Investor Presentaiton
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Glossary
Credit Risk Parameters
Exposure at Default (EAD)
Probability of Default (PD)
Loss Given Default (LGD)
Generally represents the expected gross exposures at default and includes outstanding amounts for on-balance sheet exposures and loan equivalent amounts for off-balance sheet
exposures.
Measures the likelihood that a borrower will default within a 1-year time horizon, expressed as a percentage.
Measures the severity of loss on a facility in the event of a borrower's default, expressed as a percentage of exposure at default.
Exposure Types
Non-retail
Corporate
Bank
Sovereign
Securitization
Debt obligation of a corporation, partnership, or proprietorship.
Debt obligation of a bank or bank equivalent (including certain public sector entities (PSES) treated as Bank equivalent exposures).
Debt obligation of a sovereign, central bank, certain Multilateral Development Banks (MDBs) and certain PSEs treated as Sovereign.
On-balance sheet investments in asset backed securities (ABS), mortgage backed securities (MBS), collateralized loan obligations (CLOs) and collateralized debt obligations (CDOS).
Off-balance sheet liquidity lines include credit enhancements to Bank's sponsored ABCP conduits and liquidity lines to non-bank sponsored ABCP conduits.
Retail
Real Estate Secured
Residential Mortgages
Secured Lines Of Credit
Qualifying Revolving Retail Exposures (QRRE)
Other Retail
Exposure Sub-types
Drawn
Undrawn
Repo-Style Transactions
Over-the-counter (OTC) Derivatives
Exchange-traded derivatives (ETD)
Other Off-Balance Sheet
Qualifying central counterparty (QCCP)
Non-qualifying central counterparties (NQCCP)
Loans to individuals against residential property (four units or less).
Revolving personal lines of credit secured by first charge on residential real estate.
Credit cards and unsecured line of credit for individuals.
All other personal loans, including Small Business Enterprise treated as Other Retail under regulatory disclosure requirements.
Outstanding amounts for loans, leases, acceptances, deposits with banks and available-for-sale debt securities.
Unutilized portion of an authorized credit line.
Reverse repurchase agreements (reverse repos) and repurchase agreements (repos), securities lending and borrowing.
Over-the-counter derivatives contracts.
Derivative contracts (e.g. futures contracts and options) that are transacted on an organized futures exchange. These include Futures contracts (both Long and Short positions),
Purchased Options and Written Options.
Direct credit substitutes such as standby letters of credits and guarantees, trade letters of credits, and performance letters of credits and guarantees.
A qualifying central counterparty (QCCP) is licensed as a central counterparty and is also considered as "qualifying" when it is compliant with CPSS-IOSCO standards and is able to
assist clearing member banks in properly capitalizing for CCP exposures by either undertaking the calculations and/or making available sufficient information to its clearing members,
or others, to enable the completion of capital calculations.
Defined as those central counterparties which are not compliant with CPSS-IOSCO standards as outlined under qualifying CCP's. The exposures to NQCCP will follow standardized
treatment under the Basel accord.
Other
Asset Value Correlation Multiplier (AVC)
Regulatory Capital Floor
Specific Wrong-Way Risk (WWR)
Credit Valuation Adjustment (CVA)
Basel III has increased the risk-weights on exposures to certain Financial Institutions (FIs) relative to the non-financial corporate sector by introducing an Asset Value Correlation
multiplier (AVC). The correlation factor in the risk-weight formula is multiplied by this AVC factor of 1.25 for all exposures to regulated Fls whose total assets are greater than or
equal to US $100 billion and all exposures to unregulated Fls.
Since the introduction of Basel II in 2008, OSFI has prescribed a minimum regulatory capital floor for institutions that use the advanced internal ratings-based approach for credit risk.
Effective Q2 2023, the capital floor add-on is determined under the Revised Basel III Framework by comparing RWA generated for IRB and standardized portfolios to RWA calculated
under a standardized approach at the required capital floor calibration. A shortfall to the capital floor RWA requirement is added to the Bank's RWA.
Specific Wrong-Way Risk arises when the exposure to a particular counterparty is positively correlated with the probability of default of the counterparty due to the nature of the
transactions with the counterparty.
Credit Valuation Adjustment (CVA) is the difference between the risk free value of a portfolio and the true value of that portfolio, accounting for the possible default of a
counterparty. CVA adjustment aims to identify the impact of Counterparty Risk.
Scotiabank
Supplementary Regulatory Capital Disclosure
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