LIQUIDITY MANAGEMENT
Highlights of 2021
• Maintained a prudent liquidity position and conservative investment profile.
• Higher balances of cash and securities at October 31, 2021 reflect incremental liquidity to fund capital market maturities and held against higher deposit balances, consistent with our conservative risk appetite.
We maintain a conservative liquid asset profile. Our cash and securities portfolio is comprised of high-quality debt instruments, primarily issued or guaranteed by federal (Canada or United States), provincial or municipal governments, and short-term money market instruments. A schedule outlining our securities portfolio at October 31, 2021 is provided in Note 5 of the consolidated financial statements. For additional information on the governance and risk management related to liquidity and funding risk, refer to the Liquidity and Funding Risk section of our MD&A.
Table 17 - Liquid Assets ($ thousands)
2021
2020 Change from 2020
Cash and non-interest bearing deposits with financial institutions
$
87,853
$
113,868
$
(26,015)
Interest bearing deposits with regulated financial institutions
21,344
254,451
(233,107)
Cheques and other items in transit
19,262
-
19,262
128,459
368,319
(239,860)
Government of Canada, provincial and municipal debt, term to maturity one year or less
90,435
1,077,517
(987,082)
Government of Canada, provincial and municipal debt, term to maturity more than one year
3,278,563
1,207,865
2,070,698
NHA mortgage-backed securities (1)
499,908
577,449
(77,541)
Other debt securities
198,799
377,244
(178,445)
Securities purchased (sold) under resale agreements
30,048
(15,114)
45,162
4,097,753
3,224,961
872,792
Total Liquid Assets
$
4,226,212
$
3,593,280
$
632,932
Total Assets
$ 37,323,176
$ 33,937,865
$
3,385,311
Liquid Assets as a Percentage of Total Assets
11 %
11 %
- %
Total Cash and Securities
$
3,726,304
$
3,083,021
$
643,283
Cash and Securities as a Percentage of Total Assets
10 %
9 %
1 %
Total Deposit Liabilities
$ 29,975,739
$ 27,310,354
$
2,665,385
Liquid Assets as a Percentage of Total Deposit Liabilities
14 %
13 %
1 %
(1) Includes securitized mortgages that were not transferred to third parties. These are reported in loans at amortized cost on the consolidated balance sheets.
The composition of total liquid assets supports ongoing compliance with the OSFI Liquidity Adequacy Requirements (LAR) guideline. Liquid assets, as defined by OSFI, comprised of cash, deposits, securities purchased (sold) under resale agreements and marketable debt securities, totaled $4.2 billion at October 31, 2021 (October 31, 2020 – $3.6 billion). Liquid assets represented 11% of total assets, consistent with last year, and 14% (October 31, 2020 – 13%) of total deposit liabilities at year end. Our liquidity management is based on an internal stressed cash flow model, with the level of cash and securities driven primarily by the term structure of both assets and liabilities, and the liquidity structure of liabilities. In the prior year, we adopted the final version of Guideline B-6: Liquidity Principles (Guideline B-6), which complements the LAR guideline and sets out OSFI's expectations for how deposit-taking institutions should manage liquidity risk, with no significant impact on our liquidity management. In fiscal 2021, we maintained higher levels of cash and securities due to incremental liquidity to fund capital market maturities and held against higher deposit balances, consistent with our conservative risk appetite.
Other key elements of the composition of liquid assets at October 31, 2021 compared to the prior year include:
• Maturities within one year comprise 8% (October 31, 2020 – 50%), with the decline from the prior year in response to changes in market interest rates; • Government of Canada, provincial and municipal debt securities and unencumbered NHA MBS comprise 92% (October 31, 2020 – 80%); • Cash and deposits with regulated financial institutions comprise 3% (October 31, 2020 – 10%); and, • Other marketable securities and securities purchased (sold) under resale agreements comprise 5% (October 31, 2020 – 10%).
36 | CWB Financial Group 2021 Annual Report
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