Glossary of Financial Terms
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Taxable Equivalent Basis (teb)
Revenues of operating groups reflected in our MD&A are presented on a taxable equivalent basis (teb). The teb adjustment increases GAAP revenues and the provision for income taxes by an amount that would increase revenues on certain tax-exempt securities to a level that would incur tax at the statutory rate, to facilitate comparisons.
See Revenue in the 2008 Financial Performance Review (PDF 404 KB) section of the MD&A.
Tier 1 Capital
Tier 1 Capital represents more permanent forms of capital, and primarily consists of common shareholders’ equity, preferred shares and innovative hybrid instruments, less a deduction for goodwill and excess intangible assets and certain other deductions required under Basel II.
See Enterprise-Wide Capital Management in the Financial Condition Review (PDF 363 KB) section of the MD&A and Note 22 (PDF 56 KB).
Tier 1 Capital Ratio
Tier 1 Capital Ratio is defined as Tier 1 capital divided by risk-weighted assets.
See Enterprise-Wide Capital Management in the Financial Condition Review (PDF 363 KB) section of the MD&A and Note 22 (PDF 56 KB).
Total Capital
Total Capital includes Tier 1 and Tier 2 capital, net of certain deductions. Tier 2 capital is primarily comprised of subordinated debentures and the eligible portion of the general allowance for credit losses. Deductions from Tier 2 capital are primarily comprised of our investments in non-consolidated subsidiaries and other substantial investments.
See Enterprise-Wide Capital Management in the Financial Condition Review (PDF 363 KB) section of the MD&A and Note 22 (PDF 56 KB).
Total Capital Ratio
Total Capital Ratio is defined as total capital divided by risk-weighted assets.
See Enterprise-Wide Capital Management in the Financial Condition Review (PDF 363 KB) section of the MD&A and Note 22 (PDF 56 KB).
Total Shareholder Return (TSR)
The 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 five-year period. The return includes the change in share price and assumes that dividends received were reinvested in additional common shares. The one-year TSR also assumes that dividends were reinvested in shares.
See Total Shareholder Return in the Value Measures (PDF 222 KB) section of the MD&A.
Trading-Related Revenues
Trading-Related Revenues include net interest income and non-interest revenue earned from on 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 revenues include income (expense) and gains (losses) from both on-balance sheet instruments and off-balance sheet interest rate, foreign exchange (including spot positions), equity, commodity and credit contracts.
See Trading-Related Revenues in the 2008 Financial Performance Review (PDF 404 KB) section of the MD&A.
Value at Risk (VaR)
Value at Risk (VaR) is measured for specific classes of risk in BMO’s trading and underwriting activities: interest rate, foreign exchange rate, equity and commodity prices and their implied volatilities. This measure calculates the maximum likely loss from portfolios, measured at a 99% confidence level over a specified holding period.
See Market Risk in the Enterprise-Wide Risk Management (PDF 829 KB) section of the MD&A.
Variable Interest Entities (VIEs)
Variable Interest Entities (VIEs) include entities with equity that is considered insufficient to finance the entity’s activities or in which the equity holders do not have a controlling financial interest. We are required to consolidate VIEs if the investments we hold in these entities and/or the relationships we have with them result in us being exposed to the majority of their expected losses, being able to benefit from a majority of their expected residual returns, or both, based on a calculation determined by standard setters.
See Accounting for Variable Interest Entities in the Accounting Matters and Disclosure and Internal Control (PDF 83 KB) section of the MD&A.
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