilities [member] | Hedging Derivatives [Member] | Fair value hedging derivatives liabilities [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Total fair value - hedging derivatives	$ 3,031	$ 1,682

XML

Derivative Instruments - Schedule of Notional Amounts of Trading Derivatives (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	$ 5,800,058	$ 4,707,717
Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,562,936	3,572,605
Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,831,997	3,202,365
Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	1,070,741	983,461
Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	92,916	85,586
Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	455,232	434,210
Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	76,097	70,764
Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	24,366	18,713
Trading Derivatives [Member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	5,602,127	4,530,260
Trading Derivatives [Member] | Equity contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	86,412	77,437
Trading Derivatives [Member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,415,702	3,443,730
Trading Derivatives [Member] | Interest rate swap contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	61,652	39,514
Trading Derivatives [Member] | Interest rate swap contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	65,232	46,531
Trading Derivatives [Member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,684,763	3,073,490
Trading Derivatives [Member] | Interest rate swap contract [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	411,573	195,142
Trading Derivatives [Member] | Interest rate swap contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	192,482	89,053
Trading Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	1,020,426	935,223
Trading Derivatives [Member] | Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	24,093	29,813
Trading Derivatives [Member] | Foreign exchange contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	25,438	30,350
Trading Derivatives [Member] | Foreign exchange contracts [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	739	794
Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	57,226	50,534
Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	449,187	430,808
Trading Derivatives [Member] | Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	463,743	392,924
Trading Derivatives [Member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	76,097	70,764
Trading Derivatives [Member] | Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	9,485	12,111
Trading Derivatives [Member] | Commodity contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	9,142	11,801
Trading Derivatives [Member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	24,366	18,713
Trading Derivatives [Member] | Commodity contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	33,104	28,139
Trading Derivatives [Member] | Credit default swaps [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,047	2,658
Trading Derivatives [Member] | Credit default swaps [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	443	448
Exchange Traded [Member] | Trading Derivatives [Member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	315,409	171,107
Exchange Traded [Member] | Trading Derivatives [Member] | Equity contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	33,687	14,253
Exchange Traded [Member] | Trading Derivatives [Member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	235,622	108,744
Exchange Traded [Member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	26,629	10,407
Exchange Traded [Member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	16,511	9,284
Exchange Traded [Member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	192,482	89,053
Exchange Traded [Member] | Trading Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,784	8,044
Exchange Traded [Member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	2,625	6,001
Exchange Traded [Member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	1,420	1,249
Exchange Traded [Member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	739	794
Exchange Traded [Member] | Trading Derivatives [Member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	41,316	40,066
Exchange Traded [Member] | Trading Derivatives [Member] | Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,303	5,031
Exchange Traded [Member] | Trading Derivatives [Member] | Commodity contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,909	6,896
Exchange Traded [Member] | Trading Derivatives [Member] | Commodity contract [member] | Futures contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	33,104	28,139
Over the Counter [member] | Trading Derivatives [Member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	5,286,718	4,359,153
Over the Counter [member] | Trading Derivatives [Member] | Equity contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	52,725	63,184
Over the Counter [member] | Trading Derivatives [Member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,180,080	3,334,986
Over the Counter [member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	35,023	29,107
Over the Counter [member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	48,721	37,247
Over the Counter [member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,684,763	3,073,490
Over the Counter [member] | Trading Derivatives [Member] | Interest rate swap contract [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	411,573	195,142
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	1,015,642	927,179
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	21,468	23,812
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	24,018	29,101
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	57,226	50,534
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	449,187	430,808
Over the Counter [member] | Trading Derivatives [Member] | Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	463,743	392,924
Over the Counter [member] | Trading Derivatives [Member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	34,781	30,698
Over the Counter [member] | Trading Derivatives [Member] | Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	6,182	7,080
Over the Counter [member] | Trading Derivatives [Member] | Commodity contract [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	4,233	4,905
Over the Counter [member] | Trading Derivatives [Member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	24,366	18,713
Over the Counter [member] | Trading Derivatives [Member] | Credit default swaps [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	3,047	2,658
Over the Counter [member] | Trading Derivatives [Member] | Credit default swaps [member] | Written put options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Notional amount	$ 443	$ 448

XML

Derivative Instruments - Schedule of Notional Amount and Average Rates of Derivatives and the Carrying Amount of Deposits Designated as Hedging Instruments, by Term to Maturity (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)	Oct. 31, 2017 CAD ($)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 5,800,058	$ 4,707,717
Carrying amount	26,204	$ 28,951
USD denominated deposit [member] | Foreign exchange risk [member] | Hedges of net investment in foreign operations [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount	6,596
GBP denominated deposit [member] | Foreign exchange risk [member] | Hedges of net investment in foreign operations [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount	473
Interest rate swaps [Member] | Interest rate risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 73,769
Average fixed interest rate	0.0221
Interest rate swaps [Member] | Interest rate risk [member] | Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 73,464
Average fixed interest rate	0.0217
Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 29,119
Average fixed interest rate	0.0157
Average exchange rate	1.2930
Foreign exchange risk [member] | CAD-EUR pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 21,349
Average fixed interest rate	0.0211
Average exchange rate	1.4908
Foreign exchange risk [member] | Other currency pairs [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 6,353
Average fixed interest rate	0.0259
Average exchange rate	1.3430
Total Return Swaps [Member] | Equity price risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 381
Within 1 year [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	2,757,752
Within 1 year [member] | USD denominated deposit [member] | Foreign exchange risk [member] | Hedges of net investment in foreign operations [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount	6,596
Within 1 year [member] | GBP denominated deposit [member] | Foreign exchange risk [member] | Hedges of net investment in foreign operations [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount	473
Within 1 year [member] | Interest rate swaps [Member] | Interest rate risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 5,252
Average fixed interest rate	0.0166
Within 1 year [member] | Interest rate swaps [Member] | Interest rate risk [member] | Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 14,516
Average fixed interest rate	0.0181
Within 1 year [member] | Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 3,939
Average fixed interest rate	0.0131
Average exchange rate	1.3347
Within 1 year [member] | Foreign exchange risk [member] | CAD-EUR pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 3,804
Average fixed interest rate	0.0174
Average exchange rate	1.5217
Within 1 year [member] | Total Return Swaps [Member] | Equity price risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 381
1 to 3 years [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	1,050,344
1 to 3 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 22,976
Average fixed interest rate	0.0167
1 to 3 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 21,919
Average fixed interest rate	0.0216
1 to 3 years [member] | Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 10,572
Average fixed interest rate	0.0120
Average exchange rate	1.3035
1 to 3 years [member] | Foreign exchange risk [member] | CAD-EUR pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 8,726
Average fixed interest rate	0.0210
Average exchange rate	1.4685
1 to 3 years [member] | Foreign exchange risk [member] | Other currency pairs [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 1,817
Average fixed interest rate	0.0205
Average exchange rate	1.4361
3 to 5 years [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 1,316,949
3 to 5 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 30,790
Average fixed interest rate	0.0260
3 to 5 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 22,928
Average fixed interest rate	0.0229
3 to 5 years [member] | Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 11,781
Average fixed interest rate	0.0201
Average exchange rate	1.2923
3 to 5 years [member] | Foreign exchange risk [member] | CAD-EUR pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 8,618
Average fixed interest rate	0.0226
Average exchange rate	1.4999
3 to 5 years [member] | Foreign exchange risk [member] | Other currency pairs [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 4,427
Average fixed interest rate	0.0280
Average exchange rate	1.3338
5 to 10 years [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 614,532
5 to 10 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 14,751
Average fixed interest rate	0.0242
5 to 10 years [member] | Interest rate swaps [Member] | Interest rate risk [member] | Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 14,101
Average fixed interest rate	0.0236
5 to 10 years [member] | Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 2,576
Average fixed interest rate	0.0127
Average exchange rate	1.1871
5 to 10 years [member] | Foreign exchange risk [member] | Other currency pairs [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 109
Average fixed interest rate	0.0298
Average exchange rate	0.1696
Over 10 years [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 60,481
Over 10 years [member] | Cross currency swaps and foreign exchange forwards [member] | CAD-USD pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 251
Average fixed interest rate	0.0302
Average exchange rate	1.3122
Over 10 years [member] | Foreign exchange risk [member] | CAD-EUR pair [member] | Foreign exchange risk [member] | Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Notional amount	$ 201
Average fixed interest rate	0.0297
Average exchange rate	1.4870

XML

Derivative Instruments - Cash Flow Hedges and Net Investment Hedges Information Related To Items Designated As Hedging Instruments, Hedged Items and Hedge Ineffectiveness (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Asset	$ 1,102
Carrying amount of hedging instruments, Liability	(9,432)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(2,331)
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	2,333
Ineffectiveness recorded in non-interest revenue - other	(4)
Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Asset	1,102
Carrying amount of hedging instruments, Liability	(2,363)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(2,120)
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	2,122
Ineffectiveness recorded in non-interest revenue - other	(4)
Interest rate risk [member] | Cash flow hedges [member] | Interest rate swap contract [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Asset	18
Carrying amount of hedging instruments, Liability	(1,261)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(1,685)
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	1,687
Ineffectiveness recorded in non-interest revenue - other	(4)
Foreign exchange risk [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Liability	(7,069)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(211)
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	211
Foreign exchange risk [member] | Cash flow hedges [member] | Cross currency swap [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Asset	1,084
Carrying amount of hedging instruments, Liability	(1,074)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(459)
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	459
Equity price risk [member] | Cash flow hedges [member] | Total Return Swaps [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging instruments, Liability	(28)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	24
Hedge ineffectiveness Gains (Losses) on hypothetical derivatives used to calculate hedge ineffectiveness	$ (24)

XML

Derivative Instruments - Cash Flow Hedges and Net Investment Hedges Information Related To Impacts on Consolidated Statement of Other Comprehensive Income, On a Pre-Tax Basis (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	$ 3,066
AOCI as at October 1, 2018	2,302
Cash flow hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	(227)
Gains / (losses) recognized in OCI	(1,660)
Amount reclassified to net income as the hedged item affects net income	457
AOCI as at October 1, 2018	(1,430)
Active hedges	(567)
Discontinued hedges	(863)
Cash flow hedges [member] | Interest rate risk [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	(597)
Gains / (losses) recognized in OCI	(1,681)
Amount reclassified to net income as the hedged item affects net income	67
AOCI as at October 1, 2018	(2,211)
Active hedges	(1,348)
Discontinued hedges	(863)
Cash flow hedges [member] | Foreign exchange risk [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	298
Gains / (losses) recognized in OCI	(3)
Amount reclassified to net income as the hedged item affects net income	456
AOCI as at October 1, 2018	751
Active hedges	751
Cash flow hedges [member] | Equity price risk [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	72
Gains / (losses) recognized in OCI	24
Amount reclassified to net income as the hedged item affects net income	(66)
AOCI as at October 1, 2018	30
Active hedges	30
Hedges of net investment in foreign operations [member] | Foreign exchange risk [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	(1,580)
Gains / (losses) recognized in OCI	(211)
AOCI as at October 1, 2018	(1,791)
Active hedges	(1,791)
Hedged item [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
AOCI as at November 1, 2017	(1,807)
Gains / (losses) recognized in OCI	(1,871)
Amount reclassified to net income as the hedged item affects net income	457
AOCI as at October 1, 2018	(3,221)
Active hedges	(2,358)
Discontinued hedges	$ (863)

XML

Derivative Instruments - Cash Flow Hedges and Net Investment Hedges Information Related To Impacts on Consolidated Statement of Other Comprehensive Income, On a Pre-Tax Basis (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [abstract]
Cash flow hedge AOCI, tax	$ 356

XML

Derivative Instruments - Derivatives Designated As Fair Value Hedging Instruments, Hedged Items and Hedge Ineffectiveness (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	$ (2,331)
Hedge ineffectiveness Gains (Losses) on hedged item used to calculate hedge ineffectiveness	2,333
Ineffectiveness recorded in non-interest revenue - other	(4)
Carrying amount of the hedged item (2)	(9,432)
Fair value hedges [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging derivatives Asset	701
Carrying amount of hedging derivatives liabilities	(668)
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	86
Hedge ineffectiveness Gains (Losses) on hedged item used to calculate hedge ineffectiveness	(82)
Ineffectiveness recorded in non-interest revenue - other	4
Carrying amount of the hedged item (2)	2,347
Active hedges	(441)
Discontinued hedges	436
Fair value hedges [member] | Interest rate swap contract [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Carrying amount of hedging derivatives Asset	701
Carrying amount of hedging derivatives liabilities	(668)
Fair value hedges [member] | FVOCI Debt Instruments [Member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	850
Hedge ineffectiveness Gains (Losses) on hedged item used to calculate hedge ineffectiveness	(843)
Ineffectiveness recorded in non-interest revenue - other	7
Carrying amount of the hedged item (2)	36,722
Active hedges	(1,160)
Fair value hedges [member] | Deposits and subordinated debt [member]
Disclosure of information about terms and conditions of hedging instruments and how they affect future cash flows [line items]
Gains (Losses) on hedging derivatives used to calculate hedge ineffectiveness	(764)
Hedge ineffectiveness Gains (Losses) on hedged item used to calculate hedge ineffectiveness	761
Ineffectiveness recorded in non-interest revenue - other	(3)
Carrying amount of the hedged item (2)	(34,375)
Active hedges	719
Discontinued hedges	$ 436

XML

Derivative Instruments - Schedule of Derivative-Related Credit Risk (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	$ 25,431	$ 28,594
Less: impact of master netting agreements	(15,575)	(19,909)
Derivative replacement cost	9,856	8,685
Derivative credit risk equivalents before master netting agreements	52,609	55,191
Derivative credit risk equivalents master netting agreements	(29,170)	(33,025)
Derivative credit risk weighted assets	23,439	22,166
Derivative credit risk weighted assets before master netting agreements	4,950	5,697
Derivative credit risk weighted assets master netting agreements	0	0
Derivative credit risk weighted assets	4,950	5,697
Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	8,959	9,223
Derivative credit risk equivalents before master netting agreements	11,126	12,026
Derivative credit risk weighted assets before master netting agreements	704	1,537
Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	8,514	8,742
Derivative credit risk equivalents before master netting agreements	10,699	11,603
Interest rate swap contract [member] | Forward rate agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	36	41
Derivative credit risk equivalents before master netting agreements	34	42
Interest rate swap contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	409	440
Derivative credit risk equivalents before master netting agreements	393	381
Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	12,983	17,196
Derivative credit risk equivalents before master netting agreements	31,538	34,364
Derivative credit risk weighted assets before master netting agreements	2,544	2,701
Foreign exchange contracts [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	225	250
Derivative credit risk equivalents before master netting agreements	424	420
Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	3,270	3,727
Derivative credit risk equivalents before master netting agreements	7,832	8,345
Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	5,035	8,157
Derivative credit risk equivalents before master netting agreements	14,909	17,210
Foreign exchange contracts [member] | Forward contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	4,453	5,062
Derivative credit risk equivalents before master netting agreements	8,373	8,389
Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	1,894	846
Derivative credit risk equivalents before master netting agreements	5,558	4,005
Derivative credit risk weighted assets before master netting agreements	1,188	971
Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	1,559	726
Derivative credit risk equivalents before master netting agreements	4,450	2,971
Commodity contract [member] | Purchased call options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	335	120
Derivative credit risk equivalents before master netting agreements	1,108	1,034
Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	1,585	1,322
Derivative credit risk equivalents before master netting agreements	4,332	4,750
Derivative credit risk weighted assets before master netting agreements	431	461
Credit default swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative replacement cost before master netting agreements	10	7
Derivative credit risk equivalents before master netting agreements	55	46
Derivative credit risk weighted assets before master netting agreements	$ 83	$ 27

XML

Derivative Instruments - Schedule of Replacement Cost of Contracts with Customers Based on Country of Ultimate Risk (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers, before master netting agreements	$ 25,431	$ 28,594
Replacement cost of contracts with customers, after master netting agreements	9,856	8,685
Canada [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers, before master netting agreements	13,449	15,447
Replacement cost of contracts with customers, after master netting agreements	4,901	5,045
United States [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers, before master netting agreements	5,446	7,149
Replacement cost of contracts with customers, after master netting agreements	2,102	1,940
United Kingdom [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers, before master netting agreements	1,181	1,079
Replacement cost of contracts with customers, after master netting agreements	315	182
Other countries [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers, before master netting agreements	5,355	4,919
Replacement cost of contracts with customers, after master netting agreements	$ 2,538	$ 1,518
Geographic Concentration Risk 1 [Member] | Before master netting agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	100.00%	100.00%
Geographic Concentration Risk 1 [Member] | Before master netting agreements [member] | Canada [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	53.00%	54.00%
Geographic Concentration Risk 1 [Member] | Before master netting agreements [member] | United States [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	21.00%	25.00%
Geographic Concentration Risk 1 [Member] | Before master netting agreements [member] | United Kingdom [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	5.00%	4.00%
Geographic Concentration Risk 1 [Member] | Before master netting agreements [member] | Other countries [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	21.00%	17.00%
Geographic Concentration Risk 1 [Member] | After master netting agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	100.00%	100.00%
Geographic Concentration Risk 1 [Member] | After master netting agreements [member] | Canada [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	50.00%	58.00%
Geographic Concentration Risk 1 [Member] | After master netting agreements [member] | United States [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	21.00%	22.00%
Geographic Concentration Risk 1 [Member] | After master netting agreements [member] | United Kingdom [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	3.00%	2.00%
Geographic Concentration Risk 1 [Member] | After master netting agreements [member] | Other countries [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers percentage	26.00%	18.00%

XML

Derivative Instruments - Schedule of Replacement Cost of Contracts with Customers Based on Country of Ultimate Risk (Parenthetical) (Detail) - Country	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Abstract]
Number of country represented 15% or more of our replacement cost	0	0

XML

Derivative Instruments - Schedule of Replacement Cost of Contracts with Customers (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	$ 25,431	$ 28,594
Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	8,959	9,223
Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	12,983	17,196
Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,894	846
Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,585	1,322
Credit default swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	10	7
Replacement Cost of Contracts Before Master Netting Agreements [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	25,431	28,594
Replacement Cost of Contracts Before Master Netting Agreements [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	18,336	21,336
Replacement Cost of Contracts Before Master Netting Agreements [member] | Government [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	3,228	3,163
Replacement Cost of Contracts Before Master Netting Agreements [member] | Natural resources [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	462	96
Replacement Cost of Contracts Before Master Netting Agreements [member] | Energy [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,461	860
Replacement Cost of Contracts Before Master Netting Agreements [member] | Other [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,944	3,139
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	8,959	9,223
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	6,509	6,063
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member] | Government [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,694	1,895
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member] | Natural resources [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	3
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member] | Energy [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	93	155
Replacement Cost of Contracts Before Master Netting Agreements [member] | Interest rate swap contract [member] | Other [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	660	1,110
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	12,983	17,196
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	10,238	13,898
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member] | Government [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,478	1,202
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member] | Natural resources [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	27	22
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member] | Energy [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	641	479
Replacement Cost of Contracts Before Master Netting Agreements [member] | Foreign exchange contracts [member] | Other [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	599	1,595
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,894	846
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	360	227
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member] | Government [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	56	66
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member] | Natural resources [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	432	74
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member] | Energy [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	727	226
Replacement Cost of Contracts Before Master Netting Agreements [member] | Commodity contract [member] | Other [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	319	253
Replacement Cost of Contracts Before Master Netting Agreements [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,585	1,322
Replacement Cost of Contracts Before Master Netting Agreements [member] | Equity contract [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	1,219	1,141
Replacement Cost of Contracts Before Master Netting Agreements [member] | Equity contract [member] | Other [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	366	181
Replacement Cost of Contracts Before Master Netting Agreements [member] | Credit default swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	10	7
Replacement Cost of Contracts Before Master Netting Agreements [member] | Credit default swaps [member] | Financial institutions [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Replacement cost of contracts with customers (before the impact of master netting agreements)	$ 10	$ 7

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Derivative Instruments - Schedule of Remaining Contractual Terms to Maturity for Notional Amounts of Derivative Contracts (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	$ 5,800,058	$ 4,707,717
Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	4,562,936	3,572,605
Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	3,831,997	3,202,365
Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	730,939	370,240
Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,070,741	983,461
Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	92,916	85,586
Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	455,232	434,210
Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	522,593	463,665
Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	76,097	70,764
Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	24,366	18,713
Commodity contract [member] | Futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	51,731	52,051
Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	86,794	77,781
Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	3,490	$ 3,106
Within 1 year [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	2,757,752
Within 1 year [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	2,012,689
Within 1 year [member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,404,557
Within 1 year [member] | Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	608,132
Within 1 year [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	643,251
Within 1 year [member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	12,466
Within 1 year [member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	118,783
Within 1 year [member] | Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	512,002
Within 1 year [member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	28,144
Within 1 year [member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	6,234
Within 1 year [member] | Commodity contract [member] | Futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	21,910
Within 1 year [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	72,922
Within 1 year [member] | Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	746
1 to 3 years [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,050,344
1 to 3 years [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	808,439
1 to 3 years [member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	707,683
1 to 3 years [member] | Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	100,756
1 to 3 years [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	193,232
1 to 3 years [member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	36,718
1 to 3 years [member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	147,231
1 to 3 years [member] | Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	9,283
1 to 3 years [member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	40,472
1 to 3 years [member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	14,885
1 to 3 years [member] | Commodity contract [member] | Futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	25,587
1 to 3 years [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	7,953
1 to 3 years [member] | Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	248
3 to 5 years [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,316,949
3 to 5 years [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,181,453
3 to 5 years [member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,167,568
3 to 5 years [member] | Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	13,885
3 to 5 years [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	123,956
3 to 5 years [member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	24,980
3 to 5 years [member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	97,828
3 to 5 years [member] | Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,148
3 to 5 years [member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	6,405
3 to 5 years [member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	2,875
3 to 5 years [member] | Commodity contract [member] | Futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	3,530
3 to 5 years [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	3,873
3 to 5 years [member] | Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,262
5 to 10 years [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	614,532
5 to 10 years [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	522,289
5 to 10 years [member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	514,392
5 to 10 years [member] | Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	7,897
5 to 10 years [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	88,404
5 to 10 years [member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	15,413
5 to 10 years [member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	72,857
5 to 10 years [member] | Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	134
5 to 10 years [member] | Commodity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,076
5 to 10 years [member] | Commodity contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	372
5 to 10 years [member] | Commodity contract [member] | Futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	704
5 to 10 years [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,680
5 to 10 years [member] | Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	1,083
Over 10 years [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	60,481
Over 10 years [member] | Interest rate swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	38,066
Over 10 years [member] | Interest rate swap contract [member] | Swap contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	37,797
Over 10 years [member] | Interest rate swap contract [member] | Forward rate agreements futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	269
Over 10 years [member] | Foreign exchange contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	21,898
Over 10 years [member] | Foreign exchange contracts [member] | Cross currency swaps [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	3,339
Over 10 years [member] | Foreign exchange contracts [member] | Cross currency interest rate contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	18,533
Over 10 years [member] | Foreign exchange contracts [member] | Forward foreign exchange contracts, futures and options [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	26
Over 10 years [member] | Equity contract [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	366
Over 10 years [member] | Credit Contracts [member]
Disclosure Of Derivative Financial Instruments [Line Items]
Derivative notional amount	$ 151

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Premises and Equipment - Summary of Maximum Estimated Useful Lives to Amortize Assets (Detail)	12 Months Ended
	Oct. 31, 2018
Buildings [member] | Bottom of range [member]
Disclosure Of Property Plant And Equipment Estimated Useful Life [Line Items]
Estimated useful lives of assets	10 years
Buildings [member] | Top of range [member]
Disclosure Of Property Plant And Equipment Estimated Useful Life [Line Items]
Estimated useful lives of assets	40 years
Computer equipment [member]
Disclosure Of Property Plant And Equipment Estimated Useful Life [Line Items]
Estimated useful lives of assets	5 years
Office equipment [member]
Disclosure Of Property Plant And Equipment Estimated Useful Life [Line Items]
Estimated useful lives of assets	10 years
Leasehold improvements [member]
Disclosure Of Property Plant And Equipment Estimated Useful Life [Line Items]
Estimated useful lives of assets	Lease term to a maximum of 10 years

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Premises and Equipment - Additional Information (Detail) - CAD ($)	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of detailed information about property, plant and equipment [abstract]
Impairment loss, property, plant and equipment	$ 0	$ 0
Rent expense for premises and equipment	$ 530,000,000	$ 501,000,000	$ 502,000,000

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Premises and Equipment - Summary of Premises and Equipment (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	$ 2,033
Ending balance	1,986	$ 2,033
Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	6,236	6,084
Additions	433	402
Disposals	(253)	(159)
Foreign exchange and other	32	(91)
Ending balance	6,448	6,236
Accumulated depreciation, amortization and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(4,203)	(3,937)
Disposals	(164)	(59)
Amortization	400	391
Foreign exchange and other	23	(66)
Ending balance	(4,462)	(4,203)
Land [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	174
Ending balance	145	174
Land [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	174	207
Additions	4
Disposals	(32)	(28)
Foreign exchange and other	(1)	(5)
Ending balance	145	174
Buildings [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	663
Ending balance	611	663
Buildings [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1,726	1,784
Additions	66	72
Disposals	(163)	(95)
Foreign exchange and other	(2)	(35)
Ending balance	1,627	1,726
Buildings [member] | Accumulated depreciation, amortization and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(1,063)	(1,055)
Disposals	(116)	(32)
Amortization	60	63
Foreign exchange and other	9	(23)
Ending balance	(1,016)	(1,063)
Computer equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	529
Ending balance	567	529
Computer equipment [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1,994	1,844
Additions	236	156
Disposals	(11)	(13)
Foreign exchange and other	10	7
Ending balance	2,229	1,994
Computer equipment [member] | Accumulated depreciation, amortization and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(1,465)	(1,306)
Disposals	(9)	(11)
Amortization	201	185
Foreign exchange and other	5	(15)
Ending balance	(1,662)	(1,465)
Other property, plant and equipment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	239
Ending balance	229	239
Other property, plant and equipment [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	913	902
Additions	40	69
Disposals	(27)	(13)
Foreign exchange and other	7	(45)
Ending balance	933	913
Other property, plant and equipment [member] | Accumulated depreciation, amortization and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(674)	(649)
Disposals	(24)	(8)
Amortization	48	49
Foreign exchange and other	6	(16)
Ending balance	(704)	(674)
Leasehold improvements [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	428
Ending balance	434	428
Leasehold improvements [member] | Gross carrying amount [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	1,429	1,347
Additions	87	105
Disposals	(20)	(10)
Foreign exchange and other	18	(13)
Ending balance	1,514	1,429
Leasehold improvements [member] | Accumulated depreciation, amortization and impairment [member]
Disclosure of detailed information about property, plant and equipment [line items]
Beginning balance	(1,001)	(927)
Disposals	(15)	(8)
Amortization	91	94
Foreign exchange and other	3	(12)
Ending balance	$ (1,080)	$ (1,001)

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Acquisitions - Additional information (Detail) $ in Millions, $ in Millions		12 Months Ended
	Sep. 01, 2016 CAD ($)	Oct. 31, 2018	Sep. 01, 2018 USD ($)	Sep. 01, 2018 CAD ($)
Top of range [member]
Amortization period		15 years
KGS- Alpha Capital Market [member]
Acquisition of the business			$ 304	$ 397
Acquired intangible assets	$ 49
Acquired goodwill	54
Goodwill expected to be deductible for tax purposes.	$ 32
KGS- Alpha Capital Market [member] | Bottom of range [member]
Amortization period	Three years
KGS- Alpha Capital Market [member] | Top of range [member]
Amortization period	Fourteen years

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Acquisitions - Summary of Fair Value of Assets Acquired and Liabilities Assumed at The Date of Acquisition (Detail) - Sep. 01, 2018 - KGS- Alpha Capital Market [member] $ in Millions, $ in Millions	USD ($)	CAD ($)
Disclosure of business acquisitions by acquisition assets acquired and liabilities assumed [line items]
Securities - trading		$ 5,193
Securities borrowed or purchased under resale agreement		5,669
Goodwill and intangible assets		103
Other assets		584
Total assets		11,549
Securities lent or sold under repurchase agreements		9,563
Securities sold but not yet purchased		1,431
Other liabilities		158
Purchase price	$ 304	$ 397

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Goodwill and Intangible Assets - Additional Information (Detail) - CAD ($)	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of detailed information about intangible assets [line items]
Intangible assets with indefinite lives	$ 165,000,000	$ 169,000,000
Write-downs of intangible assets	$ 13,000,000	$ 5,000,000
Cash-generating units [member]
Disclosure of detailed information about intangible assets [line items]
Cash flow projection period	10 years
Terminal growth rate	2.00%	3.00%
Write-downs of goodwill due to impairment	$ 0	$ 0
Bottom of range [member] | Cash-generating units [member]
Disclosure of detailed information about intangible assets [line items]
Discount rates for determine the recoverable amount	8.60%	8.30%
Top of range [member]
Disclosure of detailed information about intangible assets [line items]
Useful lives of intangible assets other than goodwill	15 years
Top of range [member] | Cash-generating units [member]
Disclosure of detailed information about intangible assets [line items]
Discount rates for determine the recoverable amount	11.40%	12.20%

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Goodwill and Intangible Assets - Summary of Continuity of Goodwill By Group of CGUs (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Goodwill [Line Items]
Beginning balance	$ 6,244	$ 6,381
Acquisitions (disposals) during the year	54	(4)
Foreign exchange and other	75	(133)
Ending balance	6,373	6,244
Personal and commercial banking [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	3,816	3,958
Foreign exchange and other	78	(142)
Ending balance	3,894	3,816
Wealth management [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	2,139	2,119
Acquisitions (disposals) during the year		(4)
Foreign exchange and other	(8)	24
Ending balance	2,131	2,139
BMO capital markets [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	289	304
Acquisitions (disposals) during the year	54
Foreign exchange and other	5	(15)
Ending balance	348	289
Traditional wealth management [member] | Wealth management [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	2,137	2,117
Acquisitions (disposals) during the year		(4)
Foreign exchange and other	(8)	24
Ending balance	2,129	2,137
Insurance products [member] | Wealth management [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	2	2
Ending balance	2	2
Canada [member] | Personal and commercial banking [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	97	97
Ending balance	97	97
United States [member] | Personal and commercial banking [member]
Disclosure Of Goodwill [Line Items]
Beginning balance	3,719	3,861
Foreign exchange and other	78	(142)
Ending balance	$ 3,797	$ 3,719

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Goodwill and Intangible Assets - Summary of Intangible Assets (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of detailed information about intangible assets [line items]
Beginning balance	$ 2,159
Amortization	(503)	$ (485)	$ (444)
Ending balance	2,272	2,159
Customer-related intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	223
Ending balance	213	223
Core deposit [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	169
Ending balance	121	169
Software amortizing [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	1,078
Ending balance	1,157	1,078
software under development [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	398
Ending balance	496	398
Other intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	291
Ending balance	285	291
Gross carrying amount [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	6,242	5,896
Additions (disposals)	563	446
Foreign exchange and other	32	(100)
Ending balance	6,837	6,242	5,896
Gross carrying amount [member] | Customer-related intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	654	704
Additions (disposals)	35	(33)
Foreign exchange and other	(1)	(17)
Ending balance	688	654	704
Gross carrying amount [member] | Core deposit [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	931	968
Foreign exchange and other	20	(37)
Ending balance	951	931	968
Gross carrying amount [member] | Branch distribution networks [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	187	194
Foreign exchange and other	4	(7)
Ending balance	191	187	194
Gross carrying amount [member] | Software amortizing [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	3,696	3,189
Additions (disposals)	422	546
Foreign exchange and other	9	(39)
Ending balance	4,127	3,696	3,189
Gross carrying amount [member] | software under development [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	398	476
Additions (disposals)	94	(67)
Foreign exchange and other	4	(11)
Ending balance	496	398	476
Gross carrying amount [member] | Other intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	376	365
Additions (disposals)	12
Foreign exchange and other	(4)	11
Ending balance	384	376	365
Accumulated depreciation and amortisation [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	4,083	3,718
Amortization	503	485
Additions (disposals)		(33)
Foreign exchange and other	(1)	(87)
Ending balance	4,565	4,083	3,718
Accumulated depreciation and amortisation [member] | Customer-related intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	431	398
Amortization	46	68
Additions (disposals)		(22)
Foreign exchange and other	(2)	(13)
Ending balance	475	431	398
Accumulated depreciation and amortisation [member] | Core deposit [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	762	735
Amortization	51	56
Foreign exchange and other	17	(29)
Ending balance	830	762	735
Accumulated depreciation and amortisation [member] | Branch distribution networks [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	187	194
Foreign exchange and other	4	(7)
Ending balance	191	187	194
Accumulated depreciation and amortisation [member] | Software amortizing [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	2,618	2,329
Amortization	387	336
Additions (disposals)		(11)
Foreign exchange and other	(15)	(36)
Ending balance	2,970	2,618	2,329
Accumulated depreciation and amortisation [member] | Other intangible assets [member]
Disclosure of detailed information about intangible assets [line items]
Beginning balance	85	62
Amortization	19	25
Foreign exchange and other	(5)	(2)
Ending balance	$ 99	$ 85	$ 62

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Other Assets - Components of Other within Other Assets (Details) (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of Other Assets [line items]
Accounts receivable, prepaid expenses and other items	$ 6,910	$ 6,508
Accrued interest receivable	1,461	1,079
BMO Transportation Finance - leased vehicles	937	928
Cash collateral	2,019	3,165
Due from clients, dealers and brokers	236	156
Insurance-related assets	822	644
Precious metals	1,603	582
Total	14,652	13,570
Pension Plans [member]
Disclosure of Other Assets [line items]
Pension asset	408	144	$ (337)
Other assets [member] | Pension Plans [member]
Disclosure of Other Assets [line items]
Pension asset	$ 664	$ 508

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Deposits - Summary of Deposits (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Deposits [Line Items]
Interest bearing	$ 30,192	$ 24,717
Non-interest bearing	56,729	55,876
Payables after notice	157,785	152,235
Payable on a fixed date	277,345	246,964
Total	522,051	479,792
Canada [member]
Disclosure Of Deposits [Line Items]
Interest bearing	21,735	21,557
Non-interest bearing	47,231	44,380
Payables after notice	82,091	81,590
Payable on a fixed date	161,192	145,648
Total	312,249	293,175
United States [member]
Disclosure Of Deposits [Line Items]
Interest bearing	7,395	2,259
Non-interest bearing	9,477	11,496
Payables after notice	74,476	69,555
Payable on a fixed date	86,805	75,517
Total	178,153	158,827
Other countries [member]
Disclosure Of Deposits [Line Items]
Interest bearing	1,062	901
Non-interest bearing	21
Payables after notice	1,218	1,090
Payable on a fixed date	29,348	25,799
Total	31,649	27,790
Banks [Member]
Disclosure Of Deposits [Line Items]
Interest bearing	1,450	818
Non-interest bearing	1,400	1,864
Payables after notice	526	586
Payable on a fixed date	24,531	24,937
Total	27,907	28,205
Business and governments [member]
Disclosure Of Deposits [Line Items]
Interest bearing	25,266	20,621
Non-interest bearing	33,984	33,968
Payables after notice	67,026	61,790
Payable on a fixed date	187,024	166,897
Total	313,300	283,276
Individuals [Member]
Disclosure Of Deposits [Line Items]
Interest bearing	3,476	3,278
Non-interest bearing	21,345	20,044
Payables after notice	90,233	89,859
Payable on a fixed date	65,790	55,130
Total	$ 180,844	$ 168,311

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Deposits - Summary of Deposits (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Deposits [Line Items]
Total deposits payable on a fixed date	$ 29,673	$ 30,419
U.S. dollars [member]
Disclosure Of Deposits [Line Items]
Deposits liabilities	259,747	237,127
Non USD Non CAD [member]
Disclosure Of Deposits [Line Items]
Deposits liabilities	$ 37,427	$ 27,686

XML

Deposits - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of deposits from banks [abstract]
Federal funds purchased	$ 55	$ 707
Commercial paper	9,121	8,430
Covered bonds	25,045	23,108
Fair value of notes on contractual maturity	15,309	13,674
Notional amount of notes on contractual maturity	15,668	13,563
Decrease in non-interest revenue and trading revenue	498	(72)
Increase (decrease) other comprehensive income before tax	(28)	(169)
Unrealized loss due to change in credit spread	331	303
Unrealized gain (loss) in other comprehensive income due to change in credit spread	$ (255)	$ (227)

XML

Deposits - Schedule for our Deposits Payable on a Fixed Date (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of deposits payable to customers on a fixed date [line items]
Total	$ 277,345	$ 246,964
Within 1 year [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	162,666	145,039
1-2 years [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	34,154	25,620
2 to 3 years [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	26,107	23,323
3 to 4 years [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	16,708	19,345
4 to 5 years [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	22,196	15,850
Over 5 years [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Total	$ 15,514	$ 17,787

XML

Deposits - Schedule for our Deposits Payable on a Fixed Date (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	$ 277,345	$ 246,964
Unencumbered liquid assets	242,612	213,757
Canada [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	161,192	145,648
United States [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	86,805	75,517
Other countries [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	29,348	25,799
More Than One Hundred Thousand [Member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	247,808	221,954
More Than One Hundred Thousand [Member] | Canada [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	146,697	130,197
More Than One Hundred Thousand [Member] | Canada [member] | 0 to 3 months [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	55,190	41,418
More Than One Hundred Thousand [Member] | Canada [member] | 3-6 month [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	3,836	7,922
More Than One Hundred Thousand [Member] | Canada [member] | Later than six months and not later than one year [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	12,909	10,574
More Than One Hundred Thousand [Member] | Canada [member] | After 12 months [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	74,762	70,283
More Than One Hundred Thousand [Member] | United States [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	71,770	65,963
More Than One Hundred Thousand [Member] | Other countries [member]
Disclosure of deposits payable to customers on a fixed date [line items]
Deposits booked payable on a fixed date	$ 29,341	$ 25,794

XML

Other Liabilities - Summary of Components of Other within Other Liabilities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of Other Liability [Line Items]
Accounts payable, accrued expenses and other items	$ 8,119	$ 7,894
Accrued interest payable	1,385	1,037
Cash collateral	4,343	3,696
Insurance-related liabilities	9,585	8,959	$ 7,909
Liabilities of subsidiaries, other than deposits	9,283	6,931
Payable to brokers, dealers and clients	1,898	2,177
Total	35,829	32,361
Other employee future benefit plans [member]
Disclosure of Other Liability [Line Items]
Other employee future benefits liability	960	1,303	1,343
Pension Plans [member]
Disclosure of Other Liability [Line Items]
Other employee future benefits liability	(408)	(144)	$ 337
Other liabilities [member] | Other employee future benefit plans [member]
Disclosure of Other Liability [Line Items]
Other employee future benefits liability	960	1,303
Other liabilities [member] | Pension Plans [member]
Disclosure of Other Liability [Line Items]
Other employee future benefits liability	$ 256	$ 364

XML

Other Liabilities - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure Of Investment Contracts Liabilities Measured At Fair Value [Abstract]
Fair value of investment in contract liabilities	$ 800	$ 749
Change in fair value of investment contract liabilities	(28)	(41)	$ 55
Gain (loss) recorded in other comprehensive income due to changes in credit spread	$ (2)	$ (32)	$ (7)

XML

Other Liabilities - Reconciliation of Change in Insurance-Related Liabilities (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of types of insurance contracts [abstract]
Insurance-related liabilities, beginning of year	$ 8,959	$ 7,909
Increase (decrease) in life insurance policy benefit liabilities from:
New business	742	545
In-force policies	(400)	66
Changes in actuarial assumptions and methodology	3	(52)
Foreign currency		(1)
Net increase in life insurance policy benefit liabilities	345	558
Change in other insurance-related liabilities	281	492
Insurance-related liabilities, end of year	$ 9,585	$ 8,959

XML

Other Liabilities - Summary of Reinsurance Premiums Ceded (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of net, gross and reinsurer's share for amounts arising from insurance contracts [line items]
Net premiums	$ 1,828	$ 1,593	$ 1,290
Direct premium income [member]
Disclosure of net, gross and reinsurer's share for amounts arising from insurance contracts [line items]
Net premiums	1,976	1,750	1,561
Ceded premiums [member]
Disclosure of net, gross and reinsurer's share for amounts arising from insurance contracts [line items]
Net premiums	$ (148)	$ (157)	$ (271)

XML

Subordinated Debt - Summary of Maturities of Subordinated Debt and Repayment (Detail) $ in Millions, $ in Millions	12 Months Ended
	Oct. 31, 2018 USD ($)	Oct. 31, 2018 CAD ($)	Oct. 05, 2018 USD ($)	Dec. 12, 2017 USD ($)	Oct. 31, 2017 USD ($)	Oct. 31, 2017 CAD ($)
Subordinated Liabilities [Line Items]
Face value		$ 5,800,058				$ 4,707,717
Total		6,782				5,029
Subordinated debt [member]
Subordinated Liabilities [Line Items]
Total		6,782				5,029
Subordinated debt [member] | Debentures series 20 [member]
Subordinated Liabilities [Line Items]
Face value		$ 150				150
Maturity date	December 2025 to 2040
Interest rate (%)	8.25%	8.25%
Redeemable at our option beginning in	Not redeemable
Total		$ 143				148
Subordinated debt [member] | Series F Medium Term Notes First Tranche [member]
Subordinated Liabilities [Line Items]
Face value		$ 900				900
Maturity date	March 2023
Interest rate (%)	6.17%	6.17%
Redeemable at our option beginning in	March 2018
Total						905
Subordinated debt [member] | Series H Medium Term Notes First Tranche [member]
Subordinated Liabilities [Line Items]
Face value		$ 1,000				1,000
Maturity date	September 2024
Interest rate (%)	3.12%	3.12%
Redeemable at our option beginning in	September 2019
Total		$ 1,003				1,016
Subordinated debt [member] | Series H Medium Term Notes Second Tranche [member]
Subordinated Liabilities [Line Items]
Face value		$ 1,000				1,000
Maturity date	December 2025
Interest rate (%)	3.34%	3.34%
Redeemable at our option beginning in	December 2020
Total		$ 916				969
Subordinated debt [member] | Series I Medium Term Notes First Tranche [member]
Subordinated Liabilities [Line Items]
Face value		$ 1,250				1,250
Maturity date	June 2026
Interest rate (%)	3.32%	3.32%
Redeemable at our option beginning in	June 2021
Total		$ 1,222				1,178
Subordinated debt [member] | Series I Medium Term Notes Second Tranche [member]
Subordinated Liabilities [Line Items]
Face value		$ 850				850
Maturity date	June 2027
Interest rate (%)	2.57%	2.57%
Redeemable at our option beginning in	June 2022
Total		$ 813				$ 813
Subordinated debt [member] | Three point eight zero three percentage Subordinated Notes due 2032 [Member]
Subordinated Liabilities [Line Items]
Face value	$ 1,250			$ 1,250	$ 1,250
Maturity date	December 2032
Interest rate (%)	3.80%	3.80%		3.803%
Redeemable at our option beginning in	December 2027
Total		$ 1,573
Subordinated debt [member] | Four point three three eight percentage Subordinated Notes due 2028[Member]
Subordinated Liabilities [Line Items]
Face value	$ 850		$ 850		$ 850
Maturity date	October 2028
Interest rate (%)	4.34%	4.34%	4.338%
Redeemable at our option beginning in	October 2023
Total		$ 1,112

XML

Subordinated Debt - Summary of Maturities of Subordinated Debt and Repayment (Parenthetical) (Detail) $ / shares in Units, $ in Millions, $ in Millions		12 Months Ended
	Mar. 28, 2018 CAD ($)	Oct. 31, 2018 CAD ($)	Oct. 31, 2017 CAD ($)	Oct. 31, 2018 USD ($)	Oct. 31, 2018 CAD ($) $ / shares	Oct. 05, 2018 USD ($)	Dec. 12, 2017 USD ($)	Oct. 31, 2017 USD ($)	Oct. 31, 2017 CAD ($)
Subordinated Liabilities [Line Items]
Face value					$ 5,800,058				$ 4,707,717
Subordinated debt [member]
Subordinated Liabilities [Line Items]
Increase (Decrease) in Subordinated Long Term Debt		$ 233	$ (121)
Bottom of range [member] | Subordinated debt [member]
Subordinated Liabilities [Line Items]
Common stock conversion price | $ / shares					$ 5.00
Series F Medium Term Notes First Tranche [member] | Subordinated debt [member]
Subordinated Liabilities [Line Items]
Face value					$ 900				$ 900
Interest rate				6.17%	6.17%
Series F Medium Term Notes First Tranche [member] | Subordinated debt [member] | Redeemed Subordinate Debt [member]
Subordinated Liabilities [Line Items]
Face value	$ 900
Percentage of notes redeemed	100.00%
Three point eight zero three percentage Subordinated Notes due 2032 [Member] | Subordinated debt [member]
Subordinated Liabilities [Line Items]
Face value				$ 1,250			$ 1,250	$ 1,250
Interest rate				3.80%	3.80%		3.803%
Four point three three eight percentage Subordinated Notes due 2028[Member] | Subordinated debt [member]
Subordinated Liabilities [Line Items]
Face value				$ 850		$ 850		$ 850
Interest rate				4.34%	4.34%	4.338%

XML

Equity - Summary of Classes of Share Capital (Detail) - CAD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of classes of share capital [line items]
Balance at beginning of year	$ 44,354	$ 42,328
Balance at End of Year	$ 45,727	$ 44,354	$ 42,328
Class B Series 14 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	10,000,000
Balance at End of Year		10,000,000
Dividend declared per share		$ 0.66
Class B Series15 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	10,000,000
Balance at End of Year		10,000,000
Dividend declared per share		$ 0.73
Class B Series 16 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	6,267,391
Balance at End of Year	6,267,391	6,267,391
Balance at beginning of year	$ 157
Balance at End of Year		$ 157
Dividend declared per share	$ 0.64	$ 0.85
Class B Series 17 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	5,732,609
Balance at End of Year	5,732,609	5,732,609
Balance at beginning of year	$ 143
Balance at End of Year		$ 143
Dividend declared per share	$ 0.52	$ 0.55
Class B Series 42 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	16,000,000
Balance at End of Year	16,000,000	16,000,000
Balance at beginning of year	$ 400
Balance at End of Year	$ 400	$ 400
Dividend declared per share	$ 1.10	$ 0.45
Class B Series 44 [member]
Disclosure of classes of share capital [line items]
Balance at End of Year	16,000,000
Balance at End of Year	$ 400
Class B Series 25 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	9,425,607
Balance at End of Year	9,425,607	9,425,607
Balance at beginning of year	$ 236
Balance at End of Year	$ 236	$ 236
Dividend declared per share	$ 0.45	$ 0.45
Class B Series 26 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	2,174,393
Balance at End of Year	2,174,393	2,174,393
Balance at beginning of year	$ 54
Balance at End of Year	$ 54	$ 54
Dividend declared per share	$ 0.59	$ 0.43
Class B Series 27 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	20,000,000
Balance at End of Year	20,000,000	20,000,000
Balance at beginning of year	$ 500
Balance at End of Year	$ 500	$ 500
Dividend declared per share	$ 1.00	$ 1.00
Class B Series 29 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	16,000,000
Balance at End of Year	16,000,000	16,000,000
Balance at beginning of year	$ 400
Balance at End of Year	$ 400	$ 400
Dividend declared per share	$ 0.98	$ 0.98
Class B Series 31 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	12,000,000
Balance at End of Year	12,000,000	12,000,000
Balance at beginning of year	$ 300
Balance at End of Year	$ 300	$ 300
Dividend declared per share	$ 0.95	$ 0.95
Class B Series 33 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	8,000,000
Balance at End of Year	8,000,000	8,000,000
Balance at beginning of year	$ 200
Balance at End of Year	$ 200	$ 200
Dividend declared per share	$ 0.95	$ 0.95
Class B Series 35 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	6,000,000
Balance at End of Year	6,000,000	6,000,000
Balance at beginning of year	$ 150
Balance at End of Year	$ 150	$ 150
Dividend declared per share	$ 1.25	$ 1.25
Class B Series 36 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	600,000
Balance at End of Year	600,000	600,000
Balance at beginning of year	$ 600
Balance at End of Year	$ 600	$ 600
Dividend declared per share	$ 58.50	$ 58.50
Class B Series 38 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	24,000,000
Balance at End of Year	24,000,000	24,000,000
Balance at beginning of year	$ 600
Balance at End of Year	$ 600	$ 600
Dividend declared per share	$ 1.21	$ 1.33
Class B Series 40 [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	20,000,000
Balance at End of Year	20,000,000	20,000,000
Balance at beginning of year	$ 500
Balance at End of Year	$ 500	$ 500
Dividend declared per share	$ 1.13	$ 0.80
Preferred shares [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	$ 4,240	$ 3,840	3,240
Balance at End of Year	$ 4,340	$ 4,240	$ 3,840
Common shares [member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	647,816,318	645,761,333
Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan		4,821,184
Issued/cancelled under the Stock Option Plan and other stock-based compensation plans (Note 21)	1,513,307	2,233,801
Repurchased for cancellation	(10,000,000)	(5,000,000)
Balance at End of Year	639,329,625	647,816,318	645,761,333
Balance at beginning of year	$ 13,032	$ 12,539	$ 12,313
Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan		448
Issued/cancelled under the Stock Option Plan and other stock-based compensation plans	99	146
Repurchased for cancellation	(202)	(101)
Balance at End of Year	$ 12,929	$ 13,032	$ 12,539
Dividend declared per share	$ 3.78	$ 3.56	$ 3.40
Ordinary and preference shares [Member]
Disclosure of classes of share capital [line items]
Balance at beginning of year	$ 17,272
Balance at End of Year	$ 17,269	$ 17,272

XML

Equity - Summary of Classes of Share Capital (Parenthetical) (Detail) - CAD ($) $ / shares in Units, $ in Millions				12 Months Ended
	Sep. 17, 2018	Jun. 29, 2017	Mar. 09, 2017	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016	Aug. 25, 2018	May 25, 2017
Disclosure of classes of share capital [line items]
Gross proceeds				$ 400	$ 900	$ 600
Class B Series 14 [member]
Disclosure of classes of share capital [line items]
Number of shares redeemed								10,000,000
Redemption price per share								$ 25.00
Dividends declared per share					$ 0.66
Number of shares					10,000,000
Class B Series15 [member]
Disclosure of classes of share capital [line items]
Number of shares redeemed								10,000,000
Redemption price per share								$ 25.00
Dividends declared per share					$ 0.73
Number of shares					10,000,000
Class B Series 16 [member]
Disclosure of classes of share capital [line items]
Number of shares redeemed							6,267,391
Redemption price per share							$ 25.00
Dividends declared per share				$ 0.64	$ 0.85
Number of shares				6,267,391	6,267,391
Class B Series 17 [member]
Disclosure of classes of share capital [line items]
Number of shares redeemed							5,732,609
Redemption price per share							$ 25.00
Dividends declared per share				$ 0.52	$ 0.55
Number of shares				5,732,609	5,732,609
Class B Series 40 [member]
Disclosure of classes of share capital [line items]
Redemption price per share				$ 25.00
Number of shares issued			20,000,000
Preferred shares issued price per share			$ 25.00
Gross proceeds			$ 500
Class B Series 42 [member]
Disclosure of classes of share capital [line items]
Redemption price per share				25.00
Dividends declared per share				$ 1.10	$ 0.45
Number of shares				16,000,000	16,000,000
Number of shares issued		16,000,000
Preferred shares issued price per share		$ 25.00
Gross proceeds		$ 400
Class B Series 44 [member]
Disclosure of classes of share capital [line items]
Redemption price per share				$ 25.00
Number of shares				16,000,000
Number of shares issued	16,000,000
Preferred shares issued price per share	$ 25.00
Gross proceeds	$ 400

XML

Equity - Summary of Prefered Share Rights and Privileges (Detail) - $ / shares	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Class B Series 25 [member]
Disclosure of classes of share capital [line items]
Redemption amount	$ 25.00
Quarterly non-cumulative dividend	$ 0.45	$ 0.45
Reset premium	1.15%
Date redeemable / convertible	August 25, 2021
Convertible to	Class B - Series 26
Class B Series 25 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.112813
Class B Series 26 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 0.59	0.43
Reset premium	1.15%
Date redeemable / convertible	August 25, 2021
Convertible to	Class B - Series 25
Class B Series 26 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	Floating
Class B Series 27 [member]
Disclosure of classes of share capital [line items]
Redemption amount	$ 25.00
Quarterly non-cumulative dividend	$ 1.00	1.00
Reset premium	2.33%
Date redeemable / convertible	May 25, 2019
Convertible to	Class B - Series 28
Class B Series 27 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.250000
Class B Series 29 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 0.98	0.98
Reset premium	2.24%
Date redeemable / convertible	August 25, 2019
Convertible to	Class B - Series 30
Class B Series 29 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.243750
Class B Series 31 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 0.95	0.95
Reset premium	2.22%
Date redeemable / convertible	November 25, 2019
Convertible to	Class B - Series 32
Class B Series 31 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.237500
Class B Series 33 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 0.95	0.95
Reset premium	2.71%
Date redeemable / convertible	August 25, 2020
Convertible to	Class B - Series 34
Class B Series 33 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.237500
Class B Series 35 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 1.25	1.25
Date redeemable / convertible	August 25, 2020
Convertible to	Not convertible
Reset premium	Does not reset
Class B Series 35 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.312500
Class B Series 36 [member]
Disclosure of classes of share capital [line items]
Redemption amount	1,000.00
Quarterly non-cumulative dividend	$ 58.50	58.50
Reset premium	4.97%
Date redeemable / convertible	November 25, 2020
Convertible to	Class B - Series 37
Class B Series 36 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 14.625000
Class B Series 38 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 1.21	1.33
Reset premium	4.06%
Date redeemable / convertible	February 25, 2022
Convertible to	Class B - Series 39
Class B Series 38 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.303125
Class B Series 40 [member]
Disclosure of classes of share capital [line items]
Redemption amount	$ 25.00
Reset premium	3.33%
Date redeemable / convertible	May 25, 2022
Convertible to	Class B - Series 41
Class B Series 40 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.281250
Class B Series 42 [member]
Disclosure of classes of share capital [line items]
Redemption amount	25.00
Quarterly non-cumulative dividend	$ 1.10	$ 0.45
Reset premium	3.17%
Date redeemable / convertible	August 25, 2022
Convertible to	Class B - Series 43
Class B Series 42 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.275000
Class B Series 44 [member]
Disclosure of classes of share capital [line items]
Redemption amount	$ 25.00
Reset premium	2.68%
Date redeemable / convertible	November 25, 2023
Convertible to	Class B - Series 45
Class B Series 44 [member] | Quarterly dividend [Member]
Disclosure of classes of share capital [line items]
Quarterly non-cumulative dividend	$ 0.303125

XML

Equity - Additional Information (Detail) - $ / shares	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of classes of share capital [line items]
Floor price	$ 5.00
Description of conversion of preferred shares to common shares	Each preferred share is convertible into common shares pursuant to an automatic conversion formula and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX.
Stock Option Plan [member]
Disclosure of classes of share capital [line items]
Common shares reserved for potential issuance	6,095,201	7,525,296
Dividend reinvestment and share purchase plan [member]
Disclosure of classes of share capital [line items]
Common shares reserved for potential issuance	39,947,147	39,947,147
Common shares [member]
Disclosure of classes of share capital [line items]
Purchase of common shares for cancellation	10,000,000	5,000,000
Number of shares issued		4,821,184
Common shares [member] | Dividend reinvestment and share purchase plan [member]
Disclosure of classes of share capital [line items]
Percentage of discount for shares issued from treasury		2.00%
Number of shares issued		4,821,184
Number of shares purchased	1,995,353	504,873
Normal course issuer bid [member]
Disclosure of classes of share capital [line items]
Purchase of common shares for cancellation	10,000,000	5,000,000
Normal course issuer bid [member] | Top of range [member]
Disclosure of classes of share capital [line items]
Purchase of common shares for cancellation	20,000,000

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Financial Instruments Designated At Fair Value Through Profit Or Loss (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Securities
Amortized cost	$ 6,485
Held to maturity		$ 9,094
Loans
Consumer instalment and other personal	63,225	61,944
Credit cards	8,329	8,071
Business and government	194,456	175,067
Loans gross of allowance for loan losses	385,630	360,340
Deposits	522,051	479,792
Securitization and structured entities' liabilities	25,051	23,054
Subordinated debt	6,782	5,029
Fair Value [Member]
Securities
Amortized cost	6,288
Held to maturity		9,096
Not Carried At Fair Value [Member] | At carrying value [member]
Securities
Amortized cost	6,485
Held to maturity		9,094
Loans
Residential mortgages	119,544	115,165
Consumer instalment and other personal	62,687	61,465
Credit cards	8,099	7,828
Business and government	192,225	174,084
Loans gross of allowance for loan losses	382,555	358,542
Deposits	506,742	466,118
Securitization and structured entities' liabilities	25,051	23,054
Subordinated debt	6,782	5,029
Not Carried At Fair Value [Member] | Fair Value [Member]
Securities
Amortized cost	6,288
Held to maturity		9,096
Loans
Residential mortgages	118,609	114,821
Consumer instalment and other personal	62,618	61,470
Credit cards	8,099	7,828
Business and government	191,989	174,105
Loans gross of allowance for loan losses	381,315	358,224
Deposits	506,581	466,441
Securitization and structured entities' liabilities	24,838	23,148
Subordinated debt	6,834	5,255
Not Carried At Fair Value [Member] | Fair Value [Member] | Valued using quoted market prices [member]
Securities
Amortized cost	429
Held to maturity		2,522
Not Carried At Fair Value [Member] | Fair Value [Member] | Valued using models (with observable inputs) [member]
Securities
Amortized cost	5,795
Held to maturity		6,574
Loans
Residential mortgages	118,609	114,821
Consumer instalment and other personal	62,618	61,470
Credit cards	8,099	7,828
Business and government	191,989	174,105
Loans gross of allowance for loan losses	381,315	358,224
Deposits	506,581	466,441
Securitization and structured entities' liabilities	24,838	23,148
Subordinated debt	6,834	$ 5,255
Not Carried At Fair Value [Member] | Fair Value [Member] | Valued using models (without observable inputs) [member]
Securities
Amortized cost	$ 64

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Financial Instruments Designated At Fair Value Through Profit Or Loss (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Fair value of financial instruments not carried at fair value on the balance sheet [line items]
Business and government	$ 194,456	$ 175,067
Deposits	522,051	479,792
Financial assets at fair value through profit or loss [member]
Fair value of financial instruments not carried at fair value on the balance sheet [line items]
Business and government	1,450
Deposits	$ 15,309	$ 13,674

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Fair Value Measurement of Assets And Liabilities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	$ 99,697
Other Securities	702	$ 960
FVTPL Securities	11,611
FVOCI securities	62,440
Business and Government Loans	194,456	175,067
Derivative Assets
Derivative Assets	26,204	28,951
Derivative Liabilities
Derivative Liabilities	24,411	27,804
Trading Securities		99,069
Available for Sale Securities		54,075
IAS 39 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Securities sold but not yet purchased		25,163
Structured note liabilities and other note liabilities		13,674
Annuity liabilities		749
Fair value liabilities		39,586
Derivative Assets
Derivative Assets		28,951
Derivative Liabilities
Derivative Liabilities		27,804
Trading Securities		99,069
Available for Sale Securities		54,075
IAS 39 [member] | Measured at fair value [Member] | Canadian federal government [member]
Derivative Liabilities
Trading Securities		10,827
Available for Sale Securities		9,180
IAS 39 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Derivative Liabilities
Trading Securities		7,327
Available for Sale Securities		3,627
IAS 39 [member] | Measured at fair value [Member] | U.S. federal government [member]
Derivative Liabilities
Trading Securities		9,473
Available for Sale Securities		14,269
IAS 39 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Derivative Liabilities
Trading Securities		2,131
Available for Sale Securities		4,096
IAS 39 [member] | Measured at fair value [Member] | Other governments [member]
Derivative Liabilities
Trading Securities		823
Available for Sale Securities		3,558
IAS 39 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Derivative Liabilities
Trading Securities		931
Available for Sale Securities		13,216
IAS 39 [member] | Measured at fair value [Member] | Corporate debt [member]
Derivative Liabilities
Trading Securities		11,763
Available for Sale Securities		4,525
IAS 39 [member] | Measured at fair value [Member] | Loans held for trading [member]
Derivative Liabilities
Trading Securities		153
IAS 39 [member] | Measured at fair value [Member] | Corporate equity [member]
Derivative Liabilities
Trading Securities		55,641
Available for Sale Securities		1,604
IAS 39 [member] | Measured at fair value [Member] | Other equity securities [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Other Securities		333
IAS 39 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets		9,227
Derivative Liabilities
Derivative Liabilities		8,316
IAS 39 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets		17,213
Derivative Liabilities
Derivative Liabilities		14,973
IAS 39 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets		1,078
Derivative Liabilities
Derivative Liabilities		1,074
IAS 39 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets		1,426
Derivative Liabilities
Derivative Liabilities		3,386
IAS 39 [member] | Measured at fair value [Member] | Credit default swaps [member]
Derivative Assets
Derivative Assets		7
Derivative Liabilities
Derivative Liabilities		55
IFRS9 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	99,697
FVTPL Securities	11,611
FVOCI securities	62,440
Business and Government Loans	1,450
Securities sold but not yet purchased	28,804
Structured note liabilities and other note liabilities	15,309
Annuity liabilities	800
Fair value liabilities	44,913
Derivative Assets
Derivative Assets	26,204
Derivative Liabilities
Derivative Liabilities	24,411
IFRS9 [member] | Measured at fair value [Member] | Canadian federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	10,320
FVTPL Securities	431
FVOCI securities	12,805
IFRS9 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	8,702
FVTPL Securities	946
FVOCI securities	6,862
IFRS9 [member] | Measured at fair value [Member] | U.S. federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	9,517
FVTPL Securities	69
FVOCI securities	16,823
IFRS9 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	1,216
FVOCI securities	3,655
IFRS9 [member] | Measured at fair value [Member] | Other governments [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	1,411
FVOCI securities	4,790
IFRS9 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	9,184
FVTPL Securities	7
FVOCI securities	13,687
IFRS9 [member] | Measured at fair value [Member] | Corporate debt [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	9,198
FVTPL Securities	6,821
FVOCI securities	3,756
IFRS9 [member] | Measured at fair value [Member] | Loans held for trading [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	199
IFRS9 [member] | Measured at fair value [Member] | Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	49,950
FVTPL Securities	3,337
FVOCI securities	62
IFRS9 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets	8,977
Derivative Liabilities
Derivative Liabilities	8,634
IFRS9 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets	12,999
Derivative Liabilities
Derivative Liabilities	11,854
IFRS9 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets	2,060
Derivative Liabilities
Derivative Liabilities	1,456
IFRS9 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets	2,158
Derivative Liabilities
Derivative Liabilities	2,430
IFRS9 [member] | Measured at fair value [Member] | Credit default swaps [member]
Derivative Assets
Derivative Assets	10
Derivative Liabilities
Derivative Liabilities	37
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Securities sold but not yet purchased		22,992
Fair value liabilities		22,992
Derivative Assets
Derivative Assets		346
Derivative Liabilities
Derivative Liabilities		418
Trading Securities		79,253
Available for Sale Securities		27,368
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Canadian federal government [member]
Derivative Liabilities
Trading Securities		8,712
Available for Sale Securities		8,283
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Derivative Liabilities
Trading Securities		3,177
Available for Sale Securities		920
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | U.S. federal government [member]
Derivative Liabilities
Trading Securities		9,417
Available for Sale Securities		14,269
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Derivative Liabilities
Trading Securities		189
Available for Sale Securities		18
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Other governments [member]
Derivative Liabilities
Trading Securities		630
Available for Sale Securities		2,290
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate debt [member]
Derivative Liabilities
Trading Securities		1,485
Available for Sale Securities		1,551
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Loans held for trading [member]
Derivative Liabilities
Trading Securities		3
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate equity [member]
Derivative Liabilities
Trading Securities		55,640
Available for Sale Securities		37
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets		4
Derivative Liabilities
Derivative Liabilities		7
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets		17
Derivative Liabilities
Derivative Liabilities		6
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets		232
Derivative Liabilities
Derivative Liabilities		239
Valued using quoted market prices [member] | IAS 39 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets		93
Derivative Liabilities
Derivative Liabilities		166
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	76,852
FVTPL Securities	2,172
FVOCI securities	37,232
Securities sold but not yet purchased	26,336
Fair value liabilities	26,336
Derivative Assets
Derivative Assets	486
Derivative Liabilities
Derivative Liabilities	557
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Canadian federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	9,107
FVTPL Securities	328
FVOCI securities	11,978
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	4,013
FVTPL Securities	219
FVOCI securities	3,315
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | U.S. federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	9,465
FVTPL Securities	69
FVOCI securities	16,823
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	78
FVOCI securities	14
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Other governments [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	1,210
FVOCI securities	3,143
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	60
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate debt [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	2,973
FVTPL Securities	178
FVOCI securities	1,959
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	49,946
FVTPL Securities	1,378
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets	18
Derivative Liabilities
Derivative Liabilities	14
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets	16
Derivative Liabilities
Derivative Liabilities	2
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets	166
Derivative Liabilities
Derivative Liabilities	295
Valued using quoted market prices [member] | IFRS9 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets	286
Derivative Liabilities
Derivative Liabilities	246
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Securities sold but not yet purchased		2,171
Structured note liabilities and other note liabilities		13,674
Annuity liabilities		749
Fair value liabilities		16,594
Derivative Assets
Derivative Assets		28,605
Derivative Liabilities
Derivative Liabilities		27,386
Trading Securities		19,816
Available for Sale Securities		25,263
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Canadian federal government [member]
Derivative Liabilities
Trading Securities		2,115
Available for Sale Securities		897
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Derivative Liabilities
Trading Securities		4,150
Available for Sale Securities		2,707
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | U.S. federal government [member]
Derivative Liabilities
Trading Securities		56
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Derivative Liabilities
Trading Securities		1,942
Available for Sale Securities		4,077
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Other governments [member]
Derivative Liabilities
Trading Securities		193
Available for Sale Securities		1,268
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Derivative Liabilities
Trading Securities		931
Available for Sale Securities		13,216
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate debt [member]
Derivative Liabilities
Trading Securities		10,278
Available for Sale Securities		2,972
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Loans held for trading [member]
Derivative Liabilities
Trading Securities		150
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate equity [member]
Derivative Liabilities
Trading Securities		1
Available for Sale Securities		126
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets		9,223
Derivative Liabilities
Derivative Liabilities		8,309
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets		17,196
Derivative Liabilities
Derivative Liabilities		14,967
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets		846
Derivative Liabilities
Derivative Liabilities		835
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets		1,333
Derivative Liabilities
Derivative Liabilities		3,220
Valued using models (with observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Credit default swaps [member]
Derivative Assets
Derivative Assets		7
Derivative Liabilities
Derivative Liabilities		55
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	22,583
FVTPL Securities	7,614
FVOCI securities	25,145
Securities sold but not yet purchased	2,468
Structured note liabilities and other note liabilities	15,309
Annuity liabilities	800
Fair value liabilities	18,577
Derivative Assets
Derivative Assets	25,718
Derivative Liabilities
Derivative Liabilities	23,852
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Canadian federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	1,213
FVTPL Securities	103
FVOCI securities	827
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Canadian government provincia [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	4,689
FVTPL Securities	727
FVOCI securities	3,547
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | U.S. federal government [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	52
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	1,138
FVOCI securities	3,640
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Other governments [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	201
FVOCI securities	1,647
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	8,869
FVTPL Securities	7
FVOCI securities	13,687
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate debt [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	6,218
FVTPL Securities	6,643
FVOCI securities	1,797
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Loans held for trading [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	199
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	4
FVTPL Securities	134
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Interest rate contracts [member]
Derivative Assets
Derivative Assets	8,959
Derivative Liabilities
Derivative Liabilities	8,620
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Foreign exchange contracts [member]
Derivative Assets
Derivative Assets	12,983
Derivative Liabilities
Derivative Liabilities	11,852
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Commodity contracts [member]
Derivative Assets
Derivative Assets	1,894
Derivative Liabilities
Derivative Liabilities	1,161
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Assets
Derivative Assets	1,872
Derivative Liabilities
Derivative Liabilities	2,183
Valued using models (with observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Credit default swaps [member]
Derivative Assets
Derivative Assets	10
Derivative Liabilities
Derivative Liabilities	36
Valued using models (without observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member]
Derivative Liabilities
Available for Sale Securities		1,444
Valued using models (without observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Derivative Liabilities
Available for Sale Securities		1
Valued using models (without observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate debt [member]
Derivative Liabilities
Available for Sale Securities		2
Valued using models (without observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Corporate equity [member]
Derivative Liabilities
Available for Sale Securities		1,441
Valued using models (without observable inputs) [member] | IAS 39 [member] | Measured at fair value [Member] | Other equity securities [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Other Securities		$ 333
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	262
FVTPL Securities	1,825
FVOCI securities	63
Business and Government Loans	1,450
Derivative Liabilities
Derivative Liabilities	2
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | US States, municipalities and agencies [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
FVOCI securities	1
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | NHA MBS US Agency MBS And CMO [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	255
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate debt [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Trading Securities	7
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
FVTPL Securities	1,825
FVOCI securities	62
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Equity contracts [member]
Derivative Liabilities
Derivative Liabilities	1
Valued using models (without observable inputs) [member] | IFRS9 [member] | Measured at fair value [Member] | Credit default swaps [member]
Derivative Liabilities
Derivative Liabilities	$ 1

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Fair Value Measurement of Investment (Detail) - Valued using models (without observable inputs) [member] $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Fair value of assets	$ 1,825
Corporate equity [member] | Bottom of range [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
EV/EBITDA multiple range of input values	6x
Corporate equity [member] | Top of range [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
EV/EBITDA multiple range of input values	18x
Loan [Member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Change in fair value reasonably possible alternatives	$ 3
Fair value of assets	$ 1,450
Loan [Member] | Bottom of range [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Discount range of input values	0.50%
Loan [Member] | Top of range [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Discount range of input values	1.75%

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Fair Value Measurement of Investment (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Basis point increase or decrease in discount margin for business and government loans	0.10%
Federal reserve stock and federal home loan bank stock [member] | Corporate equity [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Federal reserve stock and federal home loan bank stock	$ 889

XML

Fair Value of Financial Instruments - Additional Information (Detail) - CAD ($)	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Available for sales securities [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Transfers out of Level 1 into Level 2 of fair value hierarchy		$ 107,000,000
Transfers out of Level 2 into Level 1 of fair value hierarchy		56,000,000
Transfers out of Level 3 of fair value hierarchy	$ 0	33,000,000
Trading securities [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Transfers out of Level 1 into Level 2 of fair value hierarchy	2,578,000,000	176,000,000
Transfers out of Level 2 into Level 1 of fair value hierarchy	4,122,000,000	$ 156,000,000
Financial assets at fair value through other comprehensive income, category [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Transfers out of Level 1 into Level 2 of fair value hierarchy	2,266,000,000
Transfers out of Level 2 into Level 1 of fair value hierarchy	4,044,000,000
Financial assets at fair value through profit or loss [member]
Disclosure Of Fair Value Of Financial Instruments [Line Items]
Transfers out of Level 1 into Level 2 of fair value hierarchy	714,000,000
Transfers out of Level 2 into Level 1 of fair value hierarchy	$ 742,000,000

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Changes in Level 3 Instruments Carried At Fair Value (Detail) - Valued using models (without observable inputs) [member] - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Corporate equity [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at end of period	$ 1,825
Trading securities [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Change in fair value included in earnings	(1)
Change in fair value included in other comprehensive income	4
Purchases	313
Sales	(54)
Assets at end of period	262
Change in unrealized gains (losses) recorded in income for instruments still held	(5)
Trading securities [member] | NHA MBS US Agency MBS And CMO [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Change in fair value included in earnings	(1)
Change in fair value included in other comprehensive income	4
Purchases	306
Sales	(54)
Assets at end of period	255
Change in unrealized gains (losses) recorded in income for instruments still held	(5)
Trading securities [member] | Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Purchases	7
Assets at end of period	7
Financial assets at fair value through profit or loss [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1,774
Change in fair value included in earnings	12
Change in fair value included in other comprehensive income	27
Purchases	312
Sales	(161)
Maturities/Settlement	(2)
Transfers out of Level 3	(137)
Assets at end of period	1,825	$ 1,774
Change in unrealized gains (losses) recorded in income for instruments still held	5
Financial assets at fair value through profit or loss [member] | Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	73
Change in fair value included in other comprehensive income	(4)
Purchases	5
Transfers out of Level 3	(74)
Assets at end of period		73
Financial assets at fair value through profit or loss [member] | Corporate equity [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1,701
Change in fair value included in earnings	12
Change in fair value included in other comprehensive income	31
Purchases	307
Sales	(161)
Maturities/Settlement	(2)
Transfers out of Level 3	(63)
Assets at end of period	1,825	1,701
Change in unrealized gains (losses) recorded in income for instruments still held	5
Financial assets at fair value through other comprehensive income, category [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	3
Purchases	62
Maturities/Settlement	(2)
Assets at end of period	63	3
Financial assets at fair value through other comprehensive income, category [member] | Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	2
Maturities/Settlement	(2)
Assets at end of period		2
Financial assets at fair value through other comprehensive income, category [member] | Corporate equity [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Purchases	62
Assets at end of period	62
Financial assets at fair value through other comprehensive income, category [member] | US States, municipalities and agencies [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1
Assets at end of period	1	1
Business and government loans [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	2,372
Change in fair value included in earnings	(2)
Change in fair value included in other comprehensive income	(24)
Purchases	604
Maturities/Settlement	(1,548)
Assets at end of period	1,450	2,372
Financial assets available-for-sale, category [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1,444	1,461
Change in fair value included in earnings		(40)
Change in fair value included in other comprehensive income		(15)
Purchases		190
Sales		(118)
Maturities/Settlement		(1)
Transfers out of Level 3		(33)
Assets at end of period		1,444
Financial assets available-for-sale, category [member] | Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	2	4
Sales		(1)
Maturities/Settlement		(1)
Assets at end of period		2
Financial assets available-for-sale, category [member] | Corporate equity [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1,441	1,456
Change in fair value included in earnings		(40)
Change in fair value included in other comprehensive income		(15)
Purchases		190
Sales		(117)
Transfers out of Level 3		(33)
Assets at end of period		1,441
Financial assets available-for-sale, category [member] | US States, municipalities and agencies [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	1	1
Assets at end of period		1
Trading securities [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period		91
Change in fair value included in earnings		1
Change in fair value included in other comprehensive income		1
Maturities/Settlement		(93)
Trading securities [member] | Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period		91
Change in fair value included in earnings		1
Change in fair value included in other comprehensive income		1
Maturities/Settlement		(93)
Other securities [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Assets at beginning of period	333	320
Change in fair value included in earnings		(9)
Change in fair value included in other comprehensive income		(7)
Purchases		134
Sales		(102)
Maturities/Settlement		(3)
Assets at end of period		333
Change in unrealized gains (losses) recorded in income for instruments still held		$ (8)
Derivatives Liabilities [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Change in fair value included in earnings	0
Change in fair value included in other comprehensive income	0
Purchases	0
Sales	0
Maturities/Settlement	0
Transfers into Level 3	2
Transfers out of Level 3	0
Liabilities at end of period	2
Change in unrealized gains (losses) recorded in income for instruments still held	0
Derivatives Liabilities [member] | Equity contracts [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Change in fair value included in earnings	0
Change in fair value included in other comprehensive income	0
Purchases	0
Sales	0
Maturities/Settlement	0
Transfers into Level 3	1
Transfers out of Level 3	0
Liabilities at end of period	1
Change in unrealized gains (losses) recorded in income for instruments still held	0
Derivatives Liabilities [member] | Credit default swaps [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Change in fair value included in earnings	0
Change in fair value included in other comprehensive income	0
Purchases	0
Sales	0
Maturities/Settlement	0
Transfers into Level 3	1
Transfers out of Level 3	0
Liabilities at end of period	1
Change in unrealized gains (losses) recorded in income for instruments still held	$ 0

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Changes in Level 3 Instruments Carried At Fair Value (Parenthetical) (Detail) - IFRS9 [member] $ in Millions	Oct. 31, 2018 CAD ($)
Corporate debt [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Financial instruments reclassified from Other Securities to FVTPL upon adoption of IFRS 9.	$ 73
Corporate equity [member]
Disclosure of reconciliation of changes in fair value measurement assets liabilities [line items]
Financial instruments reclassified from Other Securities to FVTPL upon adoption of IFRS 9.	260
Financial instruments reclassified from available-for-sale to FVTPL upon adoption of IFRS 9	$ 1,441

XML

Fair Value of Financial Instruments and Trading-Related Revenue - Summary of Trading Revenue (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Trading revenue [abstract]
Interest rates	$ 437	$ 480	$ 663
Foreign exchange	377	369	349
Equities	449	239	188
Commodities	63	84	66
Other	82	47	25
Total trading revenue	1,408	1,219	1,291
Net interest income	(422)	(133)	99
Non-interest revenue - trading revenue	1,830	1,352	1,192
Total trading revenue	$ 1,408	$ 1,219	$ 1,291

XML

Offsetting of Financial Assets and Financial Liabilities - Summary of Amounts Not Offset in the Consolidated Balance Sheet (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of offsetting of financial assets and financial liabilities [Line Items]
Gross amounts	$ 139,445	$ 126,012
Amounts offset in	28,190	22,014
Net amounts presented in balance sheet	111,255	103,998
Impact of master netting agreements	28,930	29,291
Securities received as collateral	71,145	65,977
Cash collateral	3,576	2,903
Net amount	7,604	5,827
Gross amounts	119,285	104,937
Amounts offset in	28,190	22,014
Net amounts presented in balance sheet	91,095	82,923
Impact of master netting agreements	28,930	29,291
Securities pledged as collateral	53,626	46,699
Cash collateral	1,492	1,642
Net amount	7,047	5,291
Securities purchased under resale agreements and securities borrowed [member]
Disclosure of offsetting of financial assets and financial liabilities [Line Items]
Gross amounts	86,635	80,948
Amounts offset in	1,584	5,901
Net amounts presented in balance sheet	85,051	75,047
Impact of master netting agreements	13,355	9,382
Securities received as collateral	70,640	65,044
Net amount	1,056	621
Derivative financial instruments assets 1 [member]
Disclosure of offsetting of financial assets and financial liabilities [Line Items]
Gross amounts	52,810	45,064
Amounts offset in	26,606	16,113
Net amounts presented in balance sheet	26,204	28,951
Impact of master netting agreements	15,575	19,909
Securities received as collateral	505	933
Cash collateral	3,576	2,903
Net amount	6,548	5,206
Derivative financial instruments liabilities 1 [member]
Disclosure of offsetting of financial assets and financial liabilities [Line Items]
Gross amounts	51,017	43,917
Amounts offset in	26,606	16,113
Net amounts presented in balance sheet	24,411	27,804
Impact of master netting agreements	15,575	19,909
Securities pledged as collateral	555	1,263
Cash collateral	1,492	1,642
Net amount	6,789	4,990
Obligations related to securities sold under repurchase agreements and securities lent [member]
Disclosure of offsetting of financial assets and financial liabilities [Line Items]
Gross amounts	68,268	61,020
Amounts offset in	1,584	5,901
Net amounts presented in balance sheet	66,684	55,119
Impact of master netting agreements	13,355	9,382
Securities pledged as collateral	53,071	45,436
Net amount	$ 258	$ 301

XML

Capital Management - Additional Information (Detail)	12 Months Ended
	Oct. 31, 2018
Disclosure of capital management [abstract]
Capital conservation buffer, percentage	2.50%
Common equity surcharge, percentage	1.00%
Domestic stability buffer, percentage	1.50%

XML

Capital Management - Summary of Regulatory Capital Measure and Risk-Weighted Assets (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Fixed Rate of Instruments [Abstract]
Common Equity Tier 1 Capital	$ 32,721	$ 30,633
Tier 1 Capital	37,220	35,108
Total Capital	44,116	40,596
Common Equity Tier 1 Capital Risk-Weighted Assets	289,237	269,466
Tier 1 Capital Risk-Weighted Assets	289,420	269,466
Total Capital Risk-Weighted Assets	$ 289,604	$ 269,466
Common Equity Tier 1 Capital Ratio	11.30%	11.40%
Tier 1 Capital Ratio	12.90%	13.00%
Total Capital Ratio	15.20%	15.10%
Leverage Ratio	4.20%	4.40%

XML

Employee Compensation - Share-Based Compensation - Additional Information (Detail) shares in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($) shares	Oct. 31, 2017 CAD ($) shares	Oct. 31, 2016 CAD ($) shares
Disclosure of Sharebased Payment [Line Items]
Option life, share options granted	10
Employee compensation expense	$ 7,459,000,000	$ 7,467,000,000	$ 7,382,000,000
Aggregate intrinsic value of stock options outstanding	162,000,000	232,000,000	211,000,000
Aggregate intrinsic value of stock options exercisable	140,000,000	174,000,000	146,000,000
Weighted average fair value of options granted	11.30	11.62	7.60
Weighted average exercise price, options	100.63	96.90	77.23
Other liabilities	35,829,000,000	32,361,000,000
Payments under deferred incentive plan	4,000,000	4,000,000
Assets 1 [member] | Compensation trusts [member]
Disclosure of Sharebased Payment [Line Items]
Assets recognised	1,752,000,000	1,805,000,000
Third party [Member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense before tax	0	(7,000,000)	26,000,000
Employee compensation expense	0	(5,000,000)	19,000,000
Employee Stock Option Plan [Member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense before tax	7,000,000	8,000,000	6,000,000
Employee compensation expense	7,000,000	7,000,000	6,000,000
Share purchase plan [member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense	$ 51,000,000	$ 53,000,000	$ 51,000,000
Percentage of employer matching contribution for contribution up to 6%	50.00%
Percentage of employee contribution towards share ownership plans	6.00%
Share purchase plan contribution vesting period	2 years
Individual gross salary for employees contribution	$ 100,000
Description of employee ownership plan contribution	We match 50% of employee contributions up to 6% of their individual gross salary to a maximum of $100,000. Our contributions during the first two years vest after two years of participation in the plan, with subsequent contributions vesting immediately.
Common shares held in plan | shares	17.8	18.3	18.9
Midstream incentive plan [member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense before tax	$ 595,000,000	$ 703,000,000	$ 537,000,000
Employee compensation expense	437,000,000	516,000,000	397,000,000
Weighted average fair value of options granted	$ 581,000,000	$ 515,000,000	$ 492,000,000
Units granted	5,900,000	5,900,000	6,400,000
Gains on hedge contract	$ 51,000,000	$ 183,000,000	$ 111,000,000
Deferred incentive plan outstanding	17,100,000	17,000,000	17,000,000
Intrinsic value of share other than options vested	$ 1,269,000,000	$ 1,253,000,000	$ 883,000,000
Cash payments made in relation to liabilities	598,000,000	343,000,000	131,000,000
Midstream incentive plan [member] | Equity contracts [member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense	544,000,000	520,000,000	426,000,000
Deferred incentive plans [member]
Disclosure of Sharebased Payment [Line Items]
Employee compensation expense before tax	27,000,000	91,000,000	67,000,000
Employee compensation expense	$ 20,000,000	$ 67,000,000	$ 50,000,000
Deferred incentive plan outstanding	4,900,000	5,000,000	4,800,000
Deferred incentive plan units granted	300,000	300,000	400,000
Weighted average fair value at measurement date	$ 33,000,000	$ 32,000,000	$ 28,000,000
Other liabilities	485,000,000	499,000,000
Payments under deferred incentive plan	60,000,000	32,000,000	53,000,000
Gains on derivatives	8,000,000	78,000,000	57,000,000
gains resulted in net employee compensation expense before tax	19,000,000	13,000,000	10,000,000
gains resulted in net employee compensation expense	$ 14,000,000	$ 10,000,000	$ 7,000,000
Options granted after to december two thousand thirteen [member]
Disclosure of Sharebased Payment [Line Items]
Options granted vesting percentage	50.00%
Options granted vesting period	Vest in equal tranches of 50% on the third and fourth anniversaries of their grant date
Options granted prior to december two thousand thirteen [member]
Disclosure of Sharebased Payment [Line Items]
Options granted vesting period	Vest in tranches over a four-year period starting from their grant date

XML

Employee Compensation - Share-Based Compensation - Summary of Information about our Stock Option Plan (Detail)	12 Months Ended
	Oct. 31, 2018 CAD ($) shares	Oct. 31, 2017 CAD ($) shares	Oct. 31, 2016 CAD ($) shares
Disclosure Of Number And Weighted Average Exercise Prices Of Share Options and awards [Line Items]
Weighted-average exercise price,Granted	$ 100.63	$ 96.90	$ 77.23
Employee Stock Options [Member]
Disclosure Of Number And Weighted Average Exercise Prices Of Share Options and awards [Line Items]
Number of stock options, Outstanding at beginning of year	7,525,296	9,805,299	12,111,153
Number of stock options, Granted	705,398	723,431	754,714
Number of stock options, Exercised	1,513,307	2,233,801	2,103,391
Number of stock options, Forfeited/cancelled	152,417	13,243	104,606
Number of stock options, Expired	469,769	756,390	852,571
Number of stock options, Outstanding at end of year	6,095,201	7,525,296	9,805,299
Number of stock options, Exercisable at end of year	3,782,481	4,584,375	5,605,485
Number of stock options, Available for grant | shares	3,405,239	3,811,157	4,151,676
Weighted-average exercise price, Outstanding at beginning of year	$ 72.05	$ 77.41	$ 80.19
Weighted-average exercise price,Granted	100.63	96.90	77.23
Weighted-average exercise price,Exercised	58.40	57.80	55.32
Weighted-average exercise price,Forfeited/cancelled	86.85	66.89	71.76
Weighted-average exercise price,Expired	153.40	195.02	179.53
Weighted-average exercise price,Outstanding at end of year	72.19	72.05	77.41
Weighted-average exercise price,Exercisable at end of year	$ 61.39	$ 67.42	$ 83.34

XML

Employee Compensation - Share-Based Compensation - Summary of Options Outstanding and Exercisable by Range of Exercise Price (Detail) - Employee Stock Options [Member]	12 Months Ended
	Oct. 31, 2018 CAD ($) yr	Oct. 31, 2017 CAD ($)	Oct. 31, 2016 CAD ($)	Oct. 31, 2015 CAD ($)
Disclosure of range of exercise prices of share options [Line Items]
Number of stock options	6,095,201	7,525,296	9,805,299	12,111,153
Weighted- average exercise price	$ 72.19	$ 72.05	$ 77.41	$ 80.19
Number of stock options	3,782,481	4,584,375	5,605,485
Weighted- average exercise price	$ 61.39	$ 67.42	$ 83.34
Range of exercise prices $30.01 to $40.00 [member]
Disclosure of range of exercise prices of share options [Line Items]
Number of stock options	13,690
Weighted- average remaining contractual life (years) | yr	0.1
Weighted- average exercise price	$ 34.13
Number of stock options	13,690
Weighted- average remaining contractual life (years)	0.1
Weighted- average exercise price	$ 34.13
Range of exercise prices $50.01 to $60.00 [member]
Disclosure of range of exercise prices of share options [Line Items]
Number of stock options	1,736,930
Weighted- average remaining contractual life (years) | yr	2.3
Weighted- average exercise price	$ 55.88
Number of stock options	1,736,930
Weighted- average remaining contractual life (years)	2.3
Weighted- average exercise price	$ 55.88
Range of exercise prices $60.01 to $70.00 [member]
Disclosure of range of exercise prices of share options [Line Items]
Number of stock options	1,798,219
Weighted- average remaining contractual life (years) | yr	4.7
Weighted- average exercise price	$ 64.68
Number of stock options	1,798,219
Weighted- average remaining contractual life (years)	4.7
Weighted- average exercise price	$ 64.68
Range of exercise prices $70.01 and over [member]
Disclosure of range of exercise prices of share options [Line Items]
Number of stock options	2,546,362
Weighted- average remaining contractual life (years) | yr	7.7
Weighted- average exercise price	$ 88.83
Number of stock options	233,642
Weighted- average remaining contractual life (years)	6.0
Weighted- average exercise price	$ 78.62

XML

Employee Compensation - Share-Based Compensation - Summary of Further Information about our Stock Option Plan (Detail) - CAD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of number and weighted average exercise price of share options [abstract]
Unrecognized compensation cost for non-vested stock option awards	$ 5	$ 5	$ 4
Weighted-average period over which this cost will be recognized(in years)	2 years 7 months 6 days	2 years 8 months 12 days	2 years 6 months
Total intrinsic value of stock options exercised	$ 67	$ 90	$ 55
Cash proceeds from stock options exercised	$ 88	$ 129	$ 116
Weighted-average share price for stock options exercised (in dollars)	$ 102.55	$ 98.05	$ 81.41

XML

Employee Compensation - Share-Based Compensation - Summary of Ranges of Values used for each Option Pricing Assumption (Detail)	12 Months Ended
	Oct. 31, 2018 yr	Oct. 31, 2017 yr	Oct. 31, 2016 yr
Disclosure of terms and conditions of share-based payment arrangement [line items]
Expected dividend yield	4.10%	4.30%	5.50%
Risk-free rate of return	2.10%
Expected period until exercise (in years)	10
Bottom of range [member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Expected share price volatility	17.00%	18.40%	19.80%
Risk-free rate of return		1.70%	1.30%
Expected period until exercise (in years)	6.5	6.5	6.5
Top of range [member]
Disclosure of terms and conditions of share-based payment arrangement [line items]
Expected share price volatility	17.30%	18.80%	20.00%
Risk-free rate of return		1.80%	1.40%
Expected period until exercise (in years)	7.0	7.0	7.0

XML

Employee Compensation - Pension and Other Employee Future Benefits - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of defined benefit plans [line items]
Curtailment gain in non-interest expense, employee compensation	$ 52
Past service gain	277
Benefit payments for fiscal 2018 estimated	486
payment to bank and certain subsidiaries for investment management, record-keeping, custodial and administrative services rendered	4	$ 4
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Past service gain	(7)
Benefit payments for fiscal 2018 estimated	246
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Past service gain	277
Benefit payments for fiscal 2018 estimated	41
Canadian plans [member] | Common shares [member]
Disclosure of defined benefit plans [line items]
Plan assets	$ 15	$ 3

XML

Employee Compensation - Summary of Asset Allocation Ranges and Weighted-average Actual Asset Allocations (Detail) - Pension Plans [member]	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Equity Securities 1 [Member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan weighted average asset allocation	37.00%	40.00%
Fixed income investments [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan weighted average asset allocation	46.00%	46.00%
Other securities [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan weighted average asset allocation	17.00%	14.00%
Bottom of range [member] | Equity Securities 1 [Member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	25.00%
Bottom of range [member] | Fixed income investments [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	25.00%
Bottom of range [member] | Other securities [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	10.00%
Top of range [member] | Equity Securities 1 [Member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	50.00%
Top of range [member] | Fixed income investments [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	55.00%
Top of range [member] | Other securities [member]
Disclosure of weighted average asset allocations [Line Items]
Defined benefit plan target asset allocation	40.00%

XML

Employee Compensation - Summary of Plan Information for the Past Three Years (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of defined benefit plans [line items]
Fair value of plan assets	$ 7,559	$ 7,757
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation	8,311	8,846	$ 8,992
Fair value of plan assets	8,719	8,990	8,655
Surplus (deficit) and net defined benefit asset (liability)	408	144	(337)
Pension Plans [member] | Funded plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability)	573	339	(127)
Pension Plans [member] | Unfunded plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability)	(165)	(195)	(210)
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation	1,113	1,460	1,493
Fair value of plan assets	153	157	150
Surplus (deficit) and net defined benefit asset (liability)	(960)	(1,303)	(1,343)
Other employee future benefit plans [member] | Funded plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability)	37	28	7
Other employee future benefit plans [member] | Unfunded plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability)	$ (997)	$ (1,331)	$ (1,350)

XML

Employee Compensation - Summary of Pension and Other Employee Future Benefit Expenses (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Annual benefits expense
Past service cost (income)	$ (277)
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income	7,459	$ 7,467	$ 7,382
Pension Plans [member]
Annual benefits expense
Current service cost	210	254	224
Net interest (income) expense on net defined benefit (asset) liability	(10)	7	(10)
Past service cost (income)	7
Administrative expenses	5	5	5
Benefits expense	212	266	219
Defined contribution expense	153	123	96
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income	441	464	388
Pension Plans [member] | Canada and Quebec [member]
Annual benefits expense
Benefits expense	76	75	73
Other employee future benefit plans [member]
Annual benefits expense
Current service cost	26	32	25
Net interest (income) expense on net defined benefit (asset) liability	45	47	52
Past service cost (income)	(277)
Remeasurement of other long-term benefits	(10)	(6)	6
Benefits expense	(216)	73	83
Total annual pension and other employee future benefit expenses recognized in the Consolidated Statement of Income	$ (216)	$ 73	$ 83

XML

Employee Compensation - Summary of Weighted-average Assumptions Used to Determine Benefit Expenses (Detail)	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Discount rate at beginning of year	3.50%	3.40%	4.20%
Rate of compensation increase	2.40%	2.80%	2.70%
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Discount rate at beginning of year	3.60%	3.60%	4.40%
Rate of compensation increase	2.00%	2.40%	2.40%
Assumed overall health care cost trend rate	4.90%	5.20%	5.30%

XML

Employee Compensation - Summary of Weighted-average Assumptions Used to Determine Benefit Expenses (Parenthetical) (Detail)	Oct. 31, 2040	Oct. 31, 2031	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates			3.50%	3.40%	4.20%
Pension Plans [member] | Current service costs [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates			3.70%	3.68%
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate			4.90%	5.20%	5.30%
Actuarial assumption of discount rates			3.60%	3.60%	4.40%
Other employee future benefit plans [member] | Current service costs [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates			3.76%	3.78%
Scenario, Forecast [Member] | Other employee future benefit plans [member] | Actuarial assumption of medical cost trend rates [member]
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate	4.10%	4.50%

XML

Employee Compensation - Summary of Current Life Expectancies Underlying the Amounts of the Defined Benefit Obligations (Detail)	Oct. 31, 2018	Oct. 31, 2017
Canada [member] | Retiring currently at age sixty five [member] | Male [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	23.7	23.6
Canada [member] | Retiring currently at age sixty five [member] | Female [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	24.0	24.0
Canada [member] | Currently aged forty five and retiring at age sixty five [member] | Male [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	24.6	24.6
Canada [member] | Currently aged forty five and retiring at age sixty five [member] | Female [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	25.0	24.9
United States [member] | Retiring currently at age sixty five [member] | Male [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	21.9	22.0
United States [member] | Retiring currently at age sixty five [member] | Female [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	23.4	23.4
United States [member] | Currently aged forty five and retiring at age sixty five [member] | Male [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	23.1	23.2
United States [member] | Currently aged forty five and retiring at age sixty five [member] | Female [member]
Disclosure of defined benefit plans [line items]
Life expectancy for members	24.5	24.6

XML

Employee Compensation - Summary of Changes in Estimated Financial Positions of Defined Benefit Pension Plans and Other Employee Future Benefit Plans (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of defined benefit plans [line items]
Past service cost (income)	$ 277
Benefits paid	4	$ 4
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability) at end of year	408	144	$ (337)
Current service cost	(210)	(254)	(224)
Past service cost (income)	(7)
Interest cost	10	(7)	$ 10
Changes in demographic assumptions	50	127
Changes in financial assumptions	562	150
Plan member experience	(16)	(45)
Foreign exchange and other	6	(3)
Actuarial gains recognized in other comprehensive income for the year	$ 279	$ 506
Discount rate at end of year	3.50%	3.40%	4.20%
Rate of compensation increase	2.40%	2.80%	2.70%
Pension Plans [member] | Present value of defined benefit obligation [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation at beginning of year	$ 8,846	$ 8,992
Current service cost	210	254
Past service cost (income)	7
Interest cost	299	300
Benefits paid	(492)	(448)
Employee contributions	15	15
Changes in demographic assumptions	(50)	(127)
Changes in financial assumptions	(562)	(150)
Plan member experience	16	45
Foreign exchange and other	22	(35)
Defined benefit obligation at end of year	8,311	8,846	$ 8,992
Wholly or partially funded defined benefit obligation	8,146	8,651
Unfunded defined benefit obligation	$ 165	$ 195
Discount rate at end of year	4.00%	3.50%
Rate of compensation increase	2.40%	2.40%
Pension Plans [member] | Plan assets [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation at beginning of year	$ 8,990	$ 8,655
Interest cost	309	293
Benefits paid	(492)	(448)
Return on plan assets (excluding interest income)	(323)	277
Employer contributions	213	219
Employee contributions	15	15
Administrative expenses	(5)	(5)
Foreign exchange and other	12	(16)
Defined benefit obligation at end of year	8,719	8,990	8,655
Actuarial gains recognized in other comprehensive income for the year	(323)	277
Pension Plans [member] | Other assets [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability) at end of year	664	508
Pension Plans [member] | Other liabilities [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability) at end of year	(256)	(364)
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability) at end of year	(960)	(1,303)	(1,343)
Current service cost	(26)	(32)	(25)
Past service cost (income)	277
Interest cost	(45)	(47)	$ (52)
Changes in demographic assumptions	30	104
Changes in financial assumptions	72
Plan member experience	1	(41)
Actuarial gains recognized in other comprehensive income for the year	$ 93	$ 71
Discount rate at end of year	3.60%	3.60%	4.40%
Rate of compensation increase	2.00%	2.40%	2.40%
Assumed overall health care cost trend rate	4.90%	5.20%	5.30%
Other employee future benefit plans [member] | Present value of defined benefit obligation [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation at beginning of year	$ 1,460	$ 1,493
Current service cost	26	32
Past service cost (income)	(277)
Interest cost	51	52
Benefits paid	(43)	(45)
Employee contributions	5	5
Changes in demographic assumptions	(31)	(107)
Changes in financial assumptions	(77)	(2)
Plan member experience	(4)	39
Foreign exchange and other	3	(7)
Defined benefit obligation at end of year	1,113	1,460	$ 1,493
Wholly or partially funded defined benefit obligation	116	129
Unfunded defined benefit obligation	$ 997	$ 1,331
Discount rate at end of year	4.10%	3.60%
Rate of compensation increase	2.00%	2.00%
Assumed overall health care cost trend rate	4.90%	5.20%
Other employee future benefit plans [member] | Plan assets [member]
Disclosure of defined benefit plans [line items]
Defined benefit obligation at beginning of year	$ 157	$ 150
Interest cost	6	5
Benefits paid	(43)	(45)
Return on plan assets (excluding interest income)	(10)	8
Employer contributions	35	40
Employee contributions	5	5
Foreign exchange and other	3	(6)
Defined benefit obligation at end of year	153	157	$ 150
Actuarial gains recognized in other comprehensive income for the year	(10)	8
Other employee future benefit plans [member] | Other liabilities [member]
Disclosure of defined benefit plans [line items]
Surplus (deficit) and net defined benefit asset (liability) at end of year	$ (960)	$ (1,303)

XML

Employee Compensation - Summary of Changes in Estimated Financial Positions of Defined Benefit Pension Plans and Other Employee Future Benefit Plans (Parenthetical) (Detail) - Other employee future benefit plans [member]	Oct. 31, 2040	Oct. 31, 2031	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate			4.90%	5.20%	5.30%
Scenario, Forecast [Member] | Actuarial assumption of medical cost trend rates [member]
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate	4.10%	4.50%

XML

Employee Compensation - Summary of Fair Values of Plan Assets Held (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure of fair value of plan assets [line items]
Derivative instruments	$ (13)	$ (28)
Fair value of plan assets	7,559	7,757
Cash and money market funds.
Disclosure of fair value of plan assets [line items]
Cash and money market funds	114	155
Canadian federal government [member]
Disclosure of fair value of plan assets [line items]
Debt securities	149	190
Canadian Provincial And Municipal Governments [member]
Disclosure of fair value of plan assets [line items]
Debt securities	528	791
US federal Government [member]
Disclosure of fair value of plan assets [line items]
Debt securities	297	327
US State Municipal And Agencies Debt [member]
Disclosure of fair value of plan assets [line items]
Debt securities	12	16
Pooled asset funds [member]
Disclosure of fair value of plan assets [line items]
Pooled funds	4,306	3,755
Corporate debt [member]
Disclosure of fair value of plan assets [line items]
Debt securities	1,061	1,260
Corporate equity [member]
Disclosure of fair value of plan assets [line items]
Equity securities	1,105	1,291
Canadian plans [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Derivative instruments	1
Fair value of plan assets	3,441
Canadian plans [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Derivative instruments	(14)
Fair value of plan assets	4,118
Canadian plans [member] | Cash and money market funds. | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Cash and money market funds	114
Canadian plans [member] | Canadian federal government [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities	108
Canadian plans [member] | Canadian federal government [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities	41
Canadian plans [member] | Canadian Provincial And Municipal Governments [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities	219
Canadian plans [member] | Canadian Provincial And Municipal Governments [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities	309
Canadian plans [member] | US federal Government [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities	297
Canadian plans [member] | US State Municipal And Agencies Debt [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities	12
Canadian plans [member] | Pooled asset funds [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Pooled funds	1,591
Canadian plans [member] | Pooled asset funds [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Pooled funds	2,715
Canadian plans [member] | Corporate debt [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities	6
Canadian plans [member] | Corporate debt [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities	1,055
Canadian plans [member] | Corporate equity [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Equity securities	$ 1,105
Foreign defined benefit plans [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Derivative instruments		1
Fair value of plan assets		4,115
Foreign defined benefit plans [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Derivative instruments		(29)
Fair value of plan assets		3,642
Foreign defined benefit plans [member] | Cash and money market funds. | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Cash and money market funds		150
Foreign defined benefit plans [member] | Cash and money market funds. | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Cash and money market funds		5
Foreign defined benefit plans [member] | Canadian federal government [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities		143
Foreign defined benefit plans [member] | Canadian federal government [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities		47
Foreign defined benefit plans [member] | Canadian Provincial And Municipal Governments [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities		471
Foreign defined benefit plans [member] | Canadian Provincial And Municipal Governments [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities		320
Foreign defined benefit plans [member] | US federal Government [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities		307
Foreign defined benefit plans [member] | US federal Government [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities		20
Foreign defined benefit plans [member] | US State Municipal And Agencies Debt [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities		16
Foreign defined benefit plans [member] | Pooled asset funds [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Pooled funds		1,743
Foreign defined benefit plans [member] | Pooled asset funds [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Pooled funds		2,012
Foreign defined benefit plans [member] | Corporate debt [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Debt securities		9
Foreign defined benefit plans [member] | Corporate debt [member] | Unquoted [member]
Disclosure of fair value of plan assets [line items]
Debt securities		1,251
Foreign defined benefit plans [member] | Corporate equity [member] | Valued using quoted market prices [member]
Disclosure of fair value of plan assets [line items]
Equity securities		$ 1,291

XML

Employee Compensation - Summary of Changes in Number of Key Assumption (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Pension Plans [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	3.50%	3.40%	4.20%
Actuarial assumption of discount rates	2.40%	2.80%	2.70%
Pension Plans [member] | Actuarial assumption of discount rates [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	4.00%
Pension Plans [member] | Actuarial assumption of discount rates [member] | Actuarial assumption of discount rates, 1% increase [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	$ (811)
Pension Plans [member] | Actuarial assumption of discount rates [member] | Actuarial assumption of discount rates, 1% decrease [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	$ 1,016
Pension Plans [member] | Actuarial assumption of expected rates of salary increases [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	2.40%
Pension Plans [member] | Actuarial assumption of expected rates of salary increases [member] | Actuarial assumption of expected rate of compensation, 0.25% increase [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	$ 39
Pension Plans [member] | Actuarial assumption of expected rates of salary increases [member] | Actuarial assumption of expected rate of compensation, 0.25% decrease [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	(38)
Pension Plans [member] | Actuarial assumption of mortality rates [member] | Actuarial assumption of mortality, 1 year shorter life expectancy [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	(138)
Pension Plans [member] | Actuarial assumption of mortality rates [member] | Actuarial assumption of mortality, 1 year longer life expectancy [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	$ 135
Other employee future benefit plans [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	3.60%	3.60%	4.40%
Actuarial assumption of discount rates	2.00%	2.40%	2.40%
Actuarial assumption of discount rates	4.90%	5.20%	5.30%
Other employee future benefit plans [member] | Actuarial assumption of discount rates [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	4.10%
Other employee future benefit plans [member] | Actuarial assumption of discount rates [member] | Actuarial assumption of discount rates, 1% increase [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	$ (102)
Other employee future benefit plans [member] | Actuarial assumption of discount rates [member] | Actuarial assumption of discount rates, 1% decrease [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	$ 126
Other employee future benefit plans [member] | Actuarial assumption of expected rates of salary increases [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	2.00%
Other employee future benefit plans [member] | Actuarial assumption of mortality rates [member] | Actuarial assumption of mortality, 1 year shorter life expectancy [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	$ (23)
Other employee future benefit plans [member] | Actuarial assumption of mortality rates [member] | Actuarial assumption of mortality, 1 year longer life expectancy [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	$ 23
Other employee future benefit plans [member] | Actuarial assumption of health care cost trend rates [member]
Disclosure of defined benefit plans [line items]
Actuarial assumption of discount rates	4.90%
Other employee future benefit plans [member] | Actuarial assumption of health care cost trend rates [member] | Actuarial assumption of medical cost trend rate, 1% increase [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible increase in actuarial assumption	$ 47
Other employee future benefit plans [member] | Actuarial assumption of health care cost trend rates [member] | Actuarial assumption of medical cost trend rate, 1% decrease [member]
Disclosure of defined benefit plans [line items]
Increase (decrease) in benefit obligation due to reasonably possible decrease in actuarial assumption	$ (48)

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Employee Compensation - Summary of Changes in Number of Key Assumption (Parenthetical) (Detail) - Other employee future benefit plans [member]	Oct. 31, 2040	Oct. 31, 2031	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate			4.90%	5.20%	5.30%
Scenario, Forecast [Member] | Actuarial assumption of medical cost trend rates [member]
Disclosure of defined benefit plans [line items]
Assumed overall health care cost trend rate	4.10%	4.50%

XML

Employee Compensation - Summary of Duration of Defined Benefit Obligation (Detail) - Years	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Pension Plans [member] | Canada [member]
Disclosure of defined benefit plans [line items]
Duration of defined benefit obligation	14.0	14.7
Pension Plans [member] | United States [member]
Disclosure of defined benefit plans [line items]
Duration of defined benefit obligation	7.2	8.0
Other employee future benefit plans [member] | Canada [member]
Disclosure of defined benefit plans [line items]
Duration of defined benefit obligation	14.3	16.5

XML

Employee Compensation - Summary of Cash payments in connection with employee future benefit plans (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Pension Plans [member]
Disclosure of defined benefit plans and defined contribution plans [Line Items]
Contributions to defined benefit plans	$ 154	$ 187	$ 192
Contributions to defined contribution plans	153	123	96
Benefits paid directly to pensioners	59	32	43
Cash payments made for employee future benefit plans	366	342	331
Other employee future benefit plans [member]
Disclosure of defined benefit plans and defined contribution plans [Line Items]
Benefits paid directly to pensioners	35	40	38
Cash payments made for employee future benefit plans	$ 35	$ 40	$ 38

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Income Taxes - Additional Information (Detail) - CAD ($)	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of Income Tax [Line items]
Deferred income tax assets loss carryforwards	$ 2,037,000,000	$ 2,865,000,000
Temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognized	132,000,000	282,000,000
Amount of unrecognized tax loss carryforwards	8,000,000	53,000,000
Temporary differences associated with repatriation of earnings from investments in subsidiaries, branches and associates and interests in joint arrangements for which deferred tax liabilities have not been recognised	13,000,000,000	12,000,000,000
Revaluation of income tax	483,000,000
Income tax expense	425,000,000
Income tax charge in Other Compresensive Income and Shareholder's Equity	58,000,000
2012 taxation years [Member]
Disclosure of Income Tax [Line items]
Additional income tax expense and interest		116,000,000
2011 taxation years [Member]
Disclosure of Income Tax [Line items]
Additional income tax expense and interest			$ 76,000,000
2013 taxation years [Member]
Disclosure of Income Tax [Line items]
Additional income tax expense and interest	169,000,000
Canada [member] | Tax loss carryforwards [member]
Disclosure of Income Tax [Line items]
Deferred income tax assets loss carryforwards	$ 42,000,000	126,000,000
Deferred income tax assets loss carryforwards expiration period	2037
United States [member] | Tax loss carryforwards [member]
Disclosure of Income Tax [Line items]
Deferred income tax assets loss carryforwards	$ 962,000,000	1,545,000,000
Deferred income tax assets loss carryforwards expiration, start of year	2026
Deferred income tax assets loss carryforwards expiration, end of year	2038
United Kingdom [member] | Tax loss carryforwards [member]
Disclosure of Income Tax [Line items]
Deferred income tax assets loss carryforwards	$ 17,000,000	$ 16,000,000

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Income Taxes - Summary of Provision for Income Taxes (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure representing major components of tax expense income [line items]
Current income taxes	$ 1,331	$ 1,254	$ 927
Adjustments in respect of current tax for prior periods	20	18	8
Origination and reversal of temporary differences	276	80	183
Effect of changes in tax rates	425	(2)	(2)
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(92)	(54)	(15)
Provision for income taxes	1,960	1,296	1,101
Unrealized gains (losses) on FVOCI securities	(69)	21	64
Reclassification to earnings of (gains) on FVOCI securities	(23)	(36)	(11)
Gains (losses) on derivatives designated as cash flow hedges	(432)	(322)	4
Reclassification to earnings of losses on derivatives designated as cash flow hedges	121	21	6
Hedging of unrealized (gains) losses on translation of net foreign operations	(56)	8	10
Gains (losses) on remeasurement of pension and other employee future benefit plans	111	157	(156)
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value	(6)	(53)	(55)
Share-based compensation	10	(12)
Total provision for income taxes	1,616	1,080	963
Canada [member]
Disclosure representing major components of tax expense income [line items]
Federal current income taxes	501	470	434
Provincial current income taxes	299	272	248
Current income taxes	800	742	682
Federal Deferred income taxes	(45)	2	(120)
Provincial deferred income taxes	(27)		(67)
Deferred income taxes	(72)	2	(187)
Total provision for income taxes	728	744	495
Foreign countries [member]
Disclosure representing major components of tax expense income [line items]
Current income taxes	224	281	220
Deferred income taxes	664	55	248
Total provision for income taxes	$ 888	$ 336	$ 468

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Income Taxes - Summary of Effective Tax Rates (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Reconciliation of average effective tax rate and applicable tax rate [abstract]
Combined Canadian federal and provincial income taxes at the statutory tax rate	$ 1,971	$ 1,768	$ 1,525
Tax-exempt income from securities	(226)	(409)	(367)
Foreign operations subject to different tax rates	(110)	22	13
Change in tax rate for deferred income taxes	425	(2)	(2)
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(92)	(54)	(15)
Income attributable to investments in associates and joint ventures	(39)	(103)	(47)
Adjustments in respect of current tax for prior periods	20	18	8
Other	11	56	(14)
Provision for income taxes and effective tax rate	$ 1,960	$ 1,296	$ 1,101
Combined Canadian federal and provincial income taxes at the statutory tax rate	26.60%	26.60%	26.60%
Tax-exempt income from securities	(3.00%)	(6.20%)	(6.40%)
Foreign operations subject to different tax rates	(1.50%)	0.30%	0.30%
Change in tax rate for deferred income taxes	5.70%
Previously unrecognized tax loss, tax credit or temporary difference for a prior period	(1.20%)	(0.80%)	(0.30%)
Income attributable to investments in associates and joint ventures	(0.50%)	(1.50%)	(0.80%)
Adjustments in respect of current tax for prior periods	0.30%	0.20%	0.10%
Other	0.10%	0.90%	(0.30%)
Provision for income taxes and effective tax rate	26.50%	19.50%	19.20%

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Income Taxes - Summary of Components of Deferred Income Tax Balances (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	$ 2,632	$ 2,859
Benefit (expense) to income statement		(24)
Benefit (expense) to equity		(33)
Translation and other		(170)
Ending balance of net asset		2,632
IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	2,606
Benefit (expense) to income statement	(609)
Benefit (expense) to equity	17
Translation and other	(51)
Ending balance of net asset	1,963	2,606
Allowance for credit losses [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	710	883
Benefit (expense) to income statement		(118)
Translation and other		(55)
Ending balance of net asset		710
Allowance for credit losses [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	684
Benefit (expense) to income statement	(150)
Translation and other	(50)
Ending balance of net asset	484	684
Employee future benefits [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	416	424
Benefit (expense) to income statement		12
Benefit (expense) to equity		(14)
Translation and other		(6)
Ending balance of net asset		416
Employee future benefits [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	416
Benefit (expense) to income statement	(111)
Benefit (expense) to equity	(23)
Ending balance of net asset	282	416
Deferred compensation benefits [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	545	462
Benefit (expense) to income statement		102
Translation and other		(19)
Ending balance of net asset		545
Deferred compensation benefits [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	545
Benefit (expense) to income statement	(50)
Translation and other	(1)
Ending balance of net asset	494	545
Other comprehensive income [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	27	(82)
Benefit (expense) to equity		112
Translation and other		(3)
Ending balance of net asset		27
Other comprehensive income [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	50
Benefit (expense) to equity	138
Translation and other	7
Ending balance of net asset	195	50
Tax loss carryforwards [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	1,233	1,343
Benefit (expense) to income statement		(18)
Translation and other		(92)
Ending balance of net asset		1,233
Tax loss carryforwards [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	1,233
Benefit (expense) to income statement	(628)
Translation and other	1
Ending balance of net asset	606	1,233
Tax credits [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	454	407
Benefit (expense) to income statement		64
Translation and other		(17)
Ending balance of net asset		454
Tax credits [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	454
Benefit (expense) to income statement	(39)
Ending balance of net asset	415	454
Premises and equipment [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(664)	(613)
Benefit (expense) to income statement		(83)
Translation and other		32
Ending balance of net asset		(664)
Premises and equipment [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(664)
Benefit (expense) to income statement	148
Translation and other	1
Ending balance of net asset	(515)	(664)
Pension benefits [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(52)	89
Benefit (expense) to income statement		5
Benefit (expense) to equity		(143)
Translation and other		(3)
Ending balance of net asset		(52)
Pension benefits [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(52)
Benefit (expense) to income statement	19
Benefit (expense) to equity	(88)
Ending balance of net asset	(121)	(52)
Goodwill and intangible assets [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(261)	(253)
Benefit (expense) to income statement		(23)
Translation and other		15
Ending balance of net asset		(261)
Goodwill and intangible assets [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	(261)
Benefit (expense) to income statement	60
Ending balance of net asset	(201)	(261)
Securities [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	21	12
Benefit (expense) to income statement		11
Translation and other		(2)
Ending balance of net asset		21
Securities [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	21
Benefit (expense) to income statement	17
Ending balance of net asset	38	21
Deferred Tax Asset Liability Other [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	203	187
Benefit (expense) to income statement		24
Benefit (expense) to equity		12
Translation and other		(20)
Ending balance of net asset		203
Deferred Tax Asset Liability Other [member] | IFRS9 [member]
Disclosure of components of deferred tax assets and liabilities [line items]
Beginning balance of net asset	180
Benefit (expense) to income statement	125
Benefit (expense) to equity	(10)
Translation and other	(9)
Ending balance of net asset	$ 286	$ 180

XML

Income Taxes - Summary of Components of Deferred Income Tax Balances (Parenthetical) (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Reconciliation of changes in deferred tax liability (asset) [abstract]
Deferred tax assets	$ 2,037	$ 2,865
Deferred tax liabilities	$ 74	$ 233

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Earnings Per Share - Summary of Basic and Diluted Earnings Per Share (Detail) - CAD ($) $ / shares in Units, shares in Thousands, $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Basic Earnings per Share
Net income attributable to bank shareholders	$ 5,450	$ 5,348	$ 4,622
Dividends on preferred shares	(184)	(184)	(150)
Net income available to common shareholders	$ 5,266	$ 5,164	$ 4,472
Weighted-average number of common shares outstanding	642,930	649,650	644,049
Basic earnings per share	$ 8.19	$ 7.95	$ 6.94
Diluted Earnings per Share
Net income available to common shareholders adjusted for impact of dilutive instruments	$ 5,266	$ 5,164	$ 4,472
Weighted-average number of common shares outstanding	642,930	649,650	644,049
Effect of dilutive instruments
Stock options potentially exercisable	5,876	6,859	8,706
Common shares potentially repurchased	(3,893)	(4,548)	(6,629)
Weighted-average number of diluted common shares outstanding	644,913	651,961	646,126
Diluted earnings per share	$ 8.17	$ 7.92	$ 6.92

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Earnings Per Share - Summary of Basic and Diluted Earnings Per Share (Parenthetical) (Detail) - CAD ($)	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Earnings per share [line items]
Outstanding options excluded from calculation of diluted earnings per share	1,101,938	1,330,564	1,353,464
Dilutive potential shares from stock options [Member]
Earnings per share [line items]
Exercise price of outstanding share options	$ 127.45	$ 182.70	$ 238.45

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities - Summary of Maximum Amount Payable Under Various Commitments (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	$ 177,660	$ 157,194
Financial Guarantees [Member] | Standby letters of credit [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	18,458	18,126
Financial Guarantees [Member] | Credit default swaps [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	443	448
Other Credit Instruments [Member] | Backstop liquidity facilities [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	5,627	5,044
Other Credit Instruments [Member] | Securities lending [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	4,939	5,336
Other Credit Instruments [Member] | Documentary and commercial letters of credit [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	1,263	1,030
Other Credit Instruments [Member] | Commitments to extend credit [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	137,995	122,881
Other Credit Instruments [Member] | Other commitments [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Maximum potential amount of future payments	$ 8,935	$ 4,329

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities - Summary of Maximum Amount Payable Under Various Commitments (Parenthetical) (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of commitments guarantees pledged assets provisions and contingent liabilities [Abstract]
Fair value of derivative liabilities	$ 8	$ 6

XML

Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities - Summary of Pledged Assets collateral and Activities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Oct. 31, 2017
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	$ 190,995	$ 169,396
Central counterparties, payment systems and depositories [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	2,403	2,043
Foreign governments and central banks [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	3	3
Obligations related to securities sold under repurchase agreements [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	54,606	42,450
Securities borrowing and lending [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	50,388	51,120
Derivative transactions [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	6,120	5,924
Securitization [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	28,710	27,632
Covered bonds [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	26,721	24,983
Others [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	21,519	14,516
Bank of canada [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	525	725
Bank assets [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	190,995	169,396
Bank assets [member] | Cashed securities, government issued or guaranteed [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	7,784	11,904
Bank assets [member] | Cashed securities,issued or guaranteed by a Canadian province municipality or school corporation [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	7,143	6,170
Bank assets [member] | Other assets [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	60,812	51,848
Bank assets [member] | Mortgages, securities borrowed or purchased under resale agreements and other [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Pledged assets and collateral	$ 115,256	$ 99,474

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities - Additional Information (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($) Branch	Oct. 31, 2017 CAD ($)
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Fair value of counterparty collateral permitted to sell or repledge	$ 123,782	$ 118,324
Fair value of collateral sold or repledged	82,392	76,909
Minimum lease payments receivable under noncancellable operating lease	2,742
Minimum lease payments receivable under noncancellable operating lease	404
Minimum lease payments receivable under noncancellable operating lease	358
Minimum lease payments receivable under noncancellable operating lease	301
Minimum lease payments receivable under noncancellable operating lease	254
Minimum lease payments receivable under noncancellable operating lease	215
Minimum lease payments receivable under noncancellable operating lease	$ 1,210
Number of leased branch locations | Branch	1,130
ongoing bank- wide [member]
Disclosure commitments guarantees pledged assets provisions and contingent liabilities [line items]
Restructuring charges	$ 176	$ 98

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Commitments, Guarantees, Pledged Assets, Provisions and Contingent Liabilities - Summary of Changes In Provision Balance (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure Of Changes In Provisions [Abstract]
Balance at beginning of year	$ 170	$ 268
Additional provisions/increase in provisions	375	153
Provisions utilized	(250)	(172)
Amounts reversed	(11)	(75)
Exchange differences and other movements		(4)
Balance at end of year	$ 284	$ 170

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Operating and Geographic Segmentation - Additional Information (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($) Business Segments	Oct. 31, 2017 CAD ($)	Oct. 31, 2016 CAD ($)
Disclosure of operating segments [line items]
Number of operating groups | Business	3
Taxable equivalent basis adjustment amount | $	$ 313	$ 567	$ 510
Personal and commercial banking [member]
Disclosure of operating segments [line items]
Number operating segments | Segments	2

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Operating and Geographic Segmentation - Summary of Average Assets, Grouped by Operating Segment (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of operating segments [line items]
Net interest income	$ 10,313	$ 10,007	$ 9,872
Non-interest revenue	12,724	12,253	11,215
Total Revenue	23,037	22,260	21,087
Provision for (recovery of) credit losses	662	746	771
Insurance claims, commissions and changes in policy benefit liabilities	1,352	1,538	1,543
Amortization	1,127	1,103	1,047
Non-interest expense	12,486	12,227	11,994
Income (loss) before taxes and non-controlling interest in subsidiaries	7,410	6,646	5,732
Provision for (recovery of) income taxes	1,960	1,296	1,101
Reported net income (loss)	5,450	5,350	4,631
Non-controlling interest in subsidiaries		2	9
Net Income (loss) attributable to bank shareholders	5,450	5,348	4,622
Average Assets	754,295	722,626	707,122
Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	700
Performing loans [member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	(38)
Canadian P&C [member]
Disclosure of operating segments [line items]
Net interest income	5,541	5,261	5,080
Non-interest revenue	2,171	2,182	1,909
Total Revenue	7,712	7,443	6,989
Provision for (recovery of) credit losses	469	483	506
Amortization	318	309	276
Non-interest expense	3,487	3,313	3,224
Income (loss) before taxes and non-controlling interest in subsidiaries	3,438	3,338	2,983
Provision for (recovery of) income taxes	884	827	766
Reported net income (loss)	2,554	2,511	2,217
Net Income (loss) attributable to bank shareholders	2,554	2,511	2,217
Average Assets	224,553	217,685	208,018
Canadian P&C [member] | Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	466
Canadian P&C [member] | Performing loans [member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	3
US P&C [member]
Disclosure of operating segments [line items]
Net interest income	3,843	3,551	3,491
Non-interest revenue	1,140	1,066	1,119
Total Revenue	4,983	4,617	4,610
Provision for (recovery of) credit losses	220	289	249
Amortization	454	434	433
Non-interest expense	2,558	2,510	2,481
Income (loss) before taxes and non-controlling interest in subsidiaries	1,751	1,384	1,447
Provision for (recovery of) income taxes	357	357	396
Reported net income (loss)	1,394	1,027	1,051
Net Income (loss) attributable to bank shareholders	1,394	1,027	1,051
Average Assets	110,351	104,209	106,111
US P&C [member] | Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	258
US P&C [member] | Performing loans [member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	(38)
Wealth management [member]
Disclosure of operating segments [line items]
Net interest income	826	722	635
Non-interest revenue	5,468	5,492	5,274
Total Revenue	6,294	6,214	5,909
Provision for (recovery of) credit losses	6	8	9
Insurance claims, commissions and changes in policy benefit liabilities	1,352	1,538	1,543
Amortization	231	241	233
Non-interest expense	3,278	3,110	3,104
Income (loss) before taxes and non-controlling interest in subsidiaries	1,427	1,317	1,020
Provision for (recovery of) income taxes	355	350	245
Reported net income (loss)	1,072	967	775
Non-controlling interest in subsidiaries		2	2
Net Income (loss) attributable to bank shareholders	1,072	965	773
Average Assets	35,913	32,562	30,642
Wealth management [member] | Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	6
BMO capital markets [member]
Disclosure of operating segments [line items]
Net interest income	659	1,233	1,459
Non-interest revenue	3,696	3,336	2,855
Total Revenue	4,355	4,569	4,314
Provision for (recovery of) credit losses	(18)	44	81
Amortization	124	119	105
Non-interest expense	2,727	2,659	2,469
Income (loss) before taxes and non-controlling interest in subsidiaries	1,522	1,747	1,659
Provision for (recovery of) income taxes	366	472	424
Reported net income (loss)	1,156	1,275	1,235
Net Income (loss) attributable to bank shareholders	1,156	1,275	1,235
Average Assets	307,087	302,518	301,623
BMO capital markets [member] | Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	(17)
BMO capital markets [member] | Performing loans [member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	(1)
Corporate services [member]
Disclosure of operating segments [line items]
Net interest income	(556)	(760)	(793)
Non-interest revenue	249	177	58
Total Revenue	(307)	(583)	(735)
Provision for (recovery of) credit losses	(15)	(78)	(74)
Non-interest expense	436	635	716
Income (loss) before taxes and non-controlling interest in subsidiaries	(728)	(1,140)	(1,377)
Provision for (recovery of) income taxes	(2)	(710)	(730)
Reported net income (loss)	(726)	(430)	(647)
Non-controlling interest in subsidiaries			7
Net Income (loss) attributable to bank shareholders	(726)	(430)	(654)
Average Assets	76,391	$ 65,652	$ 60,728
Corporate services [member] | Impaired Loans [Member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	(13)
Corporate services [member] | Performing loans [member]
Disclosure of operating segments [line items]
Provision for (recovery of) credit losses	$ (2)

XML

Operating and Geographic Segmentation - Summary of Average Assets, Grouped by Geographic Region (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of geographical areas [line items]
Total Revenue	$ 23,037	$ 22,260	$ 21,087
Income before taxes and non-controlling interest in subsidiaries	7,410	6,646	5,732
Reported net income	5,450	5,350	4,631
Average Assets	754,295	722,626	707,122
Canada [member]
Disclosure of geographical areas [line items]
Total Revenue	13,733	13,469	12,868
Income before taxes and non-controlling interest in subsidiaries	4,838	4,597	3,902
Reported net income	3,795	3,817	3,286
Average Assets	441,376	430,570	420,155
United States [member]
Disclosure of geographical areas [line items]
Total Revenue	7,315	7,073	6,796
Income before taxes and non-controlling interest in subsidiaries	1,870	1,588	1,499
Reported net income	1,099	1,210	1,105
Average Assets	277,764	264,473	260,018
Other international non CAN non US [member]
Disclosure of geographical areas [line items]
Total Revenue	1,989	1,718	1,423
Income before taxes and non-controlling interest in subsidiaries	702	461	331
Reported net income	556	323	240
Average Assets	$ 35,155	$ 27,583	$ 26,949

XML

Significant Subsidiaries - Summary of Significant Operating Subsidiaries (Detail) $ in Millions	12 Months Ended
	Oct. 31, 2018 CAD ($)
Bank of Montreal Capital Markets (Holdings) Limited and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Bank of Montreal Capital Markets (Holdings) Limited and subsidiaries
Head or principal office	London, England
Book value of shares owned by the bank	$ 332
BMO Capital Markets Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Capital Markets Limited
Head or principal office	London, England
Pyrford International Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Pyrford International Limited
Head or principal office	London, England
Bank of Montreal (China) Co. Ltd. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Bank of Montreal (China) Co. Ltd.
Head or principal office	Beijing, China
Book value of shares owned by the bank	$ 448
Bank of Montreal Holding Inc. and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Bank of Montreal Holding Inc. and subsidiaries
Head or principal office	Toronto, Canada
Book value of shares owned by the bank	$ 29,028
Bank of Montreal Mortgage Corporation [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Bank of Montreal Mortgage Corporation
Head or principal office	Calgary, Canada
BMO Mortgage Corp. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Mortgage Corp.
Head or principal office	Vancouver, Canada
BMO Investments Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Investments Limited
Head or principal office	Hamilton, Bermuda
BMO Reinsurance Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Reinsurance Limited
Head or principal office	St. Michaels, Barbados
BMO Nesbitt Burns Holdings Corporation [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Nesbitt Burns Holdings Corporation
Head or principal office	Toronto, Canada
BMO Nesbitt Burns Inc. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Nesbitt Burns Inc.
Head or principal office	Toronto, Canada
BMO Investments Inc. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Investments Inc.
Head or principal office	Toronto, Canada
BMO InvestorLine Inc. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO InvestorLine Inc.
Head or principal office	Toronto, Canada
Bank of Montreal Ireland plc [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	Bank of Montreal Ireland plc
Head or principal office	Dublin, Ireland
Book value of shares owned by the bank	$ 1,022
BMO Financial Corp. and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Financial Corp. and subsidiaries
Head or principal office	Chicago, United States
Book value of shares owned by the bank	$ 21,893
BMO Asset Management Corp. and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Asset Management Corp. and subsidiaries
Head or principal office	Chicago, United States
BMO Capital Markets Corp. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Capital Markets Corp.
Head or principal office	New York, United States
BMO Harris Bank National Association and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Harris Bank National Association and subsidiaries
Head or principal office	Chicago, United States
BMO Harris Investment Company LLC [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Harris Investment Company LLC
Head or principal office	Las Vegas, United States
BMO Harris Financial Advisors, Inc. [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Harris Financial Advisors, Inc.
Head or principal office	Chicago, United States
BMO Harris Financing, Inc. and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Harris Financing, Inc. and subsidiaries
Head or principal office	Chicago, United States
CTC my CFO, LLC [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	CTC myCFO, LLC
Head or principal office	Palo Alto, United States
BMO Global Asset Management (Europe) Limited and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Global Asset Management (Europe) Limited and subsidiaries
Head or principal office	London, England
Book value of shares owned by the bank	$ 692
BMO Asset Management (Holdings) plc and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Asset Management (Holdings) plc and subsidiaries
Head or principal office	London, England
BMO Life Insurance Company and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Life Insurance Company and subsidiaries
Head or principal office	Toronto, Canada
Book value of shares owned by the bank	$ 1,195
BMO Life Holdings (Canada), ULC [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Life Holdings (Canada), ULC
Head or principal office	Halifax, Canada
BMO Life Assurance Company [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Life Assurance Company
Head or principal office	Toronto, Canada
BMO Trust Company [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Trust Company
Head or principal office	Toronto, Canada
Book value of shares owned by the bank	$ 768
BMO Trustee Asia Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Trustee Asia Limited
Head or principal office	Hong Kong, China
Book value of shares owned by the bank	$ 2
LGM (Bermuda) Limited and subsidiaries [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	LGM (Bermuda) Limited and subsidiaries
Head or principal office	Hamilton, Bermuda
Book value of shares owned by the bank	$ 147
BMO Global Asset Management (Asia) Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	BMO Global Asset Management (Asia) Limited
Head or principal office	Hong Kong, China
LGM Investments Limited [member]
Disclosure of subsidiaries [line items]
Significant subsidiaries	LGM Investments Limited
Head or principal office	London, England

XML

Significant Subsidiaries - Summary of Significant Operating Subsidiaries (Parenthetical) (Detail)	12 Months Ended
	Oct. 31, 2018
Disclosure of subsidiaries [abstract]
Voting rights held in subsidiaries	100.00%

XML

Related Party Transactions - Summary of Compensation of Key Management Personnel (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017	Oct. 31, 2016
Disclosure of amounts incurred by entity for provision of key management personnel services provided by separate management entities [abstract]
Base salary and incentives	$ 21	$ 23	$ 22
Post-employment benefits	2	1	2
Share-based payments	31	38	32
Total key management personnel compensation	$ 54	$ 62	$ 56

XML

Related Party Transactions - Additional Information (Detail) - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of transactions between related parties [line items]
Percentage of investment in joint venture	50.00%
Investments in joint ventures	$ 231	$ 182
Investments in associates	471	444
Key management personnel directors and their close family members [member]
Disclosure of transactions between related parties [line items]
Loans to related party	$ 16	$ 10

XML

Related Party Transactions - Summary of Transaction With Joint Ventures and Associates (Detail) - Associates and joint ventures [member] - CAD ($) $ in Millions	12 Months Ended
	Oct. 31, 2018	Oct. 31, 2017
Disclosure of transactions between related parties [line items]
Loans	$ 195	$ 178
Deposits	114	132
Fees paid for services received	$ 71	$ 66

XML

Transition to IFRS 9 - Summary of Pre-transition IAS 39 and Corresponding IFRS 9 classification and measurement categories, and reconciles Carrying Amounts for Loans, Securities and Other Financial Assets (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Nov. 01, 2017	Oct. 31, 2017	Oct. 31, 2016
Disclosure of financial assets to which overlay approach is applied [line items]
Securities	$ 180,935		$ 163,198
Consumer instalment and other	63,225		61,944
Credit cards	8,329		8,071
Business and government	194,456		175,067
Total Loans	385,630		360,340
Allowance for credit losses	(1,639)		(1,833)
Net amount of loans	383,991		358,507
Remaining financial assets	73,624		73,739
Total after-tax Accumulated Other Comprehensive Income	2,302		3,066
Total after-tax Retained Earnings	25,856		23,709
Total after-tax Shareholders' Equity	45,727		$ 44,354	$ 42,328
Financial assets at fair value through profit or loss [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Business and government	$ 1,450
IAS 39 [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		$ 163,198
Total Loans		360,340
Allowance for credit losses		(1,833)
Net amount of loans		358,507
Remaining financial assets		127,706
Allowance for credit losses on off-balancesheet exposures		163
Total after-tax Accumulated Other Comprehensive Income		3,066
Total after-tax Retained Earnings		23,709
Total after-tax Shareholders' Equity		44,354
IAS 39 [member] | Trading securities [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		99,069
IAS 39 [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		54,075
IAS 39 [member] | Held-to-maturity investments, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		9,094
IAS 39 [member] | Other measurement category [Member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		960
IAS 39 [member] | Financial assets at amortised cost, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Residential mortgages		115,258
Consumer instalment and other		61,944
Credit cards		8,071
Business and government		175,067
IFRS9 [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		163,196
Total Loans		360,340
Allowance for credit losses		(1,679)
Net amount of loans		358,661
Remaining financial assets		127,700
Allowance for credit losses on off-balancesheet exposures		239
Total after-tax Accumulated Other Comprehensive Income		3,011
Total after-tax Retained Earnings		23,808
Total after-tax Shareholders' Equity		44,398
IFRS9 [member] | Trading securities [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		90,535
IFRS9 [member] | Fair value through profit or loss category one [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		8,534
IFRS9 [member] | Financial assets at fair value through other comprehensive income, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		51,909
IFRS9 [member] | Fair value through profit or loss category two [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		2,081
IFRS9 [member] | Amortized cost [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		85
IFRS9 [member] | Held-to-maturity investments, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		9,092
IFRS9 [member] | Other measurement category [Member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		627
IFRS9 [member] | Fair value through profit or loss category three [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		333
IFRS9 [member] | Financial assets at amortised cost, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		9,177
Residential mortgages		115,258
Consumer instalment and other		61,944
Credit cards		8,071
Business and government		172,695
IFRS9 [member] | Financial assets at fair value through profit or loss [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		10,948
Business and government		2,372
Reclassification [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Total after-tax Accumulated Other Comprehensive Income		(55)
Total after-tax Retained Earnings		55
Reclassification [member] | Trading securities [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		(8,534)
Reclassification [member] | Fair value through profit or loss category one [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		8,534
Reclassification [member] | Financial assets available-for-sale, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		(54,075)
Reclassification [member] | Financial assets at fair value through other comprehensive income, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		51,909
Reclassification [member] | Fair value through profit or loss category two [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		2,081
Reclassification [member] | Amortized cost [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		85
Reclassification [member] | Other measurement category [Member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		(333)
Reclassification [member] | Fair value through profit or loss category three [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		333
Reclassification [member] | Financial assets at amortised cost, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Business and government		(2,372)
Reclassification [member] | Financial assets at fair value through profit or loss [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Business and government		2,372
Remeasurement [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		(2)
Allowance for credit losses		154
Net amount of loans		154
Remaining financial assets		(6)
Allowance for credit losses on off-balancesheet exposures		76
Total pre-tax impact of IFRS 9 adoption		70
Total after-tax Retained Earnings		44
Total after-tax Shareholders' Equity		44
Remeasurement [member] | Held-to-maturity investments, category [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Securities		$ (2)

XML

Transition to IFRS 9 - Summary of Pre-transition IAS 39 and Corresponding IFRS 9 classification and measurement categories, and reconciles Carrying Amounts for Loans, Securities and Other Financial Assets (Parenthetical) (Detail) $ in Millions	Nov. 01, 2017 CAD ($)
Reclassification [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Pre tax impact on retained earnings	$ 105
Remeasurement [member]
Disclosure of financial assets to which overlay approach is applied [line items]
Pre tax impact on retained earnings	$ 70

XML

Transition to IFRS 9 - Summary of Classification of Securities (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Nov. 01, 2017	Oct. 31, 2017
Disclosure of financial assets [line items]
Securities	$ 180,935		$ 163,198
IFRS9 [member]
Disclosure of financial assets [line items]
Securities		$ 163,196
IFRS9 [member] | Trading securities [member]
Disclosure of financial assets [line items]
Securities		90,535
IFRS9 [member] | Financial assets at fair value through profit or loss [member]
Disclosure of financial assets [line items]
Securities		10,948
IFRS9 [member] | Financial assets at fair value through other comprehensive income, category [member]
Disclosure of financial assets [line items]
Securities		51,909
IFRS9 [member] | Financial assets at amortised cost, category [member]
Disclosure of financial assets [line items]
Securities		9,177
IFRS9 [member] | Other measurement category [Member]
Disclosure of financial assets [line items]
Securities		$ 627

XML

Transition to IFRS 9 - Schedule of Impact on Transition to IFRS 9 on Allowance for Credit Loss (Detail) - CAD ($) $ in Millions	Oct. 31, 2018	Nov. 01, 2017	Oct. 31, 2017	Oct. 31, 2016
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses	$ 1,870		$ 1,996	$ 2,114
Residential mortgages [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses			118	130
Business and government loans [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses			1,155	$ 1,265
IAS 39 [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		$ 1,576
IAS 39 [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		420
IAS 39 [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,996
IAS 39 [member] | Residential mortgages [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		69
IAS 39 [member] | Residential mortgages [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		24
IAS 39 [member] | Residential mortgages [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		93
IAS 39 [member] | Consumer installment and other personal [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		343
IAS 39 [member] | Consumer installment and other personal [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		136
IAS 39 [member] | Consumer installment and other personal [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		479
IAS 39 [member] | Credit Card [Member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		243
IAS 39 [member] | Credit Card [Member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		243
IAS 39 [member] | Business and government loans [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		785
IAS 39 [member] | Business and government loans [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		233
IAS 39 [member] | Business and government loans [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,018
IAS 39 [member] | Allowance for credit losses related to loans [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,440
IAS 39 [member] | Allowance for credit losses related to loans [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		393
IAS 39 [member] | Allowance for credit losses related to loans [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,833
IAS 39 [member] | Allowance for off balance sheet positions [member] | Collective Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		136
IAS 39 [member] | Allowance for off balance sheet positions [member] | Specific Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		27
IAS 39 [member] | Allowance for off balance sheet positions [member] | Allowance [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		163
Remeasurement [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		(70)
Remeasurement [member] | Residential mortgages [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		(20)
Remeasurement [member] | Consumer installment and other personal [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		71
Remeasurement [member] | Credit Card [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		41
Remeasurement [member] | Business and government loans [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		(246)
Remeasurement [member] | Allowance for credit losses related to loans [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		(154)
Remeasurement [member] | Allowance for remaining financial assets [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		8
Remeasurement [member] | Allowance for off balance sheet positions [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		76
IFRS9 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses	1,870	1,926
IFRS9 [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		450
IFRS9 [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,056
IFRS9 [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		420
IFRS9 [member] | Residential mortgages [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses	102	73	99
IFRS9 [member] | Residential mortgages [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		16
IFRS9 [member] | Residential mortgages [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		33
IFRS9 [member] | Residential mortgages [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		24
IFRS9 [member] | Consumer installment and other personal [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		550
IFRS9 [member] | Consumer installment and other personal [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		70
IFRS9 [member] | Consumer installment and other personal [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		344
IFRS9 [member] | Consumer installment and other personal [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		136
IFRS9 [member] | Credit Card [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		284
IFRS9 [member] | Credit Card [Member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		63
IFRS9 [member] | Credit Card [Member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		221
IFRS9 [member] | Business and government loans [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses	$ 915	772	$ 912
IFRS9 [member] | Business and government loans [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		205
IFRS9 [member] | Business and government loans [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		334
IFRS9 [member] | Business and government loans [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		233
IFRS9 [member] | Allowance for credit losses related to loans [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1,679
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		354
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		932
IFRS9 [member] | Allowance for credit losses related to loans [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		393
IFRS9 [member] | Allowance for remaining financial assets [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		8
IFRS9 [member] | Allowance for remaining financial assets [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		7
IFRS9 [member] | Allowance for remaining financial assets [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		1
IFRS9 [member] | Allowance for off balance sheet positions [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		239
IFRS9 [member] | Allowance for off balance sheet positions [member] | Stage 1 [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		89
IFRS9 [member] | Allowance for off balance sheet positions [member] | Stage 2 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		123
IFRS9 [member] | Allowance for off balance sheet positions [member] | Stage 3 [Member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Allowance for credit losses		$ 27

XML

Transition to IFRS 9 - Additional Information (Detail)	12 Months Ended
	Oct. 31, 2018
Bottom of range [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Proportion of voting rights held in associate	20.00%
Top of range [member]
Disclosure of expected impact of initial application of new standards or interpretations [line items]
Proportion of voting rights held in associate	50.00%