CWBFG Annual Report 2021

8. FINANCIAL ASSETS TRANSFERRED BUT NOT DERECOGNIZED SECURITIZATION OF EQUIPMENT FINANCING LEASES AND LOANS

We securitize equipment financing leases and loans to third parties. These securitizations do not qualify for derecognition as we continue to be exposed to certain risks associated with the leases and loans, therefore we have not transferred substantially all of the risk and rewards of ownership. As the leases and loans do not qualify for derecognition, the assets are not removed from the consolidated balance sheets and a securitization liability is recognized within debt related to securitization activities for the cash proceeds received (see Note 15).

During 2021, we securitized equipment financing leases and loans of $1,071,280 (2020 – $1,253,266), which were sold to third parties for cash proceeds of $962,718 (2020 – $1,115,814).

SECURITIZATION OF RESIDENTIAL MORTGAGES We securitize fully insured residential mortgage loans through the creation of mortgage-backed securities under the National Housing Act Mortgage Backed Securities (NHA MBS) program sponsored by the Canada Mortgage and Housing Corporation (CMHC). The mortgage-backed securities are sold directly to third party investors, sold to the Canada Housing Trust (CHT) as part of the Canada Mortgage Bond (CMB) program or are held by us. The CHT issues CMBs, which are government guaranteed, to third party investors and uses resulting proceeds to purchase NHA MBS from us and other mortgage issuers in the Canadian market. The third party sale of the mortgage pools that comprise the NHA MBS does not qualify for derecognition as we retain the credit and interest rate risks associated with the mortgages, which represent substantially all of the risks and rewards associated with the transferred assets. As a result, the mortgages remain on the consolidated balance sheets as personal loans and are carried at amortized cost. Cash proceeds from the third party sale of the mortgage pools, including those sold as part of the CMB program, are recognized within debt related to securitization activities (see Note 15).

During 2021, we securitized residential mortgages of $483,099 (2020 – $208,305) which were sold to the CHT for cash proceeds of $478,254 (2020 – $207,005).

SECURITIES SOLD UNDER REPURCHASE AGREEMENTS We enter into repurchase agreements under which we sell previously recognized securities, with a simultaneous agreement to purchase them back at a specific price on a future date, but retain substantially all of the credit, price, interest rate, and foreign exchange risks and rewards associated with the assets (see Note 6). These securities are not derecognized and the cash proceeds from the sale are recognized within other liabilities on the consolidated balance sheets.

Details about the nature of transferred financial assets that do not qualify for derecognition and the associated liabilities are as follows:

As at October 31, 2021

As at October 31, 2020

Carrying Value

Fair Value

Transferred Assets that do not Qualify for Derecognition Securitized leases and loans

1,926,944 $

1,928,736 $

1,677,515 $

1,710,730

Securitized residential mortgages

880,647

870,493

515,540

522,051

Securities sold under repurchase agreements

65,198

2,807,591 2,641,843

2,799,229 2,656,176

2,258,253 2,116,878

2,297,979 2,148,860

Associated Liabilities (1)

Net Position

165,748 $

143,053

141,375 $

149,119

(1) Associated liabilities consist of $1,756,210 related to securitized lease and loans (2020 – $1,528,662) and $885,633 related to residential mortgages securitized through the NHA MBS program (2020 – $523,018). There are no liabilities related to securities sold under repurchase agreements (2020 – $65,198).

Additionally, we have securitized residential mortgages through the NHA MBS program totaling $499,908 with a fair value of $494,144 (2020 – $577,449 with a fair value of $584,743) that were not transferred to third parties.

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