Annual Report
2021
This year we introduced a new brand
that symbolizes our purpose and
refects our commitment to our clients
and their ambitions. These changes
include our bold and modern new logo
that represents the transformative role
we play in helping clients achieve their
goals. It’s a fresh take on our frst logo,
which was crafted in 1966 to celebrate
Canada’s centennial anniversary.
It embraces our rich history while
moving us further into the future.
CIBC’s purpose is
to help make your
ambition a reality
Who we are
CIBC is a leading North American fnancial institution committed to creating enduring value
for all our stakeholders — our clients, team, communities and shareholders. We are guided
by our purpose — to help make your ambition a reality, and our focus on creating a more
secure, equitable and sustainable future through our environmental, social and governance
(ESG) principles.
Across Personal and Business Banking, Commercial Banking and Wealth Management, and
Capital Markets businesses, our 45,000 employees provide a full range of fnancial products
and services to 11 million personal banking, business, public sector and institutional clients in
Canada, the U.S. and around the world.
Our strategy
In 2021, we continued to focus on building a modern, relationship-oriented bank. Through
these eforts, we’re delivering superior client experience and top-tier shareholder returns
while maintaining our fnancial strength, risk discipline and advancing our purpose-driven
culture. Foundational to our progress is a consistent focus on three strategic priorities:
1. Further strengthening our Canadian consumer franchise
2. Maintaining and growing our resilient North American Commercial Banking,
Wealth Management, and Capital Markets businesses
3. Accelerating ongoing investments in growth initiatives
$6.4B
$6.7B
$68B
Reported net income
Adjusted net income(1)
Market capitalization
Table of contents
12.4%
Basel III CET1 ratio(2)
11M
Clients
62.6
Client experience
2021 CIBC Enterprise Net
Promoter Score
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP
measures” section of the management’s discussion and analysis (MD&A).
(2) Calculated pursuant to Ofce of the Superintendent of Financial Institutions (OSFI) Capital
Adequacy Requirements (CAR) Guideline, which is based on Basel Committee on Banking
Supervision (BCBS) standards.
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ii
iii
iv
2021 performance at a glance
ESG strategy
2021 ESG performance highlights
Client experience
Message from the President
and Chief Executive Ofcer
Message from the
Chair of the Board
Enhanced Disclosure Task Force
Management’s discussion
1
and analysis
Consolidated fnancial statements 107
Notes to the consolidated
fnancial statements
Quarterly review
Ten-year statistical review
Shareholder information
122
198
200
203
ix
x
Business mix (% reported net income)
2021
business
mix
39%
Canadian
Personal and
Business Banking
26%
Canadian
Commercial
Banking
and Wealth
Management
14%
U.S. Commercial
Banking
and Wealth
Management
29%
Capital Markets
-8%
Corporate
and Other
2021 performance
at a glance
Reported
revenue
($ billions)
Reported earnings
per share
($)
Adjusted earnings
per share(1)
($)
Dividend
($/share)
20.0
18.6
18.7
13.93
14.47
5.82 5.84
5.60
11.19
8.22
11.92
9.69
19
20
21
19
20
21
19
20
21
19
20
21
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.
Financial highlights
For the year ended October 31 (Canadian $ in billions, except as noted)
Financial results
Revenue
Provision for credit losses
Expenses
Reported/Adjusted net income(1)
Financial measures (%)
Reported(2)/Adjusted efciency ratio(1)
Reported(2)/Adjusted return on common shareholders’ equity (ROE)(1)
Net interest margin(2)
Total shareholder return
Common share information
Reported/Adjusted earnings per share(1)
Market capitalization
Dividends (%)
Dividend yield
Reported(2)/Adjusted dividend payout ratio(1)
Net income by strategic business unit
Canadian Personal and Business Banking(3)
Canadian Commercial Banking and Wealth Management
U.S. Commercial Banking and Wealth Management(3)
Capital Markets(3)
2021
20.0
0.2
11.5
2020
18.7
2.5
11.4
6.4/6.7
3.8/4.4
57.6/55.4
16.1/16.7
60.6/55.8
10.0/11.7
1.42
58.3
1.50
(5.9)
13.93/14.47
8.22/9.69
67.7
3.9
44.4
5.9
41.8/40.3
70.7/60.0
2.5
1.7
0.9
1.9
1.8
1.2
0.4
1.3
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.
(2) For additional information on the composition of these specifed fnancial measures, see the “Glossary” section of the MD&A.
(3) Certain prior period information has been revised. For additional information, see the “External reporting changes” section of the MD&A.
Financial scorecard
Diluted earnings per share
(EPS) growth
5%–10% annually
$13.93,
up 69% from 2020
$14.47,
up 49% from 2020
Target(1)
2021 reported results
2021 adjusted results(2)
Return on equity (ROE)
Operating leverage(3)
15%+
Positive
16.1%
16.7%
5.3%,
an increase of 930 basis
points from 2020
0.7%,
an increase of 130 basis
points from 2020
Basel III CET1 ratio
Strong bufer to
regulatory minimum
12.4%
Dividend payout ratio
40%–50%
41.8%
40.3%
Total shareholder return
Outperform the
S&P/TSX Composite
Banks Index over a rolling
fve-year period
CIBC – 91.9%
Banks Index – 80.4%
(1) Based on adjusted measures. Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.
(2) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.
(3) For additional information on the composition of this specifed fnancial measure, see the “Glossary” section of the MD&A.
Our commitment to ESG
ESG strategy
Ambitions in action
We’re activating our resources to create positive change for our team, our clients, our communities and our planet,
contributing to a more secure, equitable and sustainable future where everyone’s ambitions are made real.
We are putting our ESG commitments into action by:
Building
integrity
and trust
We act with integrity
and transparency to
maintain the trust
that clients have
placed in us.
Creating
access to
opportunities
We partner to build
equitable and resilient
communities where
ambitions are more
attainable for all.
Accelerating
climate action
We support solutions to
address climate change,
to help transition to
a sustainable, lower
carbon future.
2021 Highlights
Building integrity and trust
We continue to foster CIBC’s principles-
based approach and align CIBC’s Code
of Conduct (Code) to refect changing
business conditions. We have enhanced
our Code to reinforce the importance of
information security practices, and health
and safety protocols; 100% of our team
members completed ethical training on
our Code(1).
We consistently add to the layers of
security in place to protect our clients,
including new technology such as digital
identity verifcation and voice biometrics
to prevent fraud.
Our investment in market-leading
public cloud technology will reinforce
and expand critical foundations in
data protection and security and enable
us to support faster, real-time, data-
driven decisions, to quickly launch and
scale new innovations for enhanced
client experience.
Creating access to opportunities
We remained focused on actively
supporting the growth ambitions of
business owners, with $4.8 billion in
new loan authorizations provided to
small and medium-sized enterprises(2)
in 2021, including a new banking program
designed for Black-owned businesses
that provides solutions, advice and
resources tailored to their unique
banking needs and includes access
to expert advice through our Black
Entrepreneurship Specialists team.
Over 200,000 clients participated in our
fnancial education seminars ofered at
no cost, over the past three years, helping
them better understand options to secure
their fnancial future with a focus on the
unique needs of women, members of
the LGBTQ+ community and Indigenous
peoples. We are committed to engage
250,000 clients in fnancial education
seminars and events over the next three
years (2022–2024).
Following the end of our fscal year we
announced the CIBC Foundation which
will serve our commitment to create a
more equitable society and help make
ambitions real for communities. CIBC has
made donations totalling $70 million in
2021 to launch the Foundation, with plans
to grow to $155 million over time.
Accelerating climate action
In 2021, we announced our ambition to
achieve net-zero greenhouse gas (GHG)
emissions from our operations and
fnancing activities by 2050. As part of this
goal and as a leader in fnancing renewable
energy initiatives, we also doubled our
commitment to mobilizing sustainable
fnance to a target of $300 billion by
2030(3) as we play a role in accelerating
the transition to a lower-carbon economy.
In addition, we joined sustainability-
focused industry partnerships, advisory
bodies and research groups to contribute
to market-led and public policy solutions
to facilitate the transition to a low-carbon
economy. In 2021, these included the
Net-Zero Banking Alliance to collaborate
on a global efort to combat climate
change, the Partnership for Carbon
Accounting Financials, an initiative
developed by the fnancial industry to
create a global standard to measure
and disclose GHG emissions on loans
and investments, as well as Canada’s
Sustainable Finance Action Council, the
Institute for Sustainable Finance, the
Rocky Mountain Institute’s Center for
Climate-Aligned Finance and Climate
Engagement Canada.
As strong believers in the value of
commercially viable sustainability
solutions, we joined with global banks to
launch Project Carbon aimed at bringing
liquidity and transparency to the carbon
credit market, better enabling clients to
achieve their net-zero targets.
(1) Excludes the U.S. Commercial Banking and Wealth Management strategic business unit and FirstCaribbean International Bank Limited.
(2) Small-sized enterprises are typically companies with revenue of less than $5 million and medium-sized enterprises are typically companies with
revenue of more than $5 million but less than $20 million.
(3) Sustainable fnancing largely relates to client activities that support, but are not limited to, renewable and emission-free energy, energy efciency,
sustainable infrastructure, afordable housing, green buildings, sustainability-linked fnancings and green fnancial products. The products ofered by
CIBC included in our mobilization commitment to support these client activities include loans and loan syndications, debt and equity underwritings,
M&A advisory and hedging solutions, as well as principal investments.
CIBC 2021 ANNUAL REPORT
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Our commitment to ESG
2021 ESG performance highlights
In 2021, we built on our long-standing commitment to ESG as a cornerstone
of how we operate and create value for our stakeholders.
Top 10
in fnancing for the renewable energy
industry across North America(1)
$4.8B
in new loan authorizations to
small and medium-sized enterprises
(Canada)(2)
38%
women in board-approved
executive roles (Global)
89%
Our employee engagement score
exceeded the Willis Towers Watson
Global Financial Services Norm(3)
$132.7M
23%
invested in community organizations
across Canada and the U.S.(4)
visible minorities in board-approved
executive roles (Canada)
Ranked A-
100%
among the top-tier of global banks for
climate actions by CDP
of employees completed CIBC ethical
training on our Code of Conduct(5)
Underwriting bank and coordinating
lead arranger for the Western Spirit
Wind power projects, sponsored
by Pattern Energy, the largest single-
phase renewable power build out
in U.S. history
(1) North American Renewables League Tables by Inframation.
(2) New loan authorizations in 2021 to small and medium-sized enterprises were comprised of $0.8 billion to small-sized enterprises and $4.0 billion to
medium-sized enterprises.
(3) Based on participation in our annual employee survey. Excludes FirstCaribbean International Bank Limited.
(4) Includes corporate giving, including $70 million to CIBC Foundation, corporate sponsorships and employee giving and fundraising.
(5) Excludes the U.S. Commercial Banking and Wealth Management strategic business unit and FirstCaribbean International Bank Limited.
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CIBC 2021 ANNUAL REPORT
Our commitment to ESG
Client experience
Our clients are important stakeholders in our bank. Helping to make their ambitions a reality
is our shared purpose, and requires an investment in our team to ensure they have the tools and
technology to help our clients plan for the future and achieve their goals.
In 2021, our clients felt our commitment more than ever, as we demonstrated genuine care through
the ongoing pandemic. Our team acted with integrity, transparency and agility to ensure our clients
felt confdent in trusting us with their banking during uncertain times.
• Our bank delivered the best year-over-year performance
among its peers in our Net Promoter Score measured by
the Ipsos Customer Satisfaction Index study. Our internal
CIBC Enterprise Net Promoter Score (CX NPS) is a balanced
weighting of internal net promoter scores from across our
businesses. As of October 31, 2021, the CX NPS was 62.6.
This represents a marginal (0.2 point) decrease from 2020
due to the inclusion of survey programs that were added to
better refect our clients’ experience across CIBC.
• We delivered further digital enhancements to our clients,
enabling clients to stay connected to their fnances and leverage
insights into their spending to help keep their ambitions on
track. Our clients now have access to innovative enhancements
and value-added digital services like CIBC Insights, Virtual
Assistant, and Digital Identity Verifcation for our Mobile
Banking® App, which was ranked #1 in overall customer
satisfaction by J.D. Power for the second year in a row.
• Financial planning and advice remains a core focus.
Increasingly, clients are looking to the future and refocusing
on their long-term ambitions. Tools like CIBC GoalPlanner™,
a digitally enabled goal-setting platform, allow our Imperial
Service advisors to better understand our clients’ ambitions,
which has led to signifcantly higher client satisfaction among
those clients who used the platform with their fnancial advisor.
• In an increasingly digital world, trust is essential. We continued
to proactively invest in our cybersecurity defences and risk
management practices to protect our clients’ data and ensure
secure banking experiences.
Our purpose-driven culture is refected in feedback from our clients
Louis and Johnny from CIBC have
been extremely attentive to my
needs as I’ve pursued my goal
of opening this practice. During
challenging economic times, they
were willing to listen to my story.
They believe in what I’m doing for
my community.”
Dr. Jason Adinata
416 Dentistry
Things happened that I didn’t see
coming, and I got into debt. CIBC
called me and ofered guidance and
help. I started to dig myself out of
this hole — and now I have savings.
I turned my life around.”
Maya Cabello
It means a lot to help communities
devastated by storms. We feel
a sense of responsibility, knowing
that our business supports
livelihoods in our own community.
As our business has grown and our
fnancial needs have gotten more
complex, it’s great knowing CIBC
is on our team.”
Tim Noble and Barrie Hall
T&T Line Construction
CIBC 2021 ANNUAL REPORT
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Message from the
President and Chief Executive Ofcer
Our CIBC Team will be the catalyst for
accelerated growth as we carry our
momentum into the years ahead. As we do,
what will unite us every day is our purpose —
to help make our clients’ ambitions a reality.“
Victor G. Dodig President and Chief Executive Ofcer
In a year marked by the ongoing COVID-19 pandemic and
resulting economic uncertainty, and vital conversations about
inclusion and climate change, our CIBC team of 45,000-strong
stepped up once again to provide leadership for our stakeholders.
Our accomplishments this year and our ambitions for the future
are made possible by our tremendous team across North America
and around the world. Their professionalism and dedication are
the foundation for everything we have accomplished.
Our bank was there for our clients and for our communities
in 2021. We invested in the tools available to our advisory
team to help make our clients’ ambitions a reality. We joined
the Net-Zero Banking Alliance, and furthered our commitment
to sustainable fnancing for innovative solutions that enable
clients to meet their own sustainability goals. And just after
year end, we announced the launch of our new charitable
foundation that will help build social and economic equality
for underserved communities.
We also delivered for shareholders, with strong growth driven
by our execution against the priorities of our client-focused
strategy, and fuelled by the investments we’ve made in our
culture and our capabilities.
Having established clear momentum in our business, we set
out as a team to write the next chapter in the history of our bank,
as we ofcially launched our new brand near the end of the year.
Our new look connects our proud past to the present and the
future, and is a symbol of our purpose.
Our CIBC Team will be the catalyst for accelerated growth as
we carry our momentum into the years ahead. As we do, what
will unite us every day is our purpose — to help make our clients’
ambitions a reality.
Business performance
Our bank reported earnings in 2021 of $6.4 billion or $6.7 billion
on an adjusted basis(1), up 70% and 50% from last year, respectively.
These results were delivered through strong top-line performance
driven by market share gains achieved by attracting new clients
and deepening existing relationships across our bank. Our
capital position remained very strong, with a CET1 ratio of 12.4%,
underscoring the strength of our bank.
In 2021, we established three clear priorities to grow our
business. The frst was to rejuvenate our Canadian consumer
franchise, the second was to maintain and grow our resilient
North American Commercial Banking, Wealth Management,
and Capital Markets businesses, and the third was to accelerate
our ongoing investments in growth initiatives into the future.
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section of the MD&A.
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CIBC 2021 ANNUAL REPORT
Rejuvenating our Canadian consumer franchise
In Canadian Personal and Business Banking, we established
clear growth momentum thanks to our eforts to revitalize and
strengthen this business, and we are pleased with our market
share gains on both sides of the balance sheet. In 2021, we
launched CIBC GoalPlanner™, a digitally enabled goal-setting
platform, allowing our Imperial Service advisors to better
understand our clients’ ambitions. To date, over 224,000 clients
have used the platform, generating positive feedback and
resulting in deeper relationships as clients take advantage of the
intuitive and interactive features of the platform to set goals and
stay connected to their progress over time. Whether clients have
experienced challenges resulting from the pandemic or are on
strong footing and focused on growth, our team was there to help
with personal advice enabled by digital tools.
Our mortgage growth accelerated this year as we helped more
Canadians achieve their ambition of home ownership through
our national team of mortgage advisors and our banking centre
teams. We delivered record net fows in our mutual fund
business, refecting our ability to help clients make progress
on their long-term ambitions despite near-term challenges
presented by the pandemic.
We made signifcant progress in delivering a modern experience
for our clients, as refected in our client experience scores which
are our best on record. And, we continued to lead the market in
digital innovation for clients, winning the J.D. Power award for
best mobile banking app among the major Canadian banks for
a second consecutive year.
We continue to look to the future as we invest in the growth
of our Direct Financial Services business, which includes
Simplii Financial and our Investor’s Edge self-directed brokerage.
This business meets the needs of digital-savvy clients who prefer
self-service options to deposit, move, and invest their money.
We delivered double-digit revenue growth in this business
through a continued focus on innovation and delivering fntech-
like services to a growing client base.
We made signifcant progress in delivering a modern
experience for our clients, as refected in our client
experience scores which are our best on record.
Revenue by Business Segment
$8.15B
Canadian Personal and
Business Banking
$4.67B
$2.19B
Canadian Commercial Banking
and Wealth Management
U.S. Commercial Banking
and Wealth Management
$4.52B
Capital Markets
Victor Dodig with NatWest Group Chief Executive Ofcer, Alison Rose, at the 2021 CIBC Sustainability Conference.
CIBC 2021 ANNUAL REPORT
v
Message from the President and Chief Executive Ofcer
Our new brand is not a promise of something that
we’re going to be — it’s a statement on the bank
we’ve worked hard to become. The brand message
of Ambitions made real is brought to life by the
investments we’ve made across our bank.
Maintaining and growing our resilient North American
Commercial Banking, Wealth Management, and Capital
Markets businesses
The private economy recovered in 2021, on both sides of the
border. While the pandemic continues to impact a number
of industries, many commercial banking clients saw a much-
improved year and have clear plans for growth over the medium
and long term. Our bank continued to be there for clients
experiencing challenges, but increasingly our conversations
with clients were about the future — particularly in our growing
Innovation Banking business. In Wealth Management, our
business beneftted from strong collaboration with all areas of
our bank, as referral momentum continued and we established
more new client relationships for the long term.
Our Capital Markets business continued to perform well by
delivering for our clients, collaborating on growth opportunities
across our bank, and furthering our growth in the U.S. market.
Our continued focus on client relationships positioned us very
well in a year with robust investment banking activity and strong
trading volumes.
Investing in growth initiatives for the future
Right across our team, we believe strongly in the bank we’re
building, and in one another. Despite the challenges and
uncertainty in the economy as a result of the pandemic, we’ve
remained steadfast in our commitment to investing for the future.
As one example, we made a strategic investment in Loop
Capital, a Chicago-headquartered fnancial services frm
with deep relationships across the U.S. This investment furthers
our ability to meet the needs of clients across strategic industries
on both sides of the border, and is aligned with our approach
to working with frms that share our client-focused culture and
a commitment to inclusive economic growth.
In Canada, we announced a new long-term agreement to
become the exclusive issuer of Costco Mastercards, including
the acquisition of the existing portfolio which serves millions
of Canadians and has over $3 billion in outstanding balances.
This will signifcantly grow and diversify our credit card portfolio
in the everyday rewards category. Importantly, this agreement
with Costco provides an opportunity to deepen relationships
with new clients from across Costco’s large and growing member
base, making this a strategically important investment for the
coming years.
We also established a strategic relationship with Microsoft,
embracing a cloud-frst approach and enhancing our resilience,
efciency and agility. We’ve made signifcant progress in
modernizing our bank, and this agreement will accelerate
those eforts.
Writing a new chapter in our history with
our new brand
Through our investments in culture and our capabilities, we’ve
become a diferent bank. In 2021, we set out on the next chapter
in the growth story of CIBC as we unveiled our new brand.
Our new brand is not a promise of something that we’re going to
be — it’s a statement on the bank we’ve worked hard to become.
The brand message of Ambitions made real is brought to life by
the investments we’ve made across our bank.
We are now a truly North American bank. The CIBC of today
is one where our team collaborates across business lines and
across borders for our clients, and one where we’re all guided
by our purpose.
Our new brand captures the signifcant growth and
transformation of our bank in recent years, and signifes the
next phase of growth in our long history.
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CIBC 2021 ANNUAL REPORT
Furthering our commitment to an inclusive,
sustainable future
We are focused on the future and recognize climate change is
one of the greatest threats facing society. We continue to take
real action to enable a lower carbon future for our stakeholders,
including announcing our ambition to achieve net-zero GHG
emissions from our operations and our fnancing activities by 2050.
We also doubled our commitment to sustainable fnance —
increasing our target to $300 billion dollars by 2030(2), a signifcant
contribution to making the sustainability ambitions of our clients
a reality. And we joined the Net-Zero Banking Alliance, reinforcing
the role our bank plays in fnancing the climate transition and giving
us an opportunity to work alongside global peers to map out an
inclusive path to combat climate change.
Importantly, we are also taking action to deliver market-based
solutions, enabling our clients to achieve their net-zero GHG
ambitions. One example is Project Carbon, a new platform
launched by CIBC in a joint efort with three other global banks,
bringing clear and consistent pricing and standards to the
voluntary carbon market. Simply put, it makes the carbon credit
market more liquid and more accessible, which will make it easier
for clients to make progress towards their net-zero commitments.
We have also made progress against our commitment to
make inclusion the cornerstone of our bank’s culture. We have
established measurable goals that make our leaders accountable
for helping to remove barriers experienced by members of the
Black community, Indigenous peoples and other communities
who continue to be underrepresented in fnancial services.
I am also proud to serve for the second year as co-chair of the
BlackNorth Initiative which catalyzes leaders across Corporate
Canada to end anti-Black systemic racism. In 2021, CIBC has
increased the representation of board-approved executives from
the Black community from 2.6% to 2.9% and the representation
of our Canadian workforce increased from 3.5% to 3.8%.
We were named the leading company in Canada for gender
equality and ranked 19th globally in Equileap’s fourth annual
Gender Equality Global Report & Ranking, refecting our long-
term commitment to creating a workplace where all our team
members can achieve their ambitions. Our bank also celebrated
our 10th year as one of Canada’s Top 100 Employers, and we
were also named a Top Employer for Young People as a result of
our ability to attract and retain top talent.
Investing in our communities
As 2021 drew to a close, we readied for the launch of the CIBC
Foundation, an important step in our ongoing eforts to support
our communities. Created to help advance social and economic
equality for underserved communities, the CIBC Foundation
came into being just after year end. It builds on our bank’s
charitable eforts to drive lasting change so that everyone can
realize their ambitions.
(2) Sustainable fnancing largely relates to client activities that support,
but are not limited to, renewable and emission-free energy, energy
efciency, sustainable infrastructure, afordable housing, green
buildings, sustainability-linked fnancings and green fnancial
products. The products ofered by CIBC included in our mobilization
commitment to support these client activities include loans and loan
syndications, debt and equity underwritings, M&A advisory and
hedging solutions, as well as principal investments.
ESG by the numbers
Women on the Board of Directors
50%
Clients engaged in fnancial education
seminars and events
72,000
Total corporate and employee giving
in 2021
$132.7M
(3)
New loan authorizations to small and
medium-sized enterprises in 2021
$4.8B
(3) Includes corporate giving, including $70 million
to CIBC Foundation, corporate sponsorships and
employee giving and fundraising.
CIBC 2021 ANNUAL REPORT vii
Message from the President and Chief Executive Ofcer
Our fagship fundraising events such as the CIBC Run for the
Cure and CIBC Miracle Day will continue to be vital elements in
how we give back and support our communities. We held these
events virtually again this year and raised $7.6 million combined
to go towards important causes in our communities related to
cancer research and supporting a brighter future for children.
Closing
Our bank weathered the onset of the pandemic in 2020 thanks
to an unrelenting focus on our clients. We advanced our growth
strategy and worked to live our purpose in 2021 through our
continued investments in initiatives that make a diference to
our clients, team, communities and investors.
We enter 2022 with a new brand, and a sense of anticipation.
That commitment is refected in our fnancial results and
underpins our investments for the future — in our bank’s growth
potential as well as in our communities as we strive to foster
a more inclusive, sustainable economy.
In refecting on such an important year for our bank, I want to
close by saying thank you to our incredible team. They are the
face of our bank and they live our purpose every day. They have
remained steadfast through a challenging time, and they are very
much the driving force behind the bank we’ve become.
The future is bright — for our stakeholders and for our bank.
The next chapter in our bank’s history begins now, and we’re
excited about what we can accomplish together.
Victor G. Dodig
President and Chief Executive Ofcer
Executive Team
1
6
2
7
3
8
4
9
5
10
(from left to right, top to bottom):
1 – Victor G. Dodig
President and Chief Executive Ofcer
2 – Shawn Beber
Senior Executive Vice-President and
Chief Risk Ofcer
3 – Michael G. Capatides
Senior Executive Vice-President and
Group Head, U.S. Region; President
and CEO, CIBC Bank USA
4 – Harry Culham
Senior Executive Vice-President and
Group Head, Capital Markets and
Direct Financial Services
5 – Laura Dottori-Attanasio
8 – Kikelomo Lawal
Senior Executive Vice-President and
Group Head, Personal and Business
Banking, Canada
Executive Vice-President and
Chief Legal Ofcer
9 – Hratch Panossian
6 – Jon Hountalas
Senior Executive Vice-President and
Group Head, Commercial Banking and
Wealth Management, Canada
7 – Christina Kramer
Senior Executive Vice-President
and Group Head, Technology,
Infrastructure and Innovation
Senior Executive Vice-President
and Chief Financial Ofcer and
Enterprise Strategy
10 – Sandy Sharman
Senior Executive Vice-President
and Group Head, People, Culture
and Brand
viii CIBC 2021 ANNUAL REPORT
Message from the
Chair of the Board
Looking back on 2021, my frst year
as Chair of the Board, I am proud of how
CIBC has supported clients, communities
and team members through the second
year of the COVID-19 pandemic.”
Katharine B. Stevenson Chair of the Board
As we look ahead to 2022 we are optimistic. Despite the
challenges of the last two years, CIBC has accelerated its
investments in growth initiatives which support our client-
focused strategy. This positions us well for future growth.
Finally, I would like to recognize your CEO, Victor Dodig, and
your management team for their leadership in guiding us through
the second year of the pandemic while delivering strong fnancial
performance. On behalf of your Board, I also would like to thank
every member of CIBC’s team. We appreciate your dedication
in living our purpose each and every day for our clients.
Katharine B. Stevenson
Chair of the Board
Our top priorities are to ensure CIBC has the right strategy,
the best talent and excellent risk management to pursue
opportunities aligned with our purpose. CIBC’s growth agenda
is on track as our clients across industries emerge from the
pandemic, and as confdence in the future rises for individuals
and businesses alike. During 2021, all our businesses performed
well and we delivered strong shareholder returns while
continuing to invest in both our U.S. and Canadian franchises.
Your Board has a relentless focus on environmental, social
and governance matters. We are committed to making inclusion
a cornerstone of CIBC’s culture and I am pleased to report
that 40% of CIBC’s Executive Committee are women, and the
Board is at gender parity with 50% women. In addition, your
Board includes one director who identifes as a member of the
Black community and one who identifes as a member of the
LGBTQ+ community.
We believe climate change is one of the most important
issues of our time. We are actively reducing our own carbon
footprint; however, our biggest impact will be by proactively
supporting our clients in their transition to a lower carbon
economy. Towards this end, we have announced our ambition
to achieve net-zero greenhouse gas emissions by 2050 and
have doubled our target for sustainable fnancing, among other
environmental commitments.
CIBC 2021 ANNUAL REPORT
ix
Enhanced Disclosure Task Force
The Enhanced Disclosure Task Force (EDTF), established by the Financial Stability Board, released its report “Enhancing the Risk Disclosures of
Banks” in 2012, which included thirty-two disclosure recommendations. The index below provides the listing of these disclosures, along with their
locations. EDTF disclosures are located in our management’s discussion and analysis, consolidated financial statements, and supplementary
packages, which may be found on our website (www.cibc.com). No information on CIBC’s website, including the supplementary packages, should
be considered incorporated herein by reference.
Topics
Recommendations
Disclosures
Management’s
discussion
and analysis
Consolidated
financial
statements
Page references
Pillar 3 Report and
Supplementary
regulatory
capital disclosure
General
Risk
governance,
risk
management
and business
model
Capital
adequacy
and risk-
weighted
assets
Liquidity
Funding
Market risk
Credit risk
Other risks
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Index of risk information – current
page
Risk terminology and measures (1)
Top and emerging risks
Key future regulatory ratio
requirements
Risk management structure
Risk culture and appetite
50
36, 39, 74, 75
172
44, 45
43, 46, 47
Risks arising from business activities
48, 53
Bank-wide stress testing
32, 49, 57, 63,
70, 72
Minimum capital requirements
Components of capital and
reconciliation to the consolidated
regulatory balance sheet
Regulatory capital flow statement
Capital management and planning
Business activities and risk-weighted
assets
Risk-weighted assets and capital
requirements
Credit risk by major portfolios
Risk-weighted assets flow statement
32
36
37
39
38, 53
34, 38
56–60
38
Back-testing of models
48, 57, 68
172
172
71–73
9, 16
8–11
12
4
4
27–36
4, 5
69, 70
Liquid assets
Encumbered assets
Contractual maturity of assets,
liabilities and off-balance sheet
instruments
Funding strategy and sources
Reconciliation of trading and
non-trading portfolios to the
consolidated balance sheet
Significant trading and non-trading
market risk factors
Model assumptions, limitations and
validation procedures
Stress testing and scenario analysis
Analysis of credit risk exposures
Impaired loan and forbearance
policies
Reconciliation of impaired loans and
the allowance for credit losses
Counterparty credit risk arising from
derivatives
Credit risk mitigation
Other risks
Discussion of publicly known risk
events
73
73
78
76
67
67–71
67–71
32, 70
58–65
55, 63, 85
63
145–152, 193
6–7, 65–68
124
146
55, 59
162–163
68, 35 (2)
55
79–82
79
162–163
20, 27–36, 39–40,
46–50, 53, 68
185
(1) A detailed glossary of our risk and capital terminology is included on page 103.
(2) Included in supplementary financial information package.
x
CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Management’s discussion and analysis
Management’s discussion and analysis (MD&A) is provided to enable readers to assess CIBC’s financial condition and results of operations as at and
for the year ended October 31, 2021, compared with prior years. The MD&A should be read in conjunction with the audited consolidated financial
statements. Unless otherwise indicated, all financial information in this MD&A has been prepared in accordance with International Financial Reporting
Standards (IFRS or GAAP) and all amounts are expressed in Canadian dollars. Certain disclosures in the MD&A have been shaded as they form an
integral part of the consolidated financial statements. The MD&A is current as of December 1, 2021. Additional information relating to CIBC, including
the Annual Information Form, is available on SEDAR at www.sedar.com and on the United States (U.S.) Securities and Exchange Commission’s (SEC)
website at www.sec.gov. No information on CIBC’s website (www.cibc.com) should be considered incorporated herein by reference. A glossary of
terms used in the MD&A and the audited consolidated financial statements is provided on pages 100 to 106 of this Annual Report.
2 External reporting changes
8 Financial performance
18 Strategic business units
2 Overview
2 Our strategy
2 Performance against objectives
5 Financial highlights
6 Economic and market
environment
6 Year in review – 2021
6 Outlook for calendar year 2022
7 Significant events
overview
8 2021 Financial results review
8 Net interest income and
margin
9 Non-interest income
9 Trading revenue (TEB)
10 Provision for credit losses
10 Non-interest expenses
10 Taxes
11 Foreign exchange
11 Fourth quarter review
12 Quarterly trend analysis
13 Review of 2020 financial
performance
15 Non-GAAP measures
overview
19 Canadian Personal and
Business Banking
21 Canadian Commercial
Banking and Wealth
Management
23 U.S. Commercial Banking and
Wealth Management
27 Capital Markets
30 Corporate and Other
31 Financial condition
31 Review of condensed
consolidated balance sheet
32 Capital management
41 Off-balance sheet
arrangements
43
83
83
89
89
90
91
91
92
Management of risk
Accounting and control
matters
Critical accounting
policies and estimates
Accounting developments
Other regulatory
developments
Related-party
transactions
Policy on the Scope of
Services of the
Shareholders’ Auditor
Controls and procedures
Supplementary annual
financial information
100
Glossary
A NOTE ABOUT FORWARD-LOOKING STATEMENTS: From time to time, we make written or oral forward-looking statements within the meaning of certain securities
laws, including in this Annual Report, in other filings with Canadian securities regulators or the SEC and in other communications. All such statements are made pursuant
to the “safe harbour” provisions of, and are intended to be forward-looking statements under applicable Canadian and U.S. securities legislation, including the U.S. Private
Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements made in the “Message from the President and Chief Executive
Officer”, “Overview – Performance against objectives”, “Economic and market environment – Outlook for calendar year 2022”, “Significant events”, “Financial performance
overview – Taxes”, “Strategic business units overview – Canadian Personal and Business Banking”, “Strategic business units overview – Canadian Commercial Banking
and Wealth Management”, “Strategic business units overview – U.S. Commercial Banking and Wealth Management”, “Strategic business units overview – Capital
Markets”, “Financial condition – Capital management”, “Financial condition – Off-balance sheet arrangements”, “Management of risk – Risk overview”, “Management of
risk – Top and emerging risks”, “Management of risk – Credit risk”, “Management of risk – Market risk”, “Management of risk – Liquidity risk”, “Accounting and control
matters – Critical accounting policies and estimates”, “Accounting and control matters – Accounting developments”, “Accounting and control matters – Other regulatory
developments” and “Accounting and control matters – Controls and procedures” sections of this report and other statements about our operations, business lines,
financial condition, risk management, priorities, targets, ongoing objectives, strategies, the regulatory environment in which we operate and outlook for calendar year 2022
and subsequent periods. Forward-looking statements are typically identified by the words “believe”, “expect”, “anticipate”, “intend”, “estimate”, “forecast”, “target”,
“objective” and other similar expressions or future or conditional verbs such as “will”, “should”, “would” and “could”. By their nature, these statements require us to make
assumptions, including the economic assumptions set out in the “Economic and market environment – Outlook for calendar year 2022” section of this report, and are
subject to inherent risks and uncertainties that may be general or specific. Given the continuing impact of the coronavirus (COVID-19) pandemic on the global economy,
financial markets, and our business, results of operations, reputation and financial condition, there is inherently more uncertainty associated with our assumptions as
compared to prior periods. A variety of factors, many of which are beyond our control, affect our operations, performance and results, and could cause actual results to
differ materially from the expectations expressed in any of our forward-looking statements. These factors include: the occurrence, continuance or intensification of public
health emergencies, such as the COVID-19 pandemic, and any related government policies and actions; credit, market, liquidity, strategic, insurance, operational,
reputation, conduct and legal, regulatory and environmental risk; currency value and interest rate fluctuations, including as a result of market and oil price volatility; the
effectiveness and adequacy of our risk management and valuation models and processes; legislative or regulatory developments in the jurisdictions where we operate,
including the Organisation for Economic Co-operation and Development Common Reporting Standard, and regulatory reforms in the United Kingdom and Europe, the
Basel Committee on Banking Supervision’s global standards for capital and liquidity reform, and those relating to bank recapitalization legislation and the payments
system in Canada; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions, and interest rate and liquidity regulatory guidance; the
resolution of legal and regulatory proceedings and related matters; the effect of changes to accounting standards, rules and interpretations; changes in our estimates of
reserves and allowances; changes in tax laws; changes to our credit ratings; political conditions and developments, including changes relating to economic or trade
matters; the possible effect on our business of international conflicts and terrorism; natural disasters, disruptions to public infrastructure and other catastrophic events;
reliance on third parties to provide components of our business infrastructure; potential disruptions to our information technology systems and services; increasing cyber
security risks which may include theft or disclosure of assets, unauthorized access to sensitive information, or operational disruption; social media risk; losses incurred as
a result of internal or external fraud; anti-money laundering; the accuracy and completeness of information provided to us concerning clients and counterparties; the
failure of third parties to comply with their obligations to us and our affiliates or associates; intensifying competition from established competitors and new entrants in the
financial services industry including through internet and mobile banking; technological change; global capital market activity; changes in monetary and economic policy;
general business and economic conditions worldwide, as well as in Canada, the U.S. and other countries where we have operations, including increasing Canadian
household debt levels and global credit risks, climate change and other environmental and social risks, our success in developing and introducing new products and
services, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels; changes in client
spending and saving habits; our ability to attract and retain key employees and executives; our ability to successfully execute our strategies and complete and integrate
acquisitions and joint ventures; the risk that expected benefits of an acquisition, merger or divestiture will not be realized within the expected time frame or at all; and our
ability to anticipate and manage the risks associated with these factors. This list is not exhaustive of the factors that may affect any of our forward-looking statements.
These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements. Any forward-looking statements
contained in this report represent the views of management only as of the date hereof and are presented for the purpose of assisting our shareholders and financial
analysts in understanding our financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented,
and may not be appropriate for other purposes. We do not undertake to update any forward-looking statement that is contained in this report or in other communications
except as required by law.
CIBC 2021 ANNUAL REPORT
1
Management’s discussion and analysis
External reporting changes
The following external reporting changes were made in 2021.
Changes made to our business segments
Simplii Financial and CIBC Investor’s Edge, previously reported in Canadian Personal and Business Banking, are now part of the
newly-created Direct Financial Services line of business in Capital Markets, along with certain other direct payment services that were
previously in Capital Markets. This change was made to align with the mandates of the relevant strategic business units (SBUs).
The financial results associated with U.S. treasury activities in U.S. Commercial Banking and Wealth Management are now included within
Treasury in Corporate and Other. In addition, the transfer pricing methodology between U.S. Commercial Banking and Wealth Management
and Treasury in Corporate and Other has been enhanced. Both changes align the treatment of U.S. Commercial Banking and Wealth
Management with our other SBUs, and allow for better management of interest rate and liquidity risks.
Prior period amounts have been revised accordingly. The changes impacted the results of our SBUs and how we measure the performance of our
SBUs. There was no impact on our consolidated financial results from these changes.
Overview
CIBC is a leading North American financial institution committed to creating enduring value for all our stakeholders – our clients, team, communities
and shareholders. We are guided by our purpose – to help make your ambitions a reality, and our focus on creating a more secure, equitable and
sustainable future through our environmental, social and governance (ESG) principles.
Across Personal and Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, our 45,000 employees
provide a full range of financial products and services to 11 million personal banking, business, public sector and institutional clients in Canada, the
U.S. and around the world.
Our strategy
In 2021, we continued to focus on building a modern, relationship-oriented bank. Through these efforts, we’re delivering superior client experience
and top-tier shareholder returns while maintaining our financial strength, risk discipline and advancing our purpose-driven culture. Foundational to
our progress is a consistent focus on three strategic priorities:
Further strengthening our Canadian consumer franchise;
Maintaining and growing our resilient North American Commercial Banking, Wealth Management, and Capital Markets businesses; and
Accelerating ongoing investments in growth initiatives.
Performance against objectives
CIBC reports a scorecard of financial measures that we use to evaluate and report on our progress to external stakeholders. These measures can
be categorized into four key areas – earnings growth, operating leverage, profitability, and balance sheet strength. We have set targets for each of
these measures over the medium term, which we define as three to five years, assuming a normal business environment and credit cycle. Our ability
to achieve these objectives may be adversely affected by extraordinary developments and disruptions.
Global economic activity accelerated this year, although the COVID-19 pandemic continues to pose a headwind to the pace of that recovery.
Distribution of COVID-19 vaccines has allowed for the re-opening of much of the economy, but not all economic activities have returned to pre-
pandemic levels and continue to have an impact on our ability to achieve certain performance objectives.
Earnings growth
To assess our earnings growth, we monitor our earnings per share (EPS).
Our target of 5% to 10% growth reflects a simple average of annual
adjusted(1) EPS growth. In 2021, against a backdrop of an improving
economic environment, year-over-year reported and adjusted(1) diluted
EPS increased by 69% and 49%, respectively.
Reported diluted EPS
($)
Adjusted diluted EPS(1)
($)
13.93
14.47
11.24
11.65
11.19
8.22
12.21 11.92
11.11
9.69
Going forward, we are maintaining our target to deliver average annual
adjusted(1) EPS growth of 5% to 10%.
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.
17
18
19
20
21
17
18
19
20
21
2
CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Operating leverage
Operating leverage, defined as the difference between the year-over-
year percentage change in revenue and year-over-year percentage
change in non-interest expenses, is a measure of the relative growth
rates of revenue and expenses. In 2021, our reported and adjusted(1)
operating leverage was 5.3% and 0.7%, respectively, compared with
(4.0)% and (0.6)%, respectively in 2020.
Going forward, our target is to deliver positive adjusted(1) operating
leverage.
Profitability
We have three metrics to measure profitability, including two shareholder
value targets:
1. Return on common shareholders’ equity (ROE)
ROE, defined as the ratio of net income to average(2) common
shareholders’ equity, is a key measure of profitability. In 2021, our
reported and adjusted(1) ROE were at 16.1% and 16.7%, respectively,
compared with 10.0% and 11.7%, respectively, in 2020.
Going forward, we will continue to target a strong adjusted(1) ROE of at
least 15%.
2. Dividend payout ratio
Dividend payout ratio is defined as the ratio of common share dividends
paid as a percentage of net income after preferred share dividends,
premium on preferred share redemptions, and distributions on other
equity instruments. Our key criteria for considering dividend increases
are our current level of payout relative to our target and our view on the
sustainability of our current earnings level. In 2021, our reported and
adjusted(1) dividend payout ratios were 41.8% and 40.3%, respectively,
compared with 70.7% and 60.0%, respectively, in 2020. In response to
the COVID-19 pandemic, effective March 2020, the Office of the
Superintendent of Financial Institutions (OSFI) directed that all federally
regulated financial institutions halt share buybacks and dividend
increases until further notice. The temporary measure was lifted effective
November 4, 2021.
Going forward, we will continue to target an adjusted(1) dividend payout
ratio of 40% to 50%.
Reported operating
leverage
(%)
Adjusted operating
leverage(1)
(%)
5.3
3.2
2.4
1.6
(1.5)
(4.0)
1.6
0.7
0.2
(0.6)
17
18
19
20
21
17
18
19
20
21
Reported return on
common
shareholders’ equity
(%)
18.3
16.6
14.5
16.1
10.0
Adjusted return on
common
shareholders’ equity(1)
(%)
18.1 17.4
15.4
16.7
11.7
17
18
19
20
21
17
18
19
20
21
Reported dividend
payout ratio
(%)
70.7
45.6 45.5
49.9
41.8
Adjusted dividend
payout ratio(1)
(%)
60.0
46.2
43.4
46.9
40.3
17
18
19
20
21
17
18
19
20
21
3.
Total shareholder return (TSR)
Rolling five-year TSR
(%)
TSR is the ultimate measure of shareholder value, and the output of delivering against the financial targets
within our control. We have an objective to deliver a TSR that exceeds the industry average, which we have
defined as the Standard & Poor’s (S&P)/Toronto Stock Exchange (TSX) Composite Banks Index, over a
rolling five-year period. For the five years ended October 31, 2021, our TSR was 91.9% (2020: 27.7%), which
was above the S&P/TSX Composite Banks Index return over the same period of 80.4%.
125
100
75
50
25
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.
(2) Average balances are calculated as a weighted average of daily closing balances.
0
Oct-20 Jan-21 Apr-21 Jul-21 Oct-21
CIBC 91.9%
S&P/TSX Composite Index 65.3%
S&P/TSX Composite Banks Index 80.4%
CIBC 2021 ANNUAL REPORT
3
Management’s discussion and analysis
Balance sheet strength
Maintaining a strong balance sheet is foundational to our long-term success. Our goal is to maintain strong
capital and liquidity positions. We look to constantly balance our objectives of holding a prudent amount of
excess capital for unexpected events and environmental uncertainties, investing in our core businesses,
growing through acquisitions and returning capital to our shareholders.
CET1 ratio
(%)
11.4
11.6
10.6
12.1
12.4
1. Basel III Common Equity Tier 1 (CET1) ratio
For the year ended October 31, 2021, our Basel III CET1(1) ratio was 12.4%, compared with 12.1% in 2020,
well above the current regulatory target set by OSFI of 10.5%.
In response to the COVID-19 pandemic, effective March 2020, OSFI directed that all federally regulated
financial institutions halt share buybacks and dividend increases until further notice. The temporary measure
was lifted effective November 4, 2021.
2.
Liquidity coverage ratio (LCR)
Our ability to meet our financial obligations is measured through the LCR ratio. It measures unencumbered
high-quality liquid assets (HQLA) that can be converted into cash to meet liquidity needs for a 30-calendar-
day liquidity stress scenario. The LCR standard requires that, absent a situation of financial stress, the value
of the ratio be no lower than 100%.
17
18
19
20
21
Liquidity coverage ratio
(%)
120
128
125
145
127
For the quarter ended October 31, 2021, our three-month daily average LCR(1) was 127% compared to 145%
for the same period last year. The decrease returns our LCR to pre-pandemic levels.
17
18
19
20
21
(1) CET1 is calculated pursuant to OSFI’s Capital Adequacy Requirements (CAR) Guideline and LCR is calculated pursuant to OSFI’s Liquidity Adequacy Requirements (LAR)
Guideline, which are both based on Basel Committee on Banking Supervision (BCBS) standards.
4
CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Financial highlights
As at or for the year ended October 31
Financial results ($ millions)
Net interest income
Non-interest income
Total revenue
Provision for credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income attributable to non-controlling interests
Preferred shareholders and other equity instrument holders
Common shareholders
Net income attributable to equity shareholders
Financial measures
Reported efficiency ratio (1)
Reported operating leverage (1)
Loan loss ratio (2)
Reported return on common shareholders’ equity (1)
Net interest margin (1)
Net interest margin on average interest-earning assets (3)(4)
Return on average assets (4)(5)
Return on average interest-earning assets (3)(4)(5)
Reported effective tax rate
Common share information
Per share ($)
Closing share price ($)
Shares outstanding (thousands)
– basic earnings
– reported diluted earnings
– dividends
– book value (6)
– weighted-average basic
– weighted-average diluted
– end of period
Market capitalization ($ millions)
Value measures
Total shareholder return
Dividend yield (based on closing share price)
Reported dividend payout ratio (1)
Market value to book value ratio
Selected financial measures – adjusted (7)
Adjusted efficiency ratio (8)
Adjusted operating leverage (8)
Adjusted return on common shareholders’ equity
Adjusted effective tax rate
Adjusted diluted earnings per share ($)
Adjusted dividend payout ratio
On- and off-balance sheet information ($ millions)
Cash, deposits with banks and securities
Loans and acceptances, net of allowance for credit losses
Total assets
Deposits
Common shareholders’ equity (1)
Average assets (4)
Average interest-earning assets (3)(4)
Average common shareholders’ equity (1)(4)
Assets under administration (AUA) (1)(9)(10)(11)
Assets under management (AUM) (1)(10)(11)
Balance sheet quality (All-in basis) and liquidity measures (12)
Risk-weighted assets (RWA) ($ millions)
Total RWA
CET1 capital RWA
Tier 1 capital RWA
Total capital RWA
Capital ratios
CET1 ratio (13)
Tier 1 capital ratio (13)
Total capital ratio (13)
Leverage ratio
LCR (14)
Other information
Full-time equivalent employees
2021
11,459
8,556
20,015
158
11,535
8,322
1,876
6,446
17
158
6,271
6,429
$
$
$
57.6 %
5.3 %
0.16 %
16.1 %
1.42 %
1.59 %
0.80 %
0.89 %
22.5 %
$
$
13.97
13.93
5.84
91.66
150.17
448,953
450,183
450,828
67,701
58.03 %
3.9 %
41.8 %
1.64
55.4 %
0.7 %
16.7 %
22.7 %
14.47
40.3 %
$
$ 218,398
462,879
837,683
621,158
41,323
809,621
721,686
38,881
2,963,221
316,834
$
$
$
$
$
$
$
2020
11,044
7,697
18,741
2,489
11,362
4,890
1,098
3,792
2
122
3,668
3,790
60.6 %
(4.0)%
0.26 %
10.0 %
1.50 %
1.69 %
0.52 %
0.58 %
22.5 %
8.23
8.22
5.82
84.05
99.38
445,435
446,021
447,085
44,431
(5.90)%
5.9 %
70.7 %
1.18
55.8 %
(0.6)%
11.7 %
21.8 %
9.69
60.0 %
211,564
416,388
769,551
570,740
37,579
735,492
654,142
36,792
2,364,005 (8)
261,037 (8)
$
$
$
$
$
$
$
2019
10,551
8,060
18,611
1,286
10,856
6,469
1,348
5,121
25
111
4,985
5,096
58.3 %
(1.5)%
0.29 %
14.5 %
1.65 %
1.84 %
0.80 %
0.89 %
20.8 %
11.22
11.19
5.60
79.87
112.31
444,324
445,457
445,342
50,016
4.19 %
5.0 %
49.9 %
1.41
55.5 %
0.2 %
15.4 %
20.6 %
11.92
46.9 %
138,669
398,108
651,604
485,712
35,569
639,716
572,677
34,467
2,423,240 (8)
249,596 (8)
$
$
$
$
$
$
$
2018
10,065
7,769
17,834
870
10,258
6,706
1,422
5,284
17
89
5,178
5,267
57.5 %
2.4 %
0.26 %
16.6 %
1.68 %
1.88 %
0.88 %
0.99 %
21.2 %
11.69
11.65
5.32
73.83
113.68
443,082
444,627
442,826
50,341
4.70 %
4.7 %
45.5 %
1.54
55.6 %
3.2 %
17.4 %
20.0 %
12.21
43.4 %
119,355
381,661
597,099
461,015
32,693
598,441
536,059
31,184
2,303,962
225,379
$
$
$
$
$
$
$
2017
8,977
7,303
16,280
829
9,571
5,880
1,162
4,718
19
52
4,647
4,699
58.8 %
1.6 %
0.25 %
18.3 %
1.66 %
1.85 %
0.87 %
0.97 %
19.8 %
11.26
11.24
5.08
66.55
113.56
412,636
413,563
439,313
49,888
18.30 %
4.5 %
45.6 %
1.71
57.2 %
1.6 %
18.1 %
20.3 %
11.11
46.2 %
107,571
365,558
565,264
439,706
29,238
542,365
485,837
25,393
2,192,947
221,571
$ 272,814
n/a
n/a
n/a
$
254,871
n/a
n/a
n/a
$
239,863
n/a
n/a
n/a
$
n/a
216,144
216,303
216,462
$
n/a
203,321
203,321
203,321
12.4 %
14.1 %
16.2 %
4.7 %
127 %
12.1 %
13.6 %
16.1 %
4.7 %
145 %
11.6 %
12.9 %
15.0 %
4.3 %
125 %
11.4 %
12.9 %
14.9 %
4.3 %
128 %
10.6 %
12.1 %
13.8 %
4.0 %
120 %
45,282
43,853
45,157
44,220
44,928
For additional information on the composition, see the “Glossary” section.
The ratio is calculated as the provision for credit losses on impaired loans to average loans and acceptances, net of allowance for credit losses.
(1)
(2)
(3) Average interest-earning assets include interest-bearing deposits with banks, interest-bearing demand deposits with Bank of Canada, securities, cash collateral on securities
borrowed, securities purchased under resale agreements, loans net of allowance for credit losses, and certain sublease-related assets.
(4) Average balances are calculated as a weighted average of daily closing balances.
(5) Net income expressed as a percentage of average assets or average interest-earning assets.
(6) Common shareholders’ equity divided by the number of common shares issued and outstanding at end of period.
(7) Adjusted measures are non-GAAP measures. Adjusted measures are calculated in the same manner as reported measures, except that financial information included in the
calculation of adjusted measures is adjusted to exclude the impact of items of note. For additional information and a reconciliation of reported results to adjusted results, see the
“Non-GAAP measures” section.
(8) Calculated on a taxable equivalent basis (TEB).
(9)
Includes the full contract amount of AUA or custody under a 50/50 joint venture between CIBC and The Bank of New York Mellon of $2,341.1 billion as at October 31, 2021 (2020:
$1,861.5 billion).
AUM amounts are included in the amounts reported under AUA.
(10)
(11) Certain prior year information has been restated.
(12) RWA and our capital ratios are calculated pursuant to OSFI’s CAR Guideline, the leverage ratio is calculated pursuant to OSFI’s Leverage Requirements Guideline, and LCR is
calculated pursuant to OSFI’s LAR Guideline, all of which are based on BCBS standards. For additional information, see the “Capital management” and “Liquidity risk” sections.
(13) Effective beginning in the second quarter of 2020, ratios reflect the expected credit loss (ECL) transitional arrangement announced by OSFI on March 27, 2020 in response to the
onset of the COVID-19 pandemic.
(14) Average for the three months ended October 31 for each respective year.
n/a Not applicable.
CIBC 2021 ANNUAL REPORT
5
Management’s discussion and analysis
Economic and market environment
Year in review – 2021
Progress towards containing outbreaks of the COVID-19 pandemic through vaccination campaigns and less restrictive public health measures
provided an improving economic backdrop for CIBC. The move from broad economic closures to lighter control measures enabled a partial
recovery in service sector activity, with spending supported by job growth, fiscal measures that had elevated savings in the prior year, and ongoing
monetary stimulus that kept interest rates at low levels. Some goods sector industries remained disrupted by global supply chain bottlenecks
caused by the pandemic. Job gains, growing business output and rising resource prices offset diminished usage of government support measures,
resulting in an improvement in business and household credit quality, although continued low interest rates held down lending margins in Canada
and the U.S. Improved consumer spending had a positive impact on retail transactions volumes relative to the lows of the pandemic in 2020, but
spending has not returned to pre-pandemic levels partly as a result of supply chain issues and consumer credit usage remained sluggish as
households drew on ample savings. Healthy growth in mortgage demand was driven by an active housing market and higher average prices.
Business credit demand picked up as firms responded to improving opportunities, while capital markets activity was supported by strong corporate
and government bond issuance, mergers tied to consolidations, and constructive equity markets in both the U.S. and Canada. Deposit growth
continued to decelerate after outsized gains early in the pandemic.
Outlook for calendar year 2022
Global economic activity accelerated this year, although the COVID-19 pandemic, fueled by the more contagious Delta and Omicron variants,
continues to pose a headwind to the pace of that recovery, impacting services demand and the supply of goods. Restrictions imposed by
governments around the world to limit the impact of the infection have eased significantly in most jurisdictions, but disruptions in production and
shipping continue to impact global supply chains and consumer caution is holding back travel and demand for other services. Vaccination rates are
climbing, and although the virus remains a threat, our outlook assumes that targeted health measures rather than broader economic closures will be
used to contain future infections in most countries. We also assume that the increased global distribution of vaccines will help relieve supply chain
disruptions, improving the availability and lowering price pressures on internationally traded goods.
In Canada, after a gain of approximately 4.5% in 2021, real gross domestic product (GDP) is expected to grow by approximately 4% in
calendar 2022, led by a further recovery in consumer services demand, as well as improvements in exports and capital spending as global supply
chain pressures ease. We expect that the unemployment rate will average near 6% in calendar 2022, approaching full-employment levels in the
latter half of the year. Improving economic activity will more than offset diminished government assistance for business and households, supporting
business and household credit growth and credit quality. Government bond issuance will decrease in 2022 on reduced deficits. Although inflation is
expected to ease during the year on improved goods supplies, we expect that the Bank of Canada will respond to a tightening labour market by
raising the overnight interest rate by 50 basis points in the latter half of the year. Longer-term rates will drift higher over the year as the market builds
in expectations for rate hikes beyond 2022, and global central banks pull back from bond purchases under quantitative easing.
In the U.S., real GDP is expected to grow by 4.2% in calendar 2022, after growing by 5.5% in the prior calendar year. Unemployment is
expected to average in the 4% range in calendar 2022, reaching full employment levels in the second half of the year. Strong employment gains and
improving business revenues will support lower insolvencies. In response to achieving its employment objectives, after maintaining near-zero short-
term interest rates in the first half of the year, the Federal Reserve is likely to increase rates by 50 basis points in the latter half of calendar 2022, after
winding down its net purchases of bonds in the first half of the calendar year.
The economic challenges from COVID-19 have impacted all our SBUs, and while they are likely to still be present in the coming year, lower
case counts and fatalities, facilitated by higher vaccination rates and other potential treatments for COVID-19, will shape the environment ahead.
From a credit perspective, lower and more targeted government support will be more than offset by improving employment and business volumes.
Deposit growth will continue at moderate rates, having already adjusted to the deceleration in the flow of government support payments to
households and businesses. The interest rate environment is expected to continue to have a modestly negative impact on the net interest margins
for all our SBUs.
For Canadian Personal and Business Banking, mortgage demand growth could decelerate slightly in the coming fiscal year on softer home
sales volumes and higher interest rates. We expect to see a modest acceleration in growth in non-mortgage credit demand in the next fiscal year as
a result of the continued easing of pandemic-related constraints on economic activity, which will support an increase in consumer spending. Further
increases in consumer spending are expected to have a positive impact on retail transaction volumes. Continued demand for business lending
products is anticipated as small businesses expand in response to the economic recovery.
Our Canadian and U.S. wealth management businesses are expected to benefit in the coming fiscal year from a further economic recovery,
with investors continuing to look for alternatives to what will still be low real interest rates.
Our Capital Markets business is expected to benefit in the coming fiscal year from trading volumes driven by greater volatility as interest rates
rise, from merger and acquisition activity as corporate consolidations continue, as well as from healthy equity issuance, but could be negatively
impacted by lower corporate and provincial bond issuance. Loan demand in our Canadian and U.S. commercial banking businesses is expected to
continue to grow at a moderate pace in the coming fiscal year in response to improving economic conditions.
The economic outlook described above reflects numerous assumptions regarding the economic impact of the COVID-19 pandemic. Although its
severity appears to be diminishing where vaccination rates are high, case counts are still escalating in some countries, and uncertainties remain
regarding the pace of global vaccination efforts, the need for booster doses, and the degree to which they will contain existing and potential new
variants, without measures that limit economic activity. Expectations reflect currently available information and are subject to change as new
information on epidemiology and government health measures becomes available. As a result, actual experience may differ materially from
expectations.
Our financial condition and our regulatory capital and liquidity positions continue to be strong. See “Capital management” and “Liquidity risk” for
further details. The impact of the pandemic on our risk environment is discussed in “Top and emerging risks”. Changes in the level of economic
uncertainty arising from the pandemic continue to impact key accounting estimates and assumptions, particularly the estimation of ECLs. See
“Accounting and control matters”, as well as Note 2 and Note 6 to our consolidated financial statements for further details. With the economic
recovery well underway, and the significant easing of restrictive public health measures, the level of our client relief programs has reduced
significantly relative to 2020. See “CIBC client relief programs in response to COVID-19” and “Government lending programs in response to
COVID-19” for further details regarding the client relief and government support programs we are involved in.
6
CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Significant events
Sale of certain banking assets in the Caribbean
On October 12, 2021, FirstCaribbean International Bank Limited (CIBC FirstCaribbean) announced that it had entered into agreements to sell its
banking assets in St. Vincent, Grenada, Dominica, St. Kitts and Aruba. The transactions are subject to regulatory approvals and other closing
conditions, which are expected to be finalized in the first half of fiscal 2022. The impacts upon closing are not expected to be material.
Acquisition of Canadian Costco credit card portfolio
On September 2, 2021, we announced that we entered into a long-term agreement to become the exclusive issuer of Costco-branded Mastercard
credit cards in Canada. We will also acquire the existing Canadian Costco credit card portfolio, which has over $3 billion in outstanding balances.
This transaction is expected to be completed in the first half of fiscal 2022, subject to customary closing conditions.
Sale of CIBC FirstCaribbean
On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of CIBC
FirstCaribbean to GNB Financial Group Limited (GNB), subject to regulatory approvals.
As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our
revised expectations concerning the likelihood and timing of a potential transaction, we discontinued the application of held for sale accounting of
CIBC FirstCaribbean in the fourth quarter of 2020 and recorded a goodwill impairment charge of $220 million. On February 3, 2021, we announced
that the proposed sale of CIBC FirstCaribbean to GNB did not receive approval from CIBC FirstCaribbean’s regulators and that the transaction will
not proceed.
For additional information, see Note 4 and Note 9 to our consolidated financial statements.
CIBC 2021 ANNUAL REPORT
7
Management’s discussion and analysis
Financial performance overview
This section provides a review of our consolidated financial results for 2021. A review of our SBU results follows on pages 18 to 29. Refer to page 13
for a review of our financial performance for 2020.
2021 Financial results review
Reported net income for the year was $6,446 million, compared with $3,792 million in 2020.
Adjusted net income(1) for the year was $6,687 million, compared with $4,447 million in 2020.
Reported diluted EPS for the year was $13.93, compared with $8.22 in 2020.
Adjusted diluted EPS(1) for the year was $14.47, compared with $9.69 in 2020.
2021
Net income was affected by the following items of note:
$125 million ($92 million after-tax) increase in legal provisions (Corporate and Other);
$109 million ($80 million after-tax) charge related to the consolidation of our real estate portfolio (Corporate and Other);
$79 million ($60 million after-tax) amortization of acquisition-related intangible assets ($50 million after-tax in U.S. Commercial Banking and
Wealth Management and $10 million after-tax in Corporate and Other); and
$12 million ($9 million after-tax) in transaction and integration-related costs(2) associated with the acquisition of the Canadian Costco credit
card portfolio (Canadian Personal and Business Banking).
The above items of note increased non-interest expenses by $325 million and decreased income taxes by $84 million. In aggregate, these items of
note decreased net income by $241 million.
2020
Net income was affected by the following items of note:
$339 million ($250 million after-tax) restructuring charge primarily related to employee severance (Corporate and Other);
$248 million ($248 million after-tax) goodwill impairment charges related to our controlling interest in CIBC FirstCaribbean of which $28 million
was recognized in the second quarter and $220 million was recognized in the fourth quarter (Corporate and Other);
$114 million ($84 million after-tax) charge related to the consolidation of our real estate portfolio (Corporate and Other);
$105 million ($80 million after-tax) amortization of acquisition-related intangible assets ($6 million after-tax in Canadian Personal and Business
Banking, $1 million after-tax in Canadian Commercial Banking and Wealth Management, $61 million after-tax in U.S. Commercial Banking and
Wealth Management, and $12 million after-tax in Corporate and Other);
$79 million ($58 million after-tax) gain as a result of plan amendments related to pension and other post-employment plans (Corporate and
Other); and
$70 million ($51 million after-tax) increase in legal provisions (Corporate and Other).
The above items of note increased non-interest expenses by $797 million and decreased income taxes by $142 million. In aggregate, these items of
note decreased net income by $655 million.
(1) Adjusted measures are non-GAAP measures. For additional information, see the “Non-GAAP measures” section.
(2) Transaction and integration costs are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the Canadian Costco
credit card portfolio, including enabling cross-sell opportunities, the upgrade and conversion of systems and processes, project management and communication costs.
Net interest income and margin
$ millions, for the year ended October 31
Average interest-earning assets
Net interest income
Net interest margin on average interest-earning assets
2021
2020
2019
$ 721,686
11,459
$ 654,142
11,044
$ 572,677
10,551
1.59 %
1.69 %
1.84 %
Net interest income was up $415 million or 4% from 2020, primarily due to volume growth across our businesses and higher trading revenue,
partially offset by lower product spreads as a result of changes in the interest rate environment and the impact of foreign exchange translation.
Net interest margin on average interest-earning assets was down 10 basis points, primarily due to a shift in the mix of average interest-earning
assets, and an increase in HQLA driven by deposit growth, as well as the current low interest environment.
Additional information on net interest income and margin is provided in the “Supplementary annual financial information” section.
8
CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Non-interest income
$ millions, for the year ended October 31
Underwriting and advisory fees
Deposit and payment fees
Credit fees
Card fees
Investment management and custodial fees (1)(2)
Mutual fund fees (2)
Insurance fees, net of claims
Commissions on securities transactions
Gains (losses) from financial instruments measured/designated at fair value through profit or loss
(FVTPL), net (3)
Gains (losses) from debt securities measured at fair value through other comprehensive income
(FVOCI) and amortized cost, net
Foreign exchange other than trading
Income from equity-accounted associates and joint ventures (1)
Other
$
2021
713
797
1,152
460
1,621
1,772
358
426
607
90
276
55
229
$
2020
468
781
1,020
410
1,382
1,586
386
362
694
9
234
79
286
$
2019
475
908
958
458
1,305
1,595
430
313
761
34
304
92
427
$ 8,556
$ 7,697
$ 8,060
(1) Custodial fees directly recognized by CIBC are included in Investment management and custodial fees. Our proportionate share of the custodial fees from the joint
ventures which CIBC has with The Bank of New York Mellon are included within Income from equity-accounted associates and joint ventures.
(2) Investment management fees and mutual fund fees are driven by various factors, including the amount of AUM. Investment management fees in our asset management
and private wealth management businesses are generally driven by the amount of AUM, while investment management fees in our retail brokerage business are driven by
a combination of the amount of AUA and, to a lesser extent, other factors not directly related to the amount of AUA (e.g., flat fees on a per account basis).
(3) Includes $87 million of loss (2020: $31 million of loss; 2019: $54 million of loss) relating to non-trading financial instruments measured/designated at FVTPL.
Non-interest income was up $859 million or 11% from 2020.
Underwriting and advisory fees were up $245 million or 52%, primarily due to higher equity and debt issuance revenue and advisory activity.
Credit fees were up $132 million or 13%, primarily due to growth in commercial loans.
Card fees were up $50 million or 12%, primarily due to higher client transaction activity in Canadian Personal and Business Banking.
Investment management and custodial fees were up $239 million or 17%, primarily due to AUA and AUM growth in our wealth management businesses.
Mutual fund fees were up $186 million or 12%, primarily due to market appreciation and net sales in our wealth management businesses.
Commissions on securities transactions were up $64 million or 18%, primarily due to higher trading volume in our retail brokerage business.
Gains (losses) from financial instruments measured/designated at FVTPL, net were down $87 million or 13%, primarily due to lower trading revenue,
treasury activities and mark-to-market losses related to certain non-trading derivatives that were largely offset by net interest income recognized on
FVTPL securities held as economic hedges.
Trading revenue (TEB)(1)(2)
$ millions, for the year ended October 31
Trading revenue consists of:
Net interest income (1)
Non-interest income (3)
Trading revenue by product line:
Interest rates
Foreign exchange
Equities (1)
Commodities
Other
2021
2020
2019
$ 1,020
694
$ 1,714
$
904
725
$
633
815
$ 1,629
$ 1,448
$
328
651
548
158
29
$
528
674
280
182
(35)
$
300
585
386
117
60
$ 1,714
$ 1,629
$ 1,448
(1) Includes a TEB adjustment of $204 million (2020: $183 million; 2019: $177 million) reported within Capital Markets. Excludes a TEB adjustment of nil (2020: nil; 2019:
$2 million) on non-trading activities reported within U.S. Commercial Banking and Wealth Management. See “Strategic business units overview” section and Note 31 to our
consolidated financial statements for further details.
(2) Trading activities is based on the risk definition of trading for regulatory capital and trading market risk management purposes. Positions in a trading book are considered
trading provided the book and positions continue to meet OSFI defined trading book criteria set out in OSFI’s Capital Adequacy Requirements.
(3) Gains (losses) from financial instruments measured/designated at FVTPL of $607 million (2020: $694 million; 2019: $761 million) consists of a gain of $694 million (2020:
$725 million; 2019: $815 million) related to trading financial instruments measured/designated at FVTPL and a loss of $87 million (2020: $31 million; 2019: $54 million)
relating to non-trading financial instruments measured/designated at FVTPL.
Trading revenue was up $85 million or 5% from 2020, primarily due to higher equities trading revenue, partially offset by lower interest rates trading
revenue.
Trading revenue comprises net interest income and non-interest income. Net interest income arises from interest and dividends relating to
financial assets and liabilities associated with trading activities, other than derivatives, net of interest expense and interest income associated with
funding these assets and liabilities. Non-interest income includes realized and unrealized gains and losses on securities mandatorily measured at
FVTPL and income relating to changes in fair value of derivative financial instruments. Trading revenue excludes underwriting fees and commissions
on securities transactions, which are shown separately in the consolidated statement of income. Trading activities and related risk management
strategies can periodically shift income between net interest income and non-interest income. Therefore, we view total trading revenue as the most
appropriate measure of trading performance.
CIBC 2021 ANNUAL REPORT
9
Management’s discussion and analysis
Provision for credit losses
$ millions, for the year ended October 31
Provision for (reversal of) credit losses – impaired
Canadian Personal and Business Banking
Canadian Commercial Banking and Wealth Management
U.S. Commercial Banking and Wealth Management
Capital Markets
Corporate and Other
Provision for (reversal of) credit losses – performing
Canadian Personal and Business Banking
Canadian Commercial Banking and Wealth Management
U.S. Commercial Banking and Wealth Management
Capital Markets
Corporate and Other
2021
2020
2019
$
484
6
104
32
76
702
(134)
(45)
(179)
(132)
(54)
(544)
$
625
162
133
121
24
$
790
159
68
109
21
1,065
1,147
564
141
354
190
175
1,424
99
4
5
51
(20)
139
$
158
$ 2,489
$ 1,286
Provision for credit losses was down $2,331 million or 94% from 2020, as the current year reflected an improvement in economic conditions as well
as our economic outlook, while the prior year was adversely impacted by the onset of the COVID-19 pandemic.
For further details regarding provision for credit losses in our SBUs, refer to the “Strategic business units overview” section.
Non-interest expenses
$ millions, for the year ended October 31
Employee compensation and benefits
Salaries
Performance-based compensation
Benefits
Occupancy costs (1)
Computer, software and office equipment
Communications
Advertising and business development
Professional fees
Business and capital taxes
Other
$
2021
3,213
2,329
908
6,450
916
2,030
318
237
277
111
1,196
$
2020
3,529
1,948
782
6,259
944
1,939
308
271
203
117
1,321
$
2019
3,081
1,873
772
5,726
892
1,874
303
359
226
110
1,366
$ 11,535
$ 11,362
$ 10,856
(1) In 2021 and 2020, occupancy costs include charges of $109 million and $114 million, respectively, related to the consolidation of our real estate portfolio, shown as items
of note.
Non-interest expenses were up $173 million or 2% from 2020.
Employee compensation and benefits were up $191 million or 3%, primarily due to higher performance-based compensation. The prior year
included a restructuring charge primarily related to employee severance, and a gain as a result of plan amendments related to pension and other
post-employment benefit plans, both shown as an item of note.
Computer, software and office equipment were up $91 million or 5%, primarily due to higher spending on strategic initiatives.
Advertising and business development were down $34 million or 13%, primarily due to lower spending driven by the impact of the COVID-19
pandemic.
Professional fees were up $74 million or 36%, primarily due to higher spending on strategic initiatives.
Other expenses were down $125 million or 9%, as the prior year included a goodwill impairment charge, partially offset by an increase in legal
provisions in the current year, both shown as an item of note.
Taxes
$ millions, for the year ended October 31
Income taxes
Indirect taxes (1)
Goods and Services Tax (GST), Harmonized Sales Tax (HST) and sales taxes
Payroll taxes
Capital taxes
Property and business taxes
Total indirect taxes
Total taxes
Reported effective tax rate
Total taxes as a percentage of net income before deduction of total taxes
2021
2020
2019
$ 1,876
$ 1,098
$ 1,348
403
306
77
70
856
411
292
79
76
858
418
271
76
72
837
$ 2,732
$ 1,956
$ 2,185
22.5 %
29.8 %
22.5 %
34.0 %
20.8 %
29.9 %
(1) Certain amounts are based on a paid or payable basis and do not factor in capitalization and subsequent amortization.
10 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Total income and indirect taxes were up $776 million from 2020.
Income tax expense was $1,876 million, up $778 million from 2020. This was primarily due to higher income.
Indirect taxes overall were consistent with the prior year, with an increase in payroll taxes offset by decreases in other indirect taxes. Indirect
taxes are included in non-interest expenses.
In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related
legal expenses (the Enron expenses). In January 2019, CIBC entered into a settlement agreement (the Agreement) with the CRA that provides
certainty with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax
recovery in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of
the Enron expenses that are expected to be deductible in the United States (the U.S. deduction). The U.S. deduction has not been agreed to by the
Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.
The CRA has reassessed CIBC for approximately $1,420 million of additional income tax by denying the tax deductibility of certain 2011 to 2016
Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. The dividends that were subject to the
reassessments are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. In August 2021, CIBC filed
a Notice of Appeal with the Tax Court of Canada and the matter is now in litigation. It is possible that subsequent years may be reassessed for similar
activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts have been
accrued in the consolidated financial statements.
In November 2021, the Tax Court of Canada ruled against CIBC on its 2007 foreign exchange capital loss reassessment (Decision). CIBC
disagrees with the Decision and filed its Appeal in November 2021. CIBC remains confident that its tax filing position was appropriate. Accordingly,
no amounts have been accrued in the consolidated financial statements. The exposure of additional tax and interest related to this and similar matters
is approximately $300 million in addition to the potential inability to utilize approximately $500 million in unrecognized capital tax loss carryforwards.
Foreign exchange
The estimated impact of U.S. dollar translation on key lines of our consolidated statement of income, as a result of changes in average exchange
rates, is as follows:
$ millions, for the year ended October 31
Estimated increase (decrease) in:
Total revenue
Provision for credit losses
Non-interest expenses
Income taxes
Net income
Impact on EPS:
Basic
Diluted
Average USD appreciation relative to CAD
Fourth quarter review
$ millions, except per share amounts, for the three months ended
Revenue
Canadian Personal and Business Banking
Canadian Commercial Banking and Wealth Management
U.S. Commercial Banking and Wealth Management
Capital Markets (2)
Corporate and Other (2)
Total revenue
Net interest income
Non-interest income
Total revenue
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
EPS – basic
– diluted
$
2021
vs.
2020
(307)
13
(141)
(26)
(153)
2020
vs.
2019
50
9
26
3
12
$
2019
vs.
2018
124
7
66
5
46
$
$
(0.34)
(0.34)
$ 0.03
0.03
$ 0.10
0.10
(6.6)%
1.1 %
3.2 %
Oct. 31
Jul. 31
Apr. 30
Jan. 31
Oct. 31
Jul. 31
Apr. 30
Jan. 31
2021
2020 (1)
$ 2,128 $ 2,056 $ 1,941 $ 2,025
1,088
561
1,174
115
1,240
562
1,012
122
1,207
539
1,140
114
1,135
532
1,194
130
$ 1,997 $ 1,910 $ 1,936 $ 2,079
1,055
501
1,006
214
1,025
511
967
139
1,028
519
934
122
1,013
512
1,146
127
$ 5,064 $ 5,056 $ 4,932 $ 4,963
$ 4,600 $ 4,708 $ 4,578 $ 4,855
$ 2,980 $ 2,893 $ 2,747 $ 2,839
2,124
2,163
2,185
2,084
$ 2,792 $ 2,729 $ 2,762 $ 2,761
2,094
1,808
1,816
1,979
5,064
78
3,135
1,851
411
5,056
(99)
2,918
2,237
507
4,932
32
2,756
2,144
493
4,963
147
2,726
2,090
465
4,600
291
2,891
1,418
402
4,708
525
2,702
1,481
309
4,578
1,412
2,704
462
70
4,855
261
3,065
1,529
317
$ 1,440 $ 1,730 $ 1,651 $ 1,625
$ 1,016 $ 1,172 $
392 $ 1,212
$
$
4 $
5 $
4 $
1,436
1,725
1,647
4
1,621
3.08 $
3.07
3.77 $
3.76
3.56 $
3.55
3.56
3.55
$
$
1 $
2 $
(8) $7
1,015
1,170
400
1,205
2.21 $
2.20
2.56 $
2.55
0.83 $
0.83
2.64
2.63
(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(2) Capital Markets revenue and income taxes are reported on a TEB with an equivalent offset in the revenue and income taxes of Corporate and Other.
Compared with Q4/20
Net income for the quarter was $1,440 million, up $424 million or 42% from the fourth quarter of 2020.
Net interest income was up $188 million, primarily due to volume growth across our businesses and higher treasury revenue, partially offset by
lower product spreads.
Non-interest income was up $276 million or 15%, primarily due to higher fee-based revenue and underwriting and advisory fees.
Provision for credit losses was down $213 million or 73% from the same quarter last year. The current quarter included a provision reversal on
performing loans of $34 million, while the same quarter last year included a provision for credit losses of $113 million. Provision for credit losses on
impaired loans was down $66 million as the same quarter last year was adversely impacted by the COVID-19 pandemic.
CIBC 2021 ANNUAL REPORT 11
Management’s discussion and analysis
Non-interest expenses were up $244 million or 8%, primarily due to higher employee-related compensation, spending on strategic initiatives
and an increase in legal provisions, shown as an item of note. The same quarter last year included a goodwill impairment charge, partially offset by
a gain as a result of plan amendments related to pension and other post-employment plans.
Income tax expense was up $9 million or 2%, primarily due to higher income.
Compared with Q3/21
Net income for the quarter was down $290 million or 17% from the prior quarter.
Net interest income was up $87 million or 3%, primarily due to volume growth across our businesses and higher trading revenue, partially
offset by lower product spreads.
Non-interest income was down $79 million or 4%, primarily due to lower trading revenue and lower underwriting and advisory fees, partially
offset by higher fee-based revenue.
The current quarter included a provision for credit losses of $78 million while the prior quarter included a provision reversal for credit losses of
$99 million. The provision reversal on performing loans was down $173 million as the prior quarter included a higher reversal related to the
favourable change in economic conditions as well as our economic outlook. Provision for credit losses on impaired loans was comparable with the
prior quarter.
Non-interest expenses were up $217 million or 7%, primarily due to the charge related to the consolidation of our real estate portfolio, shown
as an item of note, higher corporate support costs and the timing of spending on strategic initiatives.
Income tax expense was down $96 million or 19%, primarily due to lower income.
Quarterly trend analysis
Our quarterly results are modestly affected by seasonal factors. The second quarter has fewer days as compared with the other quarters, generally
leading to lower earnings. The summer months (July – third quarter and August – fourth quarter) typically experience lower levels of market activity,
which affects our brokerage, investment management, and Capital Markets activities.
Revenue
Revenue in our lending and deposit-taking businesses is generally driven by the interest rate environment, volume growth and fees related to client
transaction activity. Our wealth management businesses are driven by market conditions and net sales activity impacting AUA and AUM, as well as
the level of client investment activity. Capital Markets revenue is also influenced, to a large extent, by market conditions affecting client trading and
underwriting activity. The COVID-19 pandemic beginning in the second quarter of 2020 and the lower interest rate environment continue to impact
revenue for all our SBUs.
Canadian Personal and Business Banking revenue has been negatively impacted by the lower interest rate environment and lower client
transaction activity as a result of the COVID-19 pandemic, partially offset by volume growth.
Canadian Commercial Banking and Wealth Management has benefitted from commercial banking loan and deposit growth as well as from strong
markets. In Commercial Banking, loan growth has accelerated throughout fiscal 2021 as the economic recovery strengthened. The benefit from loan
and deposit growth has been partially offset by the lower interest rate environment. In Wealth Management, AUA and AUM growth has been driven by
continued strong market performance and record levels of investment sales subsequent to the market volatility noted in the second quarter of 2020.
U.S. Commercial Banking and Wealth Management has benefitted from growth in strategic clients that is driving increased loans, deposits, AUM,
and fee income. Loan growth has accelerated due to the new client additions and economic recovery. Wealth management AUA and AUM growth has
been driven by a continued market recovery and strong sales momentum subsequent to the market volatility in the second quarter of 2020.
Capital Markets had lower trading revenue in the second and fourth quarters of 2020, while the second and third quarters of 2021 included
increased revenue from underwriting and advisory activities.
Corporate and Other included the impact of the COVID-19 pandemic that led to excess liquidity costs from the second quarter of 2020 to the
second quarter of 2021 that negatively impacted revenue. The interest rate environment and narrower margins have negatively impacted revenue in
international banking.
Provision for credit losses
Provision for credit losses is dependent upon the credit cycle in general, on the credit performance of the loan portfolios, and changes in our economic
outlook. As a result of the impact of the COVID-19 pandemic beginning in the second quarter of 2020, some portions of our loan portfolios were
negatively impacted by the decline in economic activity associated with restrictive public health measures, mitigated to a large extent by large-scale
government support and relief programs targeting both individuals and businesses. Although public health measures in most jurisdictions have eased
in response to increasing vaccination rates, and economic recovery is well underway, uncertainty related to the economic environment persists. There
is considerable judgment involved in the estimation of credit losses in the current environment.
The significant increase in provision for credit losses on performing loans in the second quarter and, to a lesser extent, the third and fourth
quarters of 2020 reflects the early stages of the COVID-19 pandemic, which impacted all our SBUs, as well as continued pressure on oil prices. All
four quarters of 2021 reflect a moderate improvement in economic conditions as well as our economic outlook.
In Canadian Personal and Business Banking, the third and fourth quarters of 2020 and the first, third and the fourth quarters of 2021 included
lower insolvencies and write-offs in credit cards. The decrease in insolvencies was in line with the national Canadian trend. The low level of write-offs
was impacted by the assistance offered to clients from our payment deferral programs, lower client spending as well as government support. The
second quarter of 2021 included higher write-offs in credit cards, mainly attributable to a relatively small segment of client balances that were
previously in the payment deferral programs, that continued to underperform and eventually were written off after exiting the programs.
In Canadian Commercial Banking and Wealth Management, the first quarter and the second half of 2020 included provisions on one fraud-
related impairment.
In U.S. Commercial Banking and Wealth Management, the first quarter of 2021 and the second half of 2020 included higher provisions on
impaired loans.
In Capital Markets, the second and third quarters of 2020 included higher provisions on impaired loans in the oil and gas sector.
In Corporate and Other, the third quarter of 2021 included higher provisions on impaired loans in CIBC FirstCaribbean.
Non-interest expenses
Non-interest expenses have fluctuated over the period largely due to changes in employee compensation expenses, investments in strategic
initiatives and movement in foreign exchange rates. The fourth quarter of 2019 and the second and fourth quarters of 2020 included goodwill
impairment charges related to our controlling interest in CIBC FirstCaribbean. The fourth quarter of 2019, the third quarter of 2020 and the third
12 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
quarter and fourth quarter of 2021 included increases in legal provisions in Corporate and Other, all shown as items of note. The first quarter of 2020
included a restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. The fourth quarter of 2020 and
the fourth quarter of 2021 included charges related to the consolidation of our real estate portfolio as a result of our upcoming move to our new global
headquarters. The fourth quarter of 2020 included a gain as a result of plan amendments related to pension and other post-employment plans.
Income taxes
Income taxes vary with changes in income subject to tax, and the jurisdictions in which the income is earned. Taxes can also be affected by the
impact of significant items and the level of tax-exempt income.
Review of 2020 financial performance
$ millions, for the year ended October 31
2020 (2)
Net interest income
Non-interest income
Total revenue
Provision for credit losses
Non-interest expenses
Income (loss) before income taxes
Income taxes
Net income (loss)
2019 (2)
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
Net interest income
Non-interest income
Total revenue
Provision for credit losses
Non-interest expenses
Income (loss) before income taxes
Income taxes
Net income (loss)
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
Canadian
Personal and
Business
Banking
$ 5,849
2,073
7,922
1,189
4,308
2,425
640
$ 1,785
Canadian
Commercial Banking
and Wealth
Management
$ 1,248
2,873
4,121
303
2,179
1,639
437
$ 1,202
U.S.
Commercial Banking
and Wealth
Management (1)
$ 1,422
621
2,043
487
1,126
430
55
375
$
$
–
1,785
$ 5,944
2,296
8,240
889
4,459
2,892
766
$ 2,126
$
–
2,126
$
–
1,202
$ 1,205
2,822
4,027
163
2,106
1,758
471
$ 1,287
$
–
1,287
$
–
375
$ 1,327
584
1,911
73
1,114
724
76
648
$
Capital
Markets (1)
$ 2,354
1,699
4,053
311
1,929
1,813
505
$ 1,308
$
–
1,308
$ 1,681
1,794
3,475
160
1,802
1,513
396
$ 1,117
CIBC
Total
$ 11,044
7,697
18,741
2,489
11,362
4,890
1,098
3,792
$
$
2
3,790
$ 10,551
8,060
18,611
1,286
10,856
6,469
1,348
5,121
$
Corporate
and Other (1)
$
171
431
602
199
1,820
(1,417)
(539)
(878)
2
(880)
394
564
958
1
1,375
(418)
(361)
(57)
$
$
$
$
$
$
–
648
$
–
1,117
25
(82)
$
25
5,096
(1) Capital Markets revenue and income taxes are reported on a TEB, as were U.S. Commercial Banking and Wealth Management revenue and income taxes in 2019, with an
equivalent offset in the revenue and income taxes of Corporate and Other.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
The following discussion provides a comparison of our results of operations for the years ended October 31, 2020 and 2019.
Overview
Net income for 2020 was $3,792 million, compared with $5,121 million in 2019. The decrease in net income of $1,329 million was due to a higher
provision for credit losses and higher non-interest expenses, partially offset by higher revenue.
Consolidated CIBC
Net interest income
Net interest income was up $493 million or 5% from 2019, primarily due to volume growth across our businesses, higher trading revenue and higher
revenue from Capital Markets financing activities, partially offset by narrower margins driven by changes in the interest rate environment and interest
rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients during the COVID-19 pandemic.
Non-interest income
Non-interest income was down $363 million or 5% from 2019, primarily due to lower client transaction activity as a result of the pandemic, lower
sublease revenue relating to our adoption of IFRS 16 “Leases” in 2020 that was largely offset in interest income and non-interest expenses, mark-to-
market losses related to economic hedges of certain non-trading activities that were largely offset in net interest income and lower trading revenue.
Provision for credit losses
Provision for credit losses was up $1,203 million or 94% from 2019. Provision for credit losses on performing loans was up $1,285 million from 2019,
mainly due to increased provisions related to the onset of the COVID-19 pandemic. Provision for credit losses on impaired loans was down
$82 million, due to lower insolvencies and write-offs in credit cards and personal lending, reflecting the impact of the client relief and government
support programs, partially offset by higher provisions in business and government loans.
Non-interest expenses
Non-interest expenses were up $506 million or 5% from 2019, mainly due to a restructuring charge primarily related to employee severance, shown
as an item of note, and higher performance-based compensation and additional employee benefits provided to support our employees during the
COVID-19 pandemic.
Income taxes
Income tax expense was down $250 million or 19% from 2019, primarily due to lower income.
CIBC 2021 ANNUAL REPORT 13
Management’s discussion and analysis
Revenue by segment
Canadian Personal and Business Banking(1)
Revenue was down $318 million or 4% from 2019, primarily due to narrower margins largely due to changes in the interest rate environment and
interest rate relief provided to our credit card clients as part of the CIBC client relief programs offered to support our clients during the COVID-19
pandemic, and lower fees driven by lower client transaction activity, partially offset by volume growth.
Canadian Commercial Banking and Wealth Management
Revenue was up $94 million or 2% from 2019. Commercial banking revenue was up primarily due to volume growth and impact of an additional day
in 2020, partially offset by narrower margins and lower fees. Wealth management revenue was up primarily due to higher investment management
and custodial fees driven by higher average AUM and AUA and higher commission revenue, as well as higher foreign exchange revenue reflecting
higher trading volume in our full service brokerage business, partially offset by lower mutual fund fees.
U.S. Commercial Banking and Wealth Management(1)
Revenue was up $132 million or 7% from 2019. Commercial banking revenue was up primarily due to volume growth, and the impact of foreign
exchange translation, partially offset by narrower margins. Wealth management revenue was up primarily due to volume growth, higher investment
management and custodial fees driven by higher AUM and the impact of foreign exchange translation, partially offset by narrower margins.
Capital Markets(1)
Revenue was up $578 million or 17% from 2019. Global markets revenue was up primarily due to higher revenue from our interest rate, foreign
exchange and commodities trading businesses and higher revenue from financing activities, partially offset by lower revenue from our equity
derivatives trading business. Corporate and investment banking revenue was up primarily due to higher debt and equity underwriting activity and
higher corporate banking revenue, partially offset by lower advisory revenue. Direct financial services revenue was up primarily due to higher direct
brokerage trading volumes.
Corporate and Other(1)
Revenue was down $356 million or 37% from 2019. International banking revenue was down primarily due to lower revenue in CIBC FirstCaribbean
as a result of narrower margins largely due to changes in the interest rate environment related to COVID-19 and lower fees. Other revenue was
down primarily due to lower treasury revenue largely as a result of excess liquidity costs, interest income related to the settlement of certain income
tax matters in 2019, shown as an item of note, and due to lower sublease revenue relating to our adoption of IFRS 16 in 2020.
(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
14 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Non-GAAP measures
We use a number of financial measures to assess the performance of our business lines as described below. Some measures are calculated in
accordance with GAAP (IFRS), while other measures do not have a standardized meaning under GAAP, and accordingly, these measures may not
be comparable to similar measures used by other companies. Investors may find these non-GAAP measures, which include non-GAAP financial
measures and non-GAAP ratios as defined in National Instrument 52-112 “Non-GAAP and Other Financial Measures Disclosure”, useful in
understanding how management views underlying business performance.
Adjusted measures
Management assesses results on a reported and adjusted basis and considers both as useful measures of performance. Adjusted measures, which
include adjusted total revenue, adjusted provision for credit losses, adjusted non-interest expenses, adjusted income before income taxes, adjusted
income taxes and adjusted net income, in addition to the adjusted measures noted below, remove items of note from reported results to calculate
our adjusted results. Items of note include the amortization of intangible assets, and certain items of significance that arise from time to time which
management believes are not reflective of underlying business performance. We believe that adjusted measures provide the reader with a better
understanding of how management assesses underlying business performance and facilitates a more informed analysis of trends. While we believe
that adjusted measures may facilitate comparisons between our results and those of some of our Canadian peer banks, which make similar
adjustments in their public disclosure, it should be noted that there is no standardized meaning for adjusted measures under GAAP.
We also adjust our results to gross up tax-exempt revenue on certain securities to a TEB, being the amount of fully taxable revenue, which,
were it to have incurred tax at the statutory income tax rate, would yield the same after-tax revenue. See the “Strategic business units overview”
section and Note 31 to our consolidated financial statements for further details.
Adjusted diluted EPS
We adjust our reported diluted EPS to remove the impact of items of note, net of income taxes, to calculate the adjusted EPS.
Adjusted efficiency ratio
We adjust our reported revenue and non-interest expenses to remove the impact of items of note and gross up tax-exempt revenue to bring it to a
TEB, to calculate the adjusted efficiency ratio.
Adjusted operating leverage
We adjust our reported revenue and non-interest expenses to remove the impact of items of note and gross up tax-exempt revenue to bring it to a
TEB, to calculate the adjusted operating leverage.
Adjusted dividend payout ratio
We adjust our reported net income attributable to common shareholders to remove the impact of items of note, net of income taxes, to calculate the
adjusted dividend payout ratio.
Adjusted return on common shareholders’ equity
We adjust our reported net income attributable to common shareholders to remove the impact of items of note, net of income taxes, to calculate the
adjusted ROE.
Adjusted effective tax rate
We adjust our reported income before income taxes and reported income taxes to remove the impact of items of note, to calculate the adjusted
effective tax rate.
Pre-provision, pre-tax earnings
Pre-provision, pre-tax earnings is calculated as revenue net of non-interest expenses, and provides the reader with an assessment of our ability to
generate earnings to cover credit losses through the credit cycle, as well as an additional basis for comparing underlying business performance
between periods by excluding the impact of provision for credit losses, which involves the application of judgments and estimates related to matters
that are uncertain and can vary significantly between periods. We adjust our pre-provision, pre-tax earnings to remove the impact of items of note to
calculate the adjusted pre-provision, pre-tax earnings. As discussed above, we believe that adjusted measures provide the reader with a better
understanding of how management assesses underlying business performance and facilitates a more informed analysis of trends.
Allocated common equity
Common equity is allocated to the SBUs based on the estimated amount of regulatory capital required to support their businesses (as determined
for consolidated bank pursuant to OSFI’s regulatory capital requirements and internal targets). Unallocated common equity is reported in Corporate
and Other. Allocating capital on this basis provides a consistent framework to evaluate the returns of each SBU commensurate with the risk
assumed. For additional information, see the “Risks arising from business activities” section.
Segmented return on equity
We use return on equity on a segmented basis as one of the measures for performance evaluation and resource allocation decisions. While return
on equity for total CIBC provides a measure of return on common equity, return on equity on a segmented basis provides a similar metric based on
allocated common equity to our SBUs. As a result, segmented return on equity is a non-GAAP ratio. Segmented return on equity is calculated as net
income attributable to common shareholders for each SBU expressed as a percentage of average allocated common equity, which is the average
of monthly allocated common equity during the period.
CIBC 2021 ANNUAL REPORT 15
Management’s discussion and analysis
The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a consolidated basis.
$ millions, for the year ended October 31
Operating results – reported
Total revenue
Provision for credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income attributable to non-controlling interests
Net income attributable to equity shareholders
Diluted EPS ($)
Impact of items of note (1)
Revenue
2021
2020
2019
2018
2017
$ 20,015
158
11,535
8,322
1,876
6,446
17
6,429
$ 18,741 $ 18,611 $ 17,834 $ 16,280
829
9,571
870
10,258
2,489
11,362
1,286
10,856
4,890
1,098
3,792
2
3,790
6,469
1,348
5,121
25
5,096
6,706
1,422
5,284
17
5,267
5,880
1,162
4,718
19
4,699
$ 13.93
$
8.22 $ 11.19 $ 11.65 $ 11.24
$
Settlement of certain income tax matters (2)
Purchase accounting adjustments (3)
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from
$
the Barbados government debt restructuring (2)
Gain on the sale and lease back of certain retail properties
Fees and charges related to the launch of Simplii Financial and the related wind-down of
President’s Choice Financial
Impact of items of note on revenue
Provision for (reversal of) credit losses
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from
the Barbados government debt restructuring (2)
Transaction and integration-related costs as well as purchase accounting adjustments (3)
Increase (decrease) in collective allowance (4)
Impact of items of note on provision for (reversal of) credit losses
Non-interest expenses
Amortization of acquisition-related intangible assets (5)
Transaction and integration-related costs as well as purchase accounting adjustments (3)
Charge related to the consolidation of our real estate portfolio (2)
Gain as a result of plan amendments related to pension and other post-employment plans (2)
Restructuring charge (6)
Goodwill impairment (7)
Increase in legal provisions (2)
Charge for payment made to Air Canada (8)
Fees and charges related to the launch of Simplii Financial and the related wind-down of
President’s Choice Financial
Impact of items of note on non-interest expenses
Total pre-tax impact of items of note on pre-provision, pre-tax earnings and net income
Settlement of certain income tax matters (2)
Amortization of acquisition-related intangible assets (5)
Transaction and integration-related costs as well as purchase accounting adjustments (3)
Charge related to the consolidation of our real estate portfolio
Gain as a result of plan amendments related to pension and other post-employment plans
Restructuring charge (6)
Increase in legal provisions (2)
Charge for payment made to Air Canada (8)
Incremental losses on debt securities and loans in CIBC FirstCaribbean resulting from
the Barbados government debt restructuring (2)
Charge from net tax adjustments resulting from U.S. tax reforms (2)
Gain on the sale and lease back of certain retail properties
Fees and charges related to the launch of Simplii Financial and the related wind-down of
President’s Choice Financial
Increase (decrease) in collective allowance (4)
Impact of items of note on income taxes
Total after-tax impact of items of note on net income
After-tax impact of items of note on non-controlling interests
After-tax impact of items of note on net income attributable to equity shareholders
–
–
–
–
–
–
–
–
–
–
(79)
(12)
(109)
–
–
–
(125)
–
–
(325)
325
–
19
3
29
–
–
33
–
–
–
–
–
–
84
241
–
241
–
–
–
–
–
–
–
–
–
–
(105)
–
(114)
79
(339)
(248)
(70)
–
–
(797)
797
–
25
–
30
(21)
89
19
–
–
–
–
–
–
142
655
–
655
$
(67) $
(34)
$
–
(63)
–
(9)
–
–
–
(101)
–
–
–
–
(109)
11
–
–
–
(135)
(28)
(227)
–
(488)
387
(18)
27
(12)
–
–
–
7
60
–
–
–
–
–
64
323
–
323
61
–
–
(2)
(28)
–
–
(28)
(115)
(79)
–
–
–
–
–
–
–
(194)
220
–
30
2
–
–
–
–
–
19
(88)
–
–
–
(37)
257
5
252
–
(299)
3
(305)
–
(35)
18
(17)
(41)
(78)
–
–
–
–
(45)
–
(95)
(259)
(29)
–
13
31
–
–
–
12
–
–
–
(54)
27
(5)
24
(53)
–
(53)
Impact of items of note on diluted EPS ($)
$
0.54
$
1.47 $
0.73 $
0.56 $
(0.13)
For footnotes, see next page.
16 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
$ millions, for the year ended October 31
Operating results – adjusted (9)
Total revenue – adjusted (10)
Provision for credit losses – adjusted
Non-interest expenses – adjusted
Income before income taxes – adjusted
Income taxes – adjusted
Net income – adjusted
Net income attributable to non-controlling interests – adjusted
Net income attributable to equity shareholders – adjusted
2021
2020
2019
2018
2017
$ 20,015
158
11,210
$ 18,741
2,489
10,565
$ 18,510
1,286
10,368
$ 17,832
842
10,064
$ 15,975
812
9,312
8,647
1,960
6,687
17
6,670
5,687
1,240
4,447
2
4,445
6,856
1,412
5,444
25
5,419
6,926
1,385
5,541
22
5,519
5,851
1,186
4,665
1 9
4,646
Adjusted diluted EPS ($)
$
14.47
$
9.69
$
11.92
$
12.21
$
11.11
(1) Items of note are removed from reported results to calculate adjusted results.
(2) Recognized in Corporate and Other.
(3) This item of note comprises integration costs, transaction costs and purchase accounting adjustments for various acquisitions. Transaction and integration costs, shown as
an item of note starting in the fourth quarter of 2021, are comprised of direct and incremental costs incurred as part of planning for and executing the integration of the
Canadian Costco credit card portfolio, including enabling cross-sell opportunities, the upgrade and conversion of systems and processes, project management and
communication costs. Integration costs, shown as an item of note from second quarter of 2017 to fourth quarter of 2019, are comprised of direct and incremental costs
incurred as part of planning for and executing the integration of the businesses of The PrivateBank (subsequently rebranded as CIBC Bank USA) and Geneva Advisors
with CIBC, including enabling cross-sell opportunities and expansion of services in the U.S. market, the upgrade and conversion of systems and processes, project
management, integration-related travel, severance, consulting fees and marketing costs related to rebranding activities. Transaction costs, shown as an item of note from
second quarter of 2017 to fourth quarter of 2019, included legal and other advisory fees, as well as financing costs associated with pre-funding the cash component of the
merger consideration, and interest adjustments relating to the obligation payable to dissenting shareholders. Purchase accounting adjustments, shown as an item of note
from fourth quarter of 2017 to fourth quarter of 2019, include the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank, the
collective allowance established for new loan originations and renewals of acquired loans (prior to the adoption of IFRS 9 in the first quarter of 2018), and changes in the
fair value of contingent consideration relating to the Geneva Advisors and Wellington Financial acquisitions.
(4) Relates to collective allowance (prior to the adoption of IFRS 9), except for: (i) residential mortgages greater than 90 days delinquent; (ii) personal loans and scored small
business loans greater than 30 days delinquent; (iii) net write-offs for the card portfolio; and (iv) the collective allowance related to CIBC Bank USA, which were all reported
in the respective SBUs.
(5) Amortization of acquisition-related intangible assets is recognized in the SBU of the acquired business or Corporate and Other. A summary is provided in the table below.
Canadian Personal and Business Banking (pre-tax)
Canadian Personal and Business Banking (after-tax)
$
Canadian Commercial Banking and Wealth Management (pre-tax)
Canadian Commercial Banking and Wealth Management (after-tax)
U.S. Commercial Banking and Wealth Management (pre-tax)
U.S. Commercial Banking and Wealth Management (after-tax)
Corporate and Other (pre-tax)
Corporate and Other (after-tax)
$
–
–
–
–
(68)
(50)
(11)
(10)
$
$
(8)
(6)
(1)
(1)
(83)
(61)
(13)
(12)
(9)
(7)
(1)
(1)
(88)
(65)
(11)
(9)
$
(12)
(9)
(1)
(1)
(91)
(65)
(11)
(10)
(5)
(4)
(1)
(1)
(27)
(16)
(8)
(7)
(6) Restructuring charge associated with ongoing efforts to transform our cost structure and simplify our bank. This charge consists primarily of employee severance and
related costs and was recognized in Corporate and Other.
(7) Goodwill impairment charge related to our controlling interest in CIBC FirstCaribbean recognized in Corporate and Other with $28 million recognized in the second quarter
of 2020, $220 million recognized in the fourth quarter of 2020 and $135 million recognized in the fourth quarter of 2019.
(8) Charge for a payment made to Air Canada, including related sales tax and transaction costs, to secure our participation in its new loyalty program recognized in Canadian
Personal and Business Banking.
(9) Adjusted to exclude the impact of items of note.
(10) Excludes TEB adjustments of $204 million (2020: $183 million; 2019: $179 million). Our adjusted operating leverage and efficiency ratio are calculated on a TEB.
The following table provides a reconciliation of GAAP (reported) net income to non-GAAP (adjusted) net income on a segmented basis.
$ millions, for the year ended October 31
2021
Reported net income (loss)
After-tax impact of items of note (1)
Adjusted net income (loss) (2)
2020 (3) Reported net income (loss)
After-tax impact of items of note (1)
Adjusted net income (loss) (2)
2019 (3) Reported net income (loss)
After-tax impact of items of note (1)
Adjusted net income (loss) (2)
2018
Reported net income (loss)
After-tax impact of items of note (1)
Adjusted net income (loss) (2)
2017
Reported net income (loss)
After-tax impact of items of note (1)
Adjusted net income (loss) (2)
Canadian
Personal and
Business Banking
Canadian
Commercial Banking
and Wealth
Management
U.S.
Commercial Banking
and Wealth
Management
Capital
Markets
Corporate
and Other
CIBC
Total
$ 2,494
9
$ 2,503
$ 1,785
6
$ 1,791
$ 2,126
174
$ 2,300
$ 2,540
9
$ 2,549
$ 2,420
(170)
$ 2,250
$ 1,665
–
$ 1,665
$ 1,202
1
$ 1,203
$ 1,287
1
$ 1,288
$ 1,286
1
$ 1,287
$ 1,138
1
$ 1,139
$ 926
50
$ 1,857
–
$ 976
$ 1,857
$ 375
61
$ 1,308
–
$ 436
$ 1,308
$ 648
40
$ 1,117
–
$ 688
$ 1,117
$ 561
27
$ 1,086
–
$ 588
$ 1,086
$ 203
19
$ 1,090
–
$ 222
$ 1,090
$
$
$
$
$
$
$
$
$
$
(496) $ 6,446
241
182
(314) $ 6,687
(878) $ 3,792
655
587
(291) $ 4,447
(57) $ 5,121
323
108
51
$ 5,444
(189) $ 5,284
257
220
31
$ 5,541
(133) $ 4,718
(53)
97
(36) $ 4,665
(1) Items of note are removed from reported results to calculate adjusted results.
(2) Non-GAAP measure.
(3) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
CIBC 2021 ANNUAL REPORT 17
Management’s discussion and analysis
Strategic business units overview
CIBC has four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial
Banking and Wealth Management, and Capital Markets. These SBUs are supported by the following functional groups – Technology, Infrastructure
and Innovation, Risk Management, People, Culture and Brand, Finance and Enterprise Strategy, as well as other support groups, which all are
included within Corporate and Other. The expenses of these functional and support groups are generally allocated to the business lines within the
SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the U.S. Commercial Banking and Wealth
Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic investments, as well as other income
statement and balance sheet items not directly attributable to the business lines.
External reporting changes were made in the first quarter of 2021 which affected the results of our SBUs. See the “External reporting changes”
section for additional details.
Business unit allocations
Revenue, expenses, and other balance sheet resources related to certain activities are generally allocated to the lines of business within the SBUs.
Treasury activities impact the financial results of the SBUs. Each line of business within our SBUs is charged or credited with a market-based
cost of funds on assets and liabilities, respectively, which impacts the revenue performance of the SBUs. This market-based cost of funds takes into
account the cost of maintaining sufficient regulatory capital to support business requirements, including the cost of preferred shares. Once the
interest and liquidity risks inherent in our client-driven assets and liabilities are transfer priced into Treasury, they are managed within CIBC’s risk
framework and limits. Consistent with the external reporting changes made in the first quarter of 2021 (see the “External reporting changes” section
for additional details), the residual financial results associated with Treasury activities are reported in Corporate and Other. Capital is attributed to
the SBUs based on the estimated amount of regulatory capital required to support their businesses, which is intended to consistently measure and
align the costs with the underlying benefits and risks associated with SBU activities. Earnings on unattributed capital remain in Corporate and Other.
We review our transfer pricing methodologies on an ongoing basis to ensure they reflect changing market environments and industry practices.
We use a Product Owner/Customer Segment/Distributor Channel allocation management model to measure and report the results of
operations of various lines of business within our SBUs. The model uses certain estimates and methodologies to process internal transfers between
the impacted lines of business for sales, renewals and trailer commissions as well as certain attributable costs. Periodically, the sales, renewals and
trailer commission rates paid to customer segments for certain products/services are revised and applied prospectively.
The non-interest expenses of the functional and support groups are generally allocated to the business lines within the SBUs based on
appropriate criteria and methodologies. The basis of allocation is reviewed periodically to reflect changes in support to business lines. Other costs
not directly attributable to business lines remain in Corporate and Other.
We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs.
Revenue, taxable equivalent basis
Certain SBUs evaluate revenue on a TEB. In order to arrive at the TEB amount, the SBUs gross up tax-exempt revenue on certain securities to a
TEB, being the amount of fully taxable revenue, which, were it to have incurred tax at the statutory income tax rate, would yield the same after-tax
revenue. Simultaneously, an equivalent amount is booked as an income tax expense resulting in no impact on the net income of the SBUs. This
measure enables comparability of revenue arising from both taxable and tax-exempt sources. The total TEB adjustments of the SBUs are offset in
revenue and income tax expense in Corporate and Other.
18 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Canadian Personal and Business Banking
Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, services and solutions
through banking centres, digital and mobile channels to help make their ambitions a reality.
Our business strategy
We are focused on continuing to help our clients achieve their ambitions, and delivering sustainable, market-leading performance. To achieve this,
our strategy comprises three key priorities:
Introducing more opportunities for our clients to deal with us digitally by investing in digital and real-time remote capabilities;
Providing our team with the tools to deliver an excellent experience for our clients consistent with a one-team approach; and
Delivering personalized advice and experiences to our clients in a way that is meaningful and relevant to each of them.
2021 progress
In 2021, we demonstrated positive momentum, despite the economic challenges and lower client transaction activity due to the COVID-19
pandemic. While demand for certain lending products was down, we saw a significant increase in mortgage demand this year as we helped more
clients achieve their ambition of owning a home. We also delivered above market growth in everyday banking and investments solutions. As a result
of our strategy, we have seen record client growth driven by strong acquisition and client retention, and made important investments to elevate both
the experience of our clients and our team members. We will continue to maintain focus on our three strategic priorities and build on the momentum
and successes of 2021.
Introducing more opportunities for our clients to deal with us digitally
Ranked #1 again in Digital Satisfaction for Mobile Banking by J.D. Power; #1 in mobile banking experience in Surviscor’s 2021 Mobile Banking
Review; #1 ranking in Forrester’s Digital Experience Review: Canadian Mobile Banking App Review; and named Best Consumer Digital Bank in
North America by Global Finance for the second consecutive year.
Launched CIBC Virtual Assistant for online and mobile clients, helping them answer their everyday banking questions in real-time.
Introduced CIBC Insights, a digital financial coach that provides recommendations to help clients keep a pulse on their day-to-day finances.
Launched Digital Identity Verification and FastApp, streamlining how clients open chequing and savings accounts, a personal line of credit, or
a credit card digitally.
Introduced more digital options for clients to renew their mortgage online, including an enhanced online pre-qualification tool.
Enabled digital card issuance, so clients can receive a new or replacement digital credit card within minutes in the event their card is lost or
stolen.
Providing our team with the tools to deliver an excellent experience for our clients
Continued the rollout of CIBC GoalPlanner, a digitally enabled goal setting platform, allowing our Imperial Service advisors to better
understand our clients’ ambitions and to spend more time with them developing plans.
Introduced a new client relationship management tool, enabling advisors to offer more personalized advice and deepen client relationships.
Delivered a more integrated advice experience at our banking centres, including introducing a new Associate Financial Advisor role to support
clients with complex financial needs.
Extended our newcomer banking offer to include foreign workers and expanded our outreach, including a Newcomer Financial Guide in
partnership with Canadian Immigrant magazine.
Refreshed our Dividend Visa Cards with a new set of cashback categories, and introduced on-demand points redemption.
Delivering personalized advice to our clients in a way that is meaningful to them
Announced an agreement to become the exclusive issuer of Costco-branded Mastercards in Canada, expected to close in the first half of
fiscal 2022, and the acquisition of the existing Canadian Costco credit card portfolio, reflecting our focus on growing our Canadian consumer
franchise.
Expanded our business banking specialist team in support of our focus on entrepreneurs at all life stages, including the launch of Canada’s
first banking platform for Black-owned businesses.
Helped clients build financial knowledge and confidence by offering virtual seminars and education focused on a range of topics such as,
women and wealth, home ownership, as well as tax and estate planning for the LGBTQ+ community.
Grew our mobile mortgage advisor workforce while strengthening our market position through a strategic partnership with REMAX.
Ranked #1 on Investment Executive 2021 Report Card on Banks, for the sixth consecutive year.
Helped our clients meet their personal climate ambitions with solutions such as offering a carbon offset for their gas purchases through the
Parkland Journie Rewards program.
CIBC 2021 ANNUAL REPORT 19
Management’s discussion and analysis
2021 financial review
Revenue(1)
($ billions)
8.2
7.9
8.2
Net income(1)
($ millions)
Operating leverage
(%)
2,494
2,126
1,785
(5.9)
(0.5)
0.4
Average loans and
acceptances(1)(2)(3)
($ billions)
247.1 250.3
270.3
Average deposits(1)(3)
($ billions)
187.9
170.8
156.8
19
20
21
19
20
21
19
20
21
19
20
21
19
20
21
(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(2) Loan amounts are stated before any related allowances.
(3) Average balances are calculated as a weighted average of daily closing balances.
Our focus for 2022
In Canadian Personal and Business Banking our objective is to deliver sustainable, market-leading performance with a focus on helping our clients
achieve their ambitions. Our strategy remains centred on three key priorities:
Introduce more opportunities for our clients to deal with us digitally;
Provide our team with the tools to deliver an excellent experience for our clients; and
Deliver personalized advice to our clients in a way that is meaningful to them.
Results(1)
$ millions, for the year ended October 31
Revenue
Provision for (reversal of) credit losses
Impaired
Performing
Provision for credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income attributable to:
Equity shareholders
Efficiency ratio
Operating leverage
Return on equity (3)
Average allocated common equity (3)
Average assets ($ billions) (4)
Average loans and acceptances ($ billions) (4)
Average deposits ($ billions) (4)
Full-time equivalent employees
2021
2020 (2)
2019 (2)
$
8,150
$
7,922
$
8,240
484
(134)
350
4,414
3,386
892
625
564
1,189
4,308
2,425
640
790
99
889
4,459
2,892
766
$
2,494
$
1,785
$
2,126
$
2,494
$
1,785
$
2,126
54.2 %
0.4 %
38.1 %
54.4 %
(0.5)%
27.1 %
$
$
$
$
6,554
272.6
270.3
187.9
12,629
$
$
$
$
6,591
253.0
250.3
170.8
12,437
54.1 %
(5.9)%
34.3 %
$
$
$
$
6,192
249.5
247.1
156.8
13,013
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(3) For additional information, see the “Non-GAAP measures” section.
(4) Average balances are calculated as a weighted average of daily closing balances.
Financial overview
Net income was up $709 million or 40% from 2020, primarily due to lower provision for credit losses and higher revenue, partially offset by higher
non-interest expenses.
Revenue
Revenue was up $228 million or 3% from 2020, primarily due to volume growth and higher fee income, partially offset by lower product spreads
largely as a result of changes in the interest rate environment.
Provision for credit losses
Provision for credit losses was down $839 million or 71% from 2020. The current year included a provision reversal on performing loans mainly due
to a favourable change in economic conditions as well as our economic outlook partially offset by model parameter updates, while the prior year
included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the COVID-19 pandemic.
Provision for credit losses on impaired loans was down as the current year continued to benefit from higher levels of consumer liquidity from lower
relative levels of spending and from government support programs, while the prior year included a normal level of loan losses prior to the onset of
the pandemic.
Non-interest expenses
Non-interest expenses were up $106 million or 2% from 2020, primarily due to higher spending on strategic initiatives and performance-related
compensation, partially offset by a favourable commodity tax adjustment in the current year.
Income taxes
Income taxes were up $252 million or 39% from 2020, primarily due to higher income.
Average assets
Average assets were up $19.6 billion or 8% from 2020, primarily due to growth in residential mortgages.
20 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Canadian Commercial Banking and Wealth Management
Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services to
middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to
institutional investors.
Our business strategy
We are focused on building and enhancing client relationships, being Canada’s leader in financial advice and generating long-term consistent
growth. To deliver on this, our three key strategic priorities are:
Accelerating the growth of Private Wealth Management;
Evolving our Asset Management business in response to client needs; and
Delivering focused, risk-controlled growth in our Commercial Bank.
2021 progress
In 2021, as the economy began transitioning to a post-pandemic environment, we continued to stay close to our clients, helping them navigate
through the ongoing economic recovery. Commercial Banking saw record loan growth among existing clients, driven by an improved economic
outlook as well as strong new client activity. Private Wealth Management saw significant growth in asset balances driven by market appreciation,
record mutual fund sales, strong referral activity across our internal teams and an increased level of activity by clients.
Accelerating the growth of Private Wealth Management
Increased recruitment of top talent across Private Wealth Management to broaden and deepen client relationships and accelerate market
share growth.
Launched exclusive banking offers for clients in key market segments to deepen existing and onboard new relationships.
Launched CIBC Family Office services to support ultra-high net worth clients through wealth transitions within the family and through privately-
owned business sales.
Increased partner referrals activity across the bank to help clients fulfill their broader wealth needs.
The Globe and Mail named 35 CIBC Wood Gundy advisors to its inaugural ranking of Canada’s Top Wealth Advisors list.
Evolving our Asset Management business in response to client needs
Met the investment needs of our mass affluent, core banking and high net worth clients, resulting in record net flows in long-term mutual fund
sales.
Launched Sustainable Investment Solution mutual funds to align with our bank-wide ESG efforts, as well as client demand, where a percentage
of our revenues are donated to organizations supporting climate transition activities.
Founding signatory of Climate Engagement Canada and the Responsible Investment Association Canadian Investor Statement on Climate
Change as part of our bank’s ongoing efforts to address global climate change and to support investor demand for ESG-focused products.
Refinitiv Lipper Funds Awards recognized four CIBC Asset Management funds for industry-leading performance.
Delivering focused, risk-controlled growth in our Commercial Bank
Enhanced our offers to address the needs of the smaller end of the commercial banking market in high growth industries such as healthcare,
technology, business services and franchising.
Further expanded CIBC Innovation Banking across Canada, the U.S., and most recently in the U.K., to meet the needs of fast-growing and
innovative industries such as technology, life sciences and venture capital funds.
Global Finance Magazine named CIBC Canada’s Best Treasury and Cash Management Bank for the sixth time.
2021 financial review
Revenue
($ billions)
4.7
4.0
4.1
Net income
($ millions)
Operating leverage
(%)
Average loans(1)(2)
($ billions)
Average deposits(2)
($ billions)
1,665
3.1
1,287
1,202
64.7
68.2
72.8
83.6
71.1
60.2
1.2
(1.1)
19
20
21
19
20
21
19
20
21
19
20
21
19
20
21
Average commercial
banking loans(1)(2)(3)
($ billions)
Average commercial
banking deposits(2)
($ billions)
62.6
66.3
70.7
75.3
64.1
54.9
Assets under
administration and
management(4)
($ billions)
Canadian retail mutual
funds and exchange-
traded funds
($ billions)
356.6
289.1 287.7
135.0
108.9 111.4
19
20
21
19
20
21
19
20
21
19
20
21
230.3
188.9
182.4
(1) Loan amounts are stated before any related allowances.
(2) Average balances are calculated as a weighted average of daily closing balances.
(3) Comprises loans and acceptances and notional amount of letters of credit.
(4) AUM amounts are included in the amounts reported under AUA.
AUM
CIBC 2021 ANNUAL REPORT 21
Management’s discussion and analysis
Our focus for 2022
In Commercial Banking and Wealth Management, our ambition is to become the leader in financial advice to both personal and business clients. We
remain focused on three strategic priorities:
Accelerate the growth of Private Wealth Management to broaden and deepen client relationships;
Evolve our Asset Management business to increase connectivity within our own bank channels and continue to extend our investment
capabilities and fee structures to meet evolving client needs; and
Delivering risk-controlled growth in our Commercial Bank, while fostering strong referrals across CIBC.
Results(1)
$ millions, for the year ended October 31
Revenue
Commercial banking
Wealth management
Total revenue
Provision for (reversal of) credit losses
Impaired
Performing
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income attributable to:
Equity shareholders
Efficiency ratio
Operating leverage
Return on equity (2)
Average allocated common equity (2)
Average assets ($ billions) (3)
Average loans ($ billions) (3)
Average deposits ($ billions) (3)
AUA ($ billions)
AUM ($ billions)
Full-time equivalent employees
2021
2020
2019
$ 1,827
2,843
4,670
6
(45)
(39)
2,443
2,266
601
$ 1,663
2,458
$ 1,633
2,394
4,121
162
141
303
2,179
1,639
437
4,027
159
4
163
2,106
1,758
471
$ 1,665
$ 1,202
$ 1,287
$ 1,665
$ 1,202
$ 1,287
52.3 %
1.2 %
24.5 %
52.9 %
(1.1)%
18.6 %
52.3 %
3.1 %
21.7 %
$ 6,794
70.1
$
72.8
$
$
83.6
$ 356.6
$ 230.3
5,241
$ 6,454
65.8
$
68.2
$
$
71.1
$ 287.7
$ 188.9
4,984
$ 5,929
62.6
$
64.7
$
$
60.2
$ 289.1
$ 182.4
5,048
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) For additional information, see the “Non-GAAP measures” section.
(3) Average balances are calculated as a weighted average of daily closing balances.
Financial overview
Net income was up $463 million or 39% from 2020, primarily due to higher revenue and a provision reversal in the current year compared with a
provision for credit losses in the prior year, partially offset by higher non-interest expenses.
Revenue
Revenue was up $549 million or 13% from 2020.
Commercial banking revenue was up $164 million or 10%, primarily due to higher fees and volume growth, partially offset by lower product spreads.
Wealth management revenue was up $385 million or 16%, primarily due to higher fee-based revenue driven by higher average AUA and AUM
reflecting market appreciation and net sales, and higher commission revenue from increased client activity.
Provision for credit losses
The current year included a reversal of credit losses of $39 million, while the prior year included a provision for credit losses of $303 million. The
current year included a provision reversal on performing loans due to a favourable change in economic conditions as well as our economic outlook,
while the prior year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the
COVID-19 pandemic. Provision for credit losses on impaired loans was down as the prior year was impacted by the onset of the COVID-19
pandemic and provisions related to one fraud-related impairment.
Non-interest expenses
Non-interest expenses were up $264 million or 12% from 2020, primarily due to higher performance-based compensation.
Income taxes
Income taxes were up $164 million or 38% from 2020, primarily due to higher income.
Average assets
Average assets were up $4.3 billion or 6% from 2020, primarily due to growth in commercial loans.
Assets under administration
AUA were up $68.9 billion or 24% from 2020, primarily due to market appreciation and net sales. AUM amounts are included in the amounts
reported under AUA.
22 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
U.S. Commercial Banking and Wealth Management
U.S. Commercial Banking and Wealth Management provides commercial banking and private wealth services across the U.S., as well as personal
and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and
high-net-worth individuals and families.
Our business strategy
Our goal is to continue building a best-in-class commercial and wealth management financial institution in the U.S., with seamless connectivity to
our Capital Markets and Canadian Commercial Banking and Wealth Management franchise. Our key strategic priorities, which have evolved over
the year, are:
Building and deepening client relationships;
Strengthening and diversifying our deposit base;
Improving efficiency through data and technology; and
Advancing the growth and transformation of our business.
2021 progress
In 2021, our continued focus on deep-rooted relationship banking helped attract new clients and guide existing relationships through a challenging
economic environment. This approach continues to generate strong loan, deposit and AUM/AUA growth, which coupled with prudent investments,
helped mitigate revenue pressures associated with margin compression experienced throughout the industry. Our offering of products and services
continues to expand as we leverage cross-border capabilities and maintain investment in improving processes, technology and meeting client needs.
Building and deepening client relationships
Drove solid loan and deposit growth given market conditions, including continued expansion of our private banking business with existing
commercial and wealth clients.
Supported our clients who faced continued headwinds as a result of the pandemic with an additional $500 million of Paycheck Protection
Program (PPP) financing in the first half of fiscal 2021.
Generated strong growth in AUM and AUA, bolstered by the performance of our investment strategies and net inflows, driving asset
management fees to nearly 50% of non-interest income for the year.
Leveraged our strong partnership with our Capital Markets franchise to provide a wider range of products and services to U.S. commercial
and wealth clients.
Recognized as Retail Banking and Commercial Banking Client Experience leaders by Coalition Greenwich.
Ranked as a Top Five Registered Investment Advisor by Barron’s for the second straight year.
Strengthening and diversifying our deposit base
Maintained a diversified funding strategy through our commercial, private banking and retail clients.
Continued growth in private banking, expanding the team and introducing online account opening for private banking clients.
Expanded deposit gathering, including with our specialty commercial banking and institutional real estate clients.
Improving efficiency through data and technology
Advanced the implementation of customer relationship management (CRM) and data strategy initiatives to further the connectivity between
teams, provide a consolidated view of our businesses and support a strong risk management infrastructure.
Continued to refine client-facing processes, making it easier for clients to bank with us, including adding online account opening capabilities
for consumer clients, introducing card control features to consumer mobile banking and enhancing our servicing platform for our commercial
banking clients.
Advancing the growth and transformation of our business
Expanded Commercial Real Estate banking in the southeast U.S. region.
Further enhanced our risk and change management infrastructure to support our growth.
CIBC 2021 ANNUAL REPORT 23
Management’s discussion and analysis
2021 financial review
Revenue(1)
(US$ billions)
1.7
1.5
1.4
Net income(1)
($ millions)
926
648
375
Net income(1)
(US$ millions)
739
487
282
Operating leverage
(% in U.S. dollars)
8.5
5.6
(0.3)
19
20
21
19
20
21
19
20
21
19
20
21
Average loans(1)(2)(3)
(US$ billions)
Average deposits(1)(3)
(US$ billions)
31.6
33.0
26.9
33.0
25.7
19.7
Average commercial
banking loans(2)(3)
(US$ billions)
27.6 27.9
24.4
19
20
21
19
20
21
19
20
21
(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(2) Loan amounts are stated before any related allowances.
(3) Average balances are calculated as a weighted average of daily closing balances.
(4) AUM amounts are included in the amounts reported under AUA.
Assets under
administration and
management(4)
(US$ billions)
100.6
73.3
68.1
77.9
57.4
52.2
19
20
21
AUM
Our focus for 2022
To build on our momentum across U.S. Commercial Banking and Wealth Management, we will continue to focus on helping our clients achieve their
ambitions by:
Building and deepening client relationships through referral activity across all businesses, disciplined growth in Commercial Banking and
greater scale in Private Wealth Management;
Strengthen and diversify our deposit base by leveraging private banking services for commercial and wealth clients and continued growth in
regional expansion markets such as Florida and Texas;
Improve efficiency through data and technology to support growth, modernizing consumer and commercial digital platforms and enhancing
data-driven decision making; and
Advance the transformation of our business through continued investment in people, infrastructure and growth initiatives.
24 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Results in Canadian dollars(1)
$ millions, for the year ended October 31
Revenue
Commercial banking
Wealth management (3)
Total revenue (4)(5)
Provision for (reversal of) credit losses
Impaired
Performing
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes (5)
Net income
Net income attributable to:
Equity shareholders
Average allocated common equity (6)
Average assets ($ billions) (7)
Average loans ($ billions) (7)
Average deposits ($ billions) (7)
AUA ($ billions) (8)
AUM ($ billions) (8)
Full-time equivalent employees
2021
2020 (2)
2019 (2)
$ 1,444
750
2,194
104
(179)
(75)
1,121
1,148
222
926
926
$
$
$ 8,975
46.7
$
41.4
$
$
41.4
$ 124.5
96.4
$
2,170
$ 1,421
622
2,043
133
354
487
1,126
430
55
375
375
$
$
$ 9,196
48.2
$
42.5
$
34.6
$
97.6
$
76.4
$
2,085
$ 1,300
611
1,911
68
5
73
1,114
724
76
648
648
$
$
$ 8,533
41.2
$
35.7
$
26.1
$
89.7
$
68.8
$
2,095
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(3) Includes revenue related to the U.S. Paycheck Protection Program.
(4) Included $15 million of income relating to the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank (2020: $20 million; 2019:
$35 million).
(5) Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of nil (2020: nil; 2019: $2 million). The equivalent
amounts are offset in the revenue and income taxes of Corporate and Other.
(6) For additional information, see the “Non-GAAP measures” section.
(7) Average balances are calculated as a weighted average of daily closing balances.
(8) Includes certain Canadian Commercial Banking and Wealth Management assets that U.S. Commercial Banking and Wealth Management provides sub-advisory services
for.
Results in U.S. dollars(1)
US$ millions, for the year ended October 31
Revenue
Commercial banking
Wealth management (3)
Total revenue (4)(5)
Provision for (reversal of) credit losses
Impaired
Performing
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes (5)
Net income
Net income attributable to:
Equity shareholders
Efficiency ratio
Operating leverage
Return on equity (6)
Average allocated common equity (6)
Average assets ($ billions) (7)
Average loans ($ billions) (7)
Average deposits ($ billions) (7)
AUA ($ billions) (8)
AUM ($ billions) (8)
2021
1,151
597
1,748
82
(143)
(61)
893
916
177
739
739
$
$
$
2020 (2)
2019 (2)
$
1,056
464
1,520
$
978
460
1,438
99
259
358
838
324
42
282
282
$
$
52
3
55
838
545
58
487
487
$
$
51.1 %
8.5 %
10.3 %
55.1 %
5.6 %
4.1 %
58.3 %
(0.3) %
7.6 %
$ 7,149.0
37.2
$
33.0
$
33.0
$
100.6
$
77.9
$
$ 6,841.0
35.9
$
31.6
$
25.7
$
73.3
$
57.4
$
$ 6,419.0
31.0
$
26.9
$
19.7
$
68.1
$
52.2
$
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(3) Includes revenue related to the U.S. Paycheck Protection Program.
(4) Included US$12 million of income relating to the accretion of the acquisition date fair value discount on the acquired loans of The PrivateBank (2020: US$15 million; 2019:
US$25 million).
(5) Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of nil (2020: nil; 2019: US$2 million). The equivalent
amounts are offset in the revenue and income taxes of Corporate and Other.
(6) For additional information, see the “Non-GAAP measures” section.
(7) Average balances are calculated as a weighted average of daily closing balances.
(8) Includes certain Canadian Commercial Banking and Wealth Management assets that U.S. Commercial Banking and Wealth Management provides sub-advisory services
for.
CIBC 2021 ANNUAL REPORT 25
Management’s discussion and analysis
Financial overview
Net income was up $551 million (US$457 million) or 147% from 2020, primarily due to a provision reversal in the current year compared with a
provision for credit losses in the prior year and higher revenue.
Revenue
Revenue was up US$228 million or 15% from 2020.
Commercial banking revenue was up US$95 million or 9%, primarily due to volume growth and higher fees, partially offset by lower product
spreads.
Wealth management revenue was up US$133 million or 29%, primarily due to higher fee-based revenue driven by higher average AUA and AUM
reflecting market appreciation and net sales, higher product spreads, partially driven by loans made under the U.S. Paycheck Protection Program,
and volume growth.
Provision for credit losses
The current year included a reversal of credit losses of US$61 million while the prior year included a provision for credit losses of US$358 million.
The current year included a provision reversal on performing loans due to a favourable change in economic conditions as well as our economic
outlook, while the prior year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the
COVID-19 pandemic. Provision for credit losses on impaired loans was down as the prior year was impacted by the onset of the COVID-19
pandemic.
Non-interest expenses
Non-interest expenses were up US$55 million or 7% from 2020, primarily due to higher employee-related compensation, partially offset by lower
business development costs and the timing of spending on strategic initiatives.
Income taxes
Income taxes were up US$135 million or 321% from 2020, primarily due to higher income.
Average assets
Average assets were up US$1.3 billion or 4% from 2020, primarily due to growth in loans.
Assets under administration
AUA were up US$27.3 billion or 37% from 2020, primarily due to market appreciation and net sales. AUM amounts are included in the amounts
reported under AUA.
26 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Capital Markets
Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking solutions
and top-ranked research to our clients around the world. It includes Direct Financial Services which focuses on expanding CIBC’s digitally enabled
capabilities to provide a cohesive set of direct banking, direct investing and innovative multi-currency payment solutions for CIBC’s clients.
Our business strategy
Our goal is to deliver leading capital markets solutions to our North American and international clients by providing best-in-class insight, advice and
execution. To enable CIBC’s strategy and priorities, we collaborate with our partners across our bank to deepen and enhance client relationships.
Our three key strategic priorities are:
Being the leading capital markets platform in Canada for our core clients;
Building a North American client platform with global capabilities; and
Increasing connectivity across CIBC to deliver greater value and a better experience for our clients.
2021 progress
In 2021, we continued to make progress on our strategic priorities with an emphasis on deepening client relationships, growing in the U.S. and
enhancing connectivity across the bank. Collectively, these efforts have built a well-diversified Capital Markets business that delivers consistent
performance and growth. Our growth in 2021 was enabled by our strong focus on our clients, favourable market conditions for investment banking
and corporate banking activity, and continuing strong performance in Global Markets. In addition, we further expanded our Direct Financial Services
business to generate more fee-based revenue and attract new clients seeking a self-serve, digitally enabled banking and investing model.
Being the leading capital markets platform in Canada for our core clients
Established a new Energy, Infrastructure and Transition investment banking group with a global focus on delivering industry-leading advice
and capital markets solutions to clients across the full infrastructure and energy spectrum, and enabling the transition to a lower carbon future.
Continued to support the growth ambitions of our clients emerging from the pandemic, managing their funding and liquidity needs with expert
advice for the long-term.
Strengthened our platform by continuing to invest in talent and technology, including investments in simplifying processes and promoting
talent to foster our client-focused culture.
Recognized as a leader in bond trading in 2021, ranked #1 or #2 in the Investment Industry Regulatory Organization of Canada (IIROC)’s
Monthly Bond Trading Volumes.
Building a North American client platform with global capabilities
Made a strategic investment in Chicago-headquartered financial services firm Loop Capital, which is aligned with our strategy to accelerate
our momentum in the U.S.
Established a leadership position in sustainable finance, acting as a Sustainability Agent on eight sustainability-linked loans (“SLLs”) during
the year and ranking first on the Bloomberg SLL league tables for Canadian issuances for 2021.
Achieved top 10 ranking in financing for the renewable industry across North America for transactions that closed from January 1, 2021 to
September 30, 2021 (North American Renewables League Tables by Inframation).
Partnered with three global banks to launch Project Carbon, a platform that brings liquidity and transparency to the market for carbon credits,
helping to enable the sustainability ambitions of our clients.
Increasing connectivity across CIBC to deliver greater value and a better experience for our clients
Launched the industry-first Canadian Depositary Receipts (CDRs) as part of our ongoing commitment to developing innovative, market-based
solutions that meet investor needs.
Broadened the banking services available to clients through Simplii Financial, including the introduction of a U.S. dollar account and the
rollout of Visa Direct.
Continued to enhance our offerings to clients with services such as Global Money Transfer, and further expanded the capabilities of our
International Student Pay program.
Recognized as a 2021 Canadian FX Service Quality Leader as measured by the Greenwich Quality Index by Canadian Corporations and
Financial Institutional clients.
As a leading capital markets franchise in Canada and banking partner to our clients around the world, Capital Markets acted as:
Financial advisor to Husky Energy on its combination with Cenovus Energy in an all-stock transaction valued at approximately $23.6 billion
(including debt) to create a resilient integrated energy leader that is well positioned to provide superior returns for investors over the long term,
as well as strong environmental, social and governance performance.
Financial Advisor to Intact Financial Corporation (Company) on its acquisition, together with Tryg A/S, of international P&C insurer RSA
Insurance Group Plc for a transaction value of approximately $12.3 billion; joint bookrunner on the underwritten financing package including
£1.465 billion in bridge facilities and a £350 million term loan, sole bookrunner on an increase to the Company’s existing revolving credit facility
from $750 million to $1.5 billion and lead left bookrunner on a $1.25 billion issue of subscription receipts and an aggregate $1.85 billion of notes.
Joint bookrunner and joint lead arranger on a US$1.825 billion 7-year term loan B, US$700 million of 7-year senior secured notes, and
US$1.035 billion of 8-year senior unsecured notes in connection with an acquisition financing and refinancing for Madison IAQ, a portfolio
company of Madison Industries.
Bookrunner on the two largest Canadian initial public offerings (IPOs) of the year: Joint bookrunner on a US$1.1 billion IPO of subordinate
voting shares for TELUS International (Cda) Inc. consisting of a treasury offering and a secondary offering from TELUS Corporation and
Barings Private Equity Asia Group Limited, the largest technology IPO, and lead on a $719 million IPO of subordinate voting shares for
dentalcorp Holdings Ltd., the largest healthcare IPO in Canada.
Joint bookrunner on a number of corporate green bonds including Allied Properties REIT’s $600 million and $500 million green debentures,
Algonquin Power Co.’s $400 million green debentures and BCI Quadreal Realty’s $400 million green notes offerings as well as joint lead
manager for the Province of Ontario’s $1.25 billion green bond and European Investment Bank’s $1 billion maple green bond offerings.
CIBC 2021 ANNUAL REPORT 27
Management’s discussion and analysis
Led the structuring and execution of a number of SLLs in Canada, including acting as the administrative agent, joint bookrunner, and co-
sustainability structuring agent for Enbridge’s $1 billion SLL, the first SLL for a Canadian energy infrastructure client, and acting as
administrative agent, sole bookrunner, and sole sustainability structuring agent for TransAlta Corporation’s $1.25 billion SLL and Enerplus
Corporation’s US$900 million SLL.
2021 financial review
Revenue(1)
($ billions)
4.5
4.1
3.5
Net income(1)
($ millions)
Operating leverage
(%)
1,857
9.6
1,308
1,117
1.7
(2.0)
19
20
21
19
20
21
19
20
21
Average loans and
acceptances(1)
($ billions)
47.8
45.2
40.3
Average deposits(1)
($ billions)
Average value-at-risk (VaR)
($ millions)
86.0
68.0
53.9
8.5
7.6
5.7
Revenue – Direct
financial services
($ millions)
828
710
661
19
20
21
19
20
21
19
20
21
19
20
21
(1) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
Our focus for 2022
To support our bank’s long-term objectives, Capital Markets remains focused on delivering profitable growth by deepening client relationships and
collaborating with our partners across our bank to help make our clients’ ambitions a reality. We will continue to do this by:
Maintaining our focused approach to client coverage in Canada;
Growing our North American platform by further expanding our U.S. reach and broadening the services offered to clients; and
Strengthening our connectivity, technology and innovation efforts to bring more of our bank’s offerings to our clients.
28 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Results(1)
$ millions, for the year ended October 31
Revenue
Global markets
Corporate and investment banking
Direct financial services
Total revenue (3)
Provision for (reversal of) credit losses
Impaired
Performing
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes (3)
Net income
Net income attributable to:
Equity shareholders
Efficiency ratio
Operating leverage
Return on equity (4)
Average allocated common equity (4)
Average assets ($ billions) (5)
Average loans and acceptances ($ billions) (5)
Average deposits ($ billions) (5)
Full-time equivalent employees (6)
2021
2020 (2)
2019 (2)
$ 2,076
1,616
828
4,520
32
(132)
(100)
2,117
2,503
646
$ 1,999
1,344
710
$ 1,583
1,231
661
4,053
121
190
311
1,929
1,813
505
3,475
109
51
160
1,802
1,513
396
$ 1,857
$ 1,308
$ 1,117
$ 1,857
$ 1,308
$ 1,117
46.8 %
1.7 %
25.6 %
$ 7,241
$ 255.1
47.8
$
86.0
$
2,225
47.6 %
9.6 %
18.8 %
$ 6,948
$ 230.2
45.2
$
68.0
$
1,912
51.8 %
(2.0)%
17.5 %
$ 6,399
$ 194.1
40.3
$
53.9
$
1,867
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(3) Revenue and income taxes are reported on a TEB. Accordingly, revenue and income taxes include a TEB adjustment of $204 million (2020: $183 million; 2019:
$177 million). The equivalent amounts are offset in the revenue and income taxes of Corporate and Other.
(4) For additional information, see the “Non-GAAP measures” section.
(5) Average balances are calculated as a weighted average of daily closing balances.
(6) In 2021, 79 full-time equivalent employees related to Simplii Financial’s call centre operations were transferred to Capital Markets from Corporate and Other, with no
financial impact as the costs were previously allocated to Direct financial services.
Financial overview
Net income was up $549 million or 42% from 2020, primarily due to higher revenue and a provision reversal in the current year compared to a
provision for credit losses in the prior year, partially offset by higher non-interest expenses.
Revenue
Revenue was up $467 million or 12% from 2020.
Global markets revenue was up $77 million or 4%, primarily due to higher revenue from our equity derivatives trading business, partially offset by
lower fixed income and foreign exchange trading revenue.
Corporate and investment banking revenue was up $272 million or 20%, primarily due to higher equity and debt underwriting activity, higher
advisory revenue and higher corporate banking revenue.
Direct financial services revenue was up $118 million or 17%, primarily due to higher volumes and growth in our direct trading brokerage, and
innovative foreign exchange and payments business.
Provision for (reversal of) credit losses
The current year included a reversal of credit losses of $100 million while the prior year included a provision for credit losses of $311 million. The
current year included a provision reversal on performing loans due to a favourable change in economic conditions as well as our economic outlook,
while the prior year included a provision for credit losses due to an unfavourable change in our economic outlook relating to the onset of the
COVID-19 pandemic. Provision for credit losses on impaired loans was down as the prior year included higher provisions in the oil and gas sector.
Non-interest expenses
Non-interest expenses were up $188 million or 10% from 2020, primarily due to higher employee-related compensation and the timing of spending
on strategic initiatives.
Income taxes
Income taxes were up $141 million or 28% from 2020, primarily due to higher income.
Average assets
Average assets were up $24.9 billion or 11% from 2020, primarily due to higher securities purchased under resale agreements, higher trading
securities and higher loan balances.
CIBC 2021 ANNUAL REPORT 29
Management’s discussion and analysis
Corporate and Other
Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture and
Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally
allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the
U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic
investments, as well as other income statement and balance sheet items not directly attributable to the business lines.
Results(1)
$ millions, for the year ended October 31
Revenue
International banking
Other
Total revenue (3)
Provision for (reversal of) credit losses
Impaired
Performing
Provision for credit losses
Non-interest expenses
Loss before income taxes
Income taxes (3)
Net income (loss)
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
Full-time equivalent employees
2021
2020 (2)
2019 (2)
$
$
$
687
(206)
481
76
(54)
22
1,440
(981)
(485)
(496)
17
(513)
$
$
$
734
(132)
602
24
175
199
1,820
(1,417)
(539)
(878)
2
(880)
$
$
$
798
160
958
21
(20)
1
1,375
(418)
(361)
(57)
2 5
(82)
23,017
22,435
23,134
(1) For additional segmented information, see Note 31 to the consolidated financial statements.
(2) Certain prior period information has been revised. See the “External reporting changes” section for additional details.
(3) Revenue and income taxes of Capital Markets and U.S. Commercial Banking and Wealth Management are reported on a TEB. The equivalent amounts are offset in the
revenue and income taxes of Corporate and Other. Accordingly, revenue and income taxes include a TEB adjustment of $204 million (2020: $183 million; 2019:
$179 million).
Financial overview
Net loss was down $382 million from 2020, due to lower non-interest expenses and lower provision for credit losses, partially offset by lower revenue.
Revenue
Revenue was down $121 million from 2020.
International banking revenue was down $47 million, primarily due to the impact of foreign exchange translation, and lower U.S. dollar revenue in
CIBC FirstCaribbean driven by lower product spreads, partially offset by higher ECL charges on debt securities in the prior year, volume growth and
higher fees.
Other revenue was down $74 million, primarily due to lower revenue from our strategic investments, interest income in the prior year related to the
settlement of certain income tax matters, a higher TEB adjustment and lower treasury revenue.
Provision for (reversal of) credit losses
Provision for credit losses was down $177 million from 2020. The current year included a reversal of credit losses on performing loans due to a
favourable change in our economic outlook for the Caribbean region, while the prior year included a provision for credit losses due to an
unfavourable change in economic conditions as well as our economic outlook relating to the onset of the COVID-19 pandemic. Provision for credit
losses on impaired loans was up due to higher provisions in CIBC FirstCaribbean.
Non-interest expenses
Non-interest expenses were down $380 million from 2020, as the prior year included a restructuring charge and a goodwill impairment charge,
partially offset by a gain in the prior year as a result of plan amendments related to pension and other post-employment plans, all shown as items of
note. The current year included higher unallocated corporate support costs, donations and legal provisions.
Income taxes
Income tax benefit was down $54 million from 2020, primarily due to a lower loss.
30 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Financial condition
Review of condensed consolidated balance sheet
$ millions, as at October 31
Assets
Cash and deposits with banks
Securities
Securities borrowed and purchased under resale agreements
Loans and acceptances
Derivative instruments
Other assets
Liabilities and equity
Deposits
Obligations related to securities lent, sold short and under repurchase agreements
Derivative instruments
Acceptances
Other liabilities
Subordinated indebtedness
Equity
2021
2020
$
56,997
161,401
79,940
462,879
35,912
40,554
$
62,518
149,046
74,142
416,388
32,730
34,727
$ 837,683
$ 769,551
$ 621,158
97,133
32,101
10,961
24,961
5,539
45,830
$ 570,740
89,440
30,508
9,649
22,167
5,712
41,335
$ 837,683
$ 769,551
Assets
Total assets as at October 31, 2021 were up $68.1 billion or 9% from 2020, net of a decrease of approximately $17 billion due to the depreciation of
the U.S. dollar.
Cash and deposits with banks decreased by $5.5 billion or 9%, primarily due to lower short-term placements in Treasury.
Securities increased by $12.4 billion or 8%, primarily due to increases in corporate equity and debt securities in foreign governments, partially offset
by decreases in debt securities in Canadian governments. Further details on the composition of securities are provided in the “Supplementary
annual financial information” section and Note 5 to the consolidated financial statements.
Securities borrowed and purchased under resale agreements increased by $5.8 billion or 8%, primarily due to client-driven activities.
Net loans and acceptances increased by $46.5 billion or 11%, primarily due to increases in Canadian residential mortgages, and Canadian and
U.S. business and government loans. Further details on the composition of loans and acceptances are provided in the “Supplementary annual
financial information” section and Note 6 to the consolidated financial statements.
Derivative instruments increased by $3.2 billion or 10%, largely driven by increases in other commodity and equity derivatives valuation, partially
offset by a decrease in interest rate derivatives valuation.
Other assets increased by $5.8 billion or 17%, primarily due to increases in broker receivables and collateral pledged for derivatives.
Liabilities
Total liabilities as at October 31, 2021 were up $63.6 billion or 9% from 2020, net of a decrease of approximately $16 billion due to the depreciation
of the U.S. dollar.
Deposits increased by $50.4 billion or 9%, primarily due to increased wholesale funding, increased business and government deposits, and
domestic retail volume growth. Further details on the composition of deposits are provided in the “Supplementary annual financial information”
section and Note 11 to the consolidated financial statements.
Obligations related to securities lent, sold short and under repurchase agreements increased by $7.7 billion or 9%, primarily due to client-driven
activities.
Derivative instruments increased by $1.6 billion or 5%, largely driven by increases in equity and other commodity derivatives valuation, partially
offset by a decrease in interest rate derivatives valuation.
Acceptances increased by $1.3 billion or 14%, driven by client activities.
Other liabilities increased by $2.8 billion or 13%, primarily due to increases in collateral received for derivatives and broker payables.
Subordinated indebtedness decreased by $0.2 billion or 3%. In the first quarter we redeemed subordinated indebtedness and in the second
quarter we issued subordinated indebtedness. For further details see the “Capital management” section.
Equity
Equity as at October 31, 2021 increased $4.5 billion or 11% from 2020, primarily due to a net increase in retained earnings, the issuance of a limited
recourse capital note, partially offset by a decrease in accumulated other comprehensive income resulting from a net loss from foreign currency
translation adjustments, partially offset by a net remeasurement gain from post-employment defined benefit plans. For further details see the
“Capital management” section.
CIBC 2021 ANNUAL REPORT 31
Management’s discussion and analysis
Capital management
Our capital strength protects our depositors and creditors from risks inherent in our businesses. Our overall capital management objective is to
maintain a strong and efficient capital base that:
Acts as a buffer to absorb unexpected losses while providing sustainable returns to our shareholders;
Enables our businesses to grow and execute on our strategy;
Demonstrates balance sheet strength and our commitment to prudent balance sheet management; and
Supports us in maintaining a favourable credit standing and raising additional capital or other funding on attractive terms.
We actively manage our capital to meet these objectives in support of our overall enterprise strategy.
Capital management and planning framework
We maintain a capital management policy that establishes our capital management principles in the context of our risk appetite to support our
capital management objectives. Our capital management policy is reviewed and approved by the Board of Directors (the Board) in support of our
Internal Capital Adequacy Assessment Process (ICAAP). The policy includes guidelines that relate to capital strength, capital mix, dividends and
return of capital, and unconsolidated capital adequacy of regulated entities, based on regulatory requirements and our risk appetite. The level of
capital and capital ratios are continually monitored relative to our regulatory minimums and internal targets and the amount of capital required may
change in relation to our business growth, risk appetite, and the business and regulatory environment.
Capital planning is a crucial element of our overall financial planning process and establishment of strategic objectives and is developed in
accordance with the capital management policy. Each year, a capital plan and three-year outlook are developed as part of the financial plan, which
establishes targets for the coming year and business plans to achieve those targets. The capital plan is also stress-tested as a part of our
enterprise-wide stress testing process to ensure CIBC is adequately capitalized through severe but plausible stress scenarios (see the “Enterprise-
wide stress testing” section for further details). Our capital position and forecasts are monitored throughout the year and assessed against the
capital plan.
The Board, with endorsement from the Risk Management Committee (RMC), provides oversight of CIBC’s capital management through the
approval of our risk appetite, capital policy and plan. The RMC is provided with regular updates on our capital position including performance to
date, updated forecasts, and any material regulatory developments that may impact our future capital position. Treasury is responsible for the
overall management of capital including planning, forecasting, and execution of the plan, with senior management oversight provided by the Global
Asset Liability Committee (GALCO).
Enterprise-wide stress testing
We perform enterprise-wide stress testing on at least an annual basis. The results are an integral part of our ICAAP, as defined by Pillar 2 of the
Basel III Accord, wherein we identify and measure our risks on an ongoing basis in order to ensure that the capital available is sufficient to cover all
risks across CIBC, including the impacts of stress testing. We maintain a process that determines plausible but stressed economic scenarios such
as global recessions and housing price shocks, and then apply these stress scenarios to our bank-wide exposures to determine the impact on the
consolidated statement of income, RWA requirements, and consequently, key capital ratios. This helps us analyze the potential risks within our
portfolios and establish prudent capital levels in excess of the regulatory minimum requirements. All of the elements of capital are monitored
throughout the year and the capital plan is adjusted as appropriate.
Management determines the range of scenarios to be tested. Macroeconomic stress test scenarios are designed to be both severe and
plausible and designed to be consistent with OSFI’s stress testing framework to ensure that they are comprehensive.
The following diagram summarizes the enterprise-wide stress testing process including the development of scenarios, identification of risk
drivers and linkages to our other bank-wide ICAAP processes. The process includes syndication with our economists and lines of business to
ensure scenarios are relevant to our businesses and there is a consistent interpretation of the scenarios across CIBC.
Enterprise-wide Stress Testing
Scenario Development
Develop macroeconomic scenarios
relevant to the current and projected
business cycle including emerging risks
Risk Identification/Modelling
Identification of relevant risk drivers
Development and validation of stress
models and parameters
Translation of financial and macroeconomic factors
(e.g., GDP, unemployment, yield curve, etc.)
Quantify impacts
Credit
Market
Operational
Liquidity
Earnings
Other
Aggregate results
Earnings
Evaluate and review bank-wide impacts
Capital Impacts
Funding and Liquidity
Linkages
Internal Capital Adequacy Assessment Process (ICAAP)
Risk
Appetite
Capital
Management
and Planning
Financial
Management
and Planning
Liquidity
Management
Recovery and
Resolution
Planning
Risk
Management
32 CIBC 2021 A
NNUAL REPORT
Management’s discussion and analysis
Stress test scenarios are designed to capture a wide range of macroeconomic and financial variables that are relevant to assess the impact on our
specific portfolios. This includes, for example, GDP, unemployment, house prices, interest rates and equity prices.
The stress testing process is comprehensive, using a bottoms-up analysis of each of our bank-wide portfolios, and the results are analyzed on
a product, location and sector basis. Our stress testing approach combines the use of statistical models and expert judgment to ensure the results
are reasonable in estimating the impacts of the stress scenarios.
Stress testing methodologies and results are subject to a detailed review and challenge from both our lines of business and Risk Management.
Stress testing results are presented for review to the RMC and are also shared with the Board and OSFI. The results of our enterprise-wide stress
testing are used to highlight any vulnerabilities and ensure we remain well capitalized against regulatory and management expectations.
A key objective of the enterprise-wide stress tests is to identify key areas of exposure and foster discussion of management actions that would
be taken to mitigate the impact of stress scenarios. Contingency planning and strategies for extreme stress scenarios are included in the
development and maintenance of CIBC’s recovery and resolution plans. These plans include credible remedial actions that may be considered to
counteract and recover from stress, or promote CIBC’s orderly resolution with limited systemic impacts. Additional information on stress testing is
provided in the “Management of risk” section.
Recovery plan
Federally regulated financial institutions must maintain robust and credible recovery plans that identify options to restore financial strength and viability
when under severe stress. CIBC continues to maintain and update its recovery plan in line with OSFI requirements and industry best practices.
Resolution plan
In 2019, the Canada Deposit Insurance Corporation (CDIC), Canada’s resolution authority for its member institutions, including domestic
systemically important banks (D-SIBs), issued guidance for the development of comprehensive resolution plans. CDIC considers it a priority to
ensure that banks undertake the necessary work to create, maintain and test resolution plans, demonstrate their feasibility, and address any
impediments to ensure resolvability can be achieved in an orderly fashion. CIBC has developed its resolution plan in line with the guidance, and
provided its latest submission to CDIC in October 2021.
Regulatory capital requirements under Basel III
Our regulatory capital requirements are determined in accordance with guidelines issued by OSFI, which are based upon the capital standards
developed by the BCBS.
Regulatory capital consists of CET1, Tier 1 and Tier 2 capital. The tiers of regulatory capital indicate increasing quality/permanence and the
ability to absorb losses. The major components of our regulatory capital are summarized as follows:
Higher
quality
Common equity (retained earnings, common shares and stock surplus)
CET1 capital
Accumulated other comprehensive income (AOCI)(1)
Qualifying instruments issued by a consolidated banking subsidiary to third parties
Certain eligible general allowance resulting from expected credit loss provisioning(2)
Less regulatory deductions for items such as:
Goodwill and other intangible assets
➢
➢ Deferred tax assets
➢ Net assets related to defined benefit pension plans
➢ Certain investments
Non-viability contingent capital (NVCC) preferred shares
Additional Tier 1 (AT1) capital
Limited recourse capital notes
Qualifying instruments issued by a consolidated subsidiary to third parties
Innovative Tier 1 notes subject to phase-out rules for capital instruments
T
i
e
r
1
c
a
p
i
t
a
l
T
o
t
a
l
c
a
p
i
t
a
l
Lower
quality
NVCC subordinated indebtedness
Tier 2 capital
Non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments
Eligible general allowance under the standardized approach(2)
Qualifying instruments issued by a consolidated subsidiary to third parties
Excluding AOCI relating to cash flow hedges and changes to fair value option (FVO) liabilities attributable to changes in own credit risk.
(1)
(2) OSFI has provided regulatory flexibility by implementing transitional arrangements for the treatment of expected loss provisioning, such that part of the allowances that
would otherwise be included in Tier 2 capital will instead qualify for inclusion in CET1 capital subject to certain scalars and limitations until fiscal 2022. See the “Continuous
enhancement to regulatory capital requirements” section for additional details.
Qualifying regulatory capital instruments must be capable of absorbing loss at the point of non-viability of the financial institution. Non-qualifying
Tier 1 and Tier 2 capital instruments are excluded from regulatory capital at a rate of 10% per annum until November 2021, at which point they will
have no regulatory value.
OSFI requires all institutions to achieve target capital ratios which include buffers. Targets may be higher for certain institutions at OSFI’s discretion.
CIBC has been designated by OSFI as a D-SIB in Canada. D-SIBs are subject to a CET1 surcharge equal to 1.0% of RWA. In addition, OSFI expects D-
SIBs to hold a Domestic Stability Buffer (DSB) requirement intended to address Pillar 2 risks that are not adequately captured in the Pillar 1 capital
requirements. The DSB is currently set at 2.5%, but can range from 0% to 2.5% of RWA (see the “Continuous enhancement to regulatory capital
requirements” section for details regarding a recent increase to the DSB requirement that became effective October 31, 2021). Additionally, banks need
to hold an incremental countercyclical capital buffer equal to their weighted-average buffer requirement in Canada and across certain other jurisdictions
where they have private sector credit exposures. OSFI’s current targets are summarized below:
As at October 31, 2021
CET1 ratio
Tier 1 capital ratio
Total capital ratio
Minimum
4.5 %
6.0 %
8.0 %
Capital
conservation
buffer
2.5 %
2.5 %
2.5 %
D-SIB
buffer
1.0 %
1.0 %
1.0 %
Pillar 1
targets (1)
8.0 %
9.5 %
11.5 %
Domestic
Stability
Buffer (2)
2.5 %
2.5 %
2.5 %
Target including
all buffer
requirements
10.5 %
12.0 %
14.0 %
(1) The countercyclical capital buffer applicable to CIBC is insignificant as at October 31, 2021.
(2) The DSB was increased to 2.5% effective October 31, 2021. See the “Continuous enhancement to regulatory capital requirements” section for additional details.
CIBC 2021 ANNUAL REPORT 33
Management’s discussion and analysis
Capital adequacy requirements are applied on a consolidated basis consistent with our financial statements, except for our insurance subsidiaries
(CIBC Cayman Reinsurance Limited and CIBC Life Insurance Company Limited), which are excluded from the regulatory scope of consolidation.
The basis of consolidation applied to our financial statements is described in Note 1 to the consolidated financial statements. CIBC Life Insurance
Company Limited is subject to OSFI’s Life Insurance Capital Adequacy Test.
Risk-weighted assets
The following table provides a summary of permissible regulatory capital approaches and those adopted by CIBC:
Risk category
Permissible regulatory capital approaches
Approach adopted by CIBC
Credit risk(1)
Market risk
Operational risk
(1) Includes CCR.
Basel provides three approaches for calculating credit risk
capital requirements:
Standardized
Foundation
Advanced internal ratings-based (AIRB)
OSFI expects financial institutions in Canada with Total
capital in excess of $5 billion to use the AIRB approach for
all material portfolios and credit businesses.
We have adopted the AIRB approach for the majority of
our credit portfolios. Under this methodology, we utilize
our own internal estimates to determine probability of
default (PD), loss given default (LGD), maturity, and
exposure at default (EAD) for lending products and
securities. We utilize the Standardized Approach for
credit portfolios within CIBC Bank USA and CIBC
FirstCaribbean. We periodically review portfolios under
the Standardized Approach for consideration of adoption
of the AIRB approach.
OSFI provides two approaches for calculating counterparty
credit risk (CCR) for derivatives transactions:
Standardized Approach (SA-CCR)
Internal Model Method (IMM)
Effective April 30, 2020, CIBC has adopted the IMM
approach for calculating CCR exposure for qualifying
derivative transactions. Certain transactions remain under
the SA-CCR approach.
OSFI provides four approaches for calculating CCR for
repo-style transactions:
Comprehensive approach, with supervisory haircuts
Comprehensive approach, with own estimate haircuts
Repo VaR approach
IMM
Permitted approaches for equity positions in the banking
book (which includes equity investments in funds) include:
Standardized
Market-based
Look-through
Mandate-based
Fall-back
Basel provides the following approaches for calculating
capital requirements for securitization positions:
Internal Ratings-Based Approach (SEC-IRBA)
Internal Assessment Approach (SEC-IAA)
External Ratings-Based Approach (SEC-ERBA)
Standardized Approach (SEC-SA)
Market risk capital requirements can be determined under
the following approaches:
Standardized
Internal models
Internal models involve the use of internal VaR models to
measure market risk and determine the appropriate capital
requirement. The stressed VaR and incremental risk charge
(IRC) also form part of the internal models approach.
Operational risk capital requirements can be determined
under the following approaches:
Basic indicator approach
Standardized approach
The comprehensive approach, with supervisory haircuts,
is used for credit risk mitigation for repo-style
transactions.
We use the standardized approach for equity positions in
the banking book and both the look-through and
mandate-based approaches for equity investments in
funds.
We use SEC-IRBA, SEC-IAA, SEC-ERBA and SEC-SA for
securitization exposures in the banking book.
We use the internal models approach to calculate market
risk capital. Our internal market risk models comprise
VaR, stressed VaR, IRC and a capital charge for risk not
captured in VaR. We also use SEC-ERBA for trading book
securitization positions.
We use the standardized approach based on OSFI rules
to calculate operational risk capital.
We also calculate a capital floor based on the standardized approaches. If our capital requirement is lower than that calculated by reference to the
standardized approaches with a floor adjustment factor applied, currently at 70%, an adjustment to our RWA would be required.
34 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Continuous enhancement to regulatory capital requirements
The BCBS and OSFI have published a number of proposals for changes to the existing regulatory capital requirements to strengthen the regulation,
supervision and practices of banks, as well as to respond to changes in market conditions as a result of the COVID-19 pandemic, with the overall
objective of enhancing financial stability. The discussion below provides a summary of BCBS and OSFI publications that have been issued since
our 2020 Annual Report.
OSFI capital ruling
On March 15, 2021, OSFI published an update to its July 18, 2020 capital ruling on Limited Recourse Capital Notes (LRCNs). The July 18, 2020
capital ruling assessed LRCNs relative to the eligibility criteria set out in the CAR Guideline, and provided that the LRCNs can qualify as Additional
Tier 1 regulatory capital, subject to certain limitations and disclosure requirements. The 2021 revisions provide clarification on the ruling’s conditions
and limitations on the permitted investor base, and a cap on the amount of LRCN issuances that may be included in regulatory capital. Refer to the
“Capital initiatives” section and Note 16 to the consolidated financial statements for further details related to the LRCNs issued in the fourth quarter
of 2021 and 2020.
Transitional arrangements for the capital treatment of expected loss provisioning
In response to the COVID-19 pandemic, OSFI introduced transitional arrangements for ECL provisioning that are available under the Basel
Framework. These transitional arrangements were effective immediately upon being announced by OSFI on March 27, 2020 and resulted in a portion
of allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount of ECL allowances eligible for
inclusion in CET1 capital is determined based on the increase in stage 1 and stage 2 allowances relative to balances as at January 31, 2020 as a
baseline. This amount is then adjusted for tax effects and is subject to a scaling factor that decreases over time. The scaling factor has been set at
70% for fiscal 2020, 50% for fiscal 2021, and 25% for fiscal 2022. For exposures under the Internal Ratings-Based (IRB) approach, the lower of this
amount and excess allowances otherwise eligible for inclusion in Tier 2 capital is included as CET1 capital under the transitional arrangements.
Basel III reforms and revised Pillar 3 disclosure requirements
On March 27, 2020, the Group of Central Bank Governors and Heads of Supervision (GHOS) announced the deferral of the implementation of the
Basel III reforms in order to increase the operational ability of banks and supervisors to respond to the COVID-19 pandemic. On March 27, 2020,
OSFI similarly announced that implementation of the Basel III reforms would be delayed consistent with the GHOS announcement. In March and
June 2021, OSFI launched public consultations on the implementation of the final Basel III reforms into its capital, leverage and related disclosure
guidelines, as well as certain updates to the treatment of credit valuation adjustments (CVA), market risk hedges of other valuation adjustments of
over-the-counter derivatives and management of operational risk. OSFI’s proposals are in line with the BCBS standards, with considerations given to
the Canadian market. OSFI’s proposed changes include:
Revisions to both the IRB and Standardized Approach to credit risk;
Revised operational, market risk, and CVA frameworks;
Updated CET1 capital deductions for certain assets;
An updated capital output floor based on the revised Standardized Approach noted above, with the phase-in of the floor factor over three
years beginning in 2023; and
Modification to the Leverage Ratio framework, including a buffer requirement for D-SIBs.
Consistent with the GHOS announcement on March 27, 2020 that the implementation date of the revised Pillar 3 disclosure requirements finalized in
December 2018 would be deferred by one year, on March 27, 2020, OSFI also announced that the implementation date for Canadian deposit-taking
institutions would be no earlier than November 1, 2022.
On November 29, 2021, OSFI announced that the implementation date for these changes is the second quarter of 2023, with the exceptions of
revisions to the CVA and market risk frameworks, which will continue to be targeted for the first quarter of 2024.
Domestic Stability Buffer
In response to the COVID-19 pandemic and market conditions, OSFI had announced an immediate reduction in the DSB requirement from 2.0% to
1.0% for all D-SIBs effective March 13, 2020. After maintaining the DSB at 1.0% since that time, OSFI announced on June 17, 2021 that it will be
increased to 2.5% effective October 31, 2021. The 2.5% reflects the highest DSB requirement under OSFI capital requirements. This increases
OSFI’s target capital ratios, including all buffers, for CET1, Tier 1 and Total capital to 10.5%, 12.0% and 14.0% respectively.
Capital treatment of federal program supporting highly affected sectors
On January 27, 2021, OSFI provided direction on the capital treatment of the government-guaranteed loans made under the Business Development
Bank of Canada (BDC) HASCAP loan guarantee program. Pursuant to this direction, the loans are considered sovereign risk based on the BDC
guarantee, and the relevant risk weight under the CAR Guideline is applied accordingly. The entire amount of the loan is included in the exposure
measure used for calculating the leverage ratio. See “Government lending programs in response to COVID-19” for further details.
Global systemically important banks – public disclosure requirements
On August 13, 2021, OSFI issued revisions to its Advisory: “Global systemically important banks – Public disclosure requirements”. These revisions
address changes to the disclosure requirements included in BCBS’s updated global systemically important banks (G-SIB) assessment
methodology, as well as providing further guidance on the availability of publicly disclosed G-SIB indicators, and the nature of qualitative information
to accompany the disclosures. The updated assessment methodology will take effect for the 2022 G-SIB assessment exercise.
Total loss absorbing capacity requirements
Beginning in the first quarter of fiscal 2022, D-SIBs will be required to maintain a supervisory target total loss absorbing capacity requirements
(TLAC) ratio (which comprises a minimum risk-based TLAC ratio of 21.5% plus the then applicable DSB) and a minimum TLAC leverage ratio of
6.75%. TLAC is required to ensure that a non-viable bank will have sufficient loss absorbing capacity, through its regulatory capital and bail-in
eligible instruments, to support its recapitalization. In accordance with the Bank recapitalization (Bail-in) conversion regulations of the Department of
Finance (Canada), senior debt issued by D-SIBs on or after September 23, 2018, with an original term to maturity of more than 400 days (including
CIBC 2021 ANNUAL REPORT 35
Management’s discussion and analysis
explicit or embedded options) that is unsecured or partially secured is subject to bail-in. Consumer deposits, certain derivatives, covered bonds,
and certain structured notes are not eligible for bail-in.
Other regulatory capital developments
Market risk capital
On March 16, 2021, OSFI announced that the temporary COVID-19 related reduction of stressed VaR multipliers used in the determination of market
risk capital was to be unwound effective May 1, 2021.
Leverage ratio exposure
On August 12, 2021, OSFI advised that the temporary exclusion of qualifying sovereign-issued securities from the leverage ratio exposure measure
that was announced on April 9, 2020, in response to the onset of the COVID-19 pandemic, will end after December 31, 2021. However, central bank
reserves will continue to be excluded from the measure.
We continue to monitor and prepare for developments impacting regulatory capital requirements and disclosures.
Regulatory capital and ratios
The components of our regulatory capital and ratios under Basel III are presented in the table below:
$ millions, as at October 31
Common Equity Tier 1 (CET1) capital: instruments and reserves
Directly issued qualifying common share capital plus related stock surplus
Retained earnings
AOCI (and other reserves)
Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)
CET1 capital before regulatory adjustments
CET1 capital: regulatory adjustments
Prudential valuation adjustments
Goodwill (net of related tax liabilities)
Other intangibles other than mortgage-servicing rights (net of related tax liabilities)
Deferred tax assets excluding those arising from temporary differences (net of related tax liabilities)
Defined benefit pension fund net assets (net of related tax liabilities)
Other deductions or regulatory adjustments to CET1 as determined by OSFI (1)
Other
Total regulatory adjustments to CET1 capital
CET1 capital
Additional Tier 1 (AT1) capital: instruments
Directly issued qualifying AT1 instruments plus related stock surplus (2)
Directly issued capital instruments subject to phase out from AT1 (3)
AT1 instruments issued by subsidiaries and held by third parties (amount allowed in AT1)
AT1 capital
Tier 1 capital (T1 = CET1 + AT1)
Tier 2 capital: instruments and provisions
Directly issued qualifying Tier 2 instruments plus related stock surplus (4)
Directly issued capital instruments subject to phase out from Tier 2
Tier 2 instruments issued by subsidiaries and held by third parties (amount allowed in Tier 2)
General allowances
Tier 2 capital (T2)
Total capital (TC = T1 + T2)
Total RWA
Capital ratios
CET1 ratio
Tier 1 capital ratio
Total capital ratio
2021
2020
$
14,461
25,793
1,069
116
41,439
$
14,025
22,119
1,435
128
37,707
18
4,877
1,737
7
1,051
(209)
207
7,688
24
5,177
1,662
24
206
(592)
330
6,831
33,751
30,876
4,325
251
17
4,593
3,575
302
22
3,899
38,344
34,775
4,945
451
22
440
5,858
5,035
628
29
502
6,194
$
44,202
$
40,969
$ 272,814
$ 254,871
12.4 %
14.1 %
16.2 %
12.1 %
13.6 %
16.1 %
(1) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020 in response to the onset of the
COVID-19 pandemic. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1
capital. The amount is subject to certain adjustments and limitations until 2022.
(2) Comprised of non-viability contingent capital (NVCC) preferred shares and LRCN.
(3) Comprised of CIBC Tier 1 Notes – Series B due June 30, 2108. On November 1, 2021, CIBC Capital Trust redeemed all $300 million of its Tier 1 Notes – Series B.
(4) Comprised of certain debentures which qualify as NVCC.
CET1 ratio
The CET1 ratio at October 31, 2021 increased 0.3% from October 31, 2020, driven by the increase in CET1 capital partially offset by the impact of
an increase in RWA.
The increase in CET1 capital was primarily the result of internal capital generation (net income less dividends and distributions). The increase in
RWA was primarily due to increases in book size, increased market and operational risk levels, and methodology and parameter updates, partially
offset by improved credit quality and the impact of foreign exchange translation.
36 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Tier 1 capital ratio
The Tier 1 capital ratio at October 31, 2021 increased 0.5% from October 31, 2020, primarily due to the factors affecting the CET1 ratio noted
above, as well as an issuance of Limited Recourse Capital Notes during the fourth quarter of 2021. See the “Capital initiatives” section below for
further details.
Total capital ratio
The Total capital ratio at October 31, 2021 increased 0.1% from October 31, 2020. Total capital was favourably impacted by the factors affecting the
Tier 1 capital ratio noted above, while being unfavourably impacted by a decrease in the applicable cap related to the inclusion of non-qualifying
instruments. The unfavourable impact of a redemption of subordinated indebtedness during the first quarter was offset by the issuance of
subordinated indebtedness during the second quarter. See the “Capital initiatives” section below for further details.
Movement in total regulatory capital
Changes in regulatory capital under Basel III are presented in the table below:
$ millions, for the year ended October 31
CET1 capital
Balance at beginning of year
Shares issued in lieu of cash dividends (add back)
Other issue of common shares
Purchase of common shares for cancellation
Premium on purchase of common shares for cancellation
Net income attributable to equity shareholders
Preferred and common share dividends and distributions
Change in AOCI balances included in regulatory capital
Net foreign currency translation adjustments
Net change in securities measured at FVOCI
Net change in cash flow hedges
Net change in post-employment defined benefit plans
Change in shortfall of allowance to expected losses
Change in goodwill and other intangible assets
Other, including change in regulatory adjustments (1)(2)
CET 1 capital balance at end of year
AT1 capital
Balance at beginning of year
AT1 eligible capital issues
Phase-out of innovative Tier 1 notes
Redeemed
Other, including change in regulatory adjustments (2)
AT1 capital balance at end of year
Tier 2 capital
Balance at beginning of year
New Tier 2 eligible capital issues
Redeemed
Other, including change in regulatory adjustments (2)
Tier 2 capital balance at end of year
Total capital balance at end of year
2021
2020
$ 30,876
132
326
–
–
6,429
(2,780)
$ 27,707
144
227
(68)
(166)
3,790
(2,714)
(1,115)
(43)
(137)
917
–
225
(1,079)
180
189
161
80
575
194
577
$ 33,751
$ 30,876
$
$
3,899
750
(51)
–
(5)
3,144
750
–
–
5
$
4,593
$
3,899
$
$
6,194
1,000
(1,000)
(336)
5,003
1,000
(32)
223
$
5,858
$
6,194
$ 44,202
$ 40,969
(1) Includes the net impact on retained earnings as at November 1, 2019 from the adoption of IFRS 16. See Note 1 to the consolidated financial statements for additional
details.
(2) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020 in response to the onset of the
COVID-19 pandemic. The transitional arrangement results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in
CET1 capital. The amount is subject to certain adjustments and limitations until 2022.
CIBC 2021 ANNUAL REPORT 37
Management’s discussion and analysis
Components of risk-weighted assets
The components of our RWA and corresponding minimum total capital requirements are presented in the table below:
$ millions, as at October 31
Credit risk (2)
Standardized approach
Corporate
Sovereign
Banks
Real estate secured personal lending
Other retail
Trading book
Equity
Securitization
AIRB approach (3)
Corporate
Sovereign (4)
Banks
Real estate secured personal lending
Qualifying revolving retail
Other retail
Equity
Trading book
Securitization
Adjustment for scaling factor
Other credit RWA (5)
Total credit risk (before adjustment for CVA phase-in)
Market risk (Internal Models and IRB Approach)
VaR
Stressed VaR
Incremental risk charge
Securitization and other
Total market risk
Operational risk
2021
Minimum
total capital
2020
Minimum
total capital
RWA
required (1)
RWA
required (1)
$
43,768
1,418
382
2,153
976
416
654
768
50,535
92,808
3,125
3,711
22,508
13,636
9,525
564
5,484
1,246
9,082
161,689
12,913
225,137
1,575
3,887
2,583
1,061
9,106
31,397
$
3,501
113
31
172
78
33
52
61
4,041
7,425
250
297
1,801
1,091
762
45
439
100
727
12,937
1,033
18,011
126
311
206
85
728
2,512
$
41,836
2,460
326
2,859
939
787
494
1,031
50,732
83,326
2,911
2,995
20,228
14,484
9,022
423
5,200
1,704
8,315
148,608
12,152
211,492
1,309
1,626
2,192
731
5,858
30,319
$
3,347
197
26
229
75
63
40
82
4,059
6,666
233
240
1,618
1,159
722
34
416
136
665
11,889
972
16,920
105
130
175
58
468
2,426
Total RWA before adjustments for CVA phase-in
$ 265,640
$ 21,251
$ 247,669
$ 19,814
CVA capital charge
Total RWA
Total RWA after adjustments for CVA phase-in
Total RWA
$
7,174
$
574
$
7,202
$
576
$ 272,814
$ 21,825
$ 254,871
$ 20,390
(1) Refers to the minimum standard established by the BCBS before the application of the capital conservation buffer and any other capital buffers that may be established by
regulators from time to time. It is calculated by multiplying RWA by 8%.
(2) Credit risk includes CCR, which comprises derivative and repo-style transactions. Credit risk for CIBC Bank USA and CIBC FirstCaribbean are calculated under the
standardized approach.
(3) Includes RWA relating to equity investments in funds and certain commercial loans which are determined using the supervisory slotting approach.
(4) Includes residential mortgages insured by Canada Mortgage and Housing Corporation (CMHC), an agency of the Government of Canada, and government-guaranteed
student loans.
(5) Comprises RWA relating to derivative and repo-style transactions cleared through qualified central counterparties (QCCPs), settlement risk, and other assets that are subject
to the credit risk framework but are not included in the standardized or IRB frameworks, including other balance sheet assets that are risk-weighted at 100%, significant
investments in the capital of non-financial institutions that are risk-weighted at 1250%, and amounts below the thresholds for deduction that are risk-weighted at 250%.
The increase in credit risk RWA was primarily due to increases in book size, partially offset by improved credit quality, the impact of foreign
exchange translations, and methodology and parameter updates.
The increase in market risk RWA was primarily driven by methodology updates, with the COVID-19 relief measures granted in the second quarter of
2020 expiring in the third quarter of 2021 and to a lesser extent by changes and movement in risk levels, which includes changes in open positions
and the market rates affecting these positions.
The increase in operational risk RWA was driven by changes in the gross income, as defined by OSFI.
38 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Leverage ratio
The Basel III capital standards include a non-risk-based capital metric, the leverage ratio, to supplement risk-based capital requirements. The leverage
ratio is defined as Tier 1 capital divided by the leverage ratio exposure. The leverage ratio exposure is defined under the standards as the sum of:
(i) On-balance sheet assets less Tier 1 capital regulatory adjustments;
(ii) Derivative exposures;
(iii) Securities financing transaction exposures; and
(iv) Off-balance sheet exposures (such as commitments, direct credit substitutes, letters of credit, and securitization exposures).
OSFI expects federally regulated deposit-taking institutions to have leverage ratios that meet or exceed 3.0%. This minimum may be higher for
certain institutions at OSFI’s discretion. See the “Continuous enhancement to regulatory capital requirements” section for recently announced capital
measures impacting the leverage ratio.
$ millions, as at October 31
Tier 1 capital
Leverage ratio exposure
Leverage ratio
2021
$ 38,344
823,343
2020
$
34,775
741,760
4.7 %
4.7 %
The leverage ratio at October 31, 2021 was comparable with the prior year, as the impact of an increase in Tier 1 capital was offset by the impact of
an increase in leverage ratio exposure. The increase in leverage ratio exposure was primarily driven by an increase in on-balance sheet exposures.
Capital initiatives
On March 13, 2020, following the onset of the COVID-19 pandemic, OSFI imposed temporary measures on federally regulated financial institutions
to cease dividend increases and share buybacks in order to ensure that the additional capital available is used to support Canadian lending
activities. The temporary measures were lifted by OSFI effective November 4, 2021. The following were the main capital initiatives undertaken since
our 2020 Annual Report:
Normal Course Issuer Bid (NCIB)
We intend to purchase for cancellation up to 10 million common shares, or approximately 2.2% of our outstanding common shares, under a new
NCIB, subject to the approval of the TSX. Our previous bid expired on June 3, 2020.
Dividends
On December 1, 2021, the CIBC Board of Directors approved an increase in our quarterly common share dividend from $1.46 per share to $1.61
per share for the quarter ending January 31, 2022.
Common and preferred share dividends are declared quarterly at the discretion of the Board. The declaration and payment of dividends is
governed by Section 79 of the Bank Act (Canada), the terms of the preferred shares, and the terms of the Tier 1 notes issued by CIBC Capital Trust,
as explained in Notes 16 and 17 to the consolidated financial statements.
Employee share purchase plan
Pursuant to the employee share purchase plan, we issued 1,180,179 common shares for consideration of $150 million for the year ended
October 31, 2021.
Shareholder investment plan
Pursuant to the shareholder investment plan, we issued 1,011,279 common shares for consideration of $132 million for the year ended October 31,
2021.
Limited Recourse Capital Notes Series 2 (LRCN Series 2 Notes)
On September 14, 2021, we issued $750 million principal amount of 4.000% Limited Recourse Capital Notes Series 2 (NVCC) (subordinated
indebtedness). The LRCN Series 2 Notes mature on January 28, 2082, and bear interest at a fixed rate of 4.000% per annum (paid semi-annually)
until January 28, 2027. Starting on January 28, 2027, and every five years thereafter until January 28, 2077, the interest rate will be reset to the then
current five-year Government of Canada bond yield plus 3.102% per annum.
Concurrently with the issuance of the LRCN Series 2 Notes, we issued Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares
Series 54 (NVCC) (the Series 54 Preferred Shares), which are held in a CIBC LRCN Limited Recourse Trust (the Limited Recourse Trust) that is
consolidated by CIBC and, as a result, the Series 54 Preferred Shares are eliminated in CIBC’s consolidated financial statements. In the event of
non-payment by CIBC of the principal amount of, interest on, or redemption price for, the LRCN Series 2 Notes when due, the sole remedy of each
LRCN Series 2 Note holder is limited to that holder’s proportionate share of the Series 54 Preferred Shares held in the Limited Recourse Trust.
Subject to regulatory approval, we may redeem the LRCN Series 2 Notes, in whole or in part, every five years during the period from
December 28 to and including January 28, commencing on December 28, 2026, at par.
The LRCN Series 2 Notes and the Series 54 Preferred Shares carry standard NVCC provisions necessary for them to qualify as Tier 1
regulatory capital under Basel III. Upon the occurrence of a Trigger Event, each Series 54 Preferred Share held in the Limited Recourse Trust will
automatically and immediately be converted, without the consent of LRCN Series 2 Note holders, into a variable number of common shares that will
be delivered to LRCN Series 2 Note holders in satisfaction of the principal amount of, and accrued and unpaid interest on, all of the LRCN Series 2
Notes. All claims of LRCN Series 2 Note holders against CIBC under the LRCN Series 2 Notes will be extinguished upon receipt of such common
shares.
The LRCN Series 2 Notes are compound instruments with both equity and liability features as payments of interest and principal in cash are
made at our discretion, as the sole recourse of each LRCN Series 2 Note holder in the event of non-payment will be limited to that holder’s
proportionate share of the Series 54 Preferred Shares held in the Limited Recourse Trust. The liability component of the LRCN Series 2 Notes has a
nominal value and, as a result, the full proceeds received upon the issuance of the LRCN Series 2 Notes have been presented as equity on the
consolidated balance sheet and any interest payments paid thereon are accounted for as equity distributions.
CIBC 2021 ANNUAL REPORT 39
Management’s discussion and analysis
Subordinated indebtedness
On January 26, 2021, we redeemed all $1.0 billion of our 3.42% Debentures due January 26, 2026. In accordance with their terms, the Debentures
were redeemed at 100% of their principal amount, plus accrued and unpaid interest thereon.
On April 21, 2021, we issued $1.0 billion principal amount of Debentures due April 21, 2031 (subordinated indebtedness). The Debentures
bear interest at a fixed rate of 1.96% per annum (paid semi-annually) until April 21, 2026, and at the three-month Canadian dollar bankers’
acceptance rate plus 0.56% per annum (paid quarterly) thereafter until maturity on April 21, 2031.
CIBC Tier 1 Notes
On November 1, 2021, CIBC Capital Trust, a trust wholly owned by CIBC, redeemed all $300 million of its 10.25% CIBC Tier 1 Notes – Series B (the
“Tier 1 Notes – Series B”) due June 30, 2108. In accordance with their terms, the Tier 1 Notes – Series B were redeemed at 100% of their principal
amount, together with accrued and unpaid interest up to but excluding the redemption date. As a result of the redemption of the Notes by CIBC
Capital Trust, CIBC redeemed the corresponding senior deposit notes issued by CIBC to CIBC Capital Trust on November 1, 2021.
Outstanding share data
The table below provides a summary of our outstanding shares, NVCC capital instruments, and the maximum number of common shares issuable
on conversion/exercise:
$ millions, except number of shares and per share amounts, as at November 26, 2021
Common shares
Treasury shares – common shares
Preferred shares (1)(2)
Series 39 (NVCC)
Series 41 (NVCC)
Series 43 (NVCC)
Series 45 (NVCC)
Series 47 (NVCC)
Series 49 (NVCC)
Series 51 (NVCC)
Treasury shares – preferred shares (1)(2)
Limited recourse capital notes (2)(3)
4.375% Limited recourse capital notes Series 1 (NVCC)
4.000% Limited recourse capital notes Series 2 (NVCC)
Subordinated indebtedness (2)(4)
3.45% Debentures due April 4, 2028 (NVCC)
2.95% Debentures due June 19, 2029 (NVCC)
2.01% Debentures due July 21, 2030 (NVCC)
1.96% Debentures due April 21, 2031 (NVCC)
Stock options outstanding
Shares outstanding
Number
of shares
Amount
450,917,565
76,771
$ 14,363
12
$
16,000,000
12,000,000
12,000,000
32,000,000
18,000,000
13,000,000
10,000,000
(20)
n/a
n/a
n/a
n/a
n/a
n/a
400
300
300
800
450
325
250
–
750
750
1,500
1,500
1,000
1,000
Minimum
conversion
price per
common share
Maximum number
of common shares
issuable on
conversion/exercise
$
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
80,000,000
60,000,000
60,000,000
160,000,000
90,000,000
65,000,000
50,000,000
150,000,000
150,000,000
450,000,000
450,000,000
300,000,000
300,000,000
5,134,436
(1) Upon the occurrence of a Trigger Event, each share is convertible into a number of common shares, determined by dividing the par value of $25.00 plus declared and
unpaid dividends by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per share (subject to adjustment in
certain events as defined in the relevant prospectus supplement). Preferred shareholders do not have the right to convert their shares into common shares.
(2) The maximum number of common shares issuable on conversion excludes the impact of declared but unpaid dividends and accrued interest.
(3) Upon the occurrence of a Trigger Event, the Series 53 and 54 Preferred Shares held in the Limited Recourse Trust in support of the corresponding LRCN Notes are
convertible into a number of common shares, determined by dividing the par value of $1,000 by the average common share price (as defined in the relevant prospectus
supplement) subject to a minimum price per common share (subject to adjustment in certain events as defined in the relevant prospectus supplement). See Note 16 to the
consolidated financial statements for details on our preferred share and other equity instruments rights and privileges.
(4) Upon the occurrence of a Trigger Event, the Debentures are convertible into a number of common shares, determined by dividing 150% of the par value plus accrued and
unpaid interest by the average common share price (as defined in the relevant prospectus supplement) subject to a minimum price per common share (subject to
adjustment in certain events as defined in the relevant prospectus supplement).
n/a Not applicable.
The occurrence of a “Trigger Event” would result in conversion of all of the outstanding NVCC instruments described above, which would represent
a dilution impact of 84% based on the number of CIBC common shares outstanding as at October 31, 2021. As described in the CAR Guideline, a
Trigger Event occurs when OSFI determines the bank is or is about to become non-viable and, if after conversion of all contingent instruments and
consideration of any other relevant factors or circumstances, it is reasonably likely that its viability will be restored or maintained; or if the bank has
accepted or agreed to accept a capital injection or equivalent support from a federal or provincial government, without which OSFI would have
determined the bank to be non-viable.
In addition to the potential dilution impacts related to the NVCC instruments discussed above, as at October 31, 2021, $32,643 million (2020:
$19,925 million) of our outstanding liabilities were subject to conversion to common shares under the bail-in regime. Under the bail-in regime, there
is no fixed and pre-determined contractual conversion ratio for the conversion of the specified eligible shares and liabilities of CIBC that are subject
to a bail-in conversion into common shares, nor are there specific requirements regarding whether liabilities subject to a bail-in conversion are
converted into common shares of CIBC or any of its affiliates. CDIC determines the timing of the bail-in conversion, the portion of the specified
eligible shares and liabilities to be converted and the terms and conditions of the conversion, subject to parameters set out in the bail-in regime. See
the “Total loss absorbing capacity requirements” section for further details.
Preferred share and other equity instruments rights and privileges
See Note 16 to the consolidated financial statements for details on our preferred share and other equity instruments rights and privileges.
40 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Off-balance sheet arrangements
We enter into off-balance sheet arrangements in the normal course of our business. We consolidate all of our sponsored trusts that securitize our
own assets.
Non-consolidated structured entities (SEs)
We manage and administer a single-seller conduit and several CIBC-sponsored multi-seller conduits in Canada. The multi-seller conduits acquire
direct or indirect ownership or security interests in pools of financial assets from our clients and finance the acquisitions by issuing asset-backed
commercial paper (ABCP) to investors. The single-seller conduit acquires financial assets and finances these acquisitions through a credit facility
provided by a syndicate of financial institutions. The sellers to the conduits may continue to service the assets and may be exposed to credit losses
realized on these assets, typically through the provision of over-collateralization or another form of credit enhancement. The conduits may obtain
credit enhancement from third-party providers.
We generally provide the multi-seller conduits with commercial paper backstop liquidity facilities, securities distribution, and provide both the
single and multi-seller conduits with accounting, cash management, and operations services. The liquidity facilities for the managed and
administered multi-seller conduits require us to provide funding, subject to the satisfaction of certain conditions with respect to the conduits, for
ABCP not placed with external investors. We may also purchase ABCP issued by the multi-seller conduits for market-making purposes.
We are required to maintain certain short-term and/or long-term debt ratings with respect to the liquidity facilities that we provide to the
sponsored multi-seller conduits. If we are downgraded below the level specified under the terms of those facilities, we must provide alternative
satisfactory liquidity arrangements, such as procuring an alternative liquidity provider that meets the minimum rating requirements.
We may also act as the counterparty to derivative contracts entered into by a multi-seller conduit in order to convert the yield of the underlying
assets to match the needs of the multi-seller conduit’s investors or to mitigate the interest rate, basis, and currency risk within the conduit.
We earn fees for providing services related to the non-consolidated single-seller and multi-seller conduits, such as backstop liquidity facilities,
distribution, transaction structuring, and conduit administration. These fees totalled $71 million in 2021 (2020: $65 million). All fees earned in respect
of activities with the conduits are on a market basis.
As at October 31, 2021, the amount funded for the various asset types in the multi-seller conduits amounted to $7.5 billion (2020: $8.4 billion).
The estimated weighted-average life of these assets was 2.0 years (2020: 2.0 years). Our holdings of commercial paper issued by the non-
consolidated sponsored multi-seller conduits that offer commercial paper to external investors were $35 million (2020: $12 million). Our committed
backstop liquidity facilities to these conduits were $10.6 billion (2020: $10.5 billion). We also provided credit facilities of $50 million (2020: $50
million) to these conduits.
We participated in a syndicated facility for a three-year commitment, with two years remaining, of $700 million to the single-seller conduit that
provides funding to franchisees of a major Canadian retailer. Our portion of the commitment was $130 million (2020: $130 million), of which
$106 million (2020: $95 million) was funded as at October 31, 2021.
We engage one or more of the four major rating agencies, DBRS Limited (DBRS), Fitch Ratings Inc. (Fitch), Moody’s Investors Service, Inc.
(Moody’s), and S&P, to opine on the credit ratings of asset-backed securities (ABS) issued by our sponsored securitization vehicles. In the event
that ratings differ between rating agencies, we use the lower rating.
We also have investments in and provide loans, liquidity and credit facilities to certain other third-party and CIBC-managed SEs. The on-
balance sheet exposure related to these SEs is included in the consolidated financial statements.
Our on- and off-balance sheet amounts related to the SEs that are not consolidated are set out in the table below. For additional details on our
SEs, see Note 7 to the consolidated financial statements.
$ millions, as at October 31
2021
Investments
and loans (1)
Liquidity, credit
facilities and
commitments
Written credit
Investments
derivatives (2)
and loans (1)
Liquidity, credit
facilities and
commitments
2020
Written credit
derivatives (2)
Single-seller and multi-seller conduits
Third-party structured vehicles
Loan warehouse financing
Other
$
141
3,838
3,245
394
$ 7,539 (3)
2,016
921
129
$
–
–
–
87
$
107
3,165
395
343
$ 8,390 (3)
2,517
363
153
$
–
–
–
130
(1) Excludes securities issued by, retained interest in, and derivatives with entities established by CMHC, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, Government National Mortgage Association, Federal Home Loan Banks, Federal Farm Credit Bank, and Student Loan Marketing Association.
$3 million (2020: $3 million) of the exposures related to structured vehicles run-off were hedged.
(2) Disclosed amounts reflect the outstanding notional of written credit derivatives. The negative fair value recorded on the consolidated balance sheet was $54 million (2020:
$107 million). Notional of $82 million (2020: $123 million) was hedged with credit derivatives protection from third parties. The fair value of these hedges net of CVA was
$49 million (2020: $98 million). An additional notional of $5 million (2020: $7 million) was hedged through a limited recourse note.
(3) Excludes an additional $3.0 billion (2020: $2.1 billion) relating to our backstop liquidity facilities provided to the multi-seller conduits as part of their commitment to fund
purchases of additional assets. Also excludes $35 million (2020: $12 million) of our direct investments in the multi-seller conduits which we consider investment exposure.
CIBC 2021 ANNUAL REPORT 41
Management’s discussion and analysis
Other financial transactions
We are the sponsor of several mutual and pooled funds, in the form of trusts. We are the administrator of these funds. In addition, we may act in
other capacities, including custodian, trustee, and broker. We earn fees at market rates from these trusts. We do not guarantee either principal or
returns to investors in these funds. We act as a trustee of a number of personal trusts and have a fiduciary responsibility to act in the best interests
of the beneficiaries of the trusts. We earn a fee for acting as a trustee. We also participate in transactions to modify the cash flows of trusts managed
by third-party asset managers to create investments with specific risk profiles, or to assist clients in the efficient management of other risks.
Typically, these involve the use of derivative products, which transfer the risks and returns to or from a trust.
Derivatives
We participate in derivatives transactions, as a market maker facilitating the needs of our clients or as a principal to manage the risks associated
with our funding, investing and trading strategies. All derivatives are recorded at fair value on our consolidated balance sheet. See Notes 13 and 24
to the consolidated financial statements for details on derivative contracts and the risks associated with them.
Credit-related arrangements
Credit-related arrangements are generally off-balance sheet instruments and are typically entered into to meet the financing needs of clients. In
addition, there are certain exposures for which we could be obligated to extend credit that are not recorded on the consolidated balance sheet. For
additional details of these arrangements, see the “Liquidity risk” section and Note 22 to the consolidated financial statements.
Guarantees
A guarantee is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor
failed to make payment when due in accordance with the original or modified terms of a debt instrument. Guarantees include credit derivatives
protection sold and standby and performance letters of credit, as discussed in Notes 13 and 22 to the consolidated financial statements,
respectively.
42 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Management of risk
We have provided certain disclosures required under IFRS 7 “Financial Instruments – Disclosures” (IFRS 7) related to the nature and extent of
risks arising from financial instruments in the MD&A, as permitted by that IFRS standard. These disclosures are included in the “Risk overview”,
“Credit risk”, “Market risk”, “Liquidity risk”, “Operational risk”, “Reputation and legal risks”, “Conduct risk”, and “Regulatory compliance risk”
sections.
43 Risk overview
44 Risk governance structure
45 Risk management structure
46 Risk management process
46 Risk appetite statement
47 Risk input into performance and
compensation
47 Risk policies and limits
48 Risk identification and measurement
49
49 Risk treatment and mitigation
49 Risk monitoring and reporting
Stress testing
50
Top and emerging risks
53 Risks arising from business activities
54 Credit risk
54 Governance and management
54
Policies
Process and control
Exposure to credit risk
55
56 Risk measurement
58
60 Credit quality of portfolios
63 Credit quality performance
64
Loans contractually past due but not
impaired
Exposure to certain countries and
regions
Settlement risk
Securitization activities
64
65
65
Policies
66 Market risk
66 Governance and management
66
66 Market risk limits
66
66 Risk measurement
67
Process and control
Trading activities
70 Non-trading activities
71
Pension risk
Policies
Liquidity risk
72
72 Governance and management
72
72 Risk measurement
Liquid assets
73
76
Funding
78 Contractual obligations
Environmental and related social risk
Strategic risk
79 Other risks
79
79 Operational risk
81
81 Regulatory compliance risk
82
82 Reputation and legal risks
82 Conduct risk
Insurance risk
Risk overview
CIBC faces a wide variety of risks across all of its areas of business. Identifying and understanding risks and their impact allows CIBC to frame its
risk appetite and risk management practices. Defining acceptable levels of risk, and establishing sound principles, policies and practices for
managing risks, is fundamental to achieving consistent and sustainable long-term performance, while remaining within our risk appetite.
Our risk appetite defines tolerance levels for various risks. This is the foundation for our risk management culture and our risk management
framework.
Our risk management framework includes:
CIBC, SBU, functional group-level and regional risk appetite statements;
Risk frameworks, policies, procedures and limits to align activities with our risk appetite;
Regular risk reports to identify and communicate risk levels;
An independent control framework to identify and test the design and operating effectiveness of our key controls;
Stress testing to consider the potential impact of changes in the business environment on capital, liquidity and earnings;
Proactive consideration of risk mitigation options in order to optimize results; and
Oversight through our risk-focused committees and governance structure.
Managing risk is a shared responsibility at CIBC. Business units and risk management professionals work in collaboration to ensure that
business strategies and activities are consistent with our risk appetite. CIBC’s approach to enterprise-wide risk management aligns with the
three lines of defence model:
(i)
As the first line of defence, CIBC’s SBUs and functional groups own the risks and are accountable and responsible for identifying and
assessing risks inherent in their activities in accordance with the CIBC risk appetite. In addition, they establish and maintain controls to
mitigate such risks. The first line of defence may include governance groups within the relevant area to facilitate the control framework and
other risk-related processes. Control groups provide subject matter expertise to the business lines and/or implement and maintain
enterprise-wide control programs and activities. While control groups collaborate with the lines of business in identifying and managing
risk, they also challenge risk decisions and risk mitigation strategies.
The second line of defence is independent from the first line of defence and provides an enterprise-wide view of specific risk types,
guidance and effective challenge to risk and control activities. Risk Management is the primary second line of defence. Risk Management
may leverage or rely on subject matter expertise of other groups (e.g., third parties or control groups) to better inform their independent
assessments, as appropriate.
(ii)
(iii) As the third line of defence, CIBC’s internal audit function provides reasonable assurance to senior management and the Audit Committee
of the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal controls as a part of its risk-
based audit plan and in accordance with its mandate as described in the Internal Audit Charter.
A strong risk culture and communication between the three lines of defence are important characteristics of effective risk management.
We continuously monitor our risk profile against our defined risk appetite and related limits, taking action as needed to maintain an appropriate
balance of risk and return. Monitoring our risk profile includes forward-looking analysis of sensitivity to local and global market factors, economic
conditions, and geo-political and regulatory environments that influence our overall risk profile.
Regular and transparent risk reporting and discussion at senior management committees facilitates communication of risks and discussion of
risk management strategies across the organization.
CIBC 2021 ANNUAL REPORT 43
Management’s discussion and analysis
Risk governance structure
Our risk governance structure is illustrated below:
Risk Governance Structure
Board of Directors
h t
e r sig
v
o
n
ala tio
s c
e
Audit
Committee
Risk
Management
Committee
Management
Resources and
Compensation
Committee
Corporate
Governance
Committee
c
ulture
Executive Committee
fra
m
e
w
ork
Global Asset Liability
Committee
Global Risk
Committee
Board of Directors (the Board): The Board oversees the enterprise-wide risk management program through approval of our risk appetite,
control framework and supporting risk management policies and limits. The Board accomplishes its mandate through its Audit, Risk
Management, Management Resources and Compensation, and Corporate Governance committees, described below.
Audit Committee (AC): The Audit Committee reviews the overall design and operating effectiveness of internal controls and the control
environment, including controls over the risk management process.
Risk Management Committee (RMC): This committee assists the Board in fulfilling its responsibilities for defining CIBC’s risk appetite and
overseeing CIBC’s risk profile and performance against the defined risk appetite. This includes oversight of key frameworks, policies and risk
limits related to the identification, measurement, monitoring and mitigation of CIBC’s principal business risks.
Management Resources and Compensation Committee (MRCC): This committee is responsible for assisting the Board in its global oversight
of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls.
Corporate Governance Committee (CGC): This committee is responsible for assisting the Board in fulfilling its corporate governance oversight
responsibilities.
Executive Committee (ExCo): The ExCo, led by the Chief Executive Officer (CEO) and including selected executives reporting directly to the
CEO, is responsible for setting business strategy and for monitoring, evaluating and managing risks across CIBC. The ExCo is supported by the
following management governance committees:
Global Asset Liability Committee (GALCO): This committee, which comprises members from the ExCo and senior Treasury, Risk
Management and lines of business executives, provides oversight regarding capital management, funding and liquidity management, and
asset/liability management. It also provides strategic direction regarding structural interest rate risk and structural foreign exchange risk
postures, approval of funds transfer pricing policies/parameters and approval of wholesale funding plans.
Global Risk Committee (GRC): This committee, which comprises selected members of the ExCo and senior leaders from the lines of
business, Risk Management and other functional groups, provides a forum for discussion and oversight of risk appetite, risk profile and
risk-mitigation strategies. Key activities include reviewing and providing input regarding CIBC’s risk appetite statements; monitoring risk
profile against risk appetite; reviewing and evaluating business activities in the context of risk appetite; and identifying, reviewing, and
advising on current and emerging risk issues and associated mitigation plans.
44 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Risk management structure
The Risk Management group, led by our Chief Risk Officer (CRO), is responsible for setting risk strategies and for providing independent oversight
of the businesses. Risk Management works to identify, assess, mitigate, monitor and control risks associated with business activities and strategies,
and is responsible for providing an effective challenge to the lines of business.
The current structure is illustrated below:
Risk Management Structure
Chief Risk Officer
Capital
Markets Risk
Management
Global Credit
Risk
Management
(including
non-U.S. Risk
Officers)
Global
Operational
Risk
Management
Risk
Analytics
and Credit
Decisioning
Enterprise Risk
Management
Compliance
and Global
Regulatory
Affairs
Enterprise
Anti-Money
Laundering
U.S. Risk
Management
Risk Appetite and Management Control Metrics
Risk Policies and Limits
Risk Identification, Measurement, Monitoring and Reporting
Effective Challenge as Second Line of Defence
Stress Testing
Risk Treatment and Mitigation
The Risk Management group performs several important activities including:
Developing our risk appetite and associated management control metrics;
Setting risk strategy to manage risks in alignment with our risk appetite and business strategy;
Establishing and communicating risk frameworks, policies, procedures and limits to mitigate risks in alignment with risk strategy;
Measuring, monitoring and reporting on risk levels;
Identifying and assessing emerging and potential strategic risks;
Reviewing transactions that fall outside of risk limits delegated to business lines; and
Ensuring compliance with applicable regulatory and anti-money laundering (AML) requirements.
The following key groups within Risk Management, independent of the originating businesses, contribute to our management of risk:
Capital Markets Risk Management – This group provides independent oversight of the measurement, monitoring and control of market risks
(both trading and non-trading), and trading credit risk (also called counterparty credit risk) across CIBC’s portfolios, and effective challenge
and sound risk management oversight to Treasury, including with respect to liquidity and funding risk management and structural interest rate
risk management.
Global Credit Risk Management – This group is responsible for the adjudication and oversight of credit risks associated with our commercial,
corporate and wealth management activities, management of the risks in our investment portfolios, as well as management of special loan
portfolios.
Global Operational Risk Management – This group is responsible for designing and implementing effective operational risk management and
control programs, and providing effective challenge to and monitoring of all operational risks globally, including (but not limited to) technology
risk, information security risk, fraud risk, model risk, and third-party risk. In addition, the team has global accountability for corporate risk
insurance programs, reputation risks, risk policy and governance, and risk transformation programs.
Risk Analytics and Credit Decisioning – This group manages credit risk in personal and business products (such as residential mortgages,
credit cards, personal loans/lines of credit, small business loans) offered through various distribution channels and performs analytics to
optimize retail credit performance, along with collections and AML outcomes.
Enterprise Risk Management – This group is responsible for enterprise-wide analysis, including the measuring and monitoring of risk appetite,
enterprise-wide stress testing and reporting, credit loss reporting, risk models and model quantification, economic and regulatory capital
methodologies, as well as risk data management. In addition, this group identifies and manages environmental risk, including transaction-
specific environmental and related social risk, and the physical and transition risks associated with climate change.
Compliance and Global Regulatory Affairs – This group is responsible for designing and implementing an effective enterprise-wide framework
to manage and mitigate regulatory compliance risk. In addition, it provides oversight of conduct and culture risk (including sales practice risk),
performs effective challenge on compensation plan changes, and conducts examinations on business units/activities using a risk-based
approach. This group also builds and maintains credible relationships with our prudential, market, conduct and securities regulators and acts
as a liaison between the regulators and CIBC.
CIBC 2021 ANNUAL REPORT 45
Management’s discussion and analysis
Enterprise Anti-Money Laundering – This group is responsible for all aspects of compliance with and oversight of requirements relating to AML,
anti-terrorist financing (ATF), and sanctions measures. Enterprise Anti-Money Laundering provides advice to all businesses and functional
groups globally and is responsible for providing an enterprise-wide view of money laundering, terrorist financing and sanctions risks, as well
as guidance and effective independent challenge to control activities. Furthermore, Enterprise Anti-Money Laundering executes a risk-based
approach to deter, detect and report suspected money laundering, terrorist financing and sanctioned activities, in accordance with their
policies and supporting standards.
U.S. Risk Management – This group carries out the mandate of CIBC Risk Management at a regional level under the leadership of the U.S.
CRO, with oversight from the Risk Management Committee of the Board and the Risk Committees of the Boards of CIBC Bank USA and CIBC
Bancorp USA Inc. The group provides independent oversight for the identification, management, measurement, monitoring and mitigation of
risks in the U.S. Commercial Banking and Wealth Management SBU.
Risk management process
Our risk management process is illustrated below:
g
n
i
t
r
o
p
e
R
Risk Management Process
Risk Appetite Statement
Risk Policies and Limits
Risk Identification and Measurement
Stress Testing
Risk Treatment / Mitigation
w
e
i
v
e
R
d
n
a
r
o
t
i
n
o
M
Risk appetite statement
Our risk appetite statement defines the amount of risk we are willing to assume in pursuit of our strategic and financial objectives. Our guiding
principle is to practice sound risk management, supported by strong capital and funding positions, as we pursue our client-focused strategy. In
defining our risk appetite, we take into consideration our purpose, vision, values, strategy and objectives, along with our risk capacity (defined by
regulatory constraints). It defines how we conduct business, which is to be consistent with the following objectives:
Safeguarding our reputation and brand;
Doing the right thing for our clients/stakeholders;
Engaging in client-oriented businesses that we understand;
Make our client’s goals our own in a professional and radically simple manner;
Maintaining a balance between risk and returns;
Retaining a prudent attitude towards tail and event risk;
Meeting regulatory expectations and/or identifying and having plans in place to address any issues in a timely manner;
Achieving/maintaining an AA rating; and
Meeting/exceeding stakeholders’ expectations with respect to the ESG criteria including achieving net zero greenhouse gas emissions.
Our risk appetite statement contains metrics with limits that define our risk tolerance levels. In addition, we have SBU, functional group and regional
risk appetite statements that are integrated with our overall risk appetite statement that further articulate our business level risk tolerances.
Our risk appetite statement is reviewed annually in conjunction with our strategic, financial and capital planning cycle to ensure alignment and
is approved annually by the Board. To help ensure CIBC stays within its risk appetite, the Board, RMC, and senior management regularly receive
and review reporting on our risk profile against the risk appetite limits.
All strategic business decisions, as well as day-to-day business decisions, are governed by our risk appetite framework. Strategic decisions
are evaluated to ensure that the risk exposure is within our risk appetite. Day-to-day activities and decisions are governed by our framework of risk
tolerance limits, policies, standards and procedures that support our risk appetite statement.
Risk culture
Risk culture refers to desired attitudes and behaviours relative to risk taking. At CIBC, we strive to achieve a consistent and effective risk culture by:
Promoting, through both formal and informal channels, a shared accountability of risk identification, management and mitigation;
Cultivating an environment of transparency, open communication and robust discussion of risk;
Setting the appropriate “tone at the top” through clear communication and reinforcement; and
Identifying behaviours that are and are not aligned with risk appetite, and reinforcing appropriate behaviours.
Every year, all employees are required to complete formal training on risk appetite, reputation risk, operational risk, code of conduct, AML and other
key risk topics. By taking this mandatory training, all employees develop a basic knowledge of risk management in support of our risk culture. This
training is supplemented by our risk appetite statement, risk management priorities and documents on our internal website. In addition, we have
policies, procedures and limits in place that govern our day-to-day business activity, with escalation procedures for limit breaches outlined
accordingly.
46 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Risk input into performance and compensation
Throughout the year, the Risk Management team manages various compensation risk reviews. These reviews are part of the second line of defence
responsibilities to review and challenge new compensation plans, changes to existing compensation plans, compensation plans that will be closed
and periodic review of unchanged compensation plans. All compensation plans are rated as either high-risk or low-risk with high-risk compensation
plans requiring approval from the CRO.
At each year-end, Risk Management provides an assessment of adherence to risk appetite and material risk matters across CIBC. Risk
Management also considers a number of risk inputs to identify matters that may directly impact individual compensation awards and/or
performance ratings. Annually, Risk Management reviews the assessment with both the RMC and the MRCC.
The MRCC oversees the performance management and compensation process and is responsible for assisting the Board in its global
oversight of CIBC’s human capital strategy, including talent and total rewards, and the alignment with CIBC’s strategy, risk appetite and controls.
The MRCC’s oversight of human capital strategy includes inclusion and diversity, employee health, safety and wellbeing and other ESG practices
related to their mandate. The MRCC’s key compensation-related responsibilities include:
Approving CIBC’s compensation philosophy and any material changes to CIBC’s compensation principles or practices;
Approving new material compensation policies and material changes to existing material compensation policies;
Reviewing and recommending for Board approval new material compensation plans or changes to existing material compensation plans;
Assessing the appropriateness and alignment of compensation relative to actual business performance and risks;
Reviewing and recommending for Board approval incentive compensation funding and allocations, based on an assessment of business
performance and risk;
Reviewing and recommending for Board approval individual compensation target and compensation for the ExCo, including the CEO and
other key officers; and
Approving individual compensation for employees with total direct compensation above a certain materiality threshold.
Risk policies and limits
Our risk policies and limits framework is intended to ensure that risks are appropriately identified, measured, monitored and controlled in accordance
with our risk appetite. For most risks, we have developed an overarching framework document that sets out the key principles for managing the
associated risks and our key risk policies and limits. This framework is supported by standards, guidelines, processes, procedures and controls that
govern day-to-day activities in our businesses. Oversight is provided by management committees, as well as the Board/Board committees.
Key risk policies and limits are illustrated below:
Risk Management Framework
Risk Appetite Statement and Risk Appetite Framework
Risk
Credit
Market
Operational
Overarching
Framework / Policy
Credit Risk Management
Policy
Trading Credit Risk
Management Policy
Market Risk Management
Policy
Structural Risk Management
Policies
Operational Risk Management
Policy
Control Framework
Conduct and Culture Risk
Framework
Risk Limits
Management Oversight
Credit Concentration Limits
Delegated Credit Approval
Authorities
Trading Credit Risk Limits
Market Risk Limits
Delegated Risk Authorities
Key Risk Indicators
Credit Committee
Personal and Business Banking
Credit Risk Committee
Global Risk Committee
Traded Risk Committee
Global Risk Committee
Global Asset Liability
Committee
Traded Risk Committee
Operational Risk and Control
Committee
Global Risk Committee
Technology Operational Risk
Committee
Model and Parameter Risk
Committee
Corporate Governance
Committee
Traded Risk Committee
Third Party Risk Council
Executive Fraud Risk Council
Reputation
Liquidity
Reputation Risk Management
Framework and Policy
Key Risk Indicators
Reputation and Legal Risks
Committee
Liquidity Risk Management
Policy
Pledging Policy
Liquidity and Funding Limits
Pledging Limits
Global Asset Liability
Committee
Global Risk Committee
Strategic
Strategic Planning Policy
Risk Appetite Statement
Executive Committee
Regulatory
Regulatory Compliance
Management Policy
Enterprise Anti-Money
Laundering Framework and
Enterprise Anti-Money
Laundering and Anti-Terrorist
Financing Policy
Key Risk Indicators
Global Risk Committee
Risk Appetite Statement
Key AML Metrics
AML Executive Steering
Committee
CIBC 2021 ANNUAL REPORT 47
Management’s discussion and analysis
Risk identification and measurement
Risk identification and measurement are important elements of our risk management framework. Risk identification is a continuous process,
generally achieved through:
Regular assessment of risks associated with lending and trading credit exposures;
Ongoing monitoring of trading and non-trading portfolios;
Assessment of risks in new business activities and processes;
Assessment of risks in complex and unusual business transactions; and
Regular monitoring of the overall risk profile considering market developments and trends, and external and internal events.
Risk Management maintains a “Risk Register” to list all material risks facing CIBC. The inventory is based on the risks inherent in our businesses and
updated through various processes, illustrated in the following chart, to reflect changes in the nature of the risks we are facing. The Risk Register is
used to support our ICAAP, either explicitly in the economic and regulatory capital calculations, or implicitly through the buffer of actual capital over
economic capital and regulatory capital.
Risk Identification Processes
Risks Inherent
in CIBC s
Businesses
’
’
Strategic Business Reviews
Change Initiative Risk Assessment Process
Risk and Control Self Assessments
Strategic and Emerging Risk Themes
External and Peer Benchmarking
Regulatory Reviews
Macro and
External
Risks
Assessment of
Risk Level
(probability /
severity
considerations)
Risk Register
Internal Capital
Adequacy
Assessment
Process
(ICAAP)
The decision to register a new risk is based on a risk assessment through our risk identification processes and includes criteria such as severity,
measurability and probability. Furthermore, the decision to hold capital for a new risk is also based on whether the risk is being mitigated, and
whether capital is deemed to be a suitable mitigant.
We have enterprise-wide methodologies, models and techniques in place to measure both the quantitative and qualitative aspects of risks,
appropriate for the various types of risks we face. These methodologies, models and techniques are subject to independent assessment and review
to ensure that the underlying logic remains sound, that model risks have been identified and managed, that use of the models continues to be
appropriate and outputs are valid.
Risk is usually measured in terms of expected loss, unexpected loss, and economic capital.
Expected loss
Expected loss represents the loss that is statistically expected to occur in the normal course of business, with adjustments for conservatism, in a
given period of time.
In respect of credit risk, the parameters used to measure expected loss are PD, LGD and EAD. These parameters are updated regularly and
are based on our historical experience through the cycle and benchmarking of credit exposures. Unlike the PD, LGD and EAD parameters used for
calculating ECL on our consolidated financial statements, the PD, LGD and EAD parameters used for regulatory capital purposes are not adjusted
for forward-looking information.
For trading market risks, VaR is a statistical technique used to measure risk. VaR is an estimate of the loss in market value for a given level of
confidence that we would expect to incur in our trading portfolio due to an adverse one-day movement in market rates and prices. We also use
stressed VaR to replicate our VaR over a period when relevant market factors are in distress.
For trading credit risks associated with market value based products, we use models to estimate exposure relative to the value of the portfolio
of trades with each counterparty, giving consideration to market rates and prices.
Unexpected loss and economic capital
Unexpected loss is the statistical estimate of the amount by which actual losses might exceed expected losses over a specified time horizon,
computed at a given confidence level. We use economic capital to estimate the level of capital needed to protect us against unexpected losses.
Economic capital allows us to assess performance on a risk-adjusted basis.
We also use techniques such as sensitivity analysis and stress testing to help ensure that the risks remain within our risk appetite and that our
capital is adequate to cover those risks. Our stress testing program includes evaluation of the potential effects of various economic and market
scenarios on our risk profile, earnings and capital. Refer to the “Capital management” section for additional details.
Model risk management
Model risk management encompasses sound development, independent validation, and ongoing monitoring and review of the models as well as
governance and controls that are proportionate to the risks. Our model inventory includes, but is not limited to, models that relate to risk
measurement (including VaR, economic and regulatory capital), pricing, credit risk rating and scoring models, credit models for the calculation of
loss severity and stress testing, and models for the calculation of ECL under IFRS 9. CIBC’s approach to provide effective governance and
oversight for model risk management comprises the following key elements:
48 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Governance and oversight by management committees, including the Model and Parameter Risk Committee (MPRC), senior management and
the Board;
Policies, procedures and standards to outline applicable roles and responsibilities of the various oversight groups and to provide guidance to
identify, measure, control and monitor model risk throughout the model’s life cycle; and
Controls for key operational aspects of model risk management including maintaining a model inventory, model risk ranking, model risk
attestation and ongoing monitoring and reporting.
The MPRC is a subcommittee of the GRC and is responsible for reviewing and approving proposals for new and/or modified regulatory, economic
capital and financial reporting models and provides oversight of CIBC’s regulatory, economic capital and financial reporting models and parameters
for credit, market and operational risks. The MPRC has accountability and responsibility for model and parameter approvals, parameter
performance monitoring, validation oversight, and policy oversight.
Model risk mitigation policies
We have policies, procedures, standards and controls to ensure effective model risk management for CIBC. A model review and validation is the
independent effective challenge that documents the model risk and ensures models are sound and we can rely on their output. The model review
and validation process includes:
Review of model documentation;
Comprehensive, systematic testing of key model parameters on implementation to ensure results are as expected;
Replication of the risk quantification process to determine whether the model implementation is faithful to the model specifications;
Review of whether the model/parameter concepts and assumptions are appropriate and robust;
Accuracy testing to assess the calibration and accuracy of the risk components including, for example, the discriminative power of rating
systems and the reasonableness of capital parameters;
Sensitivity testing to analyze the sensitivity of model/parameter outputs to model/parameter assumptions and key inputs;
Scenario and stress testing of the model outputs to key inputs;
Back-testing by comparing actual results with model-generated risk measures;
Benchmarking to other models and comparable internal and external data;
Review of the internal usage of the model/parameter applications to ensure consistency of application;
Reporting of model status to the MPRC, supported through an up-to-date inventory of regulatory models and parameters;
A quarterly attestation process for model owners in order to ensure compliance with the Model Risk and Validation Policy; and
A comprehensive validation report that identifies the conditions for valid application of the model and summarizes these findings to the model
owners, developers and users.
Once a model has been approved for use, ongoing monitoring becomes a joint responsibility of model users, owners and validators.
Stress testing
Stress testing supplements our other risk management tools by providing an estimate of the potential impacts of plausible but stressed economic
scenarios and risk factors. Results of stress testing are interpreted in the context of our risk appetite, including metrics for capital adequacy.
Enterprise-wide stress testing, capital planning and financial planning processes are integrated for a comprehensive information system. See the
“Capital management” section for detailed discussion on our enterprise-wide stress testing.
Risk treatment and mitigation
Risk treatment and mitigation is the implementation of options for modifying risk levels. We pursue risk mitigation options in order to control our risk
profile in the context of our risk appetite. Our objective is to proactively consider risk mitigation options in order to optimize results.
Discussions regarding potential risk mitigation strategies are held between Risk Management and the lines of business, and at the GRC or
GALCO and at the RMC for governance and oversight, as appropriate. In evaluating possible strategies, considerations include costs and benefits,
residual risks (i.e., risks that are retained), secondary risks (i.e., those caused by the risk mitigation actions), and appropriate monitoring and review
to track results.
Risk controls
Our risk management framework also includes a comprehensive set of risk controls, designed to ensure that risks are being appropriately identified
and managed. Our risk controls are part of CIBC’s overall Control Framework, developed based on the Committee of Sponsoring Organizations of
the Treadway Commission’s (COSO) widely accepted “Internal Control – Integrated Framework”. The Control Framework also draws on elements of
the OSFI Supervisory Framework and Corporate Governance Guidelines.
The Board, primarily through the RMC, approves certain credit risk limits and delegates specific transactional approval authorities to the CEO or
jointly to the CEO and CRO. The RMC must approve transactions that exceed delegated authorities. Delegation of authority to business units is
controlled to ensure decision-making authorities are restricted to those individuals with the necessary experience levels. In addition, CIBC has rigorous
processes to identify, evaluate and remediate risk control deficiencies in a timely manner. Regular reporting is provided to the RMC to evidence
compliance with risk limits. Risk limits and the delegation of authority to the CEO or jointly to the CEO and CRO are reviewed annually by the RMC.
Risk monitoring and reporting
To monitor CIBC’s risk profile and facilitate evaluation against the risk appetite statement, a number of measurement metrics have been established,
with regular reporting against these metrics provided to the GRC and the RMC. This reporting enables decisions on growth and risk mitigation
strategies.
Exposures are also regularly monitored against limits, with escalation protocols for limit excesses, should they occur. Escalation protocols
ensure awareness at appropriate levels and facilitate management of excesses that is consistent with our risk appetite.
Regular management reports on each risk type are also prepared to facilitate monitoring and control of risk at a more granular level.
CIBC 2021 ANNUAL REPORT 49
Management’s discussion and analysis
Top and emerging risks
We monitor and review top and emerging risks that may affect our future results, and take action to mitigate potential risks. We perform in-depth
analyses, which may include stress testing our exposures relative to the risks, and we provide updates and related developments to the Board on a
regular basis. Top and emerging risks are those that we consider to have potential negative implications that are material for CIBC. This section
describes those top and emerging risks, as well as regulatory and accounting developments that are material for CIBC.
Pandemic outbreaks
The COVID-19 pandemic continues to disrupt the global economy, financial markets, supply chains and business productivity in unprecedented
and unpredictable ways. While restrictions imposed by governments around the world to limit the impact of the pandemic have eased significantly in
most jurisdictions and vaccination rates have climbed sharply in the developed world, resulting in acceleration of the global economy, new and
emerging variants of the virus as well as vaccine hesitancy remain a threat to the economic recovery. Our outlook assumes that targeted health
measures rather than broader economic closures will be used to contain new waves of infection.
Future developments, such as the severity and duration of the pandemic, the emergence and progression of new variants, and actions taken
by governments, monetary authorities, regulators, financial institutions and other third parties in response to a resurgence of cases, continue to
impact our outlook.
A substantial amount of our business involves extending credit or otherwise providing financial resources to individuals, companies, industries
or governments that may have been adversely impacted by the pandemic, hindering their ability to meet original loan terms and potentially impacting
their ability to repay their loans. While our estimate of ECL on performing loans considers the likelihood and extent of future defaults and impairments,
given the inherent uncertainty caused by COVID-19, actual experience may differ materially from our current estimates. To the extent that business
activity or unemployment do not continue to improve in line with our expectations due to the impact of the new and emerging variants, or clients
default on loans beyond our current expectations, we may recognize further credit losses beyond those reflected in the current year’s ECL
allowances. The effectiveness of various government support programs in place for individuals and businesses as well as the efficacy of vaccines in
controlling new and emerging variants also impact our expectations. Similarly, because of changing economic and market conditions, we may be
required to recognize losses, impairments, or reductions in other comprehensive income (OCI) in future periods relating to other assets that we hold.
Net interest income is significantly impacted by market interest rates. Interest rate cuts by the Bank of Canada and the Federal Reserve in
response to COVID-19 have negatively impacted our net interest income. The overall direction of interest rates is difficult to predict and depends on
future actions that the Bank of Canada and the Federal Reserve may take to increase or reduce targeted rates in response to COVID-19 or other
factors (see the “Outlook for calendar year 2022” section for further discussion on interest rate expectations).
Governments, monetary authorities, regulators and financial institutions have also taken actions to support the economy, increase liquidity,
mitigate unemployment, provide temporary financial assistance and regulatory flexibility, and implement other measures intended to mitigate or
counterbalance the adverse economic consequences of the pandemic. We continue to work with regulators and governments across the
jurisdictions in which we operate to support and facilitate government programs assisting our clients (see the “CIBC client relief programs in
response to COVID-19” section for further details).
We continue to adapt our operating model with a focus on the ongoing safety of our team members, including those working on-site since the
start of the pandemic. We have a thoughtful plan to return our team members who are currently working remotely to the office when the time is right,
depending on the evolving pandemic and public health guidance.
Relevant operational risk metrics continue to track at an acceptable level. Operational resilience and sustainability remain our key areas of focus.
We will continue to monitor our risk posture and trends to ensure operational risks are managed appropriately and in a timely manner.
If the COVID-19 pandemic is prolonged beyond our expectations, or if further variants emerge that give rise to similar effects that vaccines are
not able to effectively mitigate in a timely manner and if broader economic closures are reinstated to address future waves of infection, the impact
on the economy and financial markets could deepen and result in further volatility. Unexpected developments in financial markets, regulatory
environments, or consumer behaviour and confidence may have additional adverse impacts on our business, results of operations, reputation and
financial condition.
Geo-political risk
The level of geo-political risk escalates at certain points in time. While the specific impact on the global economy and on global credit and capital
markets would depend on the nature of the event, in general, any major event could result in instability and volatility, leading to widening spreads,
declining equity valuations, flight to safe-haven currencies and increased purchases of gold. In the short run, market disruption could hurt the net
income of our trading and non-trading market risk positions. Geo-political risk could reduce economic growth, and in combination with the potential
impacts on commodity prices and the recent rise of protectionism, could have serious negative implications for general economic and banking
activities. Current areas of concern include:
Global uncertainty and market repercussions pertaining to the spread of COVID-19 as discussed above;
Ongoing U.S., Canada and China relations and trade issues;
Implications of the U.S. “Buy American” policy;
Relations between the U.S. and Iran;
Tensions in the Middle East; and
Concerns following the agreed-upon Brexit deal.
While it is impossible to predict where new geo-political disruption will occur, we pay particular attention to markets and regions with existing or
recent historical instability to assess the impact of these environments on the markets and businesses in which we operate.
Climate risk
The physical effects of climate change along with regulations designed to mitigate its negative impacts will have a measurable impact on
communities and the economy. The physical risks of climate change include severe weather events, forest fires, floods, heat stresses and rising sea
levels, which have the ability to disrupt supply chains and critical infrastructure. Transition risks, which arise as society adjusts towards a low-carbon
future, are impacting many sectors of the economy through changes in policy and technology aimed at limiting global warming. As the world
transitions to a low-carbon economy, we are committed to understanding and responsibly managing the relevant impacts of climate change on our
operations and our business activities. In support of this commitment, we announced our ambition to achieve net zero greenhouse gas emissions
associated with operational and financing activities by 2050, including reducing the greenhouse gas emissions from our operations by 30% by 2028
(2018 baseline).
In 2021, we launched our Climate Credit Risk Assessment tool to be used by our corporate and commercial businesses which scores
companies based on their exposure, preparedness and resiliency to climate-related transition risks. Through this assessment, we will gain a deeper
50 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
understanding of our clients’ plans to move to a low-carbon economy over the short, medium, and long term, and how this compares with peers in
the same sector. This tool will help us manage climate change risks in our portfolio.
There is an increasing demand for disclosure around climate-related risk identification and mitigation. We currently prepare our disclosures
based on the disclosure framework developed by the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD reporting framework
provides stakeholders with consistent, material climate-related disclosures that are comparable across sectors, industries and countries. We are
proactively collaborating with peer banks to ensure consistency and comparability as we continue to improve our TCFD reporting.
We have also joined the Partnership for Carbon Accounting Financials (PCAF), a standardized measurement and reporting framework that can
be used to calculate emissions related to a bank’s financing. Measuring financed emissions is central to activities that enables CIBC to embed
climate action throughout our lending and investment activities.
In the past year, a number of regulators and standard-setting organizations have announced intentions of preparing disclosure frameworks
related to climate change risks. Key among them are IFRS Foundation’s establishment of the International Sustainability Standards Board (ISSB) to
develop global sustainability disclosure standards for the financial markets and to increase connectivity with accounting standards. Its creation will
consolidate select existing standard setters, including the Climate Disclosure Standards Board (an initiative of CDP, formerly the Carbon Disclosure
Project) and the Value Reporting Foundation (which houses the Integrated Reporting Framework and the Sustainability Accounting Standards Board
(SASB) Standards) by mid-2022. In addition, regulators such as the SEC, OSFI and the Canadian Securities Administrators (CSA) have announced
a greater focus on climate risk disclosures. Potential divergence among the regulators in disclosure expectations, coupled with the pace at which
the regulatory landscape changes pose an operational and non-conformance risk to us. We continue to monitor these developments. Despite our
relatively low direct carbon emissions, compliance by many of our clients with new carbon emission standards could result in operational stress for
those clients, which in turn may have a negative impact on our results of operations.
See the “Environmental and related social risk” section for additional information.
Canadian consumer debt and the housing market
Regulatory measures that included revised mortgage underwriting guidelines (B-20 guidelines) and taxes on foreign ownership, combined with a
previously low unemployment environment, had their intended effect as debt-to-income ratios flattened in 2018–2019. However, to counter the
economic impact due to COVID-19, the government put in place several support programs, the Bank of Canada cut interest rates and CIBC and other
Canadian banks assisted clients by offering temporary relief across all retail products, including mortgages. While there is still continued economic
and employment uncertainty, the housing market has rebounded strongly and prices have surpassed pre-COVID-19 levels giving rise to the risk that
our borrowers may be unable to repay loan obligations. As of June 1, 2021, we started to qualify uninsured and insured mortgages at the higher of the
mortgage contract rate plus 2%, or 5.25% as part of the updated B-20 guidelines. In addition, we run our enterprise-wide statistical stress tests at
lower home prices to determine potential direct losses and have also conducted stress tests to assess the impact of rising unemployment rates on
borrowers’ ability to repay loan obligations.
Technology, information and cyber security risk
Financial institutions like CIBC are evolving their use of technology and business processes to improve the client experience and streamline
operations. At the same time, cyber threats and the associated financial, reputation and business interruption risks have also increased. We
continue to actively manage these risks through strategic risk reviews, enterprise-wide technology and information security programs, with the goal
of maintaining overall cyber-resilience that prevents, detects, and responds to threats such as data breaches, malware, unauthorized access, and
denial-of-service attacks, which can result in damage to CIBC systems and information, theft or disclosure of confidential information, unauthorized
or fraudulent activity, and service disruption at CIBC or its service providers, including those that offer cloud services.
Given the importance of electronic financial systems, including secure online and mobile banking provided by CIBC to its clients, CIBC
monitors the changing environment globally, including cyber threats, mitigation strategies and evolving regulatory requirements, in order to improve
our controls and processes to protect our systems and client information. In addition, we perform cyber security preparedness, testing, and
recovery exercises to validate our defences, benchmark against best practices and provide regular updates to the Board. We have well-defined
cyber incident response protocols and playbooks in the event that a security incident or breach occurs. We also have cyber insurance coverage to
help mitigate against certain potential losses associated with cyber incidents. Our insurance coverage is subject to various terms and provisions,
including limits on the types and amounts of coverage relating to losses arising from cyber incidents. We periodically assess our insurance
coverage based on our risk tolerance and limits. Despite our commitment to information and cyber security, and given the rapidly evolving threat
and regulatory landscape, coupled with a changing business environment, it is not possible for us to identify all cyber risks or implement measures
to prevent or eliminate all potential cyber incidents from occurring. However, we monitor our risk profile for changes and continue to refine
approaches to security protection and service resilience to minimize the impact of any cyber incidents that may occur.
Commodity prices
In the fourth quarter, we have observed high volatility and a continued rally in natural gas prices. The global recovery from the COVID-19 pandemic
and higher-than-normal weather-driven demand last winter and this summer have combined with supply-side challenges resulting in below-average
storage levels as we approach the winter heating season. In addition, supply and demand fundamentals that are traditionally elastic to prices have
broken down, making it difficult for the market to balance any disruptions to supply or increases in demand. Looking forward, temperatures this
winter are expected to be a key driver of natural gas prices: colder-than-normal temperatures could push prices higher while milder temperatures
could lead to a pullback. Clients in our oil and gas portfolio continue to be assessed on the basis of our enhanced risk metrics that reflect the
current environment. In addition, other commodities including raw materials (lumber, iron, ore, etc.) and metals (gold, silver, copper, etc.) continue
to exhibit volatility, particularly in front month futures contracts, largely owing to increased demand coupled with ongoing supply chain bottlenecks
as the global pandemic recovery continues.
Disintermediation risk
Canadian banking clients are increasingly shifting their service transactions from brick-and-mortar banking centres to digital platforms. Competitive
pressure from digital disruptors, both global technology leaders and smaller financial technology entrants, is increasing and the risk of
disintermediation continues to grow due to the level of sophistication of these non-traditional competitors, and increased adoption of emerging
technologies. Blockchain is one such technology that enables parties to transact with one another without the need for centralized third-party
intermediaries such as banks. Cryptocurrencies, such as Bitcoin, are a specific application of blockchain with the potential for disintermediation.
However, widespread adoption as a substitute for government-issued currency does not appear to be a near-term prospect as Central Banks
around the world explore Central Bank Digital Currencies. Adoption as an investment vehicle poses an opportunity for disintermediation as it
enables parties to create investment products and services that financial institutions would normally provide. Advances in artificial intelligence (AI)
and automation also have the potential to transform business models over time, including the delivery of financial services advice through
automated processes. CIBC is maturing its AI capabilities with a focus on maintaining customer confidence and trust by building AI practices that
apply principles such as fairness, ethics, transparency and security.
CIBC 2021 ANNUAL REPORT 51
Management’s discussion and analysis
We manage disintermediation risk through strategic reviews as well as investment in emerging channels, in data and analytics capabilities,
and in technology and innovation in general, to meet our clients’ changing expectations, while working to reduce our cost structure and simplify
operations. We maintain a central and coordinated approach to innovation to manage these risks.
Third-party risk
The Board and senior management recognize the establishment of third-party relationships as important to CIBC’s business model and therefore
leverage them to achieve CIBC’s business objectives. With the introduction of new technologies, new foreign jurisdictions and increasing reliance
on sub-contractors, the third-party landscape continues to evolve. While such relationships may benefit us through reduced costs, increased
innovation, improved performance and increased business competitiveness, they can also introduce risks of failure or disruption to CIBC through
breakdowns in people, processes or technology or through external events that impact these third parties.
To mitigate third-party risks, prepare for future third-party risks and changing regulatory expectations, and to ensure existing processes and
internal controls are operating effectively, we rely on our strong risk culture and established the Third Party Risk Management program, which
includes policies, procedures, expertise and resources dedicated to third-party risk management. The program identifies and manages risks that
arise from third-party relationships from the point of planning through the life cycle of the business arrangement and supports the maintenance of
collaborative relationships that advance our strategic direction and operational needs within our risk appetite.
Anti-money laundering
Money laundering, terrorist financing activities and other related crimes pose a threat to the stability and integrity of a country’s financial sector and
its broader economy. In recognition of this threat, the international community has made the fight against these illegal activities a priority. We are
committed to adhering to all regulatory requirements pertaining to AML and ATF in the jurisdictions where we operate and implementing best
practices to minimize the impact of such activities. In Canada, amendments to the regulations under the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act were published in July 2019 (with provisions coming into force between 2020 and 2024) to improve the effectiveness of
Canada’s AML/ATF regime. In accordance with these amendments, we have implemented procedures, processes and controls with respect to
client due diligence, record keeping and reporting as well as mandatory annual AML/ATF training for all employees to ensure that relevant regulatory
obligations are met in each jurisdiction where we operate.
U.S. banking regulation
Our U.S. operations are subject to supervision by the Board of Governors of the Federal Reserve System (Federal Reserve), and are also subject to
a comprehensive federal and state regulatory framework. Our wholly owned subsidiary, CIBC Bancorp USA Inc. (CIBC Bancorp), is a financial
holding company subject to regulation and supervision by the Federal Reserve under the Bank Holding Company Act of 1956, as amended. CIBC
Bank USA, our Illinois-chartered bank, is subject to regulation by the U.S. Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and
the Illinois Department of Financial and Professional Regulation. CIBC’s New York branch is subject to regulation and supervision by the New York
Department of Financial Services and the Federal Reserve. Certain market activities of our U.S. operations are subject to regulation by the SEC and
the U.S. Commodity Futures Trading Commission, as well as other oversight bodies.
The scope of these regulations impact our business in a number of ways. For example, both CIBC Bancorp and CIBC Bank USA are required
to maintain minimum capital ratios in accordance with Basel III rules adopted by the U.S. bank regulatory agencies, which differ in some respects
from Canada’s Basel III rules. Under the U.S. bank regulatory framework, both CIBC and CIBC Bancorp are expected to provide a source of
strength to the subsidiary bank and may be required to commit additional capital and other resources to CIBC Bank USA in the event that its
financial condition were to deteriorate, whether due to overall challenging economic conditions in the U.S., or because of business-specific issues.
The Federal Reserve (in the case of CIBC Bancorp), and the FDIC and the Illinois Department of Financial and Professional Regulation (in the case
of CIBC Bank USA) also have the ability to restrict dividends paid by CIBC Bancorp or CIBC Bank USA, which could limit our ability to receive
distributions on our capital investment in our U.S. banking operations.
As our combined U.S. operations grow, we will become subject to additional enhanced prudential standards under the Federal Reserve’s
regulations applicable to foreign banking organizations. Furthermore, the Federal Reserve and the FDIC may also restrict our U.S. operations,
organic or inorganic growth, if, among other things, they have supervisory concerns about risk management, AML or compliance programs and
practices, governance and controls, and/or capital and liquidity adequacy at CIBC Bancorp, CIBC Bank USA or our New York branch, as
applicable. In some instances, banking regulators may take supervisory actions that may not be publicly disclosed, which may restrict or limit our
New York branch and our U.S. subsidiaries from engaging in certain categories of new activities or acquiring shares or control of other companies.
Any restrictions imposed by banking regulators could negatively impact us by loss of revenue, limitations on the products or services we offer, and
increased operational and compliance costs.
The U.S. regulatory environment continues to evolve and future legislative and regulatory developments may impact CIBC.
Interbank Offered Rate (IBOR) transition
Interest rate benchmarks including the London Interbank Offered Rate (LIBOR) and other similar benchmarks, are being reformed and replaced by
new risk-free rates that are largely based on traded markets. The U.K.’s Financial Conduct Authority (FCA) originally announced in July 2017 that it
would not compel banks to submit LIBOR rates after December 2021. In March 2021, the FCA and the ICE Benchmark Administration (IBA)
announced the dates for the cessation or loss of representativeness of various LIBOR rates including that certain non-USD LIBORs will cease on
December 31, 2021 and that most USD LIBOR tenors will cease on June 30, 2023. As IBORs are widely referenced by large volumes of derivative,
loan and cash products, the transition presents a number of risks to CIBC, and the industry as a whole. These transition risks include market risk (as
new basis risks emerge), model risk, operational risk (as processes are changed or newly introduced), legal risk (as contracts are revised) and
conduct risk (in ensuring clients are adequately informed/prepared). We have established a comprehensive enterprise-wide program to manage
and coordinate all aspects of the transition, including the identification and mitigation of these risks. See the “Other regulatory developments”
section for further details.
Tax reform
As many governments took on additional debt to support the economy during the pandemic and look to ensure a strong post-pandemic recovery,
there are tax reform proposals that could increase taxes affecting CIBC.
The 2021 Liberal Government Platform in Canada proposed tax measures that could be in effect in January 2022, including a 3% surtax on
large banks and a temporary Canada Recovery Dividend that would commence in 2023. Additional proposals would modernize the general anti-
avoidance rule (GAAR), increase resources to combat aggressive tax avoidance and implement the global minimum tax discussed below.
In 2021, 130 countries, including Canada and the other G20 nations, agreed on a new framework for global tax reform. If enacted, these
proposals would be effective beginning in 2023. The two-pillar framework’s stated purpose is to ensure that large Multinational Enterprises (MNEs)
pay tax where they operate and earn profit. Pillar I primarily targets MNE technology companies by re-allocating taxing rights to where goods or
52 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
services are consumed. Pillar II would introduce a new 15% global minimum corporate tax rate in each country where an MNE operates. Uncertainty
persists with regard to the detail of these proposals, which remain subject to due process, and will require approval, ratification and legislation in
multiple nations.
In 2021, the U.S. Congress proposed legislation called the Build Back Better Act that includes changes to corporate income tax laws.
Proposals include modifications to the Base Erosion Anti-abuse Tax (BEAT), global low-tax intangible income (GILTI) regime, and foreign-derived
intangible income (FDII) regime as well as new corporate minimum taxes. If enacted, most of the proposals would be effective for 2022 or later. The
proposed legislation remains subject to change and its impact on CIBC is uncertain.
Corporate transactions
CIBC seeks out acquisition and divestiture opportunities that align with its strategy, risk appetite and financial goals. The ability to successfully
execute on our strategy to integrate acquisitions, and the ability to anticipate and manage risks associated with such corporate transactions are
subject to various factors such as receiving regulatory and shareholder approval on a timely basis and on favourable terms, retaining clients and
key personnel, realizing synergies and efficiencies, controlling integration and acquisition costs, and changes in general business and economic
conditions, among others.
Although many of the factors are beyond our control, their impact is partially mitigated by conducting due diligence before completing the
transaction and developing and executing appropriate plans. However, given the inherent uncertainty involved in such corporate transactions, we
cannot anticipate all potential events, facts and circumstances that may arise and there could be an adverse impact on our operations and financial
performance as a result of such corporate transactions.
Regulatory developments
See the “Taxes”, “Capital management”, “Liquidity risk” and “Accounting and control matters” sections for additional information on regulatory
developments.
Accounting developments
See the “Accounting and control matters” section and Note 32 to the consolidated financial statements for additional information on accounting
developments.
Risks arising from business activities
The chart below shows our business activities and related risk measures based upon regulatory RWA and average allocated common equity as at
October 31, 2021:
CIBC
Corporate and Other
SBUs
Business
activities
Balance
sheet (1)
RWA
Average
allocated
common
equity (5)
Canadian Personal and
Business Banking
Canadian Commercial
Banking and Wealth
Management
U.S. Commercial Banking
and Wealth Management
Capital Markets
• Deposits
Residential mortgages
Personal loans
Credit cards
Business lending
Insurance
Commercial banking
Full-service brokerage
Asset management
Private wealth management
Commercial banking
Asset management
Private wealth management
Personal and small business
banking
Corporate banking
Global markets
Investment banking
Direct financial services
International banking
Investment portfolios
Joint ventures
Functional and support
groups (see page 30)
($ millions)
($ millions)
($ millions)
($ millions)
($ millions)
Average assets
Average deposits
272,645
187,850
Average assets
Average deposits
70,070
83,556
Average assets
Average deposits
46,733
41,370
Average assets
Average deposits
255,063
85,994
Average assets
Average deposits
165,110
199,484
($ millions)
($ millions)
Credit risk
Market risk
Operational risk
51,121
–
11,569
Credit risk
Market risk
Operational risk
54,845
–
6,905
Credit risk (2)
Market risk
Operational risk
($ millions)
47,489
16
3,695
Credit risk (3)
Market risk
Operational risk
($ millions)
58,291
8,800
8,325
Credit risk (4)
Market risk
Operational risk
Proportion of total
CIBC
Comprising:
Credit risk
Market risk
Operational risk
Other (6)
(%)
16
76
–
18
6
Proportion of total
CIBC
Comprising:
Credit risk
Market risk
Operational risk
Other (6)
(%)
17
77
–
10
13
Proportion of total
CIBC
Comprising:
Credit risk
Market risk
Operational risk
Other (6)
(%)
22
51
–
4
45
Proportion of total
CIBC
Comprising:
Credit risk
Market risk
Operational risk
Other (6)
(%)
19
76
12
11
1
Proportion of total
CIBC
Comprising:
Credit risk
Market risk
Operational risk
Other (6)
($ millions)
20,565
290
903
(%)
26
70
3
8
19
Risk profile
We are exposed to credit, market, liquidity, operational, and other risks, which primarily include strategic, insurance, technology, information and cyber
security, reputation and legal, regulatory compliance, and environmental and social risks.
(1) Average balances are calculated as a weighted average of daily closing balances.
(2) Includes CCR of $79 million, which comprises derivatives and repo-style transactions.
(3) Includes CCR of $17,733 million, which comprises derivatives and repo-style transactions.
(4) Includes CCR of $237 million, which comprises derivatives and repo-style transactions.
(5) Average allocated common equity is a non-GAAP measure. For additional information on the composition of this non-GAAP measure, see the “Non-GAAP measures”
section.
(6) Represents average allocated common equity relating to capital deductions, such as goodwill and intangible assets, in accordance with the rules in OSFI’s CAR Guideline.
CIBC 2021 ANNUAL REPORT 53
Management’s discussion and analysis
Credit risk
Credit risk is the risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.
Credit risk arises out of the lending businesses in each of our SBUs and in International Banking, which is included in Corporate and Other.
Other sources of credit risk consist of our trading activities, which include our over-the-counter (OTC) derivatives, debt securities, and our repo-
style transaction activity. In addition to losses on the default of a borrower or counterparty, unrealized gains or losses may occur due to changes
in the credit spread of the counterparty, which could impact the carrying or fair value of our assets.
Governance and management
Credit risk is managed through the three lines of defence model. The first line of defence consists of the frontline businesses and control groups that
assess and manage the risks associated with their activities. They own the risks and the controls that mitigate the risks – this is the first line of
defence.
The second line of defence is Risk Management, which takes a broader, independent view and is responsible for the adjudication and
oversight of credit risks associated with CIBC’s commercial, corporate and wealth management activities.
Internal audit is the third line of defence, providing reasonable assurance to senior management and the Audit Committee of the Board on the
effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in
accordance with its mandate as described in the Internal Audit Charter.
Senior management reports to the GRC and RMC at least quarterly on material credit risk matters, including material credit transactions,
compliance with limits, portfolio trends, impaired loans and credit loss provisioning levels. Provision for (reversal of) credit losses is reviewed by the
RMC and the Audit Committee quarterly.
Specific to the management of credit risk, Risk Management is mandated to provide enterprise-wide oversight of the management of credit
risk in CIBC’s credit portfolios, including the measurement, monitoring and control of credit risk and the management of credit risk models. Key
groups in Risk Management with credit risk responsibility include:
Capital Markets Risk Management: This group is responsible for independent oversight of the measurement, monitoring and control of traded and
non-traded market risk, liquidity risk and trading credit risk, including adjudication of trading credit facilities for banks, non-bank financial entities,
prime brokerage clients and central clearing counterparties. In addition, Capital Markets Risk Management is responsible for the risk management
of sovereign and country risk, securitizations and the oversight of the Global Collateral Finance framework covering repos and securities lending.
Global Credit Risk Management: This group is responsible for the adjudication and oversight of credit risks associated with our commercial,
corporate and wealth management credit portfolios, management of the risks in our investment portfolios, as well as management of special loan
portfolios.
Model Validation, Global Operational Risk Management: This group is responsible for the oversight of model validation practices. Model
validation constitutes the independent set of processes, activities and ongoing documentary evidence that models and parameters are sound and
CIBC can rely on their output.
Enterprise Risk Management: This group is responsible for enterprise-wide analysis, including enterprise-wide stress testing and reporting, risk
data systems and models, economic and regulatory capital methodologies as well as transaction-specific environmental and related social risk.
Risk Analytics and Credit Decisioning: This group manages credit risk in personal and small business products offered through the various
distribution channels (e.g., residential mortgages, credit cards, personal loans/lines of credit, small business loans) and performs analytics to
optimize retail credit performance, along with collections and AML outcomes.
U.S. Risk Management: This group carries out the mandate of CIBC Risk Management at a regional level and provides independent oversight of
the identification, management, measurement, monitoring and control of credit risks in the U.S. Commercial Banking and Wealth Management SBU.
Adjudication and oversight above delegated levels is provided by the CRO, GRC and RMC.
Policies
To control credit risk, prudent credit risk management principles are used as a base to establish policies, standards and guidelines that govern
credit activities as outlined by the credit risk management policy.
The credit risk management policy supplements CIBC’s risk management framework and risk appetite framework, and together with
CIBC’s portfolio concentration limits for credit exposures, CIBC’s common risk/concentration risk limits for credit exposures, and other
supporting credit risk policies, standards and procedures, assists CIBC in achieving its desired risk profile by providing an effective foundation
for the management of credit risk.
Credit risk limits
The RMC approves Board limits, and exposures above Board limits require reporting to, or approval of, the RMC. Management limits are
approved by the CRO. Usage is monitored to ensure risks are within allocated management and Board limits. Exposures above management
limits require the approval of the CRO. Business lines may also impose lower limits to reflect the nature of their exposures and target markets.
This tiering of limits provides for an appropriate hierarchy of decision making and reporting between management and the RMC. Credit approval
authority flows from the Board and is further cascaded to officers in writing. The Board’s Investment and Lending Authority Resolution sets
thresholds above which credit exposures require reporting to, or approval of, the RMC, ensuring an increasing level of oversight for credit
exposures of higher risk. CIBC maintains country limits to control exposures within countries outside of Canada and the U.S.
Credit concentration limits
At a bank-wide level, credit exposures are managed to promote alignment to our risk appetite statement, to maintain the target business mix and
to ensure that there is no undue concentration of risk. We set limits to control borrower concentrations by risk-rating band for large exposures
(i.e., risk-rated credits). Direct loan sales, credit derivative hedges, or structured transactions may also be used to reduce concentrations. We
also have a set of portfolio concentration limits in place to control exposures by country, industry, product and activity. Further, our policies
require limits to be established as appropriate for new initiatives and implementation of strategies involving material levels of credit risk.
Concentration limits represent the maximum exposure levels we wish to hold on our books. In the normal course, it is expected that exposures
will be held at levels below the maximums. The credit concentration limits are reviewed and approved by the RMC at least annually.
54 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Credit concentration limits are also applied to our retail lending portfolios to mitigate concentration risk. We not only have concentration
limits applied to individual borrowers and geographic regions, but also to different types of credit facilities, such as unsecured credits. In
addition, we limit the maximum insured mortgage exposure to private insurers in order to reduce counterparty risk.
Credit risk mitigation
We may mitigate credit risk by obtaining a pledge of collateral, which improves recoveries in the event of a default. Our credit risk management
policies include verification of the collateral and its value and ensuring that we have legal certainty with respect to the assets pledged.
Valuations are updated periodically depending on the nature of the collateral, legal environment, and the creditworthiness of the counterparty.
The main types of collateral include: (i) cash or marketable securities for securities lending and repurchase transactions; (ii) cash or marketable
securities taken as collateral in support of our OTC derivatives activity; (iii) charges over operating assets such as inventory, receivables and
real estate properties for lending to small business and commercial borrowers; and (iv) mortgages over residential properties for retail lending.
In certain circumstances we may use third-party guarantees to mitigate risk. We also obtain insurance to reduce the risk in our real estate
secured lending portfolios, the most material of which relates to the portion of our residential mortgage portfolio that is insured by CMHC, an
agency of the Government of Canada.
We mitigate the trading credit risk of OTC derivatives, securities lending and repurchase transactions with counterparties by employing the
International Swaps and Derivatives Association (ISDA) Master Agreement, as well as Credit Support Annexes (CSAs) or similar master and
collateral agreements. See Note 13 to the consolidated financial statements for additional details on the risks related to the use of derivatives
and how we manage these risks.
ISDA Master Agreements and similar master and collateral agreements, such as the Global Master Repurchase Agreement and Global
Master Securities Lending Agreement, facilitate cross transaction payments, prescribe close-out netting processes, and define the
counterparties’ contractual trading relationship. In addition, the agreements formalize non-transaction-specific terms. Master agreements serve
to mitigate our credit risk by outlining default and termination events, which enable parties to close out of all outstanding transactions in the case
of a negative credit event on either party’s side. The mechanism for calculating termination costs in the event of a close-out are outlined in the
master agreement; this allows for the efficient calculation of a single net obligation of one party to another.
CSAs and other collateral agreements are often included in ISDA Master Agreements or similar master agreements governing securities
lending and repurchase transactions. They mitigate CCR by providing for the exchange of collateral between parties when a party’s exposure to
the other exceeds agreed upon thresholds, subject to a minimum transfer amount. CSAs and other collateral agreements that operate with
master agreements also designate acceptable collateral types, and set out rules for re-hypothecation and interest calculation on collateral.
Collateral types permitted under CSAs and other master agreements are set through our trading credit risk management documentation
procedures. These procedures include requirements around collateral type concentrations.
Consistent with global initiatives to improve resilience in the financial system, we clear derivatives through central counterparties (CCPs)
where feasible. Credit derivatives may be used to reduce industry sector concentrations and single-name exposure.
Forbearance policy
We employ forbearance techniques to manage client relationships and to minimize credit losses due to default, foreclosure or repossession. In
certain circumstances, it may be necessary to modify a loan for reasons related to a borrower’s financial difficulties, reducing the potential of default.
Total debt restructurings are subject to our normal quarterly impairment review which considers, amongst other factors, covenants and/or payment
delinquencies. Loan loss provisions are adjusted as appropriate.
In retail lending, forbearance techniques include interest capitalization, amortization amendments and debt consolidations. We have a set of
eligibility criteria that allow our Client Account Management team to determine suitable remediation strategies and propose products based on each
borrower’s situation.
The solutions available to corporate and commercial clients vary based on the individual nature of the client’s situation and are undertaken
selectively where it has been determined that the client has or is likely to have repayment difficulties servicing its obligations. Covenants often reveal
changes in the client’s financial situation before there is a change in payment behaviour and typically allow for a right to reprice or accelerate
payments. Solutions may be temporary in nature or may involve other special management options.
Process and control
The credit approval process is centrally controlled, with all significant credit requests submitted to a credit adjudication group within Risk
Management that is independent of the originating businesses. Approval authorities are a function of the risk and amount of credit requested. In
certain cases, credit requests must be escalated to senior management, the CRO, or to the RMC for approval.
After initial approval, individual credit exposures continue to be monitored. A formal risk assessment is completed at least annually for all
risk-rated accounts, including review of assigned ratings. Higher risk-rated accounts are subject to closer monitoring and are reviewed at least
quarterly. Collections and specialized loan workout groups handle the day-to-day management of high-risk loans to maximize recoveries.
CIBC 2021 ANNUAL REPORT 55
Management’s discussion and analysis
Risk measurement
Exposures subject to AIRB approach
Under the AIRB approach we are required to categorize exposures to credit risk into broad classes of assets with different underlying risk
characteristics. This asset categorization may differ from the presentation in our consolidated financial statements. Under the AIRB approach,
credit risk is measured using the following three key risk parameters(1):
PD – the probability that the obligor will default within the next 12 months.
EAD – the estimate of the amount that will be drawn at the time of default.
LGD – the expected severity of loss as the result of the default, expressed as a percentage of the EAD.
Our credit risk exposures are divided into business and government and retail portfolios. Regulatory models used to measure credit risk
exposure under the AIRB approach are subject to CIBC’s model risk management process.
(1) These parameters differ from those used in the calculation of ECL under IFRS 9. See the “Accounting and control matters” section for further details.
Business and government portfolios (excluding scored small business) – risk-rating method
The portfolios comprise exposures to corporate, sovereign, and bank obligors. Our adjudication process and criteria includes assigning an
obligor rating that reflects our estimate of the financial strength of the borrower, and a facility rating or LGD rating that reflects the collateral
amount and quality applicable to secured exposures, the seniority position of the claim, and the capital structure of the borrower for unsecured
exposures.
The obligor rating takes into consideration our financial assessment of the obligor, the industry, and the economic environment of the region
in which the obligor operates. Where a guarantee from a third-party exists, both the obligor and the guarantor will be assessed. While our obligor
rating is determined independently of external ratings for the obligor, our risk-rating methodology includes a review of those external ratings.
CIBC employs a 20-point master internal obligor default rating scale that broadly maps to external agencies’ ratings as presented in the
table below.
Grade
Investment grade
Non-investment grade
Watch list
Default
CIBC
rating
00–47
51–67
70–80
90
S&P
equivalent
AAA to BBB-
BB+ to B-
CCC+ to C
D
Moody’s
equivalent
Aaa to Baa3
Ba1 to B3
Caa1 to Ca
C
We use quantitative modelling techniques to assist in the development of internal risk-rating systems. The risk-rating systems have been
developed through analysis of internal and external credit risk data, supplemented with expert judgment. The risk ratings are used for portfolio
management, risk limit setting, product pricing, and in the determination of regulatory and economic capital.
Our credit process is designed to ensure that we approve applications and extend credit only where we believe that our client has the
ability to repay according to the agreed terms and conditions.
Our credit framework of policies and limits defines our appetite for exposure to any single name or group of related borrowers, which is a
function of the internal risk rating. We generally extend new credit only to borrowers in the investment and non-investment grade categories
noted above. Our credit policies are also defined to manage our exposure to concentration in borrowers in any particular industry or region.
In accordance with our process, each obligor is assigned an obligor default rating and the assigned rating is mapped to a PD estimate that
represents a long-run average one-year default likelihood. For corporate obligors, PD estimates are calculated using joint maximum likelihood
techniques based on our internal default rate history by rating category and longer dated external default rates as a proxy for the credit cycle to
arrive at long-run average PD estimates. Estimates drawn from third-party statistical default prediction models are used to supplement the
internal default data for some rating bands where internal data is sparse. For small and medium corporate enterprises, PD estimates are
developed using only internal default history. For bank and sovereign obligors, PD estimates are derived from an analysis based on external
default data sets and supplemented with internal data where possible. We examine several different estimation methodologies and compare
results across the different techniques. In addition, we apply the same techniques and estimation methodologies to analogous corporate default
data and compare the results for banks and sovereigns to the corporate estimates for each technique. A regulatory floor is applied to PD
estimates for corporate and bank obligors.
Each facility is assigned an LGD rating and each assigned rating is mapped to an LGD estimate that considers economic downturn
conditions. For corporate obligors, LGD estimates are primarily derived from internal historical recovery data. Time to resolution is typically one
to two years for most corporate obligors, and one to four years in the real estate sector. LGD values are based on discounted post-default cash
flows for resolved accounts and include material direct and indirect costs associated with collections. External data is used in some cases to
supplement our analysis. Economic downturn periods are identified for each portfolio by examining the history of actual losses, default rates and
LGD. For bank and sovereign exposures, LGD estimates are primarily driven by expert judgment supplemented with external data and
benchmarks where available. Appropriate adjustments are made to LGD estimates to account for various uncertainties associated with
estimation techniques and data limitations, including adjustments for unresolved accounts.
EAD is estimated based on the current exposure to the obligor together with possible future changes in that exposure driven by factors
such as the available undrawn credit commitment amount and the obligor default rating. EAD estimates are primarily based on internal historical
loss data supplemented with comparable external data. Economic downturn periods are identified for each portfolio by examining the historical
default rates and actual EAD factors.
Appropriate adjustments are made to PD, LGD and EAD estimates to account for various uncertainties associated with estimation
techniques and data limitations, including adjustments for unresolved accounts (for LGD).
A simplified risk-rating process (slotting approach) is used for part of our uninsured Canadian commercial mortgage portfolio, which
comprises non-residential mortgages and multi-family residential mortgages. These exposures are individually rated on our rating scale using a
risk-rating methodology that considers the property’s key attributes, which include its loan-to-value (LTV) and debt service ratios, the quality of
the property, and the financial strength of the owner/sponsor. All exposures are secured by a lien over the property. In addition, we have insured
multi-family residential mortgages, which are not treated under the slotting approach, but are instead treated as sovereign exposures.
56 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Retail portfolios
Retail portfolios are characterized by a large number of relatively small exposures. They comprise: real estate secured personal lending
(residential mortgages and personal loans and lines secured by residential property); qualifying revolving retail exposures (credit cards,
overdrafts and unsecured lines of credit); and other retail exposures (loans secured by non-residential assets, unsecured loans including
student loans, and scored small business loans).
We use scoring models in the adjudication of new retail credit exposures, which are based on statistical methods of analyzing the unique
characteristics of the borrower, to estimate future behaviour. In developing our models, we use internal historical information from previous
borrowers, as well as information from external sources, such as credit bureaus. The use of credit scoring models allows for consistent
assessment across borrowers. There are specific guidelines in place for each product, and our adjudication decision will take into account the
characteristics of the borrower, any guarantors, and the quality and sufficiency of the collateral pledged (if any). The lending process will include
documentation of, where appropriate, satisfactory identification, proof of income, independent appraisal of the collateral and registration of
security.
Retail portfolios are managed as pools of homogeneous risk exposures, using external credit bureau scores and/or other behavioural
assessments to group exposures according to similar credit risk profiles. These pools are established through statistical techniques.
Characteristics used to group individual exposures vary by asset category; as a result, the number of pools, their size, and the statistical
techniques applied to their management differ accordingly.
The following table maps the PD bands to various risk levels:
Risk level
Exceptionally low
Very low
Low
Medium
High
Default
PD bands
0.01%–0.20%
0.21%–0.50%
0.51%–2.00%
2.01%–10.00%
10.01%–99.99%
100%
For the purposes of the AIRB approach for retail portfolios, additional PD, LGD and EAD segmentation into homogeneous risk exposures is
established through statistical techniques. The principal statistical estimation technique is decision trees benchmarked against alternative
techniques such as regression and random forests.
Within real estate secured lending, we have two key parameter estimation models: mortgages and real estate secured personal lines of
credit. Within qualifying revolving retail, we have three key parameter estimation models: credit cards, overdraft, and unsecured personal lines.
A small percentage of credit cards, overdraft, and unsecured line accounts that do not satisfy the requirements for qualifying revolving retail are
grouped into other retail parameter models. Within other retail, we have three key parameter models: margin lending, personal loans, and scored
small business loans. Each parameter model pools accounts according to characteristics such as: delinquency, current credit bureau score,
internal behaviour score, estimated current LTV ratio, account type, account age, utilization, outstanding balance, or authorized limit.
PD is estimated as the average default rate over an extended period based on internal historical data, generally for a 5-to-10-year period,
which is adjusted using internal historical data on default rates over a longer period or comparable external data that includes a period of stress.
A regulatory floor is applied to our PD estimate for all retail exposures with the exception of insured mortgages and government-guaranteed
loans.
LGD is estimated based on observed recovery rates over an extended period using internal historical data. In determining our LGD
estimate, we exclude any accounts that have not had enough time since default for the substantial majority of expected recovery to occur. This
recovery period is product-specific and is typically in the range of 1 to 3 years. Accounts that cure from default and return to good standing are
considered to have zero loss. We simulate the loss rate in a significant downturn based on the relationship(s) between LGD and one or more of
the following: PD; housing prices, cure rate, and recovery time; or observed LGD in periods with above-average loss rates. We apply
appropriate adjustments to address various types of estimation uncertainty including sampling error and trending. A regulatory floor is applied to
all real estate secured exposures with the exception of insured mortgages.
EAD for revolving products is estimated as a percentage of the authorized credit limit based on the observed EAD rates over an extended
period using historical data. We simulate the EAD rate in a significant downturn based on the relationship(s) between the EAD rate and PD and/
or the observed EAD rate in periods with above-average EAD rates. For term loan products, EAD is set equal to the outstanding balance.
We apply appropriate adjustments to PD, LGD and EAD to address various types of estimation uncertainty including sampling error and
trending.
Back-testing
We monitor the three key risk parameters – PD, EAD and LGD – on a quarterly basis for our business and government portfolios and on a
monthly basis for our retail portfolios. Every quarter, the back-testing results are reported to OSFI and are presented to the business and Risk
Management senior management for review and challenge. For each parameter, we identify any portfolios whose realized values are
significantly above or significantly below expectations and then test to see if this deviation is explainable by changes in the economy. If the
results indicate that a parameter model may be losing its predictive power, we prioritize that model for review and update.
Stress testing
As part of our regular credit portfolio management process, we conduct stress testing and scenario analyses on our portfolio to quantitatively
assess the impact of various historical, as well as hypothetical, stressed conditions, versus limits determined in accordance with our risk
appetite. Scenarios are selected to test our exposures to specific industries (e.g., oil and gas and real estate), products (e.g., mortgages and
cards), or geographic regions (e.g., Europe and the Caribbean). Results from stress testing are a key input into management decision making,
including the determination of limits and strategies for managing our credit exposure. See the “Real estate secured personal lending” section for
further discussion on our residential mortgage portfolio stress testing.
CIBC 2021 ANNUAL REPORT 57
Management’s discussion and analysis
Exposure to credit risk
The portfolios are categorized based upon how we manage the business and the associated risks. Gross credit exposure amounts presented in
the table below represent our estimate of EAD, which is net of derivative master netting agreements and CVA but is before allowance for credit
losses or credit risk mitigation. Gross credit exposure amounts relating to our business and government portfolios are reduced for collateral held
for repo-style transactions, which reflects the EAD value of such collateral. Non-trading equity exposures are not included in the table below as
they have been deemed immaterial under the OSFI guidelines, and hence are subject to 100% risk-weighting.
$ millions, as at October 31
2021
AIRB
approach
Standardized
approach
Total
approach (1)
AIRB
Standardized
approach
Business and government portfolios
Corporate
Drawn
Undrawn commitments
Repo-style transactions
Other off-balance sheet
OTC derivatives
$
Sovereign
Drawn
Undrawn commitments
Repo-style transactions
Other off-balance sheet
OTC derivatives
Banks
Drawn
Undrawn commitments
Repo-style transactions
Other off-balance sheet
OTC derivatives
Gross business and government portfolios
Less: collateral held for repo-style
transactions
Net business and government portfolios
Retail portfolios
Real estate secured personal lending
Drawn
Undrawn commitments
Qualifying revolving retail
Drawn
Undrawn commitments
Other off-balance sheet
Other retail
Drawn
Undrawn commitments
Other off-balance sheet
Total retail portfolios
Securitization exposures
Gross credit exposure
Less: collateral held for repo-style
transactions
Net credit exposure (2)
120,417
61,417
172,827
13,644
12,914
381,219
125,001
8,525
26,746
1,613
2,011
163,896
12,291
1,554
42,529
64,728
5,765
126,867
671,982
225,399
446,583
261,531
36,631
298,162
18,181
54,509
327
73,017
15,578
2,937
40
18,555
389,734
10,823
$
$ 36,321
7,583
–
981
415
45,300
26,272
–
–
–
1
26,273
1,565
3
–
–
12
1,580
73,153
–
73,153
4,835
–
4,835
–
–
–
–
1,419
26
–
1,445
6,280
4,556
156,738
69,000
172,827
14,625
13,329
426,519
151,273
8,525
26,746
1,613
2,012
190,169
13,856
1,557
42,529
64,728
5,777
128,447
745,135
225,399
519,736
266,366
36,631
302,997
18,181
54,509
327
73,017
16,997
2,963
40
20,000
396,014
15,379
1,072,539
83,989
1,156,528
2020
Total
138,945
56,812
139,677
15,101
11,644
362,179
155,741
8,354
38,904
1,553
2,189
206,741
14,087
1,568
24,228
59,761
5,826
105,470
674,390
187,832
486,558
236,326
31,390
267,716
18,701
53,085
271
72,057
16,195
2,847
35
19,077
358,850
15,785
$
$ 102,342
49,473
139,677
14,085
10,858
$ 36,603
7,339
–
1,016
786
316,435
45,744
133,077
8,354
38,904
1,553
2,187
184,075
12,846
1,552
24,228
59,761
5,805
104,192
604,702
187,832
416,870
231,527
31,390
262,917
18,701
53,085
271
72,057
14,869
2,819
35
17,723
352,697
12,276
969,675
22,664
–
–
–
2
22,666
1,241
16
–
–
21
1,278
69,688
–
69,688
4,799
–
4,799
–
–
–
–
1,326
28
–
1,354
6,153
3,509
225,399
–
225,399
187,832
–
187,832
$
847,140
$ 83,989
$
931,129
$ 781,843
$ 79,350
$
861,193
79,350
1,049,025
(1) Includes exposures subject to the supervisory slotting approach.
(2) Excludes exposures arising from derivative and repo-style transactions that are cleared through QCCPs as well as credit risk exposures arising from other assets that
are subject to the credit risk framework but are not included in the standardized or IRB frameworks, including other balance sheet assets that are risk-weighted at
100%, significant investments in the capital of non-financial institutions that are risk-weighted at 1,250%, settlement risk, and amounts below the thresholds for
deduction that are risk-weighted at 250%.
Net credit exposure increased by $69.9 billion in 2021, due to business growth in our North American lending portfolios.
58 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Exposures subject to the standardized approach(1)
Exposures within CIBC Bank USA, CIBC FirstCaribbean and certain exposures to individuals for non-business purposes do not have sufficient
historical data to support the AIRB approach for credit risk, and are subject to the standardized approach. The standardized approach utilizes a
set of risk weightings defined by the regulators, as opposed to the more data intensive AIRB approach. A detailed breakdown of our
standardized credit risk exposures by risk-weight category, before considering the effect of credit risk mitigation strategies and before
allowance for credit losses, is provided below.
$ millions, as at October 31
Corporate
Sovereign
Banks
Real estate secured personal lending
Other retail
$
0%
–
22,497
–
–
–
$ 22,497
$
20%
–
2,884
1,495
–
–
$ 4,379
$
$
Risk-weight category
50%
–
103
–
–
–
$ 103
75%
–
–
–
1,064
1,372
$ 2,436
35%
–
–
–
3,555
–
$ 3,555
$
100%
$ 45,164
789
85
206
70
$ 46,314
2021
Total
$ 45,300
26,273
1,580
4,835
1,445
$ 79,433
150%
$ 136
–
–
10
3
$ 149
2020
Total
$ 45,744
22,666
1,278
4,799
1,354
$ 75,841
(1) See “Securitization exposures” section for securitization exposures that are subject to the standardized approach.
We use credit ratings from S&P and Moody’s to calculate credit risk RWA for certain exposures under the standardized approach, including
securities issued by sovereigns and their central banks (sovereigns), banks and corporates, and deposits with sovereigns and banks. This includes
S&P and Moody’s issuer-specific credit ratings for securities issued by sovereigns and corporates, the S&P country credit rating for the country of
incorporation for securities issued by banks, and deposits with banks, and the S&P country credit rating for deposits with central banks. The RWA
calculated using credit ratings from these agencies represents 1.2% of credit risk RWA under the standardized approach.
Trading credit exposures
We have trading credit exposure (also called counterparty credit exposure) that arises from our OTC derivatives and our repo-style transactions.
The nature of our derivatives exposure and how it is mitigated is further explained in Note 13 to the consolidated financial statements. Our repo-
style transactions consist of our securities bought or sold under repurchase agreements, and our securities borrowing and lending activity.
The PD of our counterparties is estimated using models consistent with the models used for our direct lending activity. Due to the
fluctuations in the market values of interest rates, exchange rates, and equity and commodity prices, counterparty credit exposure cannot be
quantified with certainty at the inception of the trade. Counterparty credit exposure is estimated using the current fair value of the exposure, plus
an estimate of the maximum potential future exposure due to changes in the fair value. Credit risk associated with these counterparties is
managed within the same process as our lending business, and for the purposes of credit adjudication, the exposure is aggregated with any
exposure arising from our lending business. The majority of our counterparty credit exposure benefits from the credit risk mitigation techniques
discussed above, including daily re-margining, and posting of collateral.
We are also exposed to wrong-way risk. Specific wrong-way risk arises when CIBC receives financial collateral issued (or an underlying
reference obligation of a transaction is issued) by the counterparty itself, or by a related entity that would be considered to be part of the same
common risk group. General wrong-way risk arises when the exposure and/or collateral pledged to CIBC is highly correlated to that of the
counterparty. Exposure to wrong-way risk with derivative counterparties is monitored by Capital Markets Risk Management. Where we may be
exposed to wrong-way risk, our adjudication procedures subject those transactions to a more rigorous approval process. The exposure may be
hedged with other derivatives to further mitigate the risk that can arise from these transactions.
We establish a CVA for expected future credit losses from each of our derivative counterparties. The expected future credit loss is a
function of our estimates of the PD, the estimated loss in the event of default, and other factors such as risk mitigants.
Rating profile of OTC derivative mark-to-market (MTM) receivables
$ billions, as at October 31
Investment grade
Non-investment grade
Watch list
Default
Unrated
2021
2020
Exposure (1)
68.9 %
30.6
0.5
–
–
100.0 %
$ 7.46
2.40
0.07
0.03
–
$ 9.96
74.9 %
24.1
0.7
0.3
–
100.0 %
$
9.87
4.39
0.07
–
–
$ 14.33
(1) MTM of the OTC derivative contracts is after the impact of master netting agreements, but before any collateral.
Concentration of exposures
Concentration of credit risk exists when a number of obligors are engaged in similar activities, or operate in the same geographic areas or
industry sectors, and have similar economic characteristics so that their ability to meet contractual obligations is similarly affected by changes in
economic, political, or other conditions.
CIBC 2021 ANNUAL REPORT 59
Management’s discussion and analysis
Geographic distribution(1)
The following table provides a geographic distribution of our business and government exposures under the AIRB approach, net of collateral
held for repo-style transactions.
$ millions, as at October 31, 2021
Drawn
Undrawn commitments
Repo-style transactions
Other off-balance sheet
OTC derivatives
October 31, 2020
Canada
$ 170,156
50,998
7,360
63,615
9,863
U.S.
$ 61,388
14,133
5,506
8,098
6,436
Europe
$ 13,678
2,888
1,485
7,815
2,638
Other
$ 12,487
3,477
2,352
457
1,753
Total
$ 257,709
71,496
16,703
79,985
20,690
$ 301,992
$ 95,561
$ 28,504
$ 20,526
$ 446,583
$ 295,784
$ 81,982
$ 21,456
$ 17,648
$ 416,870
(1) Classification by country is primarily based on domicile of debtor or customer.
Business and government exposure by industry groups(1)
The following table provides an industry-wide breakdown of our business and government exposures under the AIRB approach, net of collateral
held for repo-style transactions.
$ millions, as at October 31
Commercial mortgages
Financial institutions
Retail and wholesale
Business services
Manufacturing – capital goods
Manufacturing – consumer goods
Real estate and construction
Agriculture
Oil and gas
Mining
Forest products
Hardware and software
Telecommunications and cable
Broadcasting, publishing and printing
Transportation
Utilities
Education, health, and social services
Governments
$
Drawn
9,613
78,163
7,213
7,211
2,819
3,623
33,860
7,069
4,693
1,036
337
2,178
604
431
5,822
13,005
3,447
76,585
$ 257,709
$
Undrawn
commitments
52
14,255
4,235
3,199
2,220
2,330
9,799
2,145
4,770
3,046
636
1,162
2,053
139
3,492
10,702
1,658
5,603
$ 71,496
$
Repo-style
transactions
–
15,571
–
29
–
–
179
–
–
–
–
–
–
–
–
–
1
923
$ 16,703
$
Other off-
balance sheet
–
69,994
360
592
315
247
1,322
35
830
691
226
59
464
1
294
3,434
196
925
$ 79,985
OTC
derivatives
$
– $
2021
Total
9,665 $
2020
Total
8,420
180,045
10,523
10,656
5,397
5,816
40,652
8,760
13,834
5,131
1,239
2,672
2,195
665
9,913
26,590
4,742
79,620
$ 20,690 $ 446,583 $ 416,870
187,163
12,120
11,253
5,577
6,270
45,470
9,306
15,931
4,903
1,220
3,422
3,440
614
10,889
28,209
5,530
85,601
9,180
312
222
223
70
310
57
5,638
130
21
23
319
43
1,281
1,068
228
1,565
(1) In the third quarter of 2021, certain amounts by sector were revised from those previously presented to align with our revised sector definition, or to better match the
borrowers’ risk profiles with the relevant sectors.
As part of our risk mitigation strategy, we may use credit protection purchases as a hedge against customer or industry sector concentration. As at
October 31, 2021, we had credit protection purchased totalling $124 million (2020: $185 million) related to our business and government loans.
Credit quality of portfolios
Credit quality of the retail portfolios
The following table presents the credit quality of our retail portfolios under the AIRB approach.
$ millions, as at October 31
Risk level
Exceptionally low
Very low
Low
Medium
High
Default
Real estate secured
personal lending
$ 227,533
39,417
27,717
2,777
424
294
$ 298,162
EAD
Qualifying
revolving retail
$ 51,801
4,599
9,797
6,138
649
33
$ 73,017
2021
2020
Total
$ 282,648
48,481
44,718
11,551
1,953
383
$ 389,734
Total
$ 254,621
40,731
42,353
12,122
2,322
548
$ 352,697
$
Other
retail
3,314
4,465
7,204
2,636
880
56
$ 18,555
Securitization exposures
The following table provides details on securitization exposures in our banking book, by credit rating.
$ millions, as at October 31
Exposures under the AIRB approach
S&P rating equivalent
AAA to BBB-
BB+ to BB-
Below BB-
Unrated
Exposures under the standardized approach
Total securitization exposures
60 CIBC 2021 ANNUAL REPORT
2021
2020
EAD
$ 10,823
–
–
–
10,823
4,556
$ 15,379
$ 12,276
–
–
–
12,276
3,509
$ 15,785
Management’s discussion and analysis
CIBC client relief programs in response to COVID-19
During the early stages of the pandemic, we had been actively engaged in lending activities to support our clients who were experiencing financial
hardship caused by the COVID-19 pandemic.
For our personal banking clients impacted by the COVID-19 pandemic, various client relief programs were offered at the onset of the
pandemic, including lower interest rates of 10.99% on certain credit products, in addition to certain payment deferral options; deferral of regular
payments on residential mortgages and certain secured personal loans for up to six months and on certain other loans and lines of credit for up to
two months; and early withdrawal from eligible GICs on an exception basis.
For our corporate, commercial and business banking clients in Canada, the U.S. and other regions, client relief programs have also been
offered on a case-by-case basis depending on the product and client including new or increased credit facilities to provide additional liquidity;
covenant and borrowing base relief to provide financial flexibility; principal and interest deferrals for loans, mortgages, lines of credit, authorized
overdraft and credit cards; and early withdrawal of funds held in non-registered GICs.
The number of clients under these payment deferral programs has continued to decline considerably relative to the second and third quarters
of 2020. Following the expiry of their payment deferral terms, the majority of these clients have returned to making regular payments on their loans
with a relatively small segment of client accounts written off. As at October 31, 2021, the gross outstanding balance of loans for which CIBC
provided payment deferrals was not significant for retail loans and products in Canada and the Caribbean (2020: $3.3 billion); and was $0.2 billion
for business and government loans (2020: $2.5 billion); including $0.1 billion in Canada and the U.S. (2020: $1.0 billion), and $0.1 billion in the
Caribbean (2020: $1.5 billion).
Government lending programs in response to COVID-19
Since the onset of the pandemic, CIBC has engaged in a number of lending programs introduced by the Government of Canada and the U.S.
federal government.
The Canada Emergency Business Account (CEBA) program was launched in the second quarter of 2020 by the Government of Canada, which
was expanded later in 2020 to provide financial support to certain borrowers that would have not otherwise qualified and increased the loan limit for
eligible borrowers from $40,000 to $60,000. The Export Development Canada (EDC) funds all loans advanced under the CEBA program, including
any payment defaults and principal forgiveness. The application deadline for the CEBA program ended on June 30, 2021, however, we continue to
facilitate this program as the final set of applications are reviewed and funded.
In the second quarter of 2020, the Government of Canada introduced a number of lending programs for businesses, including: (i) the EDC
loan guarantee program for small- and medium-sized enterprises and (ii) the BDC co-lending arrangement. Applications for both programs are
available until December 31, 2021.
In the first quarter of 2021, the Government of Canada launched the HASCAP, which is 100% guaranteed by the BDC and is available to small-
and medium-sized businesses that have been hardest hit by the pandemic. Applications by eligible businesses commenced on February 1, 2021
and the program is available until December 31, 2021.
The PPP, introduced by the U.S. Small Business Administration, was a forgivable loan program that ended on May 31, 2021. PPP loans are
guaranteed by the U.S. Small Business Administration.
As at October 31, 2021, loans of $4.5 billion (2020: $2.9 billion), net of repayments, have been provided to our clients under the CEBA, which
are not recognized on our consolidated balance sheet. For further details, refer to Note 2 to our consolidated financial statements. In addition,
funded loans outstanding on our consolidated balance sheet under the lending programs for businesses were $0.3 billion (2020: $0.2 billion), while
loans outstanding under the PPP in the U.S. were US$0.5 billion (2020: US$1.9 billion).
For further details regarding these programs, refer to Note 2 to our consolidated financial statements.
CIBC 2021 ANNUAL REPORT 61
Management’s discussion and analysis
Real estate secured personal lending
Real estate secured personal lending comprises residential mortgages, and personal loans and lines secured by residential property (HELOC). This
portfolio is low risk, as we have a first charge on the majority of the properties and a second lien on only a small portion of the portfolio. We use the
same lending criteria in the adjudication of both first lien and second lien loans.
Under the Bank Act (Canada), banks are limited to providing residential real estate loans of no more than 80% of the collateral value. An
exception is made for mortgage loans with a higher LTV ratio if they are insured by either CMHC or a private mortgage insurer. Mortgage insurance
protects banks from the risk of default by the borrower, over the term of the coverage. Mortgage insurers are subject to regulatory capital
requirements, which aim to ensure that they are well capitalized. If a private mortgage insurer becomes insolvent, the Government of Canada has,
provided certain conditions are met, obligations in respect of policies underwritten by certain insolvent private mortgage insurers as more fully
described in the Protection of Residential Mortgage or Hypothecary Insurance Act (PRMHIA). There is a possibility that losses could be incurred in
respect of insured mortgages if, among other things, CMHC or the applicable private mortgage insurer denies a claim, or further, if a private
mortgage insurer becomes insolvent and either the conditions under the PRMHIA are not met or the Government of Canada denies the claim.
The following disclosures are required by OSFI pursuant to the guideline B-20 “Residential Mortgage Underwriting Practices and Procedures”
(guideline B-20).
The following table provides details on our residential mortgage and HELOC portfolios:
Residential mortgages (1)
HELOC (2)
Total
Insured
Uninsured
Uninsured
Insured
Uninsured
$ billions, as at October 31, 2021
Ontario (3)
British Columbia and territories (4)
Alberta
Quebec
Central prairie provinces
Atlantic provinces
Canadian portfolio (5)(6)
U.S. portfolio (5)
Other international portfolio (5)
Total portfolio
October 31, 2020
$ 25.2
8.7
12.9
5.6
3.5
3.7
59.6
–
–
$ 59.6
$ 67.0
19 % $ 106.7
40.6
18
13.6
49
13.2
30
4.1
46
5.1
42
81 %
82
51
70
54
58
$ 10.2
3.9
2.2
1.2
0.6
0.7
100 %
100
100
100
100
100
25
–
–
183.3
2.1
2.5
75
100
100
24 % $ 187.9
31 % $ 149.0
76 %
69 %
18.8
–
–
100
–
–
$ 25.2
8.7
12.9
5.6
3.5
3.7
59.6
–
–
18 % $ 116.9
44.5
16
15.8
45
14.4
28
4.7
43
5.8
39
82 %
84
55
72
57
61
23
–
–
202.1
2.1
2.5
77
100
100
$ 18.8
100 %
$ 59.6
22 % $ 206.7
$ 19.6
100 %
$ 67.0
28 % $ 168.6
78 %
72 %
(1) Balances reflect principal values.
(2) We did not have any insured HELOCs as at October 31, 2021 and 2020.
(3) Includes $11.7 billion (2020: $13.8 billion) of insured residential mortgages, $67.7 billion (2020: $53.4 billion) of uninsured residential mortgages, and $6.0 billion
(4)
(2020: $6.1 billion) of HELOCs in the Greater Toronto Area (GTA).
Includes $3.8 billion (2020: $4.5 billion) of insured residential mortgages, $27.9 billion (2020: $22.9 billion) of uninsured residential mortgages, and $2.4 billion
(202
0: $2.5 billion) of HELOCs in the Greater Vancouver Area (GVA).
(5) Geographic location is based on the address of the property.
(6) 64% (2020: 71%) of insurance on Canadian residential mortgages is provided by CMHC and the remaining by two private Canadian insurers, both rated at least AA (low)
by DBRS.
The average LTV ratios(1) for our uninsured residential mortgages and HELOCs originated and acquired during the year are provided in the following
table:
For the year ended October 31
Ontario (2)
British Columbia and territories (3)
Alberta
Quebec
Central prairie provinces
Atlantic provinces
Canadian portfolio (4)
U.S. portfolio (4)
Other international portfolio (4)
Residential
mortgages
2021
HELOC
Residential
mortgages
2020
HELOC
64 %
61
69
68
69
69
64
63
75 %
68 %
65
73
73
74
73
68
65
n/m
63 %
60
68
68
68
71
63
65
72 %
68 %
65
73
73
74
74
68
63
n/m
(1) LTV ratios for newly originated and acquired residential mortgages and HELOCs are calculated based on weighted average.
(2) Average LTV ratios for our uninsured GTA residential mortgages originated during the year were 64% (2020: 62%).
(3) Average LTV ratios for our uninsured GVA residential mortgages originated during the year were 61% (2020: 58%).
(4) Geographic location is based on the address of the property.
n/m Not meaningful.
The following table provides the average LTV ratios on our total Canadian residential mortgage portfolio:
October 31, 2021 (1)(2)
October 31, 2020 (1)(2)
Insured
Uninsured
51 %
55 %
49 %
52 %
(1)
LTV ratios for residential mortgages are calculated based on weighted average. The house price estimates for October 31, 2021 and 2020 are based on the Forward
Sortation Area (FSA) level indices from the Teranet – National Bank National Composite House Price Index (Teranet) as of September 30, 2021 and 2020, respectively.
Teranet is an independent estimate of the rate of change in Canadian home prices.
(2) Average LTV ratio on our uninsured GTA residential mortgage portfolio was 47% (2020: 48%). Average LTV ratio on our uninsured GVA residential mortgage portfolio was
45% (2020: 46%).
62 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
The table below summarizes the remaining amortization profile of our total Canadian, U.S. and other international residential mortgages based upon
current customer payment amounts:
0–5 years
>5–10
years
>10–15
years
>15–20
years
>20–25
years
>25–30
years
>30–35
years
>35 years
Canadian portfolio
October 31, 2021
October 31, 2020
U.S. portfolio
October 31, 2021
October 31, 2020
Other international portfolio
October 31, 2021
October 31, 2020
1 %
2 %
1 %
2 %
7 %
7 %
3 %
4 %
3 %
3 %
12 %
13 %
7 %
7 %
6 %
7 %
21 %
22 %
17 %
18 %
9 %
10 %
24 %
23 %
45 %
44 %
10 %
10 %
19 %
19 %
27 %
25 %
71 %
68 %
15 %
14 %
– %
– %
– %
– %
1 %
2 %
– %
– %
– %
– %
– %
– %
We have two types of condominium exposures in Canada: mortgages and developer loans. Both are primarily concentrated in the Toronto and
Vancouver areas. As at October 31, 2021, our Canadian condominium mortgages were $34.7 billion (2020: $28.1 billion), of which 24% (2020: 31%)
were insured. Our drawn developer loans were $1.1 billion (2020: $1.4 billion), or 0.7% (2020: 1.0%) of our business and government portfolio, and
our related undrawn exposure was $4.9 billion (2020: $4.5 billion). The condominium developer exposure is diversified across 102 projects.
We stress test our mortgage and HELOC portfolio to determine the potential impact of different economic events. Our stress tests may use variables
such as unemployment rates, debt service ratios and housing price changes, to model potential outcomes for a given set of circumstances. The
stress testing involves variables that could behave differently in certain situations. Our main tests use economic variables in a similar range or more
conservative to historical events when Canada experienced economic downturns, and also incorporate the impact of the COVID-19 pandemic. Our
results show that in an economic downturn, our strong capital position should be sufficient to absorb mortgage and HELOC losses.
On May 20, 2021, OSFI and the Department of Finance (Canada) announced that effective June 1, 2021, the minimum qualifying rate for uninsured
and insured mortgages is now the higher of the mortgage contract rate plus 2%, or 5.25%, as a minimum floor. The 5.25% replaced the Bank of
Canada’s five-year benchmark posted mortgage rate that was then being applied. OSFI, as well as the Department of Finance (Canada) will revisit it
at least annually to ensure it remains appropriate for risks in the environment.
Credit quality performance
As at October 31, 2021, total loans and acceptances after allowance for credit losses were $462.9 billion (2020: $416.4 billion). Consumer loans
(comprising residential mortgages, credit cards, and personal loans, including student loans) constitute 65% (2020: 66%) of the portfolio, and
business and government loans (including acceptances) constitute the remainder of the portfolio.
Consumer loans were up $30.0 billion or 11% from the prior year, primarily due to an increase in residential mortgages, offset by a decrease in
personal loans and credit cards. Business and government loans (including acceptances) were up $16.5 billion or 12% from the prior year, mainly
attributable to financial institutions, real estate and construction, retail and wholesale, and utilities.
Impaired loans
The following table provides details of our impaired loans and allowance for credit losses:
$ millions, as at or for the year ended October 31
Gross impaired loans
Balance at beginning of year
Classified as impaired during the year
Transferred to performing during the year
Net repayments
Amounts written off
Disposals of loans
Foreign exchange and other
Balance at end of year
Allowance for credit losses – impaired loans
Net impaired loans (1)
Balance at beginning of year
Net change in gross impaired
Net change in allowance
Balance at end of year
Business and
government
loans
Consumer
loans
2021
Total
Business and
government
loans
Consumer
loans
2020
Total
$ 1,359
750
(235)
(480)
(279)
(31)
(51)
$ 1,033
$
$
$
508
709
(326)
142
525
$
$
$
$
$
990
1,686
(574)
(579)
(707)
–
(16)
800
$ 2,349
2,436
(809)
(1,059)
(986)
(31)
(67)
$ 1,833
264
$
772
726
(190)
–
536
$ 1,435
(516)
142
$ 1,061
$
911
1,256
(109)
(547)
(157)
–
5
$ 1,359
$
$
$
650
535
448
(274)
709
$
$
$
$
$
955
1,933
(580)
(543)
(778)
–
3
990
$ 1,866
3,189
(689)
(1,090)
(935)
–
8
$ 2,349
264
$
914
687
35
4
726
$ 1,222
483
(270)
$ 1,435
Net impaired loans as a percentage of net loans and
acceptances
(1) Net impaired loans are gross impaired loans net of stage 3 allowance for credit losses.
0.23 %
0.34 %
Gross impaired loans
As at October 31, 2021, gross impaired loans were $1,833 million, down $516 million from the prior year, primarily due to decreases in the Canadian
residential mortgages portfolio and the oil and gas, retail and wholesale, and business services sectors, partially offset by increases in the
education, health and social services and real estate and construction sectors.
55% of gross impaired loans related to Canada, of which the residential mortgages and personal lending portfolios, as well as the retail and
wholesale and the utilities sectors accounted for the majority.
25% of gross impaired loans related to the U.S., of which the real estate and construction, financial institutions, business services and
manufacturing sectors accounted for the majority.
The remaining gross impaired loans related to CIBC FirstCaribbean, of which the residential mortgages and personal lending portfolios, as well
as the business services and real estate and construction sectors accounted for the majority.
CIBC 2021 ANNUAL REPORT 63
Management’s discussion and analysis
See the “Supplementary annual financial information” section for additional details on the geographic distribution and industry classification of
impaired loans.
Allowance for credit losses – impaired loans
Allowance for credit losses on impaired loans was $772 million, down $142 million from the prior year, primarily due to decreases in the oil and gas,
business services, and retail and wholesale sectors, partially offset by an increase in the utilities sector.
Loans contractually past due but not impaired
The following table provides an aging analysis of the contractually past due loans that are not impaired. Most risk-rated business and
government loans that were contractually past due at the time relief was provided pursuant to payment deferral programs were presented in the
aging category that applied at the time deferrals were granted during the period of the deferral. Other business and government loans, credit
cards, personal loans and residential mortgages that were subject to a payment deferral program were generally presented in the aging
category that applied as at March 31, 2020 during the period of the deferral, which approximated the time when the majority of the deferrals
were granted. Loans that have exited a deferral program generally continue to age based on the status that was applied at the beginning of the
program to the extent a payment has not been made.
$ millions, as at October 31
Residential mortgages
Personal
Credit card
Business and government
31 to
90 days
Over
90 days
$
703
146
137
162
$
–
–
66
–
$
2021
Total
703
146
203
162
$ 1,148
$ 66
$ 1,214
2020
Total (1)
$ 1,152
222
321
281
$ 1,976
(1) Excludes loans less than 30 days past due as such loans are not generally indicative of the borrowers’ ability to repay.
During the year, gross interest income that would have been recorded if impaired loans were treated as current was $96 million
(2020: $113 million), of which $55 million (2020: $69 million) was in Canada and $41 million (2020: $44 million) was outside Canada. During the
year, interest recognized on impaired loans was $41 million (2020: $45 million), and interest recognized on loans before being classified as
impaired was $30 million (2020: $67 million), of which $21 million (2020: $43 million) was in Canada and $9 million (2020: $24 million) was
outside Canada.
Exposure to certain countries and regions
Europe
The following table provides our exposure to European countries, both within and outside the Eurozone.
Our direct exposures presented in the tables below comprise (A) funded – on-balance sheet loans (stated at amortized cost net of stage 3
allowance for credit losses, if any), deposits with banks (stated at amortized cost net of stage 3 allowance for credit losses, if any) and securities
(stated at carrying value); (B) unfunded – unutilized credit commitments, letters of credit, and guarantees (stated at notional amount net of stage 3
allowance for credit losses, if any); and (C) derivative MTM receivables (stated at fair value) and repo-style transactions (stated at fair value).
Of our total direct exposures to Europe, approximately 43% (2020: 47%) is to entities in countries with Aaa/AAA ratings from at least one of
Moody’s or S&P.
The following table provides a summary of our positions in this business:
Direct exposures
Funded
Unfunded
Derivative MTM receivables
and repo-style transactions (1)
$ millions, as at October 31, 2021
Corporate Sovereign Banks
(A) Corporate Banks
Total
funded
Total
unfunded
(B)
Corporate Sovereign Banks
Net
exposure
(C)
Total direct
exposure
(A)+(B)+(C)
Austria
Finland
France
Germany
Ireland
Luxembourg
Netherlands
Norway
Spain
Sweden
Switzerland
United Kingdom
Other European countries
$
– $
67
62
432
206
151
552
187
87
452
234
2,655
61
514 $
328
161
917
–
1,812
730
186
–
900
–
2,494
311
135 $
758
152
751
153
156
147
195
21
174
31
1,002
55
649 $
– $
1,153
375
2,100
359
2,119
1,429
568
108
1,526
265
6,151
427
97
336
321
43
61
568
714
7
137
93
3,174
12
2 $
5
103
130
–
108
275
–
25
–
–
349
83
2
102
439
451
43
169
843
714
32
137
93
3,523
95
$
–
–
–
49
–
–
28
–
–
17
11
690
–
$
– $
–
–
–
–
–
–
–
–
–
–
17
127
– $
7
34
51
226
124
12
–
–
–
84
423
9
–
7
34
100
226
124
40
–
–
17
95
1,130
136
$
651
1,262
848
2,651
628
2,412
2,312
1,282
140
1,680
453
10,804
658
Total Europe
$ 5,146 $ 8,353 $ 3,730 $ 17,229 $ 5,563 $ 1,080 $ 6,643
$ 795
$ 144 $ 970 $ 1,909
$ 25,781
October 31, 2020 (2)
$ 4,275 $ 5,211 $ 3,544 $ 13,030 $ 5,063 $
968 $ 6,031
$ 788
$ 92 $ 835 $ 1,715
$ 20,776
(1) The amounts shown are net of CVA and collateral. Collateral on derivative MTM receivables was $1.9 billion (2020: $1.8 billion), collateral on repo-style transactions was
$30.5 billion (2020: $30.3 billion), and both comprise cash and investment grade debt securities.
(2) Certain prior period balances have been revised to conform to current year presentation.
We have $2,632 million (2020: $639 million) of indirect exposure to European entities, as we hold debt or equity securities issued by European
entities as collateral for derivative transactions and securities borrowing and lending activity from counterparties that are not in Europe.
64 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Settlement risk
Settlement risk is the risk that during an agreed concurrent exchange of currency or principal payments, the counterparty will fail to make its
payment to CIBC. This risk can arise in general trading activities and from payment and settlement system participation.
Many global settlement systems offer significant risk reduction benefits through complex risk mitigation frameworks. Bilateral payment netting
agreements may be put in place to mitigate risk by reducing the aggregate settlement amount between counterparties. Further, we participate in
several North American payment and settlement systems, including a global foreign exchange multilateral netting system. We also use financial
intermediaries to access some payment and settlement systems, and for certain trades, we may utilize an established clearing house to minimize
settlement risk.
Transactions settled outside of payment and settlement systems or clearing houses require approval of credit facilities for counterparties,
either as pre-approved settlement risk limits or payment-versus-payment arrangements.
Securitization activities
We engage in three types of securitization activities: we securitize assets that we originate, we securitize assets originated by third parties and we
engage in trading activities related to securitized products.
We securitize assets that we originate principally as a funding mechanism. The credit risk on the underlying assets in these transactions is
transferred to the SE, with CIBC retaining first loss exposure and other investors exposed to the remaining credit risk.
Securitization activities relating to assets originated by third parties can include the securitization of those assets through ABCP conduits (or
similar programs) that we sponsor (including both consolidated and non-consolidated SEs; see the “Off-balance sheet arrangements” section and
Note 7 to our consolidated financial statements for additional details), or through direct exposure to a client-sponsored special purpose vehicle.
Risks associated with securitization exposures to client-originated assets are mitigated through the transaction structure, which includes credit
enhancements. For the transactions where we retain credit risk on the exposures that we hold, we earn interest income on these holdings. For the
transactions in the ABCP conduits, we are also exposed to liquidity risk associated with the potential inability to roll over maturing ABCP in the
market. We earn fee income for the services that we provide to these ABCP conduits.
We are also involved in the trading of ABS and ABCP to earn income in our role as underwriter and market maker. We are exposed to credit
and market risk on the securities that we hold in inventory on a temporary basis until such securities are sold to an investor.
Capital requirements for exposures arising from securitization activities are determined using one of the following approaches: SEC-IRBA,
SEC-ERBA, SEC-IAA, or SEC-SA.
The SEC-IAA process relies on internal risk ratings and is utilized for securitization exposures relating to ABCP conduits when external ratings
are not available for the securitization exposures but the ABCP itself is externally rated. The internal assessment process involves an evaluation of a
number of factors, including, but not limited to, pool characteristics, including asset eligibility criteria and concentration limits, transaction triggers,
the asset seller’s risk profile, servicing capabilities, and cash flow stress testing. Cash flows are stress-tested based on historical asset performance
using our internal risk rating models by asset type. These models are subject to our model risk mitigation policies and are independently reviewed
by the Model Validation team in Risk Management. The stress test factors used to determine the transaction risk profile and required credit
enhancement levels are tailored for each asset type and transaction based on the assessment of the factors described above and are done in
accordance with our internal risk rating methodologies and guidelines. Internal risk ratings are mapped to equivalent external ratings of external
credit assessment institutions (DBRS, Fitch, Moody’s and S&P) and are used to determine the appropriate risk weights for capital purposes.
Securitization exposures and underlying asset performance are monitored on an ongoing basis. Risk Management serves as a second line of
defence providing independent oversight regarding risk rating assumptions and adjudicating on the assignment of the internal risk ratings. SEC-IAA
applies to various asset types in our ABCP conduits including, but not limited to, auto loans and leases, consumer loans, credit cards, dealer
floorplan receivables, equipment loans and leases, fleet lease receivables, franchise loans, residential mortgages, and trade receivables.
Internal risk ratings determined for securitization exposures are also used in the estimation of ECL as required under IFRS 9, determining
economic capital, and for setting risk limits.
CIBC 2021 ANNUAL REPORT 65
Management’s discussion and analysis
Market risk
Market risk is the risk of economic and/or financial loss in our trading and non-trading portfolios from adverse changes in underlying market factors,
including interest rates, foreign exchange rates, equity market prices, commodity prices, credit spreads, and customer behaviour for retail
products. Market risk arises in CIBC’s trading and treasury activities, and encompasses all market-related positioning and market-making activity.
The trading portfolio consists of positions in financial instruments and commodities held to meet the near-term needs of our clients.
The non-trading portfolio consists of positions in various currencies that are related to asset/liability management and investment activities.
Governance and management
Market risk is managed through the three lines of defence model. The first line of defence comprises frontline businesses and governance groups
that are responsible for managing the market risk associated with their activities.
The second line of defence is Risk Management, which has a dedicated market risk manager for each trading business, supplemented by
regional risk managers located in all of our major trading centres, facilitating comprehensive risk coverage, including the measurement, monitoring
and control of market risk.
Internal audit is the third line of defence providing reasonable assurance to senior management and the Audit Committee of the Board on the
effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in
accordance with its mandate as described in the Internal Audit Charter.
Senior management reports material risk matters to the GRC and RMC at least quarterly, including material transactions, limit compliance, and
portfolio trends.
Policies
We have comprehensive policies for the management of market risk. These policies are related to the identification and measurement of various
types of market risk, their inclusion in the trading portfolio, and the establishment of limits within which we monitor, manage and report our
overall exposures. Our policies also outline the requirements for the construction of valuation models, model review and validation, independent
checking of the valuation of positions, the establishment of valuation adjustments, and alignment with accounting policies including MTM and
mark-to-model methodologies.
Market risk limits
We have risk tolerance levels, expressed in terms of statistically based VaR measures, potential stress losses, and notional or other limits as
appropriate. We use a multi-tiered approach to set limits on the amounts of risk that we can assume in our trading and non-trading activities, as
follows:
Management limits control market risk for CIBC overall and are lower than the Board limits to allow for a buffer in the event of extreme market
Board limits control consolidated market risk;
moves and/or extraordinary client needs;
Tier 2 limits control market risk at the business unit level; and
Tier 3 limits control market risk at the sub-business unit or desk level.
Management limits are established by the CRO, consistent with the risk appetite statement approved by the Board. Tier 2 and Tier 3 limits are
approved at levels of management commensurate with the risk assumed.
Process and control
Market risk exposures are monitored daily against approved risk limits, and processes are in place to monitor that only authorized activities are
undertaken. We generate daily risk and limit-monitoring reports, based on the previous day’s positions. Summary market risk and limit
compliance reports are produced and reviewed periodically with the GRC and RMC.
Risk measurement
We use the following measures for market risk:
VaR enables the meaningful comparison of the risks in different businesses and asset classes. VaR is determined by the combined
modelling of VaR for each of interest rate, credit spread, equity, foreign exchange, commodity, and debt specific risks, along with the
portfolio effect arising from the interrelationship of the different risks (diversification effect):
Interest rate risk measures the impact of changes in interest rates and volatilities on cash instruments and derivatives.
Credit spread risk measures the impact of changes in credit spreads of provincial, municipal and agency bonds, sovereign bonds,
corporate bonds, securitized products, and credit derivatives such as credit default swaps.
Equity risk measures the impact of changes in equity prices and volatilities.
Foreign exchange risk measures the impact of changes in foreign exchange rates and volatilities.
Commodity risk measures the impact of changes in commodity prices and volatilities, including the basis between related commodities.
Debt specific risk measures the impact of changes in the volatility of the yield of a debt instrument as compared with the volatility of the
yield of a representative bond index.
Diversification effect reflects the risk reduction achieved across various financial instrument types, counterparties, currencies and regions.
The extent of the diversification benefit depends on the correlation between the assets and risk factors in the portfolio at a particular time.
Price sensitivity measures the change in value of a portfolio to a small change in a given underlying parameter, so that component risks may
be examined in isolation, and the portfolio rebalanced accordingly to achieve a desired exposure.
Stressed VaR enables the meaningful comparison of the risks in different businesses and asset classes under stressful conditions. Changes
to rates, prices, volatilities, and spreads over a 10-day horizon from a stressful historical period are applied to current positions to determine
stressed VaR.
IRC measures the required capital due to credit migration and default risk for debt securities held in the trading portfolios.
Back-testing validates the effectiveness of risk measurement through analysis of observed and theoretical profit and loss outcomes.
Stress testing and scenario analysis provide insight into portfolio behaviour under extreme circumstances.
66 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
The following table provides balances on the consolidated balance sheet that are subject to market risk. Certain differences between accounting
and risk classifications are detailed in the footnotes below:
$ millions, as at October 31
2021
2020
Subject to market risk (1)
Subject to market risk (1)
Consolidated
balance
sheet
Trading
Non-
trading
Not
subject to
market risk
Consolidated
balance
sheet
Trading
Non-
trading
Not
subject to
market risk
Non-traded risk
primary risk
sensitivity
Cash and non-interest-bearing
deposits with banks
Interest-bearing deposits with banks
Securities
Cash collateral on securities
borrowed
Securities purchased under resale
agreements
Loans
Residential mortgages
Personal
Credit card
Business and government
Allowance for credit losses
Derivative instruments
Customers’ liability under
acceptances
Other assets
Deposits
Obligations related to securities
sold short
Cash collateral on securities lent
Obligations related to securities sold
under repurchase agreements
Derivative instruments
Acceptances
Other liabilities
Subordinated indebtedness
$ 34,573 $
22,424
161,401
–
19
56,028
$
2,661
22,405
105,373
$ 31,912
–
–
$ 43,531 $
18,987
149,046
–
75
45,825
$
2,445
18,912
103,221
$ 41,086 Foreign exchange
Interest rate
Interest rate, equity
–
–
12,368
67,572
251,526
41,897
11,134
150,213
(2,849)
35,912
–
–
–
–
–
24,780 (2)
–
34,589
12,368
67,572
251,526
41,897
11,134
125,433
(2,849)
1,323
–
–
–
–
–
–
–
–
8,547
65,595
221,165
42,222
11,389
135,546
(3,540)
32,730
–
–
–
–
–
22,643 (2)
–
31,244
8,547
65,595
221,165
42,222
11,389
112,903
(3,540)
1,486
10,958
40,554
–
2,977
10,958
26,743
–
10,834
9,606
34,727
–
3,364
9,606
20,613
–
–
–
–
–
–
–
–
Interest rate
Interest rate
Interest rate
Interest rate
Interest rate
Interest rate
Interest rate
Interest rate,
foreign exchange
–
Interest rate
10,750 Interest rate, equity,
foreign exchange
$ 837,683 $ 118,393
$ 676,544
$ 42,746
$ 769,551 $ 103,151
$ 614,564
$ 51,836
$ 621,158 $
609 (3) $ 548,419
$ 72,130
$ 570,740 $
484 (3) $ 510,788
$ 59,468
Interest rate
22,790
2,463
71,880
32,101
10,961
24,961
5,539
19,472
–
–
30,882
–
2,705
–
3,318
2,463
71,880
1,219
10,961
11,344
5,539
–
–
–
–
–
10,912
–
15,963
1,824
71,653
30,508
9,649
22,167
5,712
13,795
–
–
29,436
–
2,386
–
2,168
1,824
71,653
1,072
9,649
10,926
5,712
–
–
–
–
–
8,855
–
Interest rate
Interest rate
Interest rate
Interest rate,
foreign exchange
Interest rate
Interest rate
Interest rate
$ 791,853 $ 53,668
$ 655,143
$ 83,042
$ 728,216 $ 46,101
$ 613,792
$ 68,323
(1) Funding valuation adjustment (FVA) exposures are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these FVA exposures
also excluded beginning from the second quarter of 2020.
(2) Excludes $48 million (2020: $291 million) of loans that are warehoused for future securitization purposes. These are considered non-trading for market risk purposes.
(3) Comprises FVO deposits which are considered trading for market risk purposes.
Trading activities
We hold positions in traded financial contracts to meet client investment and risk management needs. Trading revenue (net interest income or
non-interest income) is generated from these transactions. Trading instruments are recorded at fair value and include debt and equity securities,
as well as interest rate, foreign exchange, equity, commodity, and credit derivative products.
Value-at-risk
Our VaR methodology is a statistical technique that measures the potential overnight loss at a 99% confidence level. We use a full revaluation
historical simulation methodology to compute VaR, stressed VaR and other risk measures.
Although a valuable guide to risk, VaR should always be viewed in the context of its limitations. For example:
The use of historical data for estimating future events will not encompass all potential events, particularly those that are extreme in nature.
The use of a one-day holding period assumes that all positions can be liquidated, or the risks offset in one day. This may not fully reflect the
market risk arising at times of severe illiquidity, when a one-day period may be insufficient to liquidate or hedge all positions fully.
The use of a 99% confidence level does not take into account losses that might occur beyond this level of confidence.
VaR is calculated on the basis of exposures outstanding at the close of business and assumes no management action to mitigate losses.
The VaR table below presents market risks by type of risk and in aggregate. The risks are interrelated and the diversification effect reflects the
reduction of risk due to portfolio effects among the trading positions. Our trading risk exposures to interest rates and credit spreads arise from
activities in the global debt and derivative markets, particularly from transactions in the Canadian, U.S., and European markets. The primary
instruments are government and corporate debt, and interest rate derivatives. The majority of the trading exposure to foreign exchange risk
arises from transactions involving the Canadian dollar, U.S. dollar, Euro, Pound sterling, Australian dollar, Chinese yuan, and Japanese yen,
whereas the primary risks of losses in equities are in the U.S., Canadian, and European markets. Trading exposure to commodities arises
primarily from transactions involving North American natural gas, crude oil products, and precious metals.
Stressed VaR
The stressed VaR measure is intended to replicate the VaR calculation that would be generated for our current portfolio if the values of the
relevant market risk factors were sourced from a period of stressed market conditions. The model inputs are calibrated to historical data from a
continuous 12-month period of significant financial stress relevant to our current portfolio since December 2006. In 2021, our stressed VaR
window has been the 2008-2009 Global Financial Crisis period. However, for a four-month period spanning the third and fourth quarters of 2020,
our stressed VaR window was the 2019-2020 Pandemic period. These historical periods both exhibited not only increased volatility in interest
rates but also increased volatility in equity prices, combined with a reduction in the level of interest rates, and an increase in credit spreads.
CIBC 2021 ANNUAL REPORT 67
Management’s discussion and analysis
Incremental risk charge
IRC is a measure of default and migration risk for debt securities held in the trading portfolios. Our IRC methodology is a statistical technique
that measures the risk of issuer migration and default over a period of one year by simulating changes in issuer credit rating. Validation of the
model included testing of the liquidity horizon, recovery rate, correlation, and PD and migration.
$ millions, as at or for the year ended October 31
2021
Interest rate risk
Credit spread risk
Equity risk
Foreign exchange risk
Commodity risk
Debt specific risk
Diversification effect (1)
High
Low
As at
Average
High
$ 15.0
11.8
7.8
3.8
6.1
5.7
n/m
$
4.1
5.8
2.3
0.4
1.0
2.1
n/m
$
5.7
8.4
6.5
1.6
1.3
2.9
(18.5)
$
8.7
8.5
4.1
1.4
3.0
3.1
(21.2)
$ 10.6
12.2
13.5
7.0
7.9
3.9
n/m
$
Low
3.5
1.3
1.5
0.4
1.1
1.5
n/m
2020
As at
Average
$
7.3
7.0
3.7
2.0
2.4
3.0
(12.1)
$
6.1
5.4
3.8
1.8
3.1
2.5
(14.2)
Total VaR (one-day measure)
$ 13.9
$
4.6
$
7.9
$
7.6
$ 22.0
$
3.8
$ 13.3
$
8.5
Stressed total VaR (one-day measure)
IRC (one-year measure) (2)
$ 40.8
$ 266.4
$ 15.3
$ 144.6
$ 33.2
$ 182.3
$ 28.0
$ 203.5
$ 34.1
$ 279.5
$
7.4
$ 141.8
$ 30.2
$ 175.3
$ 18.9
$ 197.9
(1) Total VaR is less than the sum of the VaR of the different market risk types due to risk offsets resulting from a portfolio diversification effect.
(2) High and low IRC are not equal to the sum of the constituent parts, because the highs and lows of the constituent parts may occur on different days.
n/m Not meaningful. It is not meaningful to compute a diversification effect because the high and low may occur on different days for different risk types.
Average total VaR for the year ended October 31, 2021 was down $0.9 million from the prior year, driven primarily by an increase in the
diversification benefit, partially offset by increases in credit spread and interest rate risks.
Average stressed total VaR for the year ended October 31, 2021 was up $9.1 million from the prior year. The increase was primarily due to changes
in exposure to interest rate and equity risk.
Average IRC for the year ended October 31, 2021 was up $5.6 million from the prior year due to increases in trading book bond inventory within our
fixed income portfolio.
Back-testing
To determine the reliability of the trading VaR model, outcomes are monitored regularly through a back-testing process to test the validity of the
assumptions and the parameters used in the trading VaR calculation. The back-testing process includes calculating a hypothetical or static
profit and loss and comparing that result with calculated VaR. Static profit and loss represents the change in value of the prior day’s closing
portfolio due to each day’s price movements, on the assumption that the portfolio remained unchanged. The back-testing process is conducted
on a daily basis at the consolidated CIBC level as well as business lines and individual portfolios.
Static profit and loss in excess of the one-day VaR are investigated. The back-testing process, including the investigation of results, is
performed by risk professionals who are independent of those responsible for development of the model.
Based on our back-testing results, we are able to ensure that our VaR model continues to appropriately measure risk.
During the year, there were three negative back-testing breaches of the total VaR measure at the consolidated CIBC level, driven by the
volatility in CAD and, to a lesser extent, USD interest rates.
68 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Trading revenue
Trading revenue (TEB) comprises both trading net interest income and non-interest income and excludes underwriting fees and commissions. See
“Financial performance overview” for details. Trading revenue (TEB) in the charts below excludes certain exited portfolios.
During the year, trading revenue (TEB) was positive for 98.8% of the days, with the largest loss of $10.9 million occurring on October 27, 2021.
Average daily trading revenue (TEB) was $6.7 million during the year, compared to $6.4 million during the previous year. Average daily trading
revenue (TEB) is calculated as the total trading revenue (TEB) divided by the number of business days in the year.
Frequency distribution of daily 2021 trading revenue (TEB) (1)
The histogram below presents the frequency distribution of daily trading revenue (TEB) for 2021.
s
y
a
D
e
u
n
e
v
e
R
g
n
d
a
r
T
i
45
40
35
30
25
20
15
10
5
0
(1) or 0
less
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
C $ millions
20 21 or
more
Trading revenue (TEB) (1) versus VaR (2)
The trading revenue (TEB) versus VaR graph below shows the current year’s daily trading revenue (TEB) against the close of business day VaR
measures.
Trading Revenue (TEB)
VaR
$ millions
35
30
25
20
15
10
5
0
(5)
(10)
(15)
(20)
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
Jul-21
Aug-21
Sep-21
Oct-21
(1) Excludes certain month-end transfer pricing and other miscellaneous adjustments.
(2) Fair value adjustments are excluded from trading activities for regulatory capital purposes, with related derivative hedges to these fair value adjustments also excluded,
beginning from the second quarter of 2020.
CIBC 2021 ANNUAL REPORT 69
Management’s discussion and analysis
Stress testing and scenario analysis
Stress testing and scenario analysis is designed to add insight into possible outcomes of abnormal market conditions, and to highlight possible
concentration of risk.
We measure the effect on portfolio valuations under a wide range of extreme moves in market risk factors. Our approach simulates the
impact on earnings of extreme market events over a one-month time horizon, assuming that no risk-mitigating actions are taken during this
period to reflect the reduced market liquidity that typically accompanies such events.
Scenarios are developed using historical market data during periods of market disruption, or are based on hypothetical impacts of
economic events, political events, and natural disasters as predicted by economists, business leaders, and risk managers.
Among the historical scenarios are the 1994 period of U.S. Federal Reserve tightening, and the market events following the 2008 market
crisis. The hypothetical scenarios include potential market crises originating in North America, Europe and Asia. In August 2020, a Pandemic
first wave scenario was incorporated into a suite of our stress scenarios. This scenario was modelled off the largest stress impacts from the first
wave of the COVID-19 pandemic that resulted in severe disruption in financial markets.
Below are examples of the core stress test scenarios which are currently run on a daily basis to add insight into potential exposures under stress:
Subprime crisis traded
U.S. Federal Reserve tightening – 1994
U.S. sovereign debt default and downgrade
Chinese hard landing
Canadian market crisis
U.S. protectionism
Eurozone bank crisis
Pandemic first wave
Quantitative easing tapering and asset
price correction
Oil crisis
Stress testing scenarios are periodically reviewed and amended as necessary to ensure they remain relevant. Under stress limit monitoring, limits
are placed on the maximum acceptable loss based on risk appetite in aggregate, at the detailed portfolio level, and for specific asset classes.
Non-trading activities
Structural interest rate risk (SIRR)
SIRR primarily consists of the risk arising due to mismatches in assets and liabilities, which do not arise from trading and trading-related
businesses. The objective of SIRR management is to lock in product spreads and deliver stable and predictable net interest income over time,
while managing the risk to the economic value of our assets arising from changes in interest rates.
SIRR results from differences in the maturities or repricing dates of assets and liabilities, both on- and off-balance sheet, as well as from
embedded optionality in retail products, and other product features that could affect the expected timing of cash flows, such as options to
pre-pay loans or redeem term deposits prior to contractual maturity. A number of assumptions affecting cash flows, product re-pricing and the
administration of rates underlie the models used to measure SIRR. The key assumptions pertain to the expected funding profile of mortgage rate
commitments, fixed rate loan prepayment behaviour, term deposit redemption behaviour, the treatment of non-maturity deposits and equity. All
assumptions are derived empirically based on historical client behaviour, balance sheet composition and product pricing with the consideration
of possible forward-looking changes. All models and assumptions used to measure SIRR are subject to independent oversight by Risk
Management. A variety of cash instruments and derivatives, primarily interest rate swaps, are used to manage these risks.
The Board has oversight of the management of SIRR, approves the risk appetite and the associated SIRR risk limits. GALCO and its
subcommittee, the Asset Liability Management Committee, regularly review structural market risk positions and provide senior management
oversight.
In addition to Board-approved limits on earnings and economic value exposure, more granular management limits are in place to guide
day-to-day management of this risk. The asset/liability management (ALM) group within Treasury is responsible for the ongoing management of
structural market risk across the enterprise, with independent oversight and compliance with SIRR policy provided by Risk Management.
ALM activities are designed to manage the effects of potential interest rate movements while balancing the cost of any hedging activities
on the current net revenue. To monitor and control SIRR, two primary metrics, net interest income risk and economic value of equity (EVE) risk,
are assessed, in addition to stress testing, gap analysis and other market risk metrics. The net interest income sensitivity is a measure of the
impact of potential changes in interest rates on the projected 12-month pre-tax net interest income of the bank’s portfolio of assets, liabilities and
off-balance sheet positions in response to prescribed parallel interest rate movements with interest rates floored at zero. The EVE sensitivity is a
measure of the impact of potential changes in interest rates on the market value of the bank’s assets, liabilities and off-balance sheet positions in
response to prescribed parallel interest rate movements with interest rates floored at zero.
The following table shows the potential before-tax impact of an immediate and sustained 100 basis points increase and 25 basis points
decrease in interest rates on projected 12-month net interest income and economic value of equity for our structural balance sheet, assuming no
subsequent hedging. While an immediate and sustained shock of 100 basis points is typically applied, and notwithstanding the possibility of
negative rates, due to the low interest rate environment in both Canada and the U.S. as at October 31, 2021, an immediate downward shock of
25 basis points was applied while maintaining a floor on market and client interest rates at zero.
Structural interest rate sensitivity – measures
$ millions (pre-tax), as at October 31
100 basis point increase in interest rates
Increase (decrease) in net interest income
Increase (decrease) in EVE
25 basis point decrease in interest rates
Increase (decrease) in net interest income
Increase (decrease) in EVE
(1) Includes CAD and other currency exposures.
70 CIBC 2021 ANNUAL REPORT
CAD (1)
2021
USD
CAD (1)
2020
USD
$
270
(684)
$
134
(161)
$
317
(556)
$
92
(348)
(117)
161
(70)
29
(119)
57
(42)
49
Management’s discussion and analysis
Foreign exchange risk
Structural foreign exchange risk primarily consists of the risk inherent in: (a) net investments in foreign operations due to changes in foreign
exchange rates; and (b) foreign currency denominated RWA and foreign currency denominated capital deductions. This risk, predominantly in U.S.
dollars, is managed using derivative hedges and by funding the investments in matching currencies. We actively manage this position to ensure
that the potential impact on our capital ratios is within an acceptable tolerance in accordance with the policy approved by the CRO, while giving
consideration to the impact on earnings and shareholders’ equity. Structural foreign exchange risk is managed by Treasury under the guidance of
GALCO with monitoring and oversight by Capital Markets Risk Management.
A 1% appreciation of the Canadian dollar would reduce our shareholders’ equity as at October 31, 2021 by approximately $160 million
(2020: $150 million) on an after-tax basis.
Our non-functional currency denominated earnings are converted into the functional currencies through spot or forward foreign exchange
transactions. Typically, there is no significant impact of exchange rate fluctuations on our consolidated statement of income.
Derivatives held for ALM purposes
Where derivatives are held for ALM purposes, and when transactions meet the criteria specified under IFRS, we apply hedge accounting for the
risks being hedged, as discussed in Notes 13 and 14 to the consolidated financial statements. Derivative hedges that do not qualify for hedge
accounting treatment are referred to as economic hedges and are recorded at fair value on the consolidated balance sheet with changes in fair
value recognized in the consolidated statement of income.
Economic hedges for other than FVO financial instruments may lead to income volatility because the hedged items are recorded either on
a cost or amortized cost basis or recorded at fair value on the consolidated balance sheet with changes in fair value recognized through OCI.
This income volatility may not be representative of the overall risk.
Equity risk
Non-trading equity risk arises primarily in our strategy and corporate development activities and strategic investments portfolio. The investments
comprise public and private equities, investments in limited partnerships, and equity-accounted investments.
The following table provides the amortized cost and fair values of our non-trading equities:
$ millions, as at October 31
2021 Equity securities designated at FVOCI
Equity-accounted investments in associates (1)
2020 Equity securities designated at FVOCI
Equity-accounted investments in associates (1)
Cost
Fair value
$ 730
66
$ 796
$ 576
71
$ 647
$ 836
89
$ 925
$ 585
93
$ 678
(1) Excludes our equity-accounted joint ventures. See Note 26 to the consolidated financial statements for further details.
Pension risk
We sponsor defined benefit pension plans in a number of jurisdictions. As at October 31, 2021, our consolidated defined benefit pension plans were
in a net asset position of $1,323 million, compared with $185 million as at October 31, 2020. The change in the net asset position of our pension
plans is disclosed in Note 19 to the consolidated financial statements.
Our Canadian pension plans represent approximately 92% of our pension plans, the most significant of which is our principal Canadian
pension plan (the CIBC Pension Plan). The estimated impact on our Canadian defined benefit obligations of a 100 basis point change in the
discount rate is disclosed in Note 19 to the consolidated financial statements.
The MRCC is responsible for sound governance and oversight, and delegates management authority to the Pension Benefits Management
Committee (PBMC). An appropriate investment strategy for the CIBC Pension Plan is set through a statement of investment objectives, policies and
procedures.
Within Treasury, the Pension Investment Management department is responsible for developing and implementing custom investment
strategies to sustainably deliver pension benefits within manageable risk tolerances and capital impacts. Key risks include actuarial risks (such as
longevity risk), interest rate risk, currency risk, market (investment) risk, and health-care cost inflation risks.
The CIBC Pension Plan principally manages these risk exposures through its liability-driven investment strategy, which includes the use of
derivatives for risk management and rebalancing purposes, as well as the ability to enhance returns. The use of derivatives within the CIBC Pension
Plan is governed by the plan’s derivatives policy that was approved by the PBMC. The fair value of derivatives held in the CIBC Pension Plan is
disclosed in Note 19 to the consolidated financial statements.
A principal risk for the CIBC Pension Plan is interest rate risk, which it mitigates through a combination of physical bonds and a bond overlay
program funded through the use of repurchase agreements. The plan also operates a currency overlay strategy, which may use forwards or similar
instruments, to manage and mitigate its currency risk. Investment risk is mitigated through a multi-asset portfolio construction process that
diversifies across a variety of market risk drivers.
CIBC 2021 ANNUAL REPORT 71
Management’s discussion and analysis
Liquidity risk
Liquidity risk is the risk of having insufficient cash or its equivalent in a timely and cost-effective manner to meet financial obligations as they
come due. Common sources of liquidity risk inherent in banking services include unanticipated withdrawals of deposits, the inability to replace
maturing debt, credit and liquidity commitments, and additional pledging or other collateral requirements.
Our approach to liquidity risk management supports our business strategy, aligns with our risk appetite and adheres to regulatory
expectations.
Our management strategies, objectives and practices are regularly reviewed to align with changes to the liquidity environment, including
regulatory, business and/or market developments. Liquidity risk remains within CIBC’s risk appetite.
Governance and management
We manage liquidity risk in a manner that enables us to withstand a liquidity stress event without an adverse impact on the viability of our
operations. Actual and anticipated cash flows generated from on- and off-balance sheet exposures are routinely measured and monitored to ensure
compliance with established limits. We incorporate stress testing into the management and measurement of liquidity risk. Stress test results assist
with the development of our liquidity assumptions, identification of potential constraints to funding planning, and contribute to the design of our
contingency funding plan.
Liquidity risk is managed using the three lines of defence model, and the ongoing management of liquidity risk is the responsibility of the
Treasurer, supported by guidance from GALCO.
The Treasurer is responsible for managing the activities and processes required for measurement and the reporting and monitoring of CIBC’s
liquidity risk position as the first line of defence.
The Liquidity and Non-Trading Market Risk group provides independent oversight of the measurement, monitoring and control of liquidity risk,
as the second line of defence.
Internal audit is the third line of defence providing reasonable assurance to senior management and the Audit Committee of the Board on the
effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit plan and in
accordance with its mandate as described in the Internal Audit Charter.
The GALCO governs CIBC’s liquidity risk management, ensuring the liquidity risk management methodologies, assumptions, and key metrics
are regularly reviewed and aligned with CIBC’s requirements. The Liquidity Risk Management Committee, a subcommittee of GALCO, monitors
global liquidity risk and is responsible for ensuring that CIBC’s liquidity risk profile is comprehensively measured and managed in alignment with
CIBC’s strategic direction, risk appetite and regulatory requirements.
The RMC provides governance through bi-annual review of CIBC’s liquidity risk management policy, and recommends liquidity risk tolerance
to the Board through the risk appetite statement which is reviewed annually.
Policies
Our liquidity risk management policy establishes requirements that enable us to meet anticipated liquidity needs in both normal and stressed
conditions by maintaining a sufficient amount of available unencumbered liquid assets and diversified funding sources. Branches and
subsidiaries possessing unique liquidity characteristics, due to distinct businesses or jurisdictional requirements, maintain local liquidity
practices in alignment with CIBC’s liquidity risk management policy.
Our pledging policy sets out consolidated limits for the pledging of CIBC’s assets across a broad range of financial activities. These limits
ensure unencumbered liquid assets are available for liquidity purposes.
We maintain a detailed global contingency funding plan that sets out the strategies for addressing liquidity shortfalls in emergency and
unexpected situations, and delineates the requirements necessary to manage a range of stress conditions, establishes lines of responsibility,
articulates implementation, defines escalation procedures, and is aligned to CIBC’s risk appetite. In order to reflect CIBC’s organizational
complexity, regional and subsidiary contingency funding plans are maintained to respond to liquidity stresses unique to the jurisdictions within
which CIBC operates, and support CIBC as an enterprise.
Risk measurement
Our liquidity risk tolerance is defined by our risk appetite statement, which is approved annually by the Board, and forms the basis for the
delegation of liquidity risk authority to senior management. We use both regulatory-driven and internally developed liquidity risk metrics to
measure our liquidity risk exposure. Internally, our liquidity position is measured using the Liquidity Horizon, which combines contractual and
behavioural cash flows to measure the future point in time when projected cumulative cash outflows exceed cash inflows under a combined
CIBC-specific and market-wide stress scenario. Expected and potential anticipated inflows and outflows of funds generated from on- and
off-balance sheet exposures are measured and monitored on a regular basis to ensure compliance with established limits. These cash flows
incorporate both contractual and behavioural on- and off-balance sheet cash flows.
Our liquidity measurement system provides liquidity risk exposure reports that include the calculation of the internal liquidity stress tests
and regulatory reporting such as the LCR, Net Stable Funding Ratio (NSFR) and Net Cumulative Cash Flow (NCCF). Our liquidity management
also incorporates the monitoring of our unsecured wholesale funding position and funding capacity.
Risk appetite
CIBC’s risk appetite statement ensures prudent management of liquidity risk by outlining qualitative considerations and quantitative metrics
including the LCR and Liquidity Horizon. Quantitative metrics are measured and managed to a set of limits approved by Risk Management.
Stress testing
A key component of our liquidity risk management, and complementing our assessments of liquidity risk exposure, is liquidity risk stress testing.
Liquidity stress testing involves the application of name-specific and market-wide stress scenarios at varying levels of severity to assess the amount
of available liquidity required to satisfy anticipated obligations as they come due. The scenarios model potential liquidity and funding requirements
in the event of changes to unsecured wholesale funding and deposit run-off, contingent liquidity utilization, and liquid asset marketability.
72 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Liquid assets
Available liquid assets include unencumbered cash and marketable securities from on- and off-balance sheet sources, that can be used to
access funding in a timely fashion. Encumbered liquid assets, composed of assets pledged as collateral and those assets that are deemed
restricted due to legal, operational, or other purposes, are not considered as sources of available liquidity when measuring liquidity risk.
Encumbered and unencumbered liquid assets from on- and off-balance sheet sources are summarized as follows:
$ millions, as at October 31
2021 Cash and deposits with banks
Securities issued or guaranteed by sovereigns,
central banks, and multilateral development banks
Other debt securities
Equities
Canadian government guaranteed National Housing
Act mortgage-backed securities
Other liquid assets (2)
2020 Cash and deposits with banks
Securities issued or guaranteed by sovereigns,
central banks, and multilateral development banks
Other debt securities
Equities
Canadian government guaranteed National Housing
Act mortgage-backed securities
Other liquid assets (2)
Bank owned
liquid assets
56,997
$
Securities received
as collateral
–
$
Total liquid
assets
56,997
$
Encumbered
liquid assets
252
$
Unencumbered
liquid assets (1)
$
56,745
113,515
5,681
37,855
36,116
12,772
$ 262,936
$
62,518
112,403
4,798
27,169
40,592
10,909
100,944
5,510
22,996
214,459
11,191
60,851
134,370
1,827
25,133
80,089
9,364
35,718
948
3,927
$ 134,325
37,064
16,699
$ 397,261
14,677
7,203
$ 183,462
22,387
9,496
$ 213,799
$
–
$
62,518
$
133
$
62,385
92,202
4,288
15,924
895
2,109
204,605
9,086
43,093
41,487
13,018
108,425
2,603
21,449
13,084
5,441
96,180
6,483
21,644
28,403
7,577
$ 258,389
$ 115,418
$ 373,807
$ 151,135
$ 222,672
(1) Unencumbered liquid assets are defined as on-balance sheet assets, assets borrowed or purchased under resale agreements, and other off-balance sheet collateral
received less encumbered liquid assets.
(2) Includes cash pledged as collateral for derivatives transactions, select ABS and precious metals.
The following table summarizes unencumbered liquid assets held by CIBC (parent) and its domestic and foreign subsidiaries:
$ millions, as at October 31
CIBC (parent)
Domestic subsidiaries
Foreign subsidiaries
2021
$ 153,971
12,271
47,557
$ 213,799
2020
$ 170,936
12,355
39,381
$ 222,672
Asset haircuts and monetization depth assumptions under a liquidity stress scenario are applied to determine asset liquidity value. Haircuts take into
consideration those margins applicable at central banks – such as the Bank of Canada and the U.S. Federal Reserve Bank – historical observations, and
securities characteristics including asset type, issuer, credit ratings, currency and remaining term to maturity, as well as available regulatory guidance.
Our unencumbered liquid assets decreased by $8.9 billion since October 31, 2020, as a result of asset growth and planned funding
repayments that are a part of our ongoing business operations and strategies.
Furthermore, we maintain access eligibility to the Bank of Canada’s Emergency Lending Assistance program and the U.S. Federal Reserve
Bank’s Discount Window.
Asset encumbrance
In the course of our day-to-day operations, securities and other assets are pledged to secure obligations, participate in clearing and settlement
systems and for other collateral management purposes.
The following table provides a summary of our total on- and off-balance sheet encumbered and unencumbered assets:
$ millions, as at October 31
2021 Cash and deposits with banks
Securities (3)
Loans, net of allowance for credit losses (4)
Other assets
2020 Cash and deposits with banks
Securities (3)
Loans, net of allowance for credit losses (4)
Other assets
Encumbered
Unencumbered
Total assets
$
Pledged as
collateral
–
154,382
1,488
6,599
$ 162,469
$
–
127,974
7,946
4,950
$ 140,870
$
Other (1)
252
1,817
44,615
–
$ 46,684
$
133
678
42,291
–
$ 43,102
$
Available as
collateral
56,745
134,018
29,331
3,005
$ 223,099
$
62,385
132,493
34,103
2,731
$ 231,712
$
Other (2)
–
–
376,487
77,820
$ 454,307
$
–
–
322,441
69,382
$ 391,823
$
56,997
290,217
451,921
87,424
$ 886,559
$
62,518
261,145
406,781
77,063
$ 807,507
(1) Includes assets supporting CIBC’s long-term funding activities and assets restricted for legal or other reasons, such as restricted cash.
(2) Other unencumbered assets are not subject to any restrictions on their use to secure funding or as collateral, however they are not considered immediately available to
existing borrowing programs.
(3) Total securities comprise certain on-balance sheet securities, as well as off-balance sheet securities received under resale agreements, secured borrowings transactions,
and collateral-for-collateral transactions.
(4) Loans included as available as collateral represent the loans underlying National Housing Act mortgage-backed securities and Federal Home Loan Banks eligible loans.
Restrictions on the flow of funds
Our subsidiaries are not subject to significant restrictions that would prevent transfers of funds, dividends or capital distributions. However,
certain subsidiaries have different capital and liquidity requirements, established by applicable banking and securities regulators.
We monitor and manage our capital and liquidity requirements across these entities to ensure that resources are used efficiently and
entities are in compliance with local regulatory and policy requirements.
CIBC 2021 ANNUAL REPORT 73
Management’s discussion and analysis
Liquidity coverage ratio
The objective of the LCR is to promote short-term resilience of a bank’s liquidity risk profile, ensuring that it has adequate unencumbered high-
quality liquid resources to meet its liquidity needs in a 30-day acute stress scenario. Canadian banks are required by OSFI to achieve a minimum
LCR value of 100%. We are in compliance with this requirement.
In accordance with the calibration methodology contained in OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, we report the LCR to
OSFI on a monthly basis. The ratio is calculated as the total of unencumbered high-quality liquid assets (HQLA) over the total net cash outflows in
the next 30 calendar days.
The LCR’s numerator consists of unencumbered HQLA, which follow an OSFI-defined set of eligibility criteria that considers fundamental and
market-related characteristics, and the relative ability to operationally monetize assets on a timely basis during a period of stress. Our centrally-
managed liquid asset portfolio includes those liquid assets reported in the HQLA, such as central government treasury bills and bonds, central bank
deposits and high-rated sovereign, agency, provincial, and corporate securities. Asset eligibility limitations inherent in the LCR metric do not
necessarily reflect our internal assessment of our ability to monetize our marketable assets under stress.
The ratio’s denominator reflects net cash outflows expected in the LCR’s stress scenario over the 30-calendar-day period. Expected cash
outflows represent LCR-defined withdrawal or draw-down rates applied against outstanding liabilities and off-balance sheet commitments,
respectively. Significant contributors to our LCR outflows include business and financial institution deposit run-off, draws on undrawn lines of credit
and unsecured debt maturities. Cash outflows are partially offset by cash inflows, which are calculated at OSFI-prescribed LCR inflow rates, and
include performing loan repayments and maturing non-HQLA marketable assets.
During a period of financial stress, institutions may use their stock of HQLA, thereby falling below 100%, as maintaining the LCR at 100% under
such circumstances could produce undue negative effects on the institution and other market participants.
The LCR is calculated and disclosed using a standard OSFI-prescribed template.
$ millions, average of the three months ended October 31, 2021
Total unweighted value (1) Total weighted value (2)
HQLA
1
HQLA
Cash outflows
Unsecured wholesale funding, of which:
Stable deposits
Less stable deposits
Retail deposits and deposits from small business customers, of which:
Operational deposits (all counterparties) and deposits in networks of cooperative banks
Non-operational deposits (all counterparties)
Unsecured debt
2
3
4
5
6
7
8
9
10
Outflows related to derivative exposures and other collateral requirements
11
Outflows related to loss of funding on debt products
12
13
Credit and liquidity facilities
14 Other contractual funding obligations
15 Other contingent funding obligations
Secured wholesale funding
Additional requirements, of which:
16
Total cash outflows
Cash inflows
Secured lending (e.g. reverse repos)
Inflows from fully performing exposures
17
18
19 Other cash inflows
20
Total cash inflows
21
22
23
Total HQLA
Total net cash outflows
LCR
$ millions, average of the three months ended July 31, 2021
24
25
26
Total HQLA
Total net cash outflows
LCR
n/a
$ 174,728
$ 214,521
95,749
118,772
211,789
81,800
103,701
26,288
n/a
135,763
20,194
2,330
113,239
3,301
332,834
n/a
81,977
18,030
4,917
15,759
2,872
12,887
102,507
20,016
56,203
26,288
4,558
32,528
11,374
2,330
18,824
3,301
6,435
165,088
13,792
8,509
4,917
$ 104,924
$
27,218
n/a
n/a
n/a
n/a
n/a
n/a
Total adjusted value
$ 174,728
$ 137,870
127 %
Total adjusted value
$ 168,259
$ 133,491
126 %
(1) Unweighted inflow and outflow values are calculated as outstanding balances maturing or callable within 30 days of various categories or types of liabilities, off-balance
sheet items or contractual receivables.
(2) Weighted values are calculated after the application of haircuts (for HQLA) and inflow and outflow rates prescribed by OSFI.
n/a Not applicable as per the LCR common disclosure template.
Our average LCR as at October 31, 2021 increased to 127% from 126% in the prior quarter, mainly due to higher HQLA, largely offset by an
increase in net cash outflows.
Furthermore, we report the LCR to OSFI in multiple currencies, thus measuring the extent of potential currency mismatch under the ratio. CIBC
predominantly operates in major currencies with deep and fungible foreign exchange markets.
Net stable funding ratio (NSFR)
Derived from the BCBS’s Basel III framework and incorporated into OSFI’s LAR Guideline, the NSFR standard aims to promote long-term resilience
of the financial sector by requiring banks to maintain a sustainable funding profile in relation to the composition of their assets and off-balance sheet
activities. Canadian D-SIBs are required to maintain a minimum NSFR value of 100% on a consolidated bank basis. CIBC is in compliance with this
requirement.
In accordance with the calibration methodology contained in OSFI’s LAR Guideline, we report the NSFR to OSFI on a quarterly basis. The ratio
is calculated as total available stable funding (ASF) over the total required stable funding (RSF).
74 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
The numerator consists of the portion of capital and liabilities considered reliable over a one-year time horizon. The NSFR considers longer-
term sources of funding to be more stable than short-term funding and deposits from retail and commercial customers to be behaviourally more
stable than wholesale funding of the same maturity. In accordance with our funding strategy, key drivers of our ASF include client deposits
supplemented by secured and unsecured wholesale funding, and capital instruments.
The denominator represents the amount of stable funding required based on the OSFI-defined liquidity characteristics and residual maturities
of assets and off-balance sheet exposures. The NSFR ascribes varying degrees of RSF such that HQLA and short-term exposures are assumed to
have a lower funding requirement than less liquid and longer-term exposures. Our RSF is largely driven by retail, commercial and corporate lending,
investments in liquid assets, derivative exposures, and undrawn lines of credit and liquidity.
The ASF and RSF may be adjusted to zero for certain liabilities and assets that are determined to be interdependent if they meet the NSFR-
defined criteria, which take into account the purpose, amount, cash flows, tenor and counterparties among other aspects to ensure the institution is
acting solely as a pass-through unit for the underlying transactions. We report, where applicable, interdependent assets and liabilities arising from
transactions OSFI has designated as eligible for such treatment in the LAR Guideline.
The NSFR is calculated and disclosed using an OSFI-prescribed template, which captures the key quantitative information based on liquidity
characteristics unique to the NSFR as defined in the LAR Guideline. As a result, amounts presented in the table below may not allow for direct
comparison with the annual consolidated financial statements.
Retail deposits and deposits from small business customers
$ millions, as at October 31, 2021
ASF item
Regulatory capital
Other capital instruments
Stable deposits
Less stable deposits
Operational deposits
Other wholesale funding
Capital
1
2
3
4
5
6
7 Wholesale funding
8
9
10
11
12
13
14
Total ASF
Liabilities with matching interdependent assets
Other liabilities
NSFR derivative liabilities
All other liabilities and equity not included in the above categories
RSF item
15
16
17
18
19
Total NSFR HQLA
Deposits held at other financial institutions for operational purposes
Performing loans and securities
Performing loans to financial institutions secured by Level 1 HQLA
Performing loans to financial institutions secured by non-Level 1 HQLA
a
b
c
d
e
Unweighted value by residual maturity
No
maturity <6 months
6 months
to <1 year
>1 year
Weighted
value
$
46,972 $
46,972
–
197,887
92,198
105,689
157,812
81,359
76,453
–
–
– $
–
–
30,121
12,748
17,373
158,071
3,025
155,046
1,627
– $
–
–
7,967
4,797
3,170
41,263
–
41,263
892
82,324 (1)
7,020 (1)
4,945
4,945
–
10,103
6,530
3,573
67,193
–
67,193
14,276
–
49,449
145
25,710
–
58,465
–
2,553
97,988
25,608
–
48,154
2,457
5
300,559
1,596
$
51,916
51,916
–
227,177
110,785
116,392
185,956
42,192
143,764
–
7,469
7,469
472,518
15,052
1,282
325,693
4,412
and unsecured performing loans to financial institutions
698
28,233
6,338
12,324
19,288
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
Performing loans to non-financial corporate clients, loans to retail and
small business customers, and loans to sovereigns, central banks
and public sector entities, of which:
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
Performing residential mortgages, of which:
With a risk weight of less than or equal to 35% under the Basel II
standardized approach for credit risk
Securities that are not in default and do not qualify as HQLA, including
exchange-traded equities
Assets with matching interdependent liabilities
Other assets
Physical traded commodities, including gold
Assets posted as initial margin for derivative contracts and
contributions to default funds of central counterparties
NSFR derivative assets
NSFR derivative liabilities before deduction of variation margin posted
All other assets not included in the above categories
Off-balance sheet items
Total RSF
NSFR
$ millions, as at July 31, 2021
35
36
37
Total ASF
Total RSF
NSFR
(1) No assigned time period per disclosure template design.
27,221
31,121
17,718
102,108
134,812
–
17,910
–
11,503
–
21,036
–
180,548
–
151,991
17,910
11,427
20,959
176,049
148,091
12,636
–
13,137
3,005
1,523
1,627
605
892
80,203 (1)
3,983
14,276
10,132
38,538
8,693 (1)
11,914 (1)
15,982 (1)
83
336,705 (1)
4,993
15,190
–
47,512
2,554
7,389
4,893
799
31,877
11,823
$ 401,362
118 %
Weighted
value
$ 454,792
$ 389,814
117 %
Our NSFR as at October 31, 2021 increased to 118% from 117% in the prior quarter, due to an increase in long-term funding largely offset by an
increase in lending in line with strategic business growth.
CIBC 2021 ANNUAL REPORT 75
Management’s discussion and analysis
CIBC considers the impact of its business decisions on the LCR, NSFR and other liquidity risk metrics that it regularly monitors as part of a robust
liquidity risk management function. Variables that can impact the metrics month-over-month include, but are not limited to, items such as wholesale
funding activities and maturities, strategic balance sheet initiatives, and transactions and market conditions affecting collateral.
Reporting of the LCR and NSFR is calibrated centrally by Treasury, in conjunction with the SBUs and other functional groups.
Funding
We fund our operations with client-sourced deposits, supplemented with a wide range of wholesale funding.
Our principal approach aims to fund our consolidated balance sheet with deposits primarily raised from personal and commercial banking
channels. We maintain a foundation of relationship-based core deposits, whose stability is regularly evaluated through internally developed
statistical assessments.
We routinely access a range of short-term and long-term secured and unsecured funding sources diversified by geography, depositor
type, instrument, currency and maturity. We raise long-term funding from existing programs including covered bonds, asset securitizations and
unsecured debt.
We continuously evaluate opportunities to diversify into new funding products and investor segments in an effort to maximize funding
flexibility and minimize concentration and financing costs. We regularly monitor wholesale funding levels and concentrations to internal limits
consistent with our desired liquidity risk profile.
GALCO and RMC review and approve CIBC’s funding plan, which incorporates projected asset and liability growth, funding maturities, and
output from our liquidity position forecasting.
The following table provides the contractual maturity profile of our wholesale funding sources at their carrying values:
$ millions, as at October 31, 2021
Less than
1 month
1–3
months
3–6
months
6–12
months
Less than
1 year total
1–2
years
Over
2 years
Deposits from banks (1)
Certificates of deposit and commercial paper
Bearer deposit notes and bankers’ acceptances
Senior unsecured medium-term notes (2)
Senior unsecured structured notes
Covered bonds/asset-backed securities
$
5,642 $
8,566
978
1,485
–
Mortgage securitization
Covered bonds
Cards securitization
Subordinated liabilities
Other
Of which:
Secured
Unsecured
358 $
422 $
304 $
6,726 $
– $
18,998
2,065
865
–
352
1,058
–
–
–
11,808
1,588
1,290
–
1,279
–
–
–
–
22,349
257
5,211
31
895
6,850
–
–
247
61,721
4,888
8,851
31
2,526
7,908
–
–
247
496
–
16,360
187
4,069
4,376
–
–
–
– $
–
–
23,192
62
10,447
11,545
1,721
5,539
8
–
–
–
–
–
Total
6,726
62,217
4,888
48,403
280
17,042
23,829
1,721
5,539
255
$ 16,671 $ 23,696 $ 16,387 $ 36,144 $ 92,898 $ 25,488 $ 52,514 $ 170,900
$
– $
1,410 $
1,279 $
7,745 $ 10,434 $
8,445 $ 23,713 $
16,671
22,286
15,108
28,399
82,464
17,043
28,801
42,592
128,308
$ 16,671 $ 23,696 $ 16,387 $ 36,144 $ 92,898 $ 25,488 $ 52,514 $ 170,900
October 31, 2020
$ 17,139 $ 15,400 $ 12,670 $ 35,224 $ 80,433 $ 17,648 $ 54,253 $ 152,334
(1) Includes non-negotiable term deposits from banks.
(2) Includes wholesale funding liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.
The following table provides the diversification of CIBC’s wholesale funding by currency:
$ billions, as at October 31
CAD
USD
Other
$
48.0
91.5
31.4
2021
28 %
54
18
$
50.8
75.4
26.1
$ 170.9
100 %
$ 152.3
2020
33 %
50
17
100 %
We manage liquidity risk in a manner that enables us to withstand severe liquidity stress events. Wholesale funding may present a higher risk of
run-off in stress situations, and we maintain significant portfolios of unencumbered liquid assets to mitigate this risk. See the “Liquid assets” section
for additional details.
Funding plan
Our funding plan is updated at least quarterly, or in response to material changes in underlying assumptions and business developments. The plan
incorporates projected asset and liability growth from our ongoing operations, and the output from our liquidity position forecasting.
76 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Credit ratings
Our access to and cost of wholesale funding are dependent on multiple factors, among them credit ratings provided by rating agencies. Rating
agencies’ opinions are based upon internal methodologies, and are subject to change based on factors including, but not limited to, financial
strength, competitive position, macroeconomic backdrop and liquidity positioning. On July 15, 2021, Fitch affirmed CIBC’s ratings and revised the
outlook to Stable from Negative.
Our credit ratings are summarized in the following table:
As at October 31, 2021
Deposit/Counterparty (1)
Legacy senior debt (2)
Senior debt (3)
Subordinated indebtedness
Subordinated indebtedness – NVCC (4)
Limited recourse capital notes – NVCC (4)
Preferred shares – NVCC (4)
Short-term debt
Outlook
DBRS
AA
AA
AA(L)
A(H)
A(L)
BBB(H)
Pfd-2
R-1(H)
Stable
Fitch
AA
AA
AA-
A
A
n/a
n/a
F1+
Stable
Moody’s
Aa2
Aa2
A2
Baa1
Baa1
Baa3
Baa3
P-1
Stable
S&P
A+
A+
BBB+
BBB+
BBB
BB+
P-3(H)
A-1
Stable
(1) DBRS Long-Term Issuer Rating; Fitch Long-Term Deposit Rating and Derivative Counterparty Rating; Moody’s Long-Term Deposit and Counterparty Risk Assessment
Rating; S&P’s Issuer Credit Rating.
(2) Includes senior debt issued prior to September 23, 2018 as well as senior debt issued on or after September 23, 2018 which is not subject to bail-in regulations.
(3) Comprises liabilities which are subject to conversion under bail-in regulations. See the “Capital management” section for additional details.
(4) Comprises instruments which are treated as NVCC in accordance with OSFI’s CAR Guideline.
n/a Not applicable.
Additional collateral requirements for rating downgrades
We are required to deliver collateral to certain derivative counterparties in the event of a downgrade to our current credit risk rating. The collateral
requirement is based on MTM exposure, collateral valuations, and collateral arrangement thresholds, as applicable. The following table presents the
additional cumulative collateral requirements for rating downgrades:
$ billions, as at October 31
One-notch downgrade
Two-notch downgrade
Three-notch downgrade
2021
$ 0.1
0.2
0.3
2020
$ 0.1
0.2
0.3
Regulatory developments concerning liquidity
On March 27, 2020, as a COVID-19 support measure, OSFI had allowed a temporary increase to the covered bond limit from 5.5% to 10% of total
assets to facilitate greater access to the Bank of Canada facilities. The temporary increase in the limit targeted covered bonds pledged directly to
the Bank of Canada, with the limit relating to market instruments remaining at 5.5%. Effective April 6, 2021, as a result of improvements to liquidity
and access to term funding, OSFI announced the unwinding of the temporary increase of the covered bond limit for deposit-taking institutions. CIBC
remains compliant with the stipulated requirements.
CIBC 2021 ANNUAL REPORT 77
Management’s discussion and analysis
Contractual obligations
Contractual obligations give rise to commitments of future payments affecting our short- and long-term liquidity and capital resource needs. These
obligations include financial liabilities, credit and liquidity commitments, and other contractual obligations.
Assets and liabilities
The following table provides the contractual maturity profile of our on-balance sheet assets, liabilities and equity at their carrying values.
Contractual analysis is not representative of our liquidity risk exposure, however this information serves to inform our management of liquidity
risk, and provide input when modelling a behavioural balance sheet.
$ millions, as at October 31, 2021
Assets
Cash and non-interest-bearing deposits
with banks (1)
Interest-bearing deposits with banks
Securities
Cash collateral on securities borrowed
Securities purchased under resale
agreements
Loans
Residential mortgages
Personal
Credit card
Business and government
Allowance for credit losses
Derivative instruments
Customers’ liability under acceptances
Other assets
Less than
1 month
1–3
months
3–6
months
6–9
months
9–12
months
1–2
years
2–5
years
Over
5 years
No
specified
maturity
Total
$ 34,573 $
22,424
2,453
12,368
– $
–
8,440
–
– $
–
5,830
–
– $
–
4,596
–
– $
–
4,632
–
– $
–
18,937
–
– $
–
44,911
–
– $
–
32,562
–
– $ 34,573
–
22,424
161,401
39,040
12,368
–
37,147
12,451
10,728
4,580
666
2,000
–
–
–
67,572
1,766
703
234
9,366
–
2,450
9,801
–
4,565
695
468
5,488
–
5,851
1,109
–
9,121
988
701
9,341
–
3,199
24
–
13,146
963
701
9,907
–
1,998
9
–
12,919
862
702
9,791
–
1,567
15
–
40,758
411
2,806
24,422
–
6,576
–
–
161,304
3,398
5,522
54,542
–
6,634
–
–
7,947
3,947
–
18,719
–
7,637
–
–
–
29,930
–
8,637
(2,849)
–
–
40,554
251,526
41,897
11,134
150,213
(2,849)
35,912
10,958
40,554
$ 133,285 $ 39,067 $ 39,932 $ 35,900 $ 31,154 $ 95,910 $ 276,311 $ 70,812 $ 115,312 $ 837,683
October 31, 2020 (2)
$ 131,720 $ 32,390 $ 42,722 $ 34,448 $ 29,883 $ 102,112 $ 226,577 $ 70,961 $ 98,738 $ 769,551
Liabilities
Deposits (3)
Obligations related to securities sold short
Cash collateral on securities lent
Obligations related to securities sold
under repurchase agreements
Derivative instruments
Acceptances
Other liabilities
Subordinated indebtedness
Equity
$ 30,570 $ 34,446 $ 31,584 $ 40,666 $ 26,305 $ 35,021 $ 48,347 $ 14,255 $ 359,964 $ 621,158
22,790
2,463
22,790
2,463
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45,145
3,639
9,804
26
–
–
17,597
5,264
1,109
49
–
–
8,038
2,660
24
75
–
–
563
1,909
9
77
–
–
192
1,515
15
80
–
–
345
4,382
–
290
–
–
–
5,473
–
620
–
–
–
7,259
–
916
5,539
–
–
–
–
22,828
–
45,830
71,880
32,101
10,961
24,961
5,539
45,830
$ 114,437 $ 58,465 $ 42,381 $ 43,224 $ 28,107 $ 40,038 $ 54,440 $ 27,969 $ 428,622 $ 837,683
October 31, 2020
$ 98,552 $ 40,528 $ 58,834 $ 43,919 $ 26,555 $ 33,273 $ 58,938 $ 26,416 $ 382,536 $ 769,551
(1) Cash includes interest-bearing demand deposits with the Bank of Canada.
(2) Restated from amounts previously presented.
(3) Comprises $213.9 billion (2020: $202.2 billion) of personal deposits; $387.1 billion (2020: $351.6 billion) of business and government deposits and secured borrowings;
and $20.2 billion (2020: $17.0 billion) of bank deposits.
The changes in the contractual maturity profile were primarily due to the natural migration of maturities and also reflect the impact of our regular
business activities.
Credit-related commitments
The following table provides the contractual maturity of notional amounts of credit-related commitments. Since a significant portion of
commitments are expected to expire without being drawn upon, the total of the contractual amounts is not representative of future liquidity
requirements.
$ millions, as at October 31, 2021
Unutilized credit commitments
Securities lending (2)
Standby and performance letters of credit
Backstop liquidity facilities
Documentary and commercial letters of
credit
Other
Less than
1 month
1–3
months
3–6
months
6–9
months
9–12
months
1–2
years
2–5
years
Over
5 years
$ 2,324 $ 10,907 $ 4,357 $ 4,972 $ 5,149 $ 24,371 $ 57,189 $ 3,625
–
–
53
3,690
–
658
43,002
3,101
–
4,561
2,511
10,522
–
2,740
10
3,015
2,435
680
–
609
292
–
636
12
No specified
maturity (1)
Total
$ 188,449
–
–
–
$ 301,343
50,578
15,775
12,174
35
978
63
–
29
–
23
–
3
–
12
–
29
–
–
–
–
–
194
978
$ 49,440 $ 28,564 $ 10,516 $ 9,343 $ 7,902 $ 25,284 $ 57,866 $ 3,678
$ 188,449
$ 381,042
October 31, 2020
$ 39,474 $ 24,451 $ 11,188 $ 8,798 $ 6,427 $ 20,638 $ 51,245 $ 1,714
$ 173,157
$ 337,092
(1) Includes $141.5 billion (2020: $131.3 billion) of personal, home equity and credit card lines, which are unconditionally cancellable at our discretion.
(2) Excludes securities lending of $2.5 billion (2020: $1.8 billion) for cash because it is reported on the consolidated balance sheet.
78 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Other off-balance sheet contractual obligations
The following table provides the contractual maturities of other off-balance sheet contractual obligations affecting our funding needs:
$ millions, as at October 31, 2021 (1)
Purchase obligations (2)
Future lease commitments (1)
Investment commitments
Underwriting commitments
Pension contributions (3)
Less than
1 month
$ 124
––
21
268
20
$ 414
1–3
months
$ 136
3–6
months
$ 161
6–9
months
$ 259
–
233
–
––
–
39
$ 176
58
$ 221
58
$ 320
9–12
months
$ 124
–
–
58
$ 185
1–2
years
$ 472
1 1
–
––
–
$ 483
2–5
years
$ 661
69
5
–
$ 735
$
Over
5 years
136
722
329
–
–
$ 1,187
Total
$ 2,073
81 0
337
268
233
$ 3,721
October 31, 2020
$ 211
$ 243
$ 231
$ 239
$ 204
$ 488
$ 795
$ 1,625
$ 4,036
(1) Excludes operating lease obligations that are accounted for under IFRS 16, which are typically recognized on the consolidated balance sheet, and operating and tax
expenses relating to lease commitments. The table includes lease obligations that are not accounted for under IFRS 16, including those related to future starting lease
commitments for which we have not yet recognized a lease liability and right-of-use asset.
(2) Obligations that are legally binding agreements whereby we agree to purchase products or services with specific minimum or baseline quantities defined at fixed,
minimum or variable prices over a specified period of time are defined as purchase obligations. Purchase obligations are included through to the termination date
specified in the respective agreements, even if the contract is renewable. Many of the purchase agreements for goods and services include clauses that would allow
us to cancel the agreement prior to expiration of the contract within a specific notice period. However, the amount above includes our obligations without regard to
such termination clauses (unless actual notice of our intention to terminate the agreement has been communicated to the counterparty). The table excludes purchases
of debt and equity instruments that settle within standard market time frames.
(3) Includes estimated minimum funding contributions for our funded defined benefit pension plans in Canada, the U.S., the U.K., and the Caribbean. Estimated minimum
funding contributions are included only for the next annual period as the minimum contributions are affected by various factors, such as market performance and
regulatory requirements, and are therefore subject to significant variability.
Other risks
Strategic risk
Strategic risk is the risk of ineffective or improper implementation of business strategies, including mergers, acquisitions and divestitures. It includes
the potential financial loss due to the failure of organic growth initiatives or failure to respond appropriately to changes in the business environment.
For additional details on corporate transactions, see the “Top and emerging risks” section.
Oversight of strategic risk is the responsibility of the ExCo and the Board. At least annually, the CEO outlines the process and presents the
strategic business plan to the Board for review and approval. As part of the annual planning process, Risk Management assesses the overall and
business unit strategic plans to ensure alignment with our risk appetite. The Board reviews the plan in light of management’s assessment of
emerging market trends, the competitive environment, potential risks and other key issues.
One of the tools for measuring, monitoring and controlling strategic risk is attribution of regulatory capital against this risk. Our regulatory capital
models include a strategic risk component for those businesses utilizing capital to fund an acquisition or a significant organic growth strategy.
Operational risk
Operational risk is the risk of loss resulting from people, inadequate or failed internal processes and systems, or from external events.
As part of the normal course of business, CIBC is exposed to operational risks in its business activities and external environment.
Operational risks which may adversely impact CIBC include the following:
Anti-money laundering / anti-terrorist financing
The risk of CIBC’s potential non-conformance with global AML and ATF regulatory requirements and sanctions regulations leading to enhanced
regulatory scrutiny, regulatory censure (i.e., cease and desist orders) and/or financial loss (i.e., regulatory, criminal or civil penalties and/or forfeiture
of assets). See “Anti-money laundering” in the “Top and emerging risks” section for further details.
Fraud risk
The risk relating to the intentions to defraud, misappropriate property/assets or circumvent regulations, the law or CIBC policy and can be
committed by either employees or by outsiders such as clients or third parties.
Information security risk (including cyber security)
The risk to the confidentiality, integrity and availability of CIBC-owned information, and the information entrusted to CIBC by clients, employees,
shareholders, business partners, and third parties that if leaked, accessed without authorization or lost, could cause damage to CIBC’s business
and its customers. See “Technology, information and cyber security risk” in the “Top and emerging risks” section for further details.
Technology risk
The risk of compromised availability, degradation, recovery, capacity, performance, integrity of new or existing systems. See “Technology,
information and cyber security risk” in the “Top and emerging risks” section for further details.
Third party risk
The potential risk that may arise from relying on a third party business arrangement between CIBC and another entity, by contract or otherwise. This
includes activities that involve outsourced products and services, use of outside consultants, networking arrangements, managed services, services
provided by affiliates and subsidiaries, joint ventures, sponsorships, no-fee contracts, and any other arrangement that involves the delivery of
business activities, functions or processes to CIBC and/or its clients. See “Third Party Risk” in the “Top and emerging risks” section for further
details.
Other operational risks include business interruption risk, data risk, conduct risk (see the “Conduct risk” section below), financial reporting risk, legal
risk (see the “Reputation and legal risk” section below), model risk, people risk, privacy risk, project risk, physical security risk, regulatory
compliance risk (see the “Regulatory compliance risk” section below) and transaction processing risk.
Our comprehensive Operational Risk Management Policy, supported by policies, tools, systems and governance structure, is used to mitigate
operational risk. We continuously monitor our operational risk profile to ensure we are operating within CIBC’s approved risk appetite.
CIBC 2021 ANNUAL REPORT 79
Management’s discussion and analysis
Governance and management
Operational risk is managed through the three lines of defence model and articulated in the Operational Risk Management Policy. A strong risk
culture and communication between the three lines of defence are important characteristics of effective risk management.
(i) As the first line of defence, our SBUs and functional groups own the risks and are accountable and responsible for identifying and assessing
risks inherent in their activities in accordance with the CIBC risk appetite. In addition, they establish and maintain controls to mitigate such
risks. The first line of defence may include governance groups within the relevant area to facilitate the control framework and other risk-related
processes. Control groups provide subject matter expertise to the business lines and/or implement and maintain enterprise-wide control
programs and activities. While control groups collaborate with the lines of business in identifying and managing risk, they also challenge risk
decisions and risk mitigation strategies.
(ii) The second line of defence is independent from the first line of defence and provides an enterprise-wide view of specific risk types, guidance
and effective challenge to risk and control activities. Risk Management is the primary second line of defence. Risk Management may leverage
the subject matter expertise of other groups (e.g., third parties or control groups) to inform their independent assessments, as appropriate.
(iii) As the third line of defence, CIBC’s internal audit function provides reasonable assurance to senior management and the Audit Committee of
the Board on the effectiveness of CIBC’s governance practices, risk management processes, and internal control as part of its risk-based audit
plan and in accordance with its mandate as described in the Internal Audit Charter.
Global Operational Risk Management (GORM) oversees CIBC’s operational risk exposures. The Head of GORM chairs the Operational Risk and
Control Committee (ORCC), a subcommittee of the GRC, with representation from the SBUs and functional groups. The ORCC is a management
forum providing oversight of CIBC’s operational risk and internal control environment. The Chair of the ORCC reports significant operational risk
matters to the GRC and RMC.
Operational risk management approach
Information transparency, timely escalation, clear accountability and a robust internal control environment are the principles forming the basis of
the Operational Risk Management Policy, which supports and governs the processes of identifying, measuring, mitigating, monitoring, and
reporting operational risks. We mitigate operational losses by consistently applying risk-based approaches and employing risk-specific
assessment tools. Regular review of our risk governance structure ensures clarity of, and ownership in, key risk areas.
Risk identification and measurement
CIBC’s business lines regularly conduct reviews of operational risks inherent in their products, services or processes and assess ways to mitigate
and manage them in alignment with CIBC’s risk appetite. These reviews include using risk and control self-assessments, audit findings, operational
risk scenarios, past internal and external loss events, key risk indicators trends, change initiative risk assessments and in-depth risk reviews to form
a holistic operational risk profile for the business lines. Under the three lines of defence model, GORM and relevant control groups challenge
business lines’ risk assessments and mitigation actions.
Operational loss is one of the key operational risk metrics informing us of areas of heightened risk. We collect and analyze internal operational
loss event data for themes and trends. The occurrence of a material or potential material loss triggers an investigation to determine the root causes
of the incident and the effectiveness of existing mitigating controls, as well as the identification of any additional mitigating actions. Additionally, we
monitor the external environment for emerging or potential risks to CIBC. The analysis of material operational risk events is performed by the first line
of defence and the outputs of the analysis are subject to formal independent challenge by our second line of defence. The analysis of material
operational risk events forms one component of our ongoing operational risk reporting to senior management and the Board.
Business lines conduct change initiative risk assessment on risks inherent to the initiatives (for example, new product launches or major
system changes). Identified inherent risks of the change initiative and related mitigation actions are challenged by GORM and other relevant second
line of defence groups, as well as control groups, to ensure residual risks remain within the approved risk appetite.
We use the standardized method to quantify our operational risk exposure in the form of operational risk regulatory capital, as agreed with
local regulators.
Risk mitigation
Our primary tool for mitigating operational risk exposure is a robust internal control environment. Our internal control framework outlines key
principles, structure and processes underpinning our approach to managing risks through effective controls. Under our framework, all key controls
are subject to ongoing testing and review to ensure they effectively mitigate our operational risk exposures. In addition, our corporate insurance
program may afford additional protection from loss while our global business continuity management program enables us to achieve operational
resilience by delivering critical services to our clients through disruption.
Risk monitoring and reporting
Both forward-looking key risk indicators (KRIs) as well as backward-looking key performance indicators provide insight into our risk exposure and
are used to monitor the main drivers of exposure associated with key operational risks and their adherence to the operational risk appetite. KRIs
assist in early detection of potential operational risk events by identifying unfavourable trends and highlighting controls that may not be designed or
operating effectively. Business lines are required to identify and implement KRIs for material risk exposures on an ongoing basis. Escalation triggers
are used to highlight risk exposures requiring additional attention from senior management and/or the Board. The second line of defence challenges
the selection of KRIs and the appropriateness of thresholds.
Our risk monitoring processes support a transparent risk-reporting program, informing both senior management and the Board of our control
environment, operational risk exposures, and mitigation strategies.
80 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Environmental and related social risk
Environmental and related social risk is the risk of financial loss or damage to reputation associated with environmental issues including related
social issues, whether arising from our credit and investment activities or related to our own operations. Our corporate environmental policy,
originally approved by the Board in 1993, with the most recent biennial update and approval by our CRO in 2021, commits CIBC to responsible
conduct in all activities to protect and conserve the environment; safeguard the interests of all stakeholders from unacceptable levels of
environmental risk; and support the principles of sustainable development.
As environmental and social risk management requires a multi-disciplinary approach, CIBC’s Board and its committees provide ongoing
oversight; and CIBC’s ESG Council, which comprises senior executives from across Strategic Business Units and Functional Groups, is responsible
for bank-wide input and coordination on strategic ESG initiatives in response to CIBC’s environmental and social responsibilities. Within CIBC’s Risk
Management function, the Enterprise Risk Management group provides independent oversight of the measurement, monitoring and control of
environmental risk. This group is led by the Senior Vice-President, Enterprise Risk Management, who has direct accountability to the CRO for
environmental risk oversight. Our environmental risk management team is responsible for developing environmental strategy, setting environmental
performance standards and targets, and reporting on performance.
The corporate environmental policy is addressed by an integrated corporate environmental management program that is under the overall
management of the environmental risk management team. Environmental and related social evaluations are integrated into our credit risk assessment
processes, with standards and procedures in place for all sectors. In addition, environmental and related social risk assessments in project finance,
project-related corporate and bridge loans are required, in accordance with our commitment to the Equator Principles, which are a voluntary set of
guidelines for financial institutions based on the screening criteria of the International Finance Corporation. We adopted the Equator Principles in 2003.
An escalation process is in place for transactions with the potential to have significant environmental and related social risk, with escalation up to the
Reputation and Legal Risks Committee for senior executive review, if required.
We also conduct ongoing research and benchmarking on environmental issues such as climate change as they may pertain to responsible
lending practices. We are a participant in the CDP (formerly Carbon Disclosure Project) climate change program, which promotes corporate
disclosure to the investment community on greenhouse gas emissions and climate change management.
We are a supporter of the reporting framework developed by the TCFD, which provides guidance for voluntary, consistent climate-related risk
disclosures. In 2019, CIBC published its first climate-related disclosure aligned to the TCFD recommendations and structured around its four core
elements. Our TCFD report, available on our website, provides details as to how CIBC is identifying and managing both physical and transition risks
associated with climate change.
We keep informed of emerging risks by engaging with stakeholders through established partnerships, such as the United Nations Environment
Program – Finance Initiative (UNEP-FI) and the Rocky Mountain Institute (RMI) Center of Climate-Aligned Finance (CCAF). We are also a signatory to
external sustainability frameworks such as the Partnership for Carbon Accounting Financials (PCAF), the Global Reporting Initiative (GRI) and the
Sustainability Accounting Standards Board (SASB) to ensure comparable sustainability disclosure.
In 2018, CIBC Asset Management Inc. became a signatory to the United Nations-supported Principles for Responsible Investment, which
commit signatories to incorporate environmental and social issues into investment analysis and decision making across all investment classes.
The environmental risk management team works closely with our main business units and functional groups to ensure that high standards of
environmental responsibility are applied to the banking services that we provide to our clients, the relationships we have with our stakeholders, and
to the way we manage our facilities.
Our Supplier Code of Conduct sets out the principles, standards and behaviours that our suppliers must follow, as we expect that they act
ethically and adhere to all applicable laws, rules and regulations, such as maintaining responsible labour practices and human rights, in the
jurisdictions in which they operate.
Our Modern Slavery and Human Trafficking Statement commits CIBC to respecting human rights and standing against slavery and human
trafficking in all our business segments and throughout our supply chains.
More information on our environmental governance, policy, management and performance can be found in our Sustainability Report, which is
available on our website.
The information provided on our website does not form a part of this document.
Regulatory compliance risk
Regulatory compliance risk is the risk of CIBC’s potential non-conformance with applicable regulatory requirements.
Our regulatory compliance philosophy is to manage and mitigate regulatory compliance risk through the promotion of a strong risk culture
within the parameters established by CIBC’s Risk Appetite Statement. The foundation of this approach is a comprehensive Regulatory
Compliance Management (RCM) framework. The RCM framework, owned by the Senior Vice-President, Chief Compliance Officer and Global
Regulatory Affairs, and approved by the RMC, maps regulatory requirements to internal policies, procedures and/or controls that govern
regulatory compliance.
Our Compliance department is responsible for the development and maintenance of a comprehensive regulatory compliance program,
including oversight of the RCM framework. This department is independent of business management and regularly reports to the RMC.
Primary responsibility for compliance with all applicable regulatory requirements rests with senior management of the business and
functional groups, and extends to all employees. The Compliance department’s activities support those groups, with particular emphasis on
regulatory requirements that govern the relationship between CIBC and its clients.
See the “Regulatory developments” section for further details.
CIBC 2021 ANNUAL REPORT 81
Management’s discussion and analysis
Insurance risk
Insurance risk is the risk of loss arising from the obligation to pay out benefits and expenses on insurance policies in excess of expected amounts.
Unfavourable actual experience could emerge due to adverse fluctuations in timing, size and frequency of actual claims (e.g., mortality, morbidity),
policyholder behaviour (e.g., cancellation of coverage), or associated expenses.
Insurance contracts provide financial compensation to the beneficiary in the event of an insured risk occurring in exchange for premiums. We
are exposed to insurance risk in our life insurance business and in our reinsurance business within the respective subsidiaries.
Senior management of the insurance and reinsurance subsidiaries have primary responsibility for managing insurance risk with oversight by Risk
Management. The insurance and reinsurance subsidiaries also have their own boards of directors, and an independent Appointed Actuary who provide
additional input to risk management oversight. Processes and oversight are in place to manage the risk to our insurance business. Underwriting risk on
business assumed is managed through risk policies that limit exposure to an individual life, to certain types of business and to regions.
Our risk governance practices ensure strong independent oversight and control of risk within the insurance businesses. The subsidiaries’ boards
outline the internal risk and control structure to manage insurance risk, which includes risk, capital and control policies, processes as well as limits and
governance. Senior management of the insurance and reinsurance subsidiaries and Risk Management attend the subsidiaries’ board meetings.
Reputation and legal risks
Our reputation and financial soundness are of fundamental importance to us and to our clients, shareholders, third parties, regulators, team
members and communities.
Reputation risk is the risk of negative publicity regarding our business conduct or practices which, whether true or not, could significantly
harm our reputation as a leading financial institution, or could materially and adversely affect our business, operations or financial condition.
Legal risk is the risk of financial loss arising from one or more of the following factors: (a) civil, criminal or regulatory enforcement
proceedings against us; (b) our failure to correctly document, enforce or comply with contractual obligations; (c) failure to comply with our legal
obligations to clients, investors, team members, counterparties or other stakeholders; (d) failure to take appropriate legal measures to protect
our assets or security interests; or (e) misconduct by our team members or agents.
All team members at CIBC play an important role in protecting our reputation by ensuring that the highest ethical standards are followed in
how we act and what we do. Not only must we act with integrity at all times, we must also ensure that activities being conducted do not pose
undue risks to CIBC’s reputation for ethical, sound and responsible business practices. As a result, requirements for the management and
oversight of potential reputation risk are integrated throughout our framework of policies and related procedures. These processes include the
management of various risks as set out in CIBC’s Risk Appetite Statement, Risk Management Framework and Code of Conduct. Our Reputation
Risk Management Framework, Global Reputation and Legal Risks Policy and business-specific procedures outline how we safeguard our
reputation through identification, assessment, escalation and mitigation of potential reputation and legal risks. Proactive management of potential
reputation and legal risks is a key responsibility of CIBC and all our team members.
Overall governance and oversight of reputation risk is provided by the Board, primarily through the RMC of the Board. Senior management
oversight of reputation and legal risks is provided by the Reputation and Legal Risks Committee, which is a sub-committee of GRC and reports
its activities regularly to the GRC.
Conduct risk
Conduct risk is the risk that the actions or omissions (i.e., behaviour) of the organization, team members and/or third parties: do not align with our
desired culture and values; deliver poor or unfair outcomes for clients, team members or shareholders; result in adverse market practices and
outcomes; impact CIBC’s reputation as a leading financial institution; or materially and adversely affect our business, operations or financial
condition.
Our Conduct and Culture Risk Framework applies enterprise-wide and outlines how we manage conduct risk through the proactive
identification, measurement and management of potential conduct risk. Every team member is accountable for the identification and
management of conduct risk. The overarching principles and requirements for maintaining appropriate conduct and addressing inappropriate
conduct are covered in the CIBC Code of Conduct and other business specific and corporate-wide policies, frameworks, programs, processes
and procedures. All team members must abide by the code, and CIBC policies and procedures in carrying out the accountabilities of their role.
Overall governance of conduct risk is provided by the Board and its committees, including the CGC, as well as senior management committees.
82 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Accounting and control matters
Critical accounting policies and estimates
As discussed in the “Economic and market environment” section, progress towards containing outbreaks of the COVID-19 pandemic through
vaccination campaigns and less restrictive public health measures provided an improving economic backdrop for CIBC. However, the pandemic,
fueled by more contagious variants, continues to pose a risk to the recovery. As a result, we continue to operate in an uncertain environment. This
gives rise to heightened uncertainty as it relates to our critical accounting estimates and increases the need to apply judgment in evaluating the
economic and market environment and its impact on significant estimates. This particularly impacts estimates relating to the allowance for credit
losses.
A summary of significant accounting policies is presented in Note 1 to the consolidated financial statements. Changes in the judgments and
estimates required in the critical accounting policies discussed below could have a material impact on our financial results. We have established
control procedures to ensure accounting policies are applied consistently and processes for changing methodologies are well controlled.
IFRS 16 “Leases”
CIBC adopted IFRS 16 “Leases” (IFRS 16) in place of International Accounting Standards (IAS) 17 “Leases” as of November 1, 2019. We applied
IFRS 16 on a modified retrospective basis. As permitted, we did not restate our prior period comparative consolidated financial statements, which
were reported under the prior guidance. The impact of adopting IFRS 16 is discussed in Note 1.
As a lessee, we recognize a right-of-use asset and a corresponding lease liability based on the present value of future lease payments, less any
lease incentives receivable, when the lessor makes the leased asset available for use to CIBC, based on the non-cancellable portion of the lease
term, adjusted for any renewal or termination options that are reasonably certain to be exercised. Measurement of the right-of-use asset also
includes any initial direct costs of procuring the lease, and any lease payments made or lease incentives received prior to lease commencement.
Discount rates are based on the rate implicit in the lease, if determinable, or on CIBC’s incremental borrowing rate. Where a property lease contains
both a lease and non-lease component, we have elected not to allocate the consideration in the contract to each of the components. Subsequent to
initial measurement, CIBC measures the lease liability by increasing the carrying amount to reflect interest on the lease liability based on the
discount rate at the time of recognition and reducing the carrying amount to reflect lease payments made during the period, net of any
remeasurements for lease reassessment or modifications.
The right-of-use asset is measured using the cost model and amortized on a straight-line basis over the lease term. Right-of-use assets and
the corresponding lease liabilities are recognized in Property and equipment and Other liabilities, respectively, on our consolidated balance sheet.
The right-of-use asset and the corresponding lease liability are remeasured when there is a change in lease term, a change in the assessment of an
option to purchase a leased asset, a change in the expected residual value guarantee (if any), or a change in future lease payments due to a
change in the index or rate applicable to the payment. Right-of-use assets are tested for impairment as required under IAS 36 “Impairment of
Assets”. In addition, the evaluation of the useful life for depreciation is assessed under IAS 36.
Lease payments for low-value assets, short-term leases and variable leases are systematically recognized in Non-interest expenses based on
the nature of the expense.
As an intermediate lessor, we classify a sublease as an operating or finance sublease based on whether substantially all of the risks and
rewards related to the underlying right-of-use asset are transferred to the sub-lessee. If classified as a finance sublease, the related right-of-use
asset is derecognized and an investment in sublease is recognized, with the difference recognized in the consolidated statement of income as a
gain or loss. In measuring the investment in sublease, we apply the head lease discount rate unless the rate implicit in the sublease is determinable.
Where a finance sublease includes lease and non-lease components, we allocate the total consideration in the contract to each component based
on the standalone prices for each of these components. The investment in sublease is recognized in Other assets on our consolidated balance
sheet, and is subsequently measured using the effective interest rate method, with interest income recognized over the term of the sublease. Rental
income from operating subleases is recognized on a systematic basis over the lease term.
Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
In response to reforms to interest rate benchmarks, the International Accounting Standards Board (IASB) issued amendments to impacted
accounting standards in two phases to provide relief to entities impacted by the transition to alternative rates.
In September 2019, the IASB issued “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” (the Phase 1
amendments), which provides relief for specific hedge accounting requirements to address uncertainties in the period before interest rate
benchmark reform, and provides disclosure requirements related to interest rate benchmark reform. Only the amendments to IAS 39 “Financial
Instruments: Recognition and Measurement” (IAS 39) and IFRS 7 “Financial Instruments: Disclosures” (IFRS 7) apply to us because we elected to
continue to apply the hedge accounting requirements of IAS 39 upon the adoption of IFRS 9 “Financial Instruments” (IFRS 9). CIBC elected to early
adopt the Phase 1 amendments effective November 1, 2019 to prepare for uncertainties that may increase relating to the timing or amount of
benchmark-based cash flows of hedged items and hedging instruments.
The relief provided in the Phase 1 amendments allows hedge accounting to continue during the period of uncertainty before the replacement
of existing interest rate benchmarks with an alternative rate. The application of this relief will end at the earlier of the discontinuation of the impacted
hedge relationship and when the uncertainty arising from the reform is no longer present with respect to the timing and amount of cash flows of the
hedged item and hedging instrument, which is expected to occur on the cessation date of the relevant LIBOR rate.
In August 2020, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16”
(the Phase 2 amendments), which addresses issues that affect financial reporting once an existing rate is replaced with an alternative rate and
provides for additional disclosure requirements. As we elected to continue to apply the hedge accounting requirements of IAS 39 upon the adoption
of IFRS 9, the Phase 2 amendments apply to the classification and measurement sections of IFRS 9, the hedge accounting sections of IAS 39 and to
IFRS 7, IFRS 4 and IFRS 16 for us. While the Phase 2 amendments are effective for annual periods beginning on or after January 1, 2021, CIBC
elected to early adopt the Phase 2 amendments effective November 1, 2020.
The Phase 2 amendments permit modifications of amortized cost financial assets and financial liabilities, and lessee lease liabilities that are
made as a direct consequence of IBOR reform, and on an economically equivalent basis to be accounted for by updating the effective interest rate
prospectively with no immediate gain or loss recognition. The amendments also provide temporary relief that allows for hedging relationships to
CIBC 2021 ANNUAL REPORT 83
Management’s discussion and analysis
continue upon the replacement of an existing interest rate benchmark with an alternative rate under certain qualifying conditions. The amendments
allow entities to redefine the hedged risk to an alternative rate, and to amend the description of the hedged item, the hedging instrument, and how
the entity will assess hedge effectiveness to reflect changes required by the reform without discontinuing the hedge relationship.
The amendments also provide temporary relief that allows entities to designate an alternative rate as a risk component to hedge provided that
the entity reasonably expects that the alternative rate will become separately identifiable within 24 months of its first designation. Judgment is
involved in our evaluation of whether certain modifications have been made on an economically equivalent basis and in assessing whether an
alternative rate will become separately identifiable within 24 months following its designation. Further relief is also provided for cash flow hedges,
where the amounts accumulated in the cash flow reserve are deemed to be based on the alternative rates on which the hedged future cash flows
are determined. As a result of the adoption of the Phase 2 amendments, we have provided additional disclosures related to our exposures to
significant benchmark rates subject to the reform in Note 1 to our consolidated financial statements.
We have established an enterprise-wide transition program to assess the impact of interest rate benchmark reform and manage the process to
transition to alternative benchmark rates. For details on this program, refer to the “Other regulatory developments” section.
International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments”
CIBC adopted International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments” (IFRIC 23) as at
November 1, 2019. IFRIC 23 clarifies the accounting for uncertainties in income taxes. There was no impact to our consolidated financial statements
and no changes in our accounting policies as a result of adopting IFRIC 23.
Conceptual Framework for Financial Reporting
The Conceptual Framework sets out the fundamental concepts that underlie the preparation and presentation of financial statements and serves to
guide the IASB in developing IFRS standards. The Conceptual Framework is effective for annual periods beginning on or after January 1, 2020. As a
result, CIBC adopted the Conceptual Framework as at November 1, 2020.
There was no impact to our consolidated financial statements and no changes in our accounting policies as a result of adopting the
Conceptual Framework.
Use and classification of financial instruments
As a financial institution, our assets and liabilities primarily comprise financial instruments, which include deposits, securities, loans, derivatives,
acceptances, repurchase agreements, and subordinated indebtedness.
We use these financial instruments for both trading and non-trading activities. Trading activities primarily include the purchase and sale of
securities and metals, transacting in foreign exchange and derivative instruments in the course of facilitating client trades and taking proprietary
trading positions with the objective of income generation. Non-trading activities generally include the business of lending, investing, funding, and ALM.
The use of financial instruments may either introduce or mitigate exposures to market, credit and/or liquidity risks. See the “Management of
risk” section for details on how these risks are managed.
Financial instruments are accounted for according to their classification. Judgment is applied in determining the appropriate classification of
financial instruments under IFRS 9, in particular as it relates to the assessment of whether debt financial assets meet the solely payment of principal
and interest (SPPI) test, and the assessment of the business model used to manage financial assets. For details on the accounting for these
instruments under IFRS 9, see Note 1 to the consolidated financial statements.
Determination of fair value of financial instruments
Under IFRS 9, debt and equity securities mandatorily measured and designated at FVTPL, business and government loans mandatorily measured
and designated at FVTPL, obligations related to securities sold short, derivative contracts, FVOCI securities and FVO financial instruments are
carried at fair value. FVO financial instruments include certain debt securities, certain secured borrowings, obligations related to securities sold
under repurchase agreements, structured deposits and business and government deposits. Retail mortgage interest rate commitments are also
designated as FVO financial instruments.
IFRS 13 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability at the measurement date in an
orderly arm’s-length transaction between market participants in the principal market under current market conditions (i.e., the exit price). Fair value
measurements are categorized into levels within a fair value hierarchy based on the nature of the valuation inputs (Level 1, 2 or 3). We have an
established and documented process for determining fair value. Fair value is based on unadjusted quoted prices in an active market for the same
instrument, where available (Level 1). If active market prices or quotes are not available for an instrument, fair value is then based on valuation
models in which the significant inputs are observable (Level 2) or in which one or more of the significant inputs are non-observable (Level 3).
Estimating fair value requires the application of judgment. The type and level of judgment required is largely dependent on the amount of
observable market information available.
For instruments valued using internally developed models that use significant non-observable market inputs and are therefore classified within
Level 3 of the hierarchy, the judgment used to estimate fair value is more significant than when estimating the fair value of instruments classified
within Levels 1 and 2. To ensure that valuations are appropriate, a number of policies and controls are in place, including independent validation of
valuation inputs to external sources such as exchange quotes, broker quotes or other management-approved independent pricing sources.
The following table presents amounts, in each category of financial instruments, which are valued using valuation techniques based on Level 3
inputs. For further details of the valuation of and sensitivity associated with Level 3 financial assets and liabilities, see Note 3 to the consolidated
financial statements.
84 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
$ millions, as at October 31
Assets
Securities mandatorily measured and designated at FVTPL and loans mandatorily measured at FVTPL
Debt securities measured at FVOCI and equity securities designated at FVOCI
Derivative instruments
Liabilities
Deposits and other liabilities (2)
Derivative instruments
2021
2020
Level 3
Total (1)
Level 3
Total (1)
$ 1,099
392
97
$ 1,588
$
742
267
$ 1,009
$
1.1 %
0.7
0.3
802
240
358
0.8 %
$ 1,400
3.8 %
0.8
1.3 %
$
$
(4)
298
294
0.9 %
0.4
1.1
0.8 %
– %
1.0
0.4 %
(1) Represents the percentage of Level 3 assets and liabilities over total assets and liabilities for each reported category that are carried on the consolidated balance sheet at
fair value.
(2) Includes FVO deposits and bifurcated embedded derivatives.
Note 3 to the consolidated financial statements presents the valuation methods used to determine fair value showing separately those financial
instruments that are carried at fair value on the consolidated balance sheet and those that are not.
In order to reflect the observed market practice of pricing collateralized and uncollateralized derivatives, our valuation approach uses
overnight indexed swap curves as the discount rate in the valuation of collateralized derivatives and market cost of funding in the valuation of
uncollateralized derivatives. The use of a market cost of funds curve reduces the fair value of uncollateralized derivative assets incremental to the
reduction in fair value for credit risk already reflected through the CVA. In contrast, the use of a market cost of funds curve reduces the fair value of
uncollateralized derivative liabilities in a manner that generally includes adjustments for our own credit. As market practices continue to evolve in
regard to derivative valuation, further adjustments may be required in the future.
Fair value adjustments
We apply judgment in establishing valuation adjustments that take into account various factors that may have an impact on the valuation of financial
instruments that are carried at fair value on the consolidated balance sheet. Such factors include, but are not limited to, the bid-offer spread,
illiquidity due to lack of market depth and other market risks, parameter uncertainty, model risk, and credit risk.
The establishment of fair value adjustments involves estimates that are based on accounting processes and judgments by management. We
evaluate the adequacy of the fair value adjustments on an ongoing basis. The level of fair value adjustments could change as events warrant and
may not reflect ultimate realizable amounts.
As at October 31, 2021, the total valuation adjustments related to financial instruments carried at fair value on the consolidated balance sheet
was $270 million (2020: $358 million), primarily related to credit risk, bid-offer spreads, and parameter uncertainty of our derivative assets and
liabilities, as well as adjustments recognized for valuing our uncollateralized derivative assets and liabilities based on an estimated market cost of
funds curve.
Impairment of financial assets
Under IFRS 9, we establish and maintain ECL allowances for all debt instrument financial assets classified as amortized cost or FVOCI. In addition,
the ECL allowances apply to loan commitments and financial guarantees that are not measured at FVTPL.
ECL allowances represent credit losses that reflect an unbiased and probability-weighted amount that is determined by evaluating a range of
possible outcomes, the time value of money and reasonable and supportable information about past events, current conditions and forecasts of
future economic conditions. One of the objectives of IFRS 9 is to record lifetime losses on all financial instruments that have experienced a
significant increase in credit risk since their initial recognition. As a result, ECL allowances are measured at amounts equal to either: (i) 12-month
ECL; or (ii) lifetime ECL for those financial instruments that have experienced a significant increase in credit risk since initial recognition or when
there is objective evidence of impairment.
Key drivers of expected credit loss
The ECL impairment requirements of IFRS 9 require that we make judgments and estimates related to matters that are uncertain. In particular, the
ECL requirements of IFRS 9 incorporate the following elements that are subject to a high level of judgment:
Measuring both 12-month and lifetime credit losses; and
Forecasting forward-looking information for multiple scenarios and determining the probability weighting of each scenario.
Determining when a significant increase in credit risk of a loan has occurred;
In addition, the interrelationship between these elements is also subject to a high degree of judgment. Changes in the judgments and estimates
related to IFRS 9 can have a significant impact on the level of ECL allowance recognized and the period-over-period volatility of the provision for
credit losses. Changes in a particular period could have a material impact on our financial results.
The uncertainty created by the COVID-19 pandemic has increased the level of judgment applied in respect of all of these elements. During the
year ended October 31, 2021, improvements in our economic outlook resulted in moderate reductions in our stage 1 and stage 2 performing ECLs
relative to the increases recognized in 2020 as a result of the onset of the COVID-19 pandemic. Significant judgment continued to be inherent in the
forecasting of forward-looking information, including with regard to our base case assumption that vaccination programs, including the efficacy of
the vaccines and the rate of vaccination, will be able to effectively respond to emerging variants and that the government will respond to subsequent
waves of infection with targeted health measures rather than broader economic closures. Significant judgment also continues to be applied in
evaluating changes in various credit metrics due to concerns that they may not correlate with losses to the same extent as they may have in prior
periods as a result of various government support measures and changes in consumer behaviours that are unique to the current environment. See
Note 6 to our consolidated financial statements for more information concerning the high level of judgment inherent in the estimation of ECL
allowance under IFRS 9, including the impact of the COVID-19 pandemic.
CIBC 2021 ANNUAL REPORT 85
Management’s discussion and analysis
Use of the regulatory framework
Our ECL model leverages the data, systems and processes that are used to calculate Basel expected losses regulatory adjustments for the portion
of our portfolios under the AIRB approach. Significant judgment is applied in making appropriate adjustments to the Basel parameters to meet
IFRS 9 requirements, including the conversion of through-the-cycle and downturn parameters used in the Basel regulatory calculations to
point-in-time parameters used under IFRS 9 that consider forward-looking information. In addition, credit losses under IFRS 9 are 12 months for
stage 1 financial instruments and lifetime for stage 2 and stage 3 financial instruments, compared to 12 months for AIRB portfolios under Basel. The
main adjustments necessary to Basel risk parameters are explained in the table below:
Regulatory Capital
IFRS 9
Through-the-cycle PD represents long-run average PD
throughout a full economic cycle
Point-in-time 12-month or lifetime PD based on current conditions
and relevant forward-looking assumptions
Downturn LGD based on losses that would be expected in an
economic downturn and subject to certain regulatory floors
Discounted using the cost of capital
Based on the drawn balance plus expected utilization of any
undrawn portion prior to default, and cannot be lower than the
drawn balance
Unbiased probability-weighted LGD based on estimated LGD
including impact of relevant forward-looking assumptions such as
changes in collateral value
Discounted using the original effective interest rate
Amortization and repayment of principal and interest from the
balance sheet date to the default date is also captured
ECL is discounted from the default date to the reporting date
PD
LGD
EAD
Other
Attribution of provision for credit losses
We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs. Provision for
credit losses recognized directly on our consolidated statement of income is in respect to financial instruments classified as loans and bankers’
acceptances. Provision for credit losses for FVOCI debt securities and amortized cost securities are recognized in Gains (losses) from debt
securities measured at FVOCI and amortized cost, net in the consolidated statement of income.
Hedge accounting
The IFRS 9 hedge accounting guidance is intended to better align the accounting with risk management activities. However, IFRS 9 allows the
existing hedge accounting requirements under IAS 39 to continue in place of the hedge accounting requirements under IFRS 9. As permitted, we
previously elected to not adopt the IFRS 9 hedge accounting requirements and instead retained the IAS 39 hedge accounting requirements. As
required, we have adopted the hedge accounting disclosure requirements under amendments to IFRS 7 that were effective in 2018. As a result of
interest rate benchmark reform, we have adopted “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” (Phase 1
amendments) issued by the IASB as of November 1, 2019, and adopted “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4, and IFRS 16” (Phase 2 amendments) as of November 1, 2020. See the “Interest Rate Benchmark Reform: Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16” section above for more information.
Securitizations and structured entities
Securitization of our own assets
Under IFRS 10 “Consolidated Financial Statements” (IFRS 10), judgment is exercised in determining whether an investor controls an investee
including assessing whether the investor has: (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the
investee; and (iii) the ability to affect those returns through its power over the investee. Power may be exercised through voting or similar rights or, in
the case of structured entities, through contractual arrangements that direct the relevant activities of the investee. When voting rights are not
relevant in deciding whether CIBC has power over an entity, particularly for complex SEs, the assessment of control considers all facts and
circumstances, including the purpose and design of the investee, its relationship with other parties and each party’s ability to make decisions over
significant activities, and whether CIBC is acting as a principal or as an agent.
We sponsor several SEs that have purchased and securitized our own assets including Cards II Trust, which we consolidate under IFRS 10.
We also securitize our own mortgage assets through a government-sponsored securitization program. We sell these securitized assets to a
government-sponsored securitization vehicle that we do not consolidate, as well as to other third parties. IFRS 9 provides guidance on when to
derecognize financial assets. A financial asset is derecognized when the contractual rights to receive cash flows from the asset have expired, or
when we have transferred the rights to receive cash flows from the asset such that:
We have transferred substantially all the risks and rewards of the asset; or
We have neither transferred nor retained substantially all the risks and rewards of the asset, but have transferred control of the asset.
We have determined that our securitization activities related to residential mortgages and cards receivables are accounted for as secured
borrowing transactions because we have not met the aforementioned criteria.
Securities lending and repurchase transactions generally do not result in the transfer of substantially all the risks and rewards of the securities
and as a result do not result in derecognition of the securities.
We also sell certain U.S. commercial mortgages to third parties that qualify for derecognition because we have transferred substantially all the
risks and rewards of the mortgages and have no continuous involvement after the transfer.
Securitization of third-party assets
We also sponsor several SEs that purchase pools of third-party assets. We consider a number of factors in determining whether CIBC controls these
SEs. We monitor the extent to which we support these SEs, through direct investment in the debt issued by the SEs and through the provision of
liquidity protection to the other debtholders, to assess whether we should consolidate these entities.
IFRS 10 also requires that we reconsider our consolidation assessment if facts and circumstances relevant to the entities indicate that there are
changes to one or more of the three elements of control described above. Factors that trigger reassessment include, but are not limited to,
significant changes in ownership structure of the entities, changes in contractual or governance arrangements, provision of a liquidity facility beyond
the original terms, transactions with the entities that were not contemplated originally and changes in the financing structure of the entities.
86 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Specifically, in relation to our multi-seller conduits, we would reconsider our consolidation assessment if our level of interest in the ABCP issued
by the conduits changes significantly, or in the rare event that the liquidity facility that we provide to the conduits is drawn or amended.
A significant increase in our holdings of the outstanding commercial paper issued by the conduits would become more likely in a scenario in
which the market for bank-sponsored ABCP suffered a significant deterioration such that the conduits were unable to roll their ABCP.
For additional information on the securitizations of our own assets and third-party assets, see the “Off-balance sheet arrangements” section
and Note 7 to the consolidated financial statements.
Asset impairment
Goodwill
As at October 31, 2021, we had goodwill of $4,954 million (2020: $5,253 million). Goodwill is not amortized, but is tested, at least annually, for
impairment by comparing the recoverable amount of the cash-generating unit (CGU) to which goodwill has been allocated, with the carrying amount
of the CGU including goodwill. Any deficiency is recognized as impairment of goodwill. The recoverable amount of a CGU is defined as the higher
of its estimated fair value less cost to sell and its value in use. Goodwill is also required to be tested for impairment whenever there are indicators
that it may be impaired.
Estimation of the recoverable amount is an area of significant judgment. Recoverable amounts are estimated using internally developed
models that require the use of significant assumptions including forecasted earnings, discount rates, growth rates, forecasted regulatory capital
requirements, and price-earnings multiples. Reductions in the estimated recoverable amount could arise from various factors, such as reductions in
forecasted cash flows, an increase in the assumed level of required capital, and any adverse changes to the discount rate or terminal growth rates
either in isolation or in any combination thereof. Where our estimated recoverable amount is not significantly in excess of the carrying amount of the
CGU, additional judgment is required, and reductions in the recoverable amount are more likely to result in an impairment charge.
In the fourth quarter of 2021, we performed our annual impairment test. We concluded that the recoverable amounts of our CGUs were in
excess of their carrying amounts.
As discussed in Note 4 to our consolidated financial statements, in the second quarter of 2020 we recognized a goodwill impairment charge of
$28 million on our CIBC FirstCaribbean CGU. In the fourth quarter of 2020, we concluded that held for sale accounting was no longer appropriate and
we recognized an additional goodwill impairment charge of $220 million based on our revised estimate of the recoverable value of CIBC
FirstCaribbean. This reduced the carrying amount of the goodwill relating to the CIBC FirstCaribbean CGU to $35 million (US$26 million) as at
October 31, 2020. No additional goodwill impairment loss was recognized for the year ended October 31, 2021.
For additional information, see Note 4 and Note 9 to our consolidated financial statements.
Other intangible assets and long-lived assets
As at October 31, 2021, we had other intangible assets with an indefinite life of $140 million (2020: $142 million). Acquired intangible assets are
separately recognized if the benefits of the intangible assets are obtained through contractual or other legal rights, or if the intangible assets can be
sold, transferred, licensed, rented, or exchanged. Determining the useful lives of intangible assets requires judgment and fact-based analysis.
Intangible assets with an indefinite life are not amortized but are assessed for impairment by comparing the recoverable amount to the
carrying amount. The recoverable amount is defined as the higher of the estimated fair value less cost to sell and value in use. An impairment test is
required at least annually, or whenever there are indicators that these assets may be impaired.
Long-lived assets and other identifiable intangible assets with a definite life are amortized over their estimated useful lives. These assets are
tested for impairment whenever events or changes in circumstances indicate that the carrying amount is higher than the recoverable amount.
Determining the recoverable amount of intangible assets and long-lived assets is an area of judgment as we estimate the future cash flows
expected to result from the use of the asset and, where appropriate, cash flows arising from the asset’s eventual disposition.
For additional details, see Note 9 to the consolidated financial statements.
Income taxes
We are committed to responsible tax practices. We execute active tax governance and tax compliance processes to meet the requirements of tax
laws in all countries where we operate. We seek to manage tax and reputational risk to ensure any financial exposure is well understood and
remains consistent with our strategy, risk appetite and financial goals.
We are subject to income tax laws in the various jurisdictions where we operate, and the tax laws in those jurisdictions are potentially subject to
different interpretations by us and the relevant taxation authority, which gives rise to uncertainty. We use judgment in the estimation of income taxes
and deferred tax assets and liabilities. As a result, management judgment is applied in the interpretation of the relevant tax laws and in estimating
the provision for current and deferred income taxes. For tax positions where there is uncertainty regarding the ultimate determination of the tax
impact, including positions which are under audit, dispute or appeal, we recognize provisions to consider this uncertainty based on our best
estimate of the amount expected to be paid based on an assessment of the relevant factors.
Deferred tax assets or liabilities are determined for each temporary difference based on the tax rates that are expected to be in effect in the
period that the assets are realized or the liabilities are settled. Deferred tax liabilities are generally recognized for all taxable temporary differences
unless the temporary differences relate to our net investments in foreign operations (NIFOs) and will not reverse in the foreseeable future.
We are required to assess whether it is probable that our deferred tax assets will be realized prior to their expiration and, based on all of the
available evidence, determine if any portion of our deferred tax assets should not be recognized. The factors used to assess the probability of realization
are based on our past experience of income and capital gains, forecasts of future net income before income taxes, available tax planning strategies that
could be implemented to realize the deferred tax assets, and the remaining expiration period of tax loss carryforwards. In addition, for deductible
temporary differences arising from our NIFOs, we must consider whether the temporary difference will reverse in the foreseeable future. Although
realization is not assured, we believe, based on all of the available evidence, it is probable that the recognized deferred tax assets will be realized.
Income tax accounting impacts all of our reporting segments. For further details on our income taxes, see Note 20 to the consolidated financial
statements.
CIBC 2021 ANNUAL REPORT 87
Management’s discussion and analysis
Contingent liabilities and provisions
Legal proceedings and other contingencies
In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for
substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it
is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of
the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount appears to be a better
estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other
amount, the mid-point in the range is accrued. In some instances, however, it is not possible to determine whether an obligation is probable or to
reliably estimate the amount of loss, in which case no accrual can be made.
While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal
counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our consolidated financial
statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting
period. We regularly assess the adequacy of CIBC’s litigation accruals and make the necessary adjustments to incorporate new information as it
becomes available.
CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur
losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss
pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.
A description of significant ongoing matters to which CIBC is a party can be found in Note 23 to the consolidated financial statements. The
provisions disclosed in Note 23 include all of CIBC’s accruals for legal matters as at October 31, 2021, including amounts related to the significant
legal proceedings described in that note and to other legal matters.
CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal
proceedings, where it is possible to make such an estimate, is from nil to approximately $1.1 billion as at October 31, 2021. This estimated
aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is
involved, taking into account CIBC’s best estimate of such losses for those cases for which an estimate can be made. CIBC’s estimate involves
significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose
share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the
estimated range as at October 31, 2021 consist of the significant legal matters disclosed in Note 23 to the consolidated financial statements. The
matters underlying the estimated range will change from time to time, and actual losses may vary significantly from the current estimate. For certain
matters, CIBC does not believe that an estimate can currently be made as many of them are in preliminary stages and certain matters have no
specific amount claimed. Consequently, these matters are not included in the range.
Restructuring
During the first quarter of 2020, we recognized a restructuring charge of $339 million in Corporate and Other associated with ongoing efforts to
transform our cost structure and simplify our bank. This charge consisted primarily of employee severance and related costs and was recorded in
Non-interest expenses – Employee compensation and benefits.
As at October 31, 2021, the remaining provision related to this restructuring charge was $99 million. This amount represents our best estimate
as at October 31, 2021 of the amount required to settle the obligation, including obligations related to ongoing payments as a result of the
restructuring. For further details on our restructuring provision, see Note 23 to the consolidated financial statements.
Post-employment and other long-term benefit plan assumptions
We sponsor a number of benefit plans to eligible employees, including registered and supplemental pension plans, and post-retirement medical
and dental plans (other post-employment benefit plans). We also continue to sponsor a long-term disability income replacement plan and
associated medical and dental benefits (collectively, other long-term benefit plans). The long-term disability plan was closed to new claims effective
June 1, 2004.
The calculation of net defined benefit plan expense and obligations depends on various actuarial assumptions such as discount rates, health-
care cost trend rates, turnover of employees, projected salary increases, retirement age, and mortality rates. The actuarial assumptions used for
determining the net defined benefit plan expense for a fiscal year are set at the beginning of the annual reporting period, are reviewed in
accordance with accepted actuarial practice and are approved by management.
The discount rate assumption used in measuring the net defined benefit plan expense and obligations reflects market yields, as of the
measurement date, on high-quality debt instruments with a currency and term to maturity that match the currency and expected timing of benefit
payments. Our discount rate is estimated by developing a yield curve based on high-quality corporate bonds. While there is a deep market of
high-quality corporate bonds denominated in Canadian dollars with short and medium terms to maturity, there is not a deep market in bonds with
terms to maturity that match the timing of all the expected benefit payments for all of our Canadian plans. As a result, for our Canadian pension,
other post-employment and other long-term benefit plans, we estimate the yields of high-quality corporate bonds with longer-term maturities by
extrapolating current yields on bonds with short- and medium-term durations along the yield curve. Judgment is required in constructing the yield
curve, and as a result, different methodologies applied in constructing the yield curve can give rise to different discount rates.
For further details of our annual pension and other post-employment expense and obligations, see Note 19 and Note 1 to the consolidated
financial statements.
Self-managed loyalty points program
We sponsor certain self-managed credit card loyalty points programs for which we recognize credit card loyalty point liabilities that are subject to
periodic remeasurement to reflect the expected cost of redemption as this expectation changes over time. The calculation of the expected cost of
redemption requires the use of judgment and depends on various assumptions, including estimation of the cost per point and the long-term
redemption rate.
For further details on our self-managed loyalty points programs, see Note 1 to the consolidated financial statements.
88 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Accounting developments
Transition to IFRS 17
IFRS 17 “Insurance Contracts” (IFRS 17), issued in May 2017, replaces IFRS 4 “Insurance Contracts”. In June 2020, the IASB issued amendments to
IFRS 17 partly aimed at helping companies implement the standard. IFRS 17, incorporating the amendments, is effective for annual reporting
periods beginning on or after January 1, 2023, which for us, will be November 1, 2023. IFRS 17 provides comprehensive guidance on the
recognition, measurement, presentation and disclosure of insurance contracts we issue and reinsurance contracts we hold.
We continue to prepare for the implementation of IFRS 17, which is overseen by an Executive Steering Committee. Significant progress has
been made in evaluating the required changes to our accounting and actuarial policies resulting from the adoption of IFRS 17. We plan to
implement the required technology solution to support the new requirements in the upcoming year.
Other regulatory developments
Reforms to interest rate benchmarks
Various interest rate and other indices that are deemed to be “benchmarks” (including LIBOR) are the subject of international regulatory guidance
and proposals for reform. Regulators in various jurisdictions have pushed for the transition from Interbank Offered Rates (IBORs) to alternative
benchmark rates (alternative rates), based upon risk-free rates determined using actual market transactions. The U.K.’s Financial Conduct Authority
(FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR rates after December 2021. In March 2021, the FCA and
the ICE Benchmark Administration (IBA) announced the dates for the cessation or loss of representativeness of various LIBOR rates including that
GBP, EUR, CHF and JPY LIBORs will cease on December 31, 2021 and that most USD LIBOR tenors will cease on June 30, 2023. This
announcement results in a fixed spread between the LIBOR rate and the alternative rate for a given tenor which will apply on the cessation of the
relevant LIBOR rates. The extension for most USD LIBOR tenors until June 30, 2023 is intended to allow for many legacy contracts to mature before
the cessation date, although originations of new USD LIBOR linked products would cease after the end of 2021.
The transition from current reference rates to alternative rates may adversely affect the value of, return on, or trading market for contracts
linked to existing benchmarks. These developments may cause some LIBOR and other benchmarks to be discontinued.
A significant number of CIBC’s derivatives, securities, and lending and deposit contracts reference various interest rate benchmarks, including
contracts with maturity dates that extend beyond the cessation dates announced by the FCA in March 2021.
In response to the proposed reforms to interest rate benchmarks, CIBC established an Enterprise IBOR Transition Program (“Program”), to
manage and coordinate all aspects of the transition. The Program is supported by a formal governance structure and dedicated working groups
that include stakeholders from frontline businesses as well as functional groups such as Treasury, Technology and Operations, Risk Management,
Legal, and Finance, to facilitate the transition.
An IBOR Steering Committee has been established with responsibility for oversight and execution of the Program, including:
Ensuring key project milestones are met;
Providing direction and guidance on a holistic basis;
Reviewing and resolving key issues and risks; and
Ensuring that our transition strategies and any transition actions remain consistent with CIBC’s overall strategy, risk appetite, and control
framework.
As a part of the Program, we are transitioning our existing IBOR based contracts to those that reference the new alternative rates, and have
developed business processes to support the transition. We are on track to substantially complete the remediation of our non-USD LIBOR
referenced contracts by incorporating appropriate fallback language or by replacing the LIBOR referenced rates to the corresponding alternative
rates with appropriate spread adjustments. We have ceased the issuance of GBP and JPY LIBOR linked products earlier this year, and expect to
cease origination of new USD LIBOR products before the end of calendar year 2021 in a manner consistent with regulatory expectations. We are
also working with clearing houses to transition our existing non-USD LIBOR referenced derivatives cleared by them to alternative rates, which is
expected to occur in December 2021. We have also started to offer products based upon alternative rates to our clients, and have continued to
make information available to them, advising on developments on IBOR transition.
We continue to assess the impact of IBOR reform on our operations, engage with industry associations on ongoing developments on the transition to
risk-free rates, and continue to incorporate recent developments into our project plan. The Program provides regular updates to senior
management, including the Executive Committee, and the Board.
Current accounting policy changes relating to interest rate benchmark reform
The IASB has addressed interest rate benchmark reform and its effects on financial reporting in two phases. The first phase focuses on issues
affecting financial reporting in the period before the interest rate benchmark reform, while the second phase focuses on issues that affect financial
reporting once the existing rate is replaced with an alternative rate. See the “Accounting and controls matters” section and Note 1 to our consolidated
financial statements for additional details.
CIBC 2021 ANNUAL REPORT 89
Management’s discussion and analysis
Client-focused reforms
In October 2019, the CSA published final amendments to National Instrument 31-103 “Registration Requirements, Exemptions, and Ongoing
Registrant Obligations” and its Companion Policy. The client-focused reforms are supported by new and/or amended requirements with respect to
know your client, enhanced suitability, product due diligence, know your product, conflicts of interest, relationship disclosure, referrals, and
misleading communications. The CSA expects that these requirements will result in a new, higher standard of conduct across all categories for
registered dealers, advisers and their representatives. In addition, the IIROC and the Mutual Fund Dealers Association (MFDA) published rule
amendments aligning to the CSA client-focused reforms.
Due to COVID-19, the original implementation dates scheduled for June 30, 2020 (conflicts of interest) and December 31, 2020 (all remaining
amendments) were deferred to 2021. Pursuant to the new timelines, the requirements related to conflicts of interest were effective June 30, 2021
and all other remaining requirements are effective December 31, 2021.
These requirements impact our Canadian Commercial Banking and Wealth Management and Canadian Personal and Business Banking SBUs,
as well as Direct Financial Services within our Capital Markets SBU. Relevant changes to our policies and procedures to comply with the conflicts of
interest requirements were implemented by June 30, 2021. We expect to implement the remaining changes to our policies and procedures to
comply with the remaining requirements by December 31, 2021.
CDIC – Deposit protection modernization
In April 2019, the Canadian federal government approved changes to the Canada Deposit Insurance Corporation Act intended to strengthen and
modernize deposit protection. The changes occur in two phases. The first phase was effective on April 30, 2020, and included changes to extend
CDIC coverage to foreign currency deposits and deposits with terms greater than five years, and to eliminate coverage for travellers’ cheques. The
second phase will be effective on April 30, 2022, and will include additional changes such as providing separate coverage for certain registered
plans and introducing new requirements for deposits held in trust.
Related-party transactions
We have various processes in place to ensure that the relevant related-party information is identified and reported to the CGC of the Board on a
quarterly basis, as required by the Bank Act (Canada). The CGC has the responsibility for reviewing our policies and practices in identifying
transactions with our related parties that may materially affect us, and reviewing the associated procedures for promoting compliance with the Bank
Act (Canada).
In the ordinary course of business, we provide banking services and enter into transactions with related parties on terms similar to those
offered to unrelated parties. Related parties include key management personnel(1), their close family members, and entities that they or their close
family members control or jointly control. Related parties also include associates and joint ventures accounted for under the equity method, and
post-employment benefit plans for CIBC employees. Loans to these related parties are made in the ordinary course of business and on substantially
the same terms as for comparable transactions with unrelated parties. We offer a subsidy on annual fees and preferential interest rates on credit
card balances to senior officers which is the same offer extended to all employees of CIBC. In addition, CIBC offers deferred share and other plans
to non-employee directors, executives, and certain other key employees. Details of our compensation of key management personnel(1) and our
investments in equity-accounted associates and joint ventures are disclosed in Notes 18, 19, 25 and 26 to the consolidated financial statements.
(1) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of CIBC directly or
indirectly and comprise the members of the Board (referred to as directors), ExCo and certain named officers per the Bank Act (Canada) (collectively referred to as senior
officers). Board members who are also ExCo members are included as senior officers.
90 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Policy on the Scope of Services of the Shareholders’ Auditor
The “Policy on the Scope of Services of the Shareholders’ Auditors” sets out the parameters for the engagement of the shareholders’ auditor by
CIBC that are consistent with applicable law, including the U.S. Sarbanes-Oxley Act of 2002 and SEC rules. The policy requires the Audit
Committee’s pre-approval of all work performed by the shareholders’ auditor and prohibits CIBC from engaging the shareholders’ auditor for
“prohibited” services. The Audit Committee is accountable for the oversight of the work of the shareholders’ auditor and for an annual assessment of
the engagement team’s qualifications, performance and independence, including lead audit partner rotation. The Audit Committee is also
responsible for conducting a periodic comprehensive review of the external auditor at least every five years. The Audit Committee’s oversight
activities over the shareholders’ auditor are disclosed in our Management Proxy Circular.
Controls and procedures
Disclosure controls and procedures
CIBC’s disclosure controls and procedures are designed to provide reasonable assurance that relevant information is accumulated and
communicated to CIBC’s management, including the President and CEO and the Chief Financial Officer (CFO), to allow timely decisions regarding
required disclosure.
CIBC’s management, with the participation of the President and CEO and the CFO, has evaluated the effectiveness of CIBC’s disclosure controls
and procedures as at October 31, 2021 (as defined in the rules of the SEC and the CSA). Based on that evaluation, the President and CEO and the
CFO have concluded that such disclosure controls and procedures were effective.
Management’s annual report on internal control over financial reporting
CIBC’s management is responsible for establishing and maintaining adequate internal control over financial reporting for CIBC.
Internal control over financial reporting is a process designed by, or under the supervision of, the President and CEO and the CFO and
effected by the Board, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with IFRS as issued by the IASB. CIBC’s internal control over financial
reporting includes those 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 CIBC; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures of CIBC are being
made only in accordance with authorizations of CIBC’s management and directors; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of CIBC’s assets that could have a material effect on the consolidated financial
statements.
All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements on a timely
basis. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement
preparation and presentation.
CIBC’s management has used the Internal Control – Integrated Framework that was published in 2013 by the COSO as the basis to evaluate
the effectiveness of CIBC’s internal control over financial reporting.
As at October 31, 2021, management assessed the effectiveness of CIBC’s internal control over financial reporting and concluded that such
internal control was effective.
Ernst & Young LLP, the shareholders’ auditor, has audited the consolidated financial statements of CIBC for the year ended October 31, 2021,
and has also issued a report on internal control over financial reporting under standards of the Public Company Accounting Oversight Board (United
States).
Changes in internal control over financial reporting
There have been no changes in CIBC’s internal control over financial reporting during the year ended October 31, 2021 that have materially
affected, or are reasonably likely to materially affect, its internal control.
CIBC 2021 ANNUAL REPORT 91
Management’s discussion and analysis
Supplementary annual financial information
Average balance sheet, net interest income and margin
Average balance (1)
Interest
Average rate
$ millions, for the year ended October 31
2021
2020
2019
2021
2020
2019
2021
2020
2019
Total domestic assets
550,730
510,353
459,897
11,676
13,335
15,433
Domestic assets (2)
Cash and deposits with banks
Securities
Securities borrowed or purchased under resale
agreements
Loans
Residential mortgages
Personal and credit card
Business and government
Total loans
Other interest-bearing assets
Derivative instruments
Customers’ liability under acceptances
Other non-interest-bearing assets
Foreign assets (2)
Cash and deposits with banks
Securities
Securities borrowed or purchased under resale
agreements
Loans
Residential mortgages
Personal and credit card
Business and government
Total loans
Other interest-bearing assets
Derivative instruments
Customers’ liability under acceptances
Other non-interest-bearing assets
Total foreign assets
Total assets
Domestic liabilities (2)
Personal
Deposits
Business and government
Bank
Secured borrowings
Total deposits
Derivative instruments
Acceptances
Obligations related to securities sold short
Obligations related to securities lent or sold under
repurchase agreements
Other liabilities
Subordinated indebtedness
Total domestic liabilities
Foreign liabilities (2)
Deposits
Personal
Business and government
Bank
Secured borrowings
Total deposits
Derivative instruments
Acceptances
Obligations related to securities sold short
Obligations related to securities lent or sold under
repurchase agreements
Other liabilities
Subordinated indebtedness
Total foreign liabilities
Total liabilities
Shareholders’ equity
Non-controlling interests
$
37,527 $
82,262
30,232 $
76,063
7,156 $
66,954
$
95
1,567
150 $
1,776
164
1,852
0.25 % 0.50 %
1.90
2.33
2.29 %
2.77
27,203
230,606
50,110
70,755
351,471
8,901
11,382
10,613
21,371
26,498
208,811
51,948
68,072
328,831
5,194
14,334
9,560
19,641
23,950
203,575
53,490
63,131
320,196
3,837
10,248
10,170
17,386
154
5,141
2,962
1,712
9,815
45
–
–
–
290
5,581
3,433
2,043
496
6,347
4,012
2,434
11,057
12,793
62
–
–
–
128
–
–
–
30,270
72,870
51,157
4,501
1,321
66,677
72,499
923
24,186
1
6,985
20,050
62,014
42,199
4,429
1,309
66,015
71,753
701
20,629
1
7,792
13,305
49,059
35,491
3,815
1,435
55,443
60,693
555
13,419
–
7,297
36
574
165
157
83
1,995
2,235
55
–
–
–
99
792
552
176
97
2,416
2,689
55
–
–
–
232
927
978
201
105
2,819
3,125
2
–
–
–
258,891
225,139
179,819
3,065
4,187
5,264
0.57
2.23
5.91
2.42
2.79
0.51
–
–
–
2.12
0.12
0.79
0.32
3.49
6.28
2.99
3.08
5.96
–
–
–
1.18
1.09
2.67
6.61
3.00
3.36
1.19
–
–
–
2.61
0.49
1.28
1.31
3.97
7.41
3.66
3.75
7.85
–
–
–
1.86
2.07
3.12
7.50
3.86
4.00
3.34
–
–
–
3.36
1.74
1.89
2.76
5.27
7.32
5.08
5.15
0.36
–
–
–
2.93
$ 809,621 $ 735,492 $ 639,716 $ 14,741 $ 17,522 $ 20,697
1.82 % 2.38 %
3.24 %
$ 189,599 $ 172,913 $ 157,537 $
178,476
2,105
39,076
198,978
2,220
37,893
153,092
1,915
39,111
428,690
10,621
10,614
19,018
26,349
20,432
5,340
392,570
14,398
9,563
16,794
27,374
6,464
4,891
351,655
10,790
10,171
15,412
15,995
14,621
4,549
734 $
1,170
3
378
2,285
–
–
229
151
36
120
1,405 $
2,019
13
668
4,105
–
–
251
220
49
152
1,861
3,033
29
1,037
5,960
–
–
285
477
9
193
521,064
472,054
423,193
2,821
4,777
6,924
16,795
134,038
16,848
1,883
169,564
22,571
1
1,050
50,142
2,395
96
245,819
766,883
42,563
175
16,974
113,877
13,891
1,322
146,064
20,718
1
1,047
41,881
13,706
152
223,569
695,623
39,682
187
15,543
97,429
12,277
226
125,475
14,130
–
1,089
35,413
3,014
150
179,271
602,464
37,072
180
62
268
20
16
366
–
–
7
57
29
2
461
3,282
–
–
142
964
100
15
1,221
–
–
3
436
34
7
1,701
6,478
–
–
193
2,068
197
4
2,462
–
–
6
721
28
5
3,222
10,146
–
–
0.39 % 0.81 %
0.59
0.14
1.00
1.13
0.62
1.71
1.18 %
1.98
1.51
2.65
0.53
–
–
1.20
0.57
0.18
2.25
0.54
0.37
0.20
0.12
0.85
0.22
–
–
0.67
0.11
1.21
2.08
0.19
0.43
–
–
1.05
–
–
1.49
0.80
0.76
3.11
1.01
0.84
0.85
0.72
1.13
0.84
–
–
0.29
1.04
0.25
4.61
0.76
0.93
–
–
1.69
–
–
1.85
2.98
0.06
4.24
1.64
1.24
2.12
1.60
1.77
1.96
–
–
0.55
2.04
0.93
3.33
1.80
1.68
–
–
Total liabilities and equity
$ 809,621 $ 735,492 $ 639,716 $
3,282 $
6,478 $ 10,146
0.41 % 0.88 %
1.59 %
Net interest income and net interest margin (3)
$ 11,459 $ 11,044 $ 10,551
1.42 % 1.50 %
1.65 %
Additional disclosures: Non-interest-bearing deposit liabilities
Domestic
Foreign
$
76,224 $
22,396
59,862 $
18,430
48,478
14,582
(1) Average balances are calculated as a weighted average of daily closing balances.
(2) Classification as domestic or foreign is based on domicile of debtor or customer.
(3) Net interest income as a percentage of average assets.
92 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Volume/rate analysis of changes in net interest income
$ millions
2021/2020
2020/2019
Increase (decrease) due to change in:
Increase (decrease) due to change in:
Domestic assets (1)
Cash and deposits with banks
Securities
Securities borrowed or purchased under resale agreements
$
Loans
Residential mortgages
Personal and credit card
Business and government
Total loans
Other interest-bearing assets
Change in domestic interest income
Foreign assets (1)
Cash and deposits with banks
Securities
Securities borrowed or purchased under resale agreements
Loans
Residential mortgages
Personal and credit card
Business and government
Total loans
Other interest-bearing assets
Change in foreign interest income
Total change in interest income
Domestic liabilities (1)
Personal
Deposits
Business and government
Bank
Secured borrowings
Total deposits
Obligations related to securities sold short
Obligations related to securities lent or sold under
repurchase agreements
Other liabilities
Subordinated indebtedness
Change in domestic interest expense
Foreign liabilities (1)
Deposits
Personal
Business and government
Bank
Secured borrowings
Total deposits
Obligations related to securities sold short
Obligations related to securities lent or sold under
repurchase agreements
Other liabilities
Subordinated indebtedness
Change in foreign interest expense
Total change in interest expense
Change in total net interest income
Average
balance
Average
rate
36
145
8
583
(121)
81
543
44
776
50
139
117
3
1
24
28
17
$
(91)
(354)
(144)
(1,023)
(350)
(412)
(1,785)
(61)
(2,435)
(113)
(357)
(504)
(22)
(15)
(445)
(482)
(17)
$
Total
(55)
(209)
(136)
(440)
(471)
(331)
(1,242)
(17)
(1,659)
(63)
(218)
(387)
(19)
(14)
(421)
(454)
–
Average
balance
Average
rate
$
529
252
53
163
(116)
190
237
45
1,116
118
245
185
32
(9)
538
561
1
$
(543)
(328)
(259)
(929)
(463)
(581)
(1,973)
(111)
(3,214)
(251)
(380)
(611)
(57)
1
(941)
(997)
52
$
Total
(14)
(76)
(206)
(766)
(579)
(391)
(1,736)
(66)
(2,098)
(133)
(135)
(426)
(25)
(8)
(403)
(436)
53
351
(1,473)
(1,122)
1,110
(2,187)
(1,077)
$ 1,127
$
(3,908)
$
(2,781)
$ 2,226
$
(5,401)
$
(3,175)
$
$
$
136
232
1
(20)
349
33
(8)
106
14
494
(1)
171
21
6
197
–
86
(28)
(3)
252
746
381
$
(807)
(1,081)
(11)
(270)
(2,169)
(55)
(61)
(119)
(46)
$
(671)
(849)
(10)
(290)
(1,820)
(22)
(69)
(13)
(32)
$
182
503
3
(1)
687
26
339
(5)
15
$
(638)
(1,517)
(19)
(368)
(2,542)
(60)
(596)
45
(56)
$
(456)
(1,014)
(16)
(369)
(1,855)
(34)
(257)
40
(41)
(2,450)
(1,956)
1,062
(3,209)
(2,147)
(79)
(867)
(101)
(5)
(1,052)
4
(465)
23
(2)
(1,492)
(3,942)
34
$
$
(80)
(696)
(80)
1
(855)
4
(379)
(5)
(5)
(1,240)
18
349
26
19
412
–
132
99
–
643
$
$
(3,196)
$ 1,705
415
$
521
$
$
(69)
(1,453)
(123)
(8)
(1,653)
(3)
(417)
(93)
2
(2,164)
(5,373)
(28)
(51)
(1,104)
(97)
11
(1,241)
(3)
(285)
6
2
(1,521)
(3,668)
493
$
$
(1) Classification as domestic or foreign is based on domicile of debtor or customer.
CIBC 2021 ANNUAL REPORT 93
Management’s discussion and analysis
Analysis of net loans and acceptances(1)
Canada (2)
85,338
60,760
$ 382,221 $ 343,677 $ 333,366 $ 326,572 $ 315,885
74,934
76,595
69,076
Analysis of net loans and acceptances (continued)(1)
2021
2020
2019
2018
2017
$ 246,581 $ 216,215 $ 204,383 $ 203,930 $ 203,787
39,533
11,805
255,125
6,481
5,403
5,186
6,237
1,912
3,019
13,293
5,558
3,159
668
464
539
281
40,317
10,550
267,082
5,844
9,434
5,442
6,824
2,115
3,326
20,782
6,829
3,627
610
474
608
108
41,506
12,060
257,496
6,426
6,885
6,000
6,969
2,318
3,294
16,297
6,011
3,246
824
446
624
275
41,906
12,143
258,432
6,064
7,565
6,548
6,975
2,465
3,972
18,465
6,965
3,648
1,024
628
713
191
39,940
10,362
296,883
6,259
11,407
6,549
6,663
2,222
3,430
25,151
7,242
2,539
415
283
589
238
343
2,526
4,397
3,664
1,666
–
406
2,218
3,783
3,333
1,173
–
557
2,193
3,027
3,221
857
–
527
1,880
3,328
2,870
954
–
291
1,818
2,840
2,937
869
–
2021
$ 2,071
542
22
2,635
48
13,705
2,449
4,808
2,500
1,283
18,138
129
1,818
127
165
2,275
1,196
71
1,255
3,654
3,927
229
–
2020
$ 2,000
409
27
2,436
292
7,560
2,089
5,095
2,547
1,057
18,750
103
2,364
142
141
1,939
1,015
99
1,283
3,332
4,203
216
–
U.S. (2)
2019
$ 1,527
435
35
1,997
115
8,111
2,215
4,398
2,399
958
16,871
124
2,447
154
162
1,387
314
92
1,263
2,353
2,941
127
–
2018
$ 1,152 $
356
36
1,544
39
5,529
2,013
3,720
2,143
695
14,559
79
1,852
60
215
1,202
887
2017
902
326
35
1,263
95
3,248
1,904
3,567
1,559
702
13,761
107
1,838
87
209
883
756
102
893
1,650
3,040
92
–
117
602
1,713
3,099
7
12
(245)
(341)
(144)
(98)
(195)
(282)
(536)
(138)
(108)
(83)
2021
$ 2,594
647
125
3,366
268
3,896
596
1,789
93
91
1,264
36
238
490
–
130
130
95
2,909
3,519
23
1,736
–
2020
$ 2,587
664
145
3,396
252
2,227
517
1,758
49
97
1,312
147
346
507
–
107
140
58
3,033
2,945
27
1,817
–
Other (2)
2019
$ 2,531
757
157
3,445
258
2,103
510
1,801
128
61
1,529
104
28
642
–
21
185
81
2,012
1,926
34
1,657
–
2018
$ 2,453
715
159
3,327
266
2,043
618
1,675
125
92
1,624
25
74
710
–
–
208
85
1,642
833
28
1,598
–
2017
$ 2,379
583
152
3,114
218
841
706
1,736
432
111
1,325
22
185
784
–
20
301
89
1,847
878
29
1,662
–
57,495
$ 60,130
51,691
$ 54,127
46,293
$ 48,290
38,662
34,183
$ 40,206 $ 35,446
Total
2021
2018
2020
2019
2017
$ 251,246 $ 220,802 $ 208,441 $ 207,535 $ 207,068
40,442
11,992
259,502
6,794
9,492
7,796
11,540
3,903
3,832
28,379
5,687
5,182
1,539
673
1,442
1,338
42,577
12,255
262,367
6,731
14,457
8,631
12,364
4,586
4,081
32,480
6,115
5,172
1,594
661
1,826
1,370
41,390
10,722
272,914
6,388
19,221
8,048
13,677
4,711
4,480
40,844
7,079
6,337
1,259
615
2,654
1,263
43,098
12,335
263,874
6,437
17,779
9,273
13,174
4,992
4,991
36,865
7,193
6,123
1,820
790
2,121
690
41,129
10,509
302,884
6,575
29,008
9,594
13,260
4,815
4,804
44,553
7,407
4,595
1,032
448
2,994
1,564
509
6,690
11,570
7,614
3,631
–
563
6,534
10,060
7,563
3,206
–
730
5,468
7,306
6,196
2,641
–
714
4,415
5,811
5,938
2,644
–
497
4,267
5,431
6,065
2,538
12
$ millions, as at October 31
Residential mortgages
Personal
Credit card
Total net consumer loans
Non-residential mortgages
Financial institutions
Retail and wholesale
Business services
Manufacturing – capital goods
Manufacturing – consumer goods
Real estate and construction (3)
Agriculture
Oil and gas
Mining
Forest products
Hardware and software
Telecommunications and cable
Publishing, printing, and
broadcasting
Transportation
Utilities
Education, health and social
services
Governments
Others
Stage 1 and 2 allowance for credit
losses (2017: Collective
allowance allocated to business
and government loans) (3)(4)
Total net business and government
loans, including acceptances
Total net loans and acceptances
$ millions, as at October 31
Residential mortgages
Personal
Credit card
Total net consumer loans
Non-residential mortgages
Financial institutions
Retail and wholesale
Business services
Manufacturing – capital goods
Manufacturing – consumer goods
Real estate and construction (3)
Agriculture
Oil and gas
Mining
Forest products
Hardware and software
Telecommunications and cable
Publishing, printing, and
broadcasting
Transportation
Utilities
Education, health and social
services
Governments
Others
Stage 1 and 2 allowance for credit
losses (2017: Collective
allowance allocated to business
and government loans) (3)(4)
Total net business and government
loans, including acceptances
Total net loans and acceptances
(141)
(151)
(73)
(90)
(73)
(668)
(1,028)
(355)
(296)
(351)
17,162
$ 20,528
15,188
$ 18,584
13,007
$ 16,452
11,556
$ 14,883
11,113
$ 14,227
159,995
106,056
$ 462,879 $ 416,388 $ 398,108 $ 381,661 $ 365,558
119,294
143,474
134,234
(1) In the third quarter of 2021, certain amounts by sector were revised from those previously presented to align with our revised sector definition, or to better match the
borrowers’ risk profiles with the relevant sectors.
(2) Classification by country is primarily based on domicile of debtor or customer.
(3) Stage 3 allowance for credit losses (2017: individual allowance under IAS 39) is allocated to business and government loans, including acceptances, by category above.
(4) Stage 1 and 2 allowance (2017: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.
94 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Summary of allowance for credit losses
$ millions, as at or for the year ended October 31
Balance at beginning of year under IAS 39
Impact of adopting IFRS 9 at November 1, 2017
Balance at beginning of year under IFRS 9
Provision for credit losses
Write-offs
Domestic (2)
Residential mortgages
Personal and credit card
Other business and government
Foreign (2)
Residential mortgages
Personal and credit card
Other business and government
Total write-offs
Recoveries
Domestic (2)
Personal and credit card
Other business and government
Foreign (2)
Residential mortgages
Personal and credit card
Other business and government
Total recoveries
Net write-offs
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Comprises:
Loans
Undrawn credit facilities and other off-balance sheet exposures
Ratio of net write-offs during the year to average loans outstanding
during the year
2021
n/a
n/a
2020
n/a
n/a
2019
n/a
n/a
2018 (1)
2017
$ 1,737
63
$ 1,813
n/a
$ 3,722
158
$ 2,044
2,489
$ 1,741
1,286
1,800
870
n/a
829
21
869
51
17
19
80
22
897
30
7
14
160
19
866
37
35
14
79
1,130
1,050
1,057
173
6
2
6
7
194
936
(40)
(7)
174
6
–
4
6
190
860
(23)
(46)
168
15
–
5
5
193
864
(26)
(15)
26
663
126
1
17
153
986
185
5
3
4
9
206
780
(41)
(89)
15
755
43
1
7
114
935
170
4
6
7
5
192
743
(45)
(23)
$ 2,970
$ 3,722
$ 2,044
$ 1,741
$ 1,737
$ 2,849
121
$ 3,540
182
$ 1,915
129
$ 1,639
102
$ 1,618
119
0.18 %
0.19 %
0.25 %
0.24 %
0.26 %
(1) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card
loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement
proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed
or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days
in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as
impaired until payments were contractually 180 days in arrears.
(2) Classification as domestic or foreign is primarily based on domicile of debtor or customer.
n/a Not applicable.
Allowance for credit losses on impaired loans as a percentage of gross impaired loans
$ millions, as at October 31
Domestic (4)
Residential mortgages
Personal loans
Business and government
Total domestic
Foreign (4)
Residential mortgages
Personal loans
Business and government
Total foreign
Total allowance
2021
2020
2019
2018 (2)
2017 (3)
2021
2020
2019
2018 (2)
2017 (3)
Allowance for
credit losses (1)
Allowance as a % of
gross impaired loans
$
54
64
344
462
104
42
164
310
$
69 $
80
406
555
82
33
244
359
61 $
98
217
376
79
30
159
268
54 $
22
79
56
189
89
30
174
293
110
43
175
123
31
148
302
12.7 %
61.5
72.9
10.8 %
60.2
62.6
10.5 %
62.4
45.8
10.9 %
57.7
41.5
46.2
39.1
31.0
24.6
48.8
72.4
29.2
37.3
47.7
68.8
34.4
38.6
46.5
63.8
36.4
41.0
49.4
66.7
35.8
41.2
7.5 %
94.8
41.7
34.2
55.7
56.4
28.3
37.8
$ 772
$ 914
$ 644
$ 482
$ 477
42.1 %
38.9 %
34.5 %
32.6 %
36.4 %
(1) Excludes allowance on undrawn credit facilities and other off-balance sheet exposures.
(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card
loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement
proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed
or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days
in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as
impaired until payments were contractually 180 days in arrears.
(3) Under IAS 39, comprises individual allowance, and collective allowance related to personal, scored small business, and mortgage impaired loans that are greater than 90
days delinquent.
(4) Classification as domestic or foreign is primarily based on domicile of debtor or customer.
CIBC 2021 ANNUAL REPORT 95
Management’s discussion and analysis
Allowance on performing loans as a percentage of net loans and acceptances
$ millions, as at October 31
2021
2020
2019
2018 (3)
2017
2021
2020
2019
2018 (3)
2017
Allowance for
credit losses (1)(2)
Allowance as a % of net
loans and acceptances
Domestic
Residential mortgages
Personal loans
Credit cards
Business and government
Total domestic
Foreign
Residential mortgages
Personal loans
Credit cards
Business and government
Total foreign
$
$
$
65
647
619
245
89
697
659
341
$
38
415
413
144
1,576
1,786
1,010
57
15
6
423
501
123
22
8
687
840
33
10
7
211
261
$
29
362
415
98
904
42
10
3
198
253
34
345
383
187
949
24
9
3
156
192
– %
1.6
6.0
0.3
0.4
1.2
1.3
4.1
0.6
0.6
– %
– %
– %
– %
1.7
6.2
0.4
0.5
2.7
2.1
4.7
1.0
1.2
1.0
3.4
0.2
0.3
0.8
0.8
3.6
0.4
0.4
0.9
3.4
0.1
0.3
1.2
0.9
1.5
0.4
0.5
0.9
3.2
0.3
0.3
0.7
1.0
1.6
0.3
0.4
Total stage 1 and 2 allowance (2017: total
allowance)
$ 2,077 $ 2,626 $ 1,271 $ 1,157 $ 1,141
0.4 %
0.6 %
0.3 %
0.3 %
0.3 %
(1) Excludes allowance on undrawn credit facilities and other off-balance sheet exposures.
(2) Stage 1 and 2 allowance (2017: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.
(3) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card
loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement
proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed
or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days
in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as
impaired until payments were contractually 180 days in arrears.
Net loans and acceptances by geographic location(1)
$ millions, as at October 31
Canada
Atlantic provinces
Quebec
Ontario
Prairie provinces
Alberta, Northwest Territories and Nunavut
British Columbia and Yukon
Stage 1 and 2 allowance (2017: collective allowance) allocated to
Canada (2)
Total Canada
U.S.
Other countries
2021
2020
2019
2018
2017
$
14,898
35,092
202,789
15,092
46,816
69,110
$
14,685
30,916
176,915
14,710
46,133
62,104
$
14,578
30,113
169,073
14,680
45,103
60,829
$
14,036
28,598
165,592
13,947
44,896
60,407
$
14,194
27,027
157,987
13,746
44,354
59,479
(1,576) (3)
(1,786) (3)
(1,010) (3)
(904) (3)
(902) (4)
382,221
60,130
20,528
343,677
54,127
18,584
333,366
48,290
16,452
326,572
315,885
40,206
14,883
35,446
14,227
Total net loans and acceptances
$ 462,879
$ 416,388
$ 398,108
$ 381,661
$ 365,558
(1) Classification by country is primarily based on domicile of debtor or customer.
(2) Stage 1 and 2 allowance (2017: collective allowance under IAS 39) are primarily allocated based on the geographic location where they are recorded.
(3) Stage 3 allowance for credit losses (2017: individual allowance under IAS 39) is allocated to provinces above, including acceptances.
(4) Under IAS 39, relates to collective allowance, except for: (i) residential mortgages greater than 90 days delinquent; and (ii) personal loans and scored small business loans
greater than 30 days delinquent.
96 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Net impaired loans
$ millions, as at October 31
Gross impaired loans
Residential mortgages
Personal
Total gross impaired consumer loans
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
Canada (1)
U.S. (1)
2021
2020
2019
2018 (2)
2017
2021
2020
2019
2018 (2)
2017
$
425 $
104
637 $
133
581 $ 497 $ 292
116
137
157
$
529
2
4
192
24
16
10
50
4
6
93
71
472
770
15
8
383
5
39
27
124
1
4
38
5
649
738
3
2
283
6
38
53
46
2
4
32
5
474
634
408
3
5
62
7
39
8
1
2
3
–
5
135
769
100
7
–
38
6
33
9
2
3
2
–
3
103
511
337
18
3
21
–
70
55
51
239
–
7
6
–
–
8
436
457
–
$
17
5
22
–
34
98
65
169
–
135
6
–
34
21
562
584
–
$
$
16
5
21
–
37
89
35
46
–
69
2
–
–
23
13
2
15
–
65
44
14
90
–
54
2
1
–
56
301
322
–
326
341
–
$
9
2
11
–
8
52
1
137
–
114
2
–
–
45
359
370
–
Total gross impaired – business and government loans
Total gross impaired loans
Other past due loans (3)
1,001
64
1,419
127
1,212
96
Total gross impaired and other past due loans
$ 1,065 $ 1,546 $ 1,308 $ 869 $ 848
$ 457 $ 584 $ 322 $ 341 $ 370
Allowance for credit losses
Residential mortgages
Personal
Total allowance – consumer loans
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
Total allowance – business and government loans
Total allowance
Net impaired loans
Residential mortgages
Personal
Total net impaired consumer loans
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
$
$
$
$
54
64
69 $
80
61 $
98
54 $
79
118
–
1
177
9
8
7
33
3
3
79
24
344
149
–
4
289
3
11
22
56
–
2
17
2
406
159
–
1
151
4
16
24
11
–
2
5
3
217
133
–
–
26
4
15
4
1
1
2
–
3
56
22
110
132
2
–
18
5
9
–
2
2
2
–
3
43
$
5 $
2
7
–
15
19
3
62
–
1
1
–
–
–
$
3
2
5
–
8
24
29
58
–
48
2
–
5
1
3
1
4
–
1
28
–
28
–
34
–
–
–
10
101
175
101
$
2 $
–
2
–
14
27
1
41
–
5
–
–
–
–
88
462 $
555 $
376 $ 189 $ 175
$ 108 $ 180 $ 105 $
90 $
371 $
40
411
568 $
53
621
2
3
15
15
8
3
17
1
3
14
47
15
4
94
2
28
5
68
1
2
21
3
520 $ 443 $ 270
6
58
59
$
579
3
1
132
2
22
29
35
2
2
27
2
257
501
276
3
5
36
3
24
4
–
1
1
–
2
79
5
–
20
1
24
9
–
1
–
–
–
60
$
$
$
13
1
14
–
55
36
48
177
–
6
5
–
–
8
335
14
3
17
–
26
74
36
111
–
87
4
–
29
20
387
$
13
4
17
–
36
61
35
18
–
35
2
–
–
13
11
2
13
–
51
17
13
49
–
49
2
1
–
56
200
238
–
–
–
–
–
16
–
41
–
8
–
–
–
–
65
65
9
2
11
–
8
36
1
96
–
106
2
–
–
45
294
Total net impaired – business and government loans
128
243
Total net impaired loans
$
539 $
864 $
836 $ 580 $ 336
$ 349 $ 404 $ 217 $ 251 $ 305
(1) Classification by country is primarily based on domicile of debtor or customer.
(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card
loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement
proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed
or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days
in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as
impaired until payments were contractually 180 days in arrears.
(3) Represents loans where repayment of principal or payment of interest is contractually in arrears between 90 and 180 days.
CIBC 2021 ANNUAL REPORT 97
Management’s discussion and analysis
Net impaired loans (continued)
$ millions, as at October 31
Gross impaired loans
Residential mortgages
Personal
Other (1)
Total
2021
2020
2019
2018 (2) 2017
2021
2020
2019
2018 (2)
2017
$ 195
55
$ 155
43
$ 154
42
$ 167
43
$ 212
53
$ 638 $ 809 $ 751
204
181
162
$ 677
182
$ 513
171
Total gross impaired consumer loans
250
198
196
210
265
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
Total gross impaired – business and government loans
Total gross impaired loans
Other past due loans (3)
11
1
53
16
42
–
–
–
2
–
–
125
375
2
11
1
49
3
55
–
27
–
2
–
–
148
346
5
17
–
43
4
59
–
–
–
2
–
11
136
332
3
15
1
52
4
72
1
–
–
3
–
12
160
370
3
17
2
57
5
78
1
–
–
4
–
–
164
429
3
800
13
75
300
91
297
10
57
10
8
93
79
990
26
43
530
73
263
27
286
7
6
72
26
1,033
1,833
66
1,359
2,349
132
955
20
39
415
45
143
53
115
4
6
32
39
911
859
18
71
158
25
201
9
55
4
7
–
73
621
684
24
10
147
12
248
10
116
5
6
–
48
626
1,866
99
1,480
103
1,310
340
Total gross impaired and other past due loans
$ 377 $ 351
$ 335
$ 373
$ 432
$ 1,899 $ 2,481 $ 1,965
$1,583
$1,650
Allowance for credit losses
Residential mortgages
Personal
$ 99 $ 79
31
40
$ 76
29
$ 87
30
$ 123
31
Total allowance – consumer loans
139
110
105
117
154
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
Total allowance – business and government loans
2
1
33
4
22
–
–
–
1
–
–
63
2
1
21
2
29
–
13
–
1
–
–
69
5
–
18
2
30
–
–
–
1
–
2
58
7
1
28
3
39
1
–
–
2
–
5
86
9
–
29
3
39
1
–
–
2
–
–
83
$ 158 $ 151 $ 140
128
113
106
264
2
17
229
16
92
7
34
4
4
79
24
508
264
2
13
334
34
98
22
117
2
3
22
3
650
268
5
2
197
6
74
24
45
–
3
5
15
376
$ 143
109
$ 145
141
252
286
7
15
81
8
95
5
6
1
4
–
8
11
–
63
8
89
1
10
2
4
–
3
230
191
Total allowance
Net impaired loans
Residential mortgages
Personal
$ 202
$ 179
$ 163
$ 203
$ 237
$ 772 $ 914 $ 644
$ 482
$ 477
$ 96 $ 76 $ 78 $ 80 $ 89 $ 480 $ 658 $ 611
76
68
56
15
13
13
22
12
$ 534
73
$ 368
30
Total net impaired consumer loans
Non-residential mortgages
Financial institutions
Retail, wholesale and business services
Manufacturing – consumer and capital goods
Real estate and construction
Agriculture
Resource-based industries
Telecommunications, media and technology
Transportation
Utilities
Other
Total net impaired – business and government loans
111
9
–
20
12
20
–
–
–
1
–
–
62
88
9
–
28
1
26
–
14
–
1
–
–
79
91
12
–
25
2
29
–
–
–
1
–
9
78
93
8
–
24
1
33
–
–
–
1
–
7
74
111
8
2
28
2
39
–
–
–
2
–
–
81
536
11
58
71
75
205
3
23
6
4
14
55
525
726
24
30
196
39
165
5
169
5
3
50
23
709
687
15
37
218
39
69
29
70
4
3
27
24
535
607
11
56
77
17
106
4
49
3
3
–
65
391
398
13
10
84
4
159
9
106
3
2
–
45
435
Total net impaired loans
$ 173
$ 167
$ 169
$ 167
$ 192
$ 1,061 $ 1,435 $ 1,222
$ 998
$ 833
(1) Classification by country is primarily based on domicile of debtor or customer.
(2) Effective November 1, 2017, all loans that are contractually 90 days in arrears are automatically classified as impaired and as stage 3 under IFRS 9, except for credit card
loans which are classified as impaired and are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement
proposal, or enlistment of credit counselling services. The determination of impairment was generally the same under IAS 39, except (i) residential mortgages guaranteed
or insured by a Canadian government (federal or provincial) or a Canadian government agency were not classified as impaired until payments were contractually 365 days
in arrears, and (ii) residential mortgages guaranteed or insured by a private insurer, or loans that were fully secured and in the process of collection were not classified as
impaired until payments were contractually 180 days in arrears.
(3) Represents loans where repayment of principal or payment of interest is contractually in arrears between 90 and 180 days.
98 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Deposits
$ millions, for the year ended October 31
2021
2020
2019
2021
2020
2019
2021
2020
2019
Average balance (1)
Interest
Rate
Deposits in domestic bank offices (2)
Payable on demand
Personal
Business and government
Bank
Payable after notice
Personal
Business and government
Bank
Payable on a fixed date
Personal
Business and government
Bank
Secured borrowings
$
12,820 $
67,233
8,881
11,945 $
50,683
5,761
130,636
64,661
351
50,479
105,251
2,167
37,893
109,856
56,758
276
55,164
102,953
2,078
39,076
$
9,939
43,539
4,517
99,859
44,691
256
51,522
85,978
1,161
39,111
$
5
164
–
194
390
2
552
684
2
378
Total domestic
480,372
434,550
380,573
2,371
Deposits in foreign bank offices
Payable on demand
Personal
Business and government
Bank
Payable after notice
Personal
Business and government
Payable on a fixed date
Personal
Business and government
Bank
Secured borrowings
Total foreign
Total deposits
2,213
24,156
37
8,305
16,623
1,941
55,092
7,632
1,883
1,971
20,454
31
8,119
12,825
2,832
48,680
7,850
1,322
117,882
104,084
1,687
15,687
13
6,909
9,544
3,164
51,082
8,245
226
96,557
1
8
1
33
26
11
166
18
16
280
14
305
1
460
659
2
969
1,358
20
668
4,456
2
32
1
66
83
36
546
89
15
870
$
17
585
3
855
927
4
1,040
2,063
23
1,037
6,554
2
70
–
82
185
58
1,271
196
4
1,868
0.04 %
0.24
–
0.12 %
0.60
0.02
0.17 %
1.34
0.07
0.15
0.60
0.57
1.09
0.65
0.09
1.00
0.49
0.05
0.03
2.70
0.40
0.16
0.57
0.30
0.24
0.85
0.24
0.42
1.16
0.72
1.76
1.32
0.96
1.71
1.03
0.10
0.16
3.23
0.81
0.65
1.27
1.12
1.13
1.13
0.84
0.86
2.07
1.56
2.02
2.40
1.98
2.65
1.72
0.12
0.45
–
1.19
1.94
1.83
2.49
2.38
1.77
1.93
$ 598,254 $ 538,634 $ 477,130
$ 2,651
$ 5,326
$ 8,422
0.44 %
0.99 %
1.77 %
(1) Average balances are calculated as a weighted average of daily closing balances.
(2) Deposits by foreign depositors in our domestic bank offices amounted to $51.9 billion (2020: $42.2 billion; 2019: $29.3 billion).
Short-term borrowings
$ millions, as at or for the year ended October 31
Amounts outstanding at end of year
Obligations related to securities sold short
Obligations related to securities lent or sold under repurchase agreements
Total short-term borrowings
Obligations related to securities sold short
Average balance (1)
Maximum month-end balance
Average interest rate
Obligations related to securities lent or sold under repurchase agreements
Average balance (1)
Maximum month-end balance
Average interest rate
(1) Average balances are calculated as a weighted average of daily closing balances.
Fees paid to the shareholders’ auditor
$ millions, for the year ended October 31
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Total
2021
2020
2019
$ 22,790
74,343
$ 97,133
$ 15,963
73,477
$ 89,440
$ 15,635
53,623
$ 69,258
$ 20,068
22,790
$ 17,841
22,467
$ 16,501
18,448
1.18 %
1.42 %
1.76 %
$ 76,491
83,664
$ 69,255
81,349
$ 51,408
57,346
0.27 %
0.95 %
2.33 %
2021
$ 23.1
2.3
1.3
–
$ 26.7
2020
$ 24.0
2.2
1.4
–
$ 27.6
2019
$ 22.3
1.7
1.9
0.1
$ 26.0
(1) For the audit of CIBC’s annual financial statements and the audit of certain of our subsidiaries, as well as other services normally provided by the principal auditor in
connection with CIBC’s statutory and regulatory filings. Audit fees also include the audit of internal control over financial reporting under the standards of the Public
Company Accounting Oversight Board (United States).
(2) For the assurance and related services that are reasonably related to the performance of the audit or review of CIBC’s consolidated financial statements, including
accounting consultation, various agreed upon procedures and translation of financial reports.
(3) For tax compliance and advisory services.
(4) Includes fees for non-audit services.
CIBC 2021 ANNUAL REPORT 99
Management’s discussion and analysis
Glossary
Allowance for credit losses
Under IFRS 9, allowance for credit losses represents 12 months of expected credit losses (ECL) for instruments that have not been subject to a
significant increase in credit risk, while allowance for credit losses represents lifetime ECL for instruments that have been subject to a significant
increase in credit risk, including impaired instruments. ECL allowances for loans and acceptances are included in Allowance for credit losses on the
consolidated balance sheet. ECL allowances for fair value through other comprehensive income (FVOCI) debt securities are included as a
component of the carrying value of the securities, which are measured at fair value. Expected credit loss allowances for other financial assets are
included in the carrying value of the instrument. ECL allowances for guarantees and loan commitments are included in Other liabilities.
Under IAS 39, allowance for credit losses generally represented an allowance set up in the financial statements sufficient to absorb specifically
identified and inherent credit-related losses in CIBC’s portfolio of loans, acceptances, letters of credit and guarantees. This allowance can be
“collective”, assessed by reviewing a portfolio of loans with similar characteristics, or “individual”, assessed by reviewing the characteristics of an
individual exposure.
Allowance for credit losses are adjusted for provisions for (reversals of) credit losses and are reduced by write-offs, net of recoveries.
Amortized cost
The amount at which a financial asset or financial liability is measured at initial recognition minus repayments, plus or minus any unamortized
origination date premiums or discounts, plus or minus any basis adjustments resulting from a fair value hedge, and minus any reduction for
impairment (directly or through the use of an allowance account). The amount of a financial asset or liability measured at initial recognition is the
cost of the financial asset or liability including capitalized transaction costs and deferred fees.
Assets under administration (AUA)
Assets administered by CIBC that are beneficially owned by clients and are, therefore, not reported on the consolidated balance sheet. The services
provided by CIBC are of an administrative nature, such as safekeeping of securities, client reporting and record keeping, collection of investment
income, and the settlement of purchase and sale transactions. In addition, assets under management (AUM) amounts are included in the amounts
reported under AUA.
Assets under management (AUM)
Assets managed by CIBC that are beneficially owned by clients and are, therefore, not reported on the consolidated balance sheet. The service
provided in respect of these assets is discretionary portfolio management on behalf of the clients.
Average interest-earning assets
Average interest-earning assets include interest-bearing deposits with banks, interest-bearing demand deposits with the Bank of Canada,
securities, cash collateral on securities borrowed or securities purchased under resale agreements, loans net of allowance for credit losses, and
certain sublease-related assets.
Basis point
One-hundredth of a percentage point (0.01%).
Collateral
Assets pledged to secure loans or other obligations, which are forfeited if the obligations are not repaid.
Collateralized debt obligation (CDO)
Securitization of any combination of corporate debt, asset-backed securities (ABS), mortgage-backed securities or tranches of other CDOs to form
a pool of diverse assets that are tranched into securities that offer varying degrees of risk and return to meet investor demand.
Collateralized loan obligation (CLO)
Securitizations of diversified portfolios of corporate debt obligations and/or ABS that are tranched into securities that offer varying degrees of risk
and return to meet investor demand.
Common shareholders’ equity
Common shareholders’ equity includes common shares, contributed surplus, retained earnings and accumulated other comprehensive income
(AOCI).
Credit derivatives
A category of financial instruments that allow one party (the beneficiary) to separate and transfer the credit risk of nonpayment or partial payment of
an underlying financial instrument to another party (the guarantor).
Credit valuation adjustment (CVA)
A valuation adjustment that is required to be considered in measuring fair value of over-the-counter (OTC) derivatives to recognize the risk that any
given derivative counterparty may not ultimately be able to fulfill its obligations. In assessing the net counterparty credit risk (CCR) exposure, we
take into account credit mitigants such as collateral, master netting arrangements, and settlements through clearing houses.
Current replacement cost
The estimated cost of replacing an asset at the present time according to its current worth.
Derivatives
A financial contract that derives its value from the performance of an underlying instrument, index or financial rate.
100 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Dividend payout ratio
Common share dividends paid as a percentage of net income after preferred share dividends, premium on preferred share redemptions, and
distributions on other equity instruments.
Dividend yield
Dividends per common share divided by the closing common share price.
Effective interest rate method
A method of calculating the amortized cost of a financial asset or financial liability and of allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of
the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.
Efficiency ratio
Non-interest expenses as a percentage of total revenue (net interest income and non-interest income).
Exchange-traded derivative contracts
Standardized derivative contracts (e.g., futures contracts and options) that are transacted on an organized exchange and cleared through a central
clearing house, and are generally subject to standard margin requirements.
Fair value
The price that would be received to sell an asset, or paid to transfer a liability, between market participants in an orderly transaction in the principal
market at the measurement date under current market conditions.
Forward contracts
A non-standardized contract to buy or sell a specified asset at a specified price and specified date in the future.
Forward rate agreement
An OTC forward contract that determines an interest rate to be paid or received commencing on a specified date in the future for a specified period.
Full-time equivalent employees
A measure that normalizes the number of full-time and part-time employees, base salary plus commissioned employees, and 100% commissioned
employees into equivalent full-time units based on actual hours of paid work during a given period, for individuals whose compensation is included
in the Employee compensation and benefits line on the consolidated statement of income.
Futures
A standardized contract to buy or sell a specified commodity, currency or financial instrument of standardized quantity and quality at a specific
price and date in the future. Futures contracts are traded on an exchange.
Guarantees and standby letters of credit
Primarily represent CIBC’s obligation, subject to certain conditions, to make payments to third parties on behalf of clients, if these clients cannot
make those payments, or are unable to meet other specified contractual obligations.
Hedge
A transaction intended to offset potential losses/gains that may be incurred in a transaction or portfolio.
Loan loss ratio
The ratio is calculated as the provision for credit losses on impaired loans to average loans and acceptances, net of allowance for credit losses.
Mark-to-market
The fair value (as defined above) at which an asset can be sold or a liability can be transferred.
Net interest income
The difference between interest earned on assets (such as loans and securities) and interest incurred on liabilities (such as deposits and
subordinated indebtedness).
Net interest margin
Net interest income as a percentage of average assets.
Normal course issuer bid (NCIB)
Involves a listed company buying its own shares for cancellation through a stock exchange or other published market, from time to time, and is
subject to the various rules of the exchanges and securities commissions.
Notional amount
Principal amount or face amount of a financial contract used for the calculation of payments made on that contract.
Off-balance sheet financial instruments
A financial contract that is based mainly on a notional amount and represents a contingent asset or liability of an institution. Such instruments
include credit-related arrangements.
CIBC 2021 ANNUAL REPORT 101
Management’s discussion and analysis
Office of the Superintendent of Financial Institutions (OSFI)
OSFI supervises and regulates all banks, all federally incorporated or registered trust and loan companies, insurance companies, cooperative credit
associations, fraternal benefit societies, and federal pension plans in Canada.
Operating leverage
Operating leverage is the difference between the year-over-year percentage change in revenue and year-over-year percentage change in
non-interest expenses.
Options
A financial contract under which the writer (seller) confers the right, but not the obligation, to the purchaser to either buy (call option) or sell (put
option) a specified amount of an underlying asset or instrument at a specified price either at or by a specified date.
Provision for (reversal of) credit losses
An amount charged or credited to income to adjust the allowance for credit losses to the appropriate level, for both performing and impaired
financial assets. Provision for (reversal of) credit losses for loans and acceptances and related off-balance sheet loan commitments is included in
the Provision for (reversal of) credit losses line on the consolidated statement of income. Provision for (reversal of) credit losses for debt securities
measured at FVOCI or amortized cost is included in Gains (losses) from debt securities measured at FVOCI and amortized cost, net.
Return on average assets or average interest-earning assets
Net income expressed as a percentage of average assets or average interest-earning assets.
Return on common shareholders’ equity
Net income attributable to equity shareholders expressed as a percentage of average common shareholders’ equity.
Securities borrowed
Securities are typically borrowed to cover short positions. Borrowing requires the pledging of collateral by the borrower to the lender. The collateral
may be cash or a highly rated security.
Securities lent
Securities are typically lent to a borrower to cover their short positions. Borrowing requires the pledging of collateral by the borrower to the lender.
The collateral provided may be cash or a highly rated security.
Securities purchased under resale agreements
A transaction where a security is purchased by the buyer and, at the same time, the buyer commits to resell the security to the original seller at a
specific price and date in the future.
Securities sold short
A transaction in which the seller sells securities that it does not own. Initially the seller typically borrows the securities in order to deliver them to the
purchaser. At a later date, the seller buys identical securities in the market to replace the borrowed securities.
Securities sold under repurchase agreements
A transaction where a security is sold by the seller and, at the same time, the seller commits to repurchase the security from the original purchaser
at a specific price and date in the future.
Structured entities (SEs)
Entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any
voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
Swap contracts
A financial contract in which counterparties exchange a series of cash flows based on a specified notional amount over a specified period.
Taxable equivalent basis (TEB)
The gross-up of tax-exempt revenue on certain securities to a TEB. There is an equivalent offsetting adjustment to the income tax expense.
Total shareholder return
The total return earned on an investment in CIBC’s common shares. The return measures the change in shareholder value, assuming dividends paid
are reinvested in additional shares.
102 CIBC 2021 ANNUAL REPORT
Management’s discussion and analysis
Risk and capital glossary
Advanced internal ratings-based (AIRB) approach for credit risk
Internal models based on historical experience of key risk assumptions such as probability of default (PD), loss given default (LGD) and exposure at
default (EAD) are used to compute the capital requirements subject to the Office of the Superintendent of Financial Institutions (OSFI) approval. A
capital floor based on the standardized approach is also calculated by banks under the AIRB approach for credit risk and an adjustment to risk-
weighted assets (RWA) may be required as prescribed by OSFI.
Asset/liability management (ALM)
The practice of managing risks that arise from mismatches between the assets and liabilities, mainly in the non-trading areas of the bank.
Techniques are used to manage the relative duration of CIBC’s assets (such as loans) and liabilities (such as deposits), in order to minimize the
adverse impact of changes in interest rates.
Bail-in eligible liabilities
Bail-in eligible liabilities include long-term (i.e., original maturity over 400 days), unsecured senior debt issued on or after September 23, 2018 that is
tradable and transferrable, and any preferred shares and subordinated debt that are not considered non-viability contingent capital (NVCC).
Consumer deposits, secured liabilities (including covered bonds), certain financial contracts (including derivatives) and certain structured notes are
not bail-in eligible.
Bank exposures
All direct credit risk exposures to deposit-taking institutions and regulated securities firms, and exposures guaranteed by those entities.
Business and government portfolio
A category of exposures that includes lending to businesses and governments, where the primary basis of adjudication relies on the determination
and assignment of an appropriate risk rating that reflects the credit risk of the exposure.
Central counterparty (CCP)
A clearing house that interposes itself between counterparties to clear contracts traded in one or more financial markets, becoming the buyer to
every seller and the seller to every buyer and thereby ensuring the future performance of open contracts.
Comprehensive approach for securities financing transactions
A framework for the measurement of counterparty credit risk (CCR) with respect to securities financing transactions, which utilizes a volatility-
adjusted collateral value to reduce the amount of the exposure.
Common Equity Tier 1 (CET1), Tier 1 and Total capital ratios
CET1, Tier 1 and total regulatory capital, divided by RWA, as defined by OSFI’s Capital Adequacy Requirements (CAR) Guideline, which is based
on Basel Committee on Banking Supervision (BCBS) standards.
Corporate exposures
All direct credit risk exposures to corporations, partnerships and proprietorships, and exposures guaranteed by those entities.
Credit risk
The risk of financial loss due to a borrower or counterparty failing to meet its obligations in accordance with contractual terms.
Drawn exposure
The amount of credit risk exposure resulting from loans and other receivables advanced to the customer.
Economic capital
Economic capital provides a framework to evaluate the returns of each strategic business unit, commensurate with risk assumed. Economic capital
is a non-GAAP risk measure based upon an internal estimate of equity capital required by the businesses to absorb unexpected losses consistent
with our targeted risk rating over a one-year horizon. Economic capital comprises primarily credit, market, operational and strategic risk capital.
Economic profit
A non-GAAP risk-adjusted performance measure used for measuring economic value added. It is calculated as earnings of each business less a
charge for the cost of capital.
Exposure at default (EAD)
An estimate of the amount of exposure to a customer at the event of, and at the time of, default.
Incremental risk charge (IRC)
A capital charge applied in addition to market risk capital specifically to cover default and migration risk in unsecuritized credit assets of varying
liquidity held in the trading book.
Internal Capital Adequacy Assessment Process (ICAAP)
A framework and process designed to provide a comprehensive view on capital adequacy, as defined by Pillar II of the Basel Accord, wherein we
identify and measure our risks on an ongoing basis in order to ensure that the capital available is sufficient to cover all risks across CIBC.
CIBC 2021 ANNUAL REPORT 103
Management’s discussion and analysis
Internal models approach (IMA) for market risk
Models, which have been developed by CIBC and approved by OSFI, for the measurement of risk and regulatory capital in the trading portfolio for
general market risk, debt specific risk, and equity specific risk.
Internal model method (IMM) for counterparty credit risk
Models, which have been developed by CIBC and approved by OSFI, for the measurement of CCR with respect to over-the-counter (OTC)
derivatives.
Internal ratings-based (IRB) approach for securitization exposures
This approach comprises two calculation methods available for securitization exposures that require OSFI approval: the Internal Ratings-Based
Approach (SEC-IRBA) is available to the banks approved to use the IRB approach for underlying exposures securitized and the Internal
Assessment Approach (SEC-IAA) available for certain securitization exposures extended to asset-backed commercial paper (ABCP) programs.
Leverage ratio exposure
The leverage ratio exposure is defined under the OSFI rules as on-balance sheet assets (unweighted) less Tier 1 capital regulatory adjustments plus
derivative exposures, securities financing transaction exposures with a limited form of netting under certain conditions, and other off-balance sheet
exposures (such as commitments, direct credit substitutes, forward asset purchases, standby/trade letters of credit and securitization exposures).
While OSFI currently permits exposures arising from central bank reserves and sovereign-issued securities that qualify as High Quality Liquid
Assets (HQLA) to be excluded from the exposure measure for leverage ratio purposes, the exclusion will no longer be available for sovereign-
issued securities after December 31, 2021.
Leverage ratio
Defined as Tier 1 capital divided by the leverage ratio exposure determined in accordance with guidelines issued by OSFI, which are based on
BCBS standards.
Liquidity coverage ratio (LCR)
Derived from the BCBS’s Basel III framework and incorporated into OSFI’s Liquidity Adequacy Requirements (LAR) Guideline, the LCR is a liquidity
standard that aims to ensure that an institution has an adequate stock of unencumbered HQLA that consists of cash or assets that can be converted
into cash at little or no loss of value in private markets, to meet its liquidity needs for a 30-calendar-day liquidity stress scenario.
Liquidity risk
The risk of having insufficient cash or its equivalent in a timely and cost-effective manner to meet financial obligations as they come due.
Loss given default (LGD)
An estimate of the amount of exposure to a customer that will not be recovered following a default by that customer, expressed as a percentage of
the EAD. LGD is generally based on through-the-cycle assumptions for regulatory capital purposes, and generally based on point-in-time
assumptions reflecting forward-looking information for IFRS 9 expected credit loss (ECL) purposes.
Market risk
The risk of economic financial loss in our trading and non-trading portfolios from adverse changes in underlying market factors, including interest
rates, foreign exchange rates, equity market prices, commodity prices, credit spreads and customer behaviour for retail products.
Master netting agreement
An industry standard agreement designed to reduce the credit risk of multiple transactions with a counterparty through the creation of a legal right
of offset of exposures in the event of a default by that counterparty and through the provision for net settlement of all contracts through a single
payment.
Net cumulative cash flow (NCCF)
The NCCF is a liquidity horizon metric defined under OSFI’s LAR Guideline as a monitoring and supervision tool for liquidity risk that measures an
institution’s detailed cash flows in order to capture the risk posed by funding mismatches between assets and liabilities.
Net stable funding ratio (NSFR)
Derived from the BCBS’s Basel III framework and incorporated into OSFI’s LAR Guideline, the NSFR standard aims to promote long-term resilience
of the financial sector by requiring banks to maintain a sustainable stable funding profile in relation to the composition of their assets and off-balance
sheet activities.
Non-viability contingent capital (NVCC)
Effective January 1, 2013, in order to qualify for inclusion in regulatory capital, all non-common Tier 1 and Tier 2 capital instruments must be capable
of absorbing losses at the point of non-viability of a financial institution. This will ensure that investors in such instruments bear losses before
taxpayers where the government determines that it is in the public interest to rescue a non-viable bank.
Operational risk
The risk of loss resulting from people, inadequate or failed internal processes and systems, or from external events.
Other off-balance sheet exposure
The amount of credit risk exposure resulting from the issuance of guarantees and letters of credit.
Other retail
This exposure class includes all loans other than qualifying revolving retail and real estate secured personal lending that are extended to individuals
and small businesses under the regulatory capital reporting framework.
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Management’s discussion and analysis
Over-the-counter derivatives exposure
The amount of credit risk exposure resulting from derivatives that trade directly between two counterparties, rather than through exchanges.
Probability of default (PD)
An estimate of the likelihood of default for any particular customer which occurs when that customer is not able to repay its obligations as they
become contractually due. PD is based on through-the-cycle assumptions for regulatory capital purposes, and based on point-in-time assumptions
reflecting forward-looking information for IFRS 9 ECL purposes.
Qualifying central counterparty (QCCP)
An entity that is licensed to operate as a CCP and is permitted by the appropriate regulator or oversight body to operate as such with respect to the
products offered by that CCP.
Qualifying revolving retail
This exposure class includes credit cards, unsecured lines of credit and overdraft protection products extended to individuals. Under the
standardized approach, these exposures would be included under “other retail”.
Real estate secured personal lending
This exposure class includes residential mortgages and home equity loans and lines of credit extended to individuals.
Regulatory capital
Regulatory capital, as defined by OSFI’s CAR Guideline, is comprised of CET1, Additional Tier 1 (AT1) and Tier 2 capital. CET1 capital includes
common shares, retained earnings, accumulated other comprehensive income (AOCI) (excluding AOCI relating to cash flow hedges and changes
in fair value option liabilities attributable to changes in own credit risk) and qualifying instruments issued by a consolidated banking subsidiary to
third parties, less regulatory adjustments for items such as goodwill and other intangible assets, deferred tax assets, net assets related to defined
benefit pension plans, and certain investments. On March 27, 2020, OSFI introduced transitional arrangements for the capital treatment of expected
loss provisioning, such that part of the allowances that would otherwise be included in Tier 2 capital will instead qualify for inclusion in CET1 capital
subject to certain adjustments and limitations until fiscal year 2022. AT1 capital primarily includes NVCC preferred shares, Limited Recourse Capital
Notes, qualifying instruments issued by a consolidated subsidiary to third parties, and non-qualifying innovative Tier 1 notes which are subject to
phase-out rules for capital instruments. Tier 1 capital is comprised of CET1 plus AT1. Tier 2 capital includes NVCC subordinated indebtedness,
non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments, eligible general allowances, and qualifying instruments
issued by a consolidated subsidiary to third parties. Total capital is comprised of Tier 1 capital plus Tier 2 capital. Qualifying regulatory capital
instruments must be capable of absorbing loss at the point of non-viability of the financial institution; non-qualifying capital instruments were
excluded from regulatory capital at a rate of 10% per annum commencing January 1, 2013 through to November 1, 2021.
Repo-style transactions exposure
The amount of credit risk exposure resulting from our securities bought or sold under resale agreements, as well as securities borrowing and
lending activities.
Reputation risk
The risk of negative publicity regarding CIBC’s business conduct or practices which, whether true or not, could significantly harm CIBC’s reputation
as a leading financial institution, or could materially and adversely affect CIBC’s business, operations, or financial condition.
Resecuritization
A securitization exposure in which the risk associated with an underlying pool of exposures is tranched and at least one of the underlying exposures
is a securitization exposure.
Retail portfolios
A category of exposures that primarily includes consumer but also small business lending, where the primary basis of adjudication relies on credit-
scoring models.
Risk-weighted assets
RWA consist of three components: (i) RWA for credit risk, which are calculated using the AIRB and standardized approaches, (ii) RWA for market
risk, and (iii) RWA for operational risk. The AIRB RWA are calculated using PDs, LGDs, EADs, and in some cases maturity adjustments, while the
standardized approach applies risk weighting factors specified in the OSFI guidelines to on- and off-balance sheet exposures. The RWA for market
risk in the trading portfolio are based on the internal models approved by OSFI with the exception of the RWA for traded securitization assets where
we are using the methodology defined by OSFI. The RWA for operational risk, which relate to the risk of losses resulting from people, inadequate or
failed internal processes, and systems or from external events, are calculated under a standardized approach.
Since the introduction of Basel II in 2008, OSFI has prescribed a capital floor requirement for institutions that use the AIRB approach for credit
risk. The capital floor is determined by comparing a capital requirement calculated by reference to the Basel II standardized approach against the
Basel III calculation, as specified by OSFI. Any shortfall in the Basel III capital requirement is added to RWA.
Securitization
The process of selling assets (normally financial assets such as loans, leases, trade receivables, credit card receivables or mortgages) to trusts or
other structured entities (SEs). A SE normally issues securities or other forms of interests to investors and/or the asset transferor, and the SE uses
the proceeds from the issue of securities or other forms of interest to purchase the transferred assets. The SE will generally use the cash flows
generated by the assets to meet the obligations under the securities or other interests issued by the SE, which may carry a number of different risk
profiles.
Sovereign exposures
All direct credit risk exposures to governments, central banks and certain public sector entities, and exposures guaranteed by those entities.
CIBC 2021 ANNUAL REPORT 105
Management’s discussion and analysis
Standardized approach for credit risk
Applied to exposures when there is not sufficient information to allow for the use of the AIRB approach for credit risk. Credit risk capital requirements
are calculated based on a standardized set of risk weights as prescribed in the CAR Guideline. The standardized risk weights are based on
external credit assessments, where available, and other risk-related factors, including export credit agencies, exposure asset class, collateral, etc.
Standardized approach for operational risk
Capital is based on prescribed percentages that vary by business activity and is applied to the three-year average gross income.
Standardized approach for securitization exposures
This approach comprises the calculation methods available for securitization exposures that do not require OSFI approval: the External Ratings-
Based Approach (SEC-ERBA) and the Standardized Approach (SEC-SA).
Strategic risk
The risk of ineffective or improper implementation of business strategies, including mergers and acquisitions. It includes the potential financial loss
due to the failure of organic growth initiatives or failure to respond appropriately to changes in the business environment.
Stressed Value-at-Risk (VaR)
A value-at-risk calculation using a one-year observation period related to significant losses for the given portfolio at a specified level of confidence
and time horizon.
Structural foreign exchange risk
Structural foreign exchange risk primarily consists of the risk inherent in net investments in foreign operations due to changes in foreign exchange
rates, and foreign currency denominated RWA and foreign currency denominated capital deductions.
Structural interest rate risk
Structural interest rate risk primarily consists of the risk arising due to mismatches in assets and liabilities, which do not arise from trading and
trading-related businesses.
Total loss absorbing capacity (TLAC) measure
The sum of Total capital and bail-in eligible liabilities that have a residual maturity greater than one year. Bail-in eligible liabilities include long-term
(original maturity over 400 days), unsecured senior debt issued on or after September 23, 2018, that is tradable and transferrable, and any
preferred shares and subordinated debt that are not NVCC. Consumer deposits, secured liabilities (for example, covered bonds), eligible financial
contracts (for example derivatives) and certain structured notes are excluded from the bail-in power.
Total loss absorbing capacity ratio
Defined as TLAC measure divided by risk-weighted assets determined in accordance with guidelines issued by OSFI, which are based on BCBS
standards.
Total loss absorbing capacity leverage ratio
Defined as TLAC measure divided by leverage ratio exposure measure determined in accordance with guidelines issued by OSFI, which are based
on BCBS standards.
Transitional arrangements for capital treatment of expected loss provisioning
On March 27, 2020, OSFI introduced transitional arrangements for expected credit loss provisioning. These arrangements result in a portion of
allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount of ECL allowances eligible for
inclusion in CET1 capital is determined based on the increase in stage 1 and stage 2 allowances relative to balances as at January 31, 2020 as a
baseline. This amount is then adjusted for tax effects and is subject to a scaling factor that will decrease over time. The scaling factor has been set
at 70% for fiscal 2020, 50% for fiscal 2021, and 25% for fiscal 2022. For exposures under the internal ratings-based (IRB) approach, the lower of this
amount and excess allowances eligible for inclusion in Tier 2 capital is included as CET1 capital under the transitional arrangements.
Undrawn exposures
The amount of credit risk exposure resulting from loans that have not been advanced to a customer, but which a customer may be entitled to draw
in the future.
Value-at-Risk (VaR)
Generally accepted risk measure that uses statistical models to estimate the distribution of possible returns on a given portfolio at a specified level
of confidence and time horizon.
106 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Consolidated financial statements
108
109
113
116
117
118
119
120
121
122
Financial reporting responsibility
Independent auditor’s report – Canadian generally accepted auditing standards
Report of independent registered public accounting firm – Standards of the Public Company Accounting Oversight Board
(United States)
Report of independent registered public accounting firm – Internal control over financial reporting
Consolidated balance sheet
Consolidated statement of income
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Details of the notes to the consolidated financial statements
122 Note 1
– Basis of preparation and summary of
135 Note 2
136 Note 3
143 Note 4
143 Note 5
145 Note 6
153 Note 7
significant accounting policies
–
Impact of COVID-19
– Fair value measurement
– Significant transactions
– Securities
– Loans
– Structured entities and derecognition of
financial assets
– Property and equipment
– Goodwill, software and other intangible assets
156 Note 8
156 Note 9
158 Note 10 – Other assets
159 Note 11 – Deposits
159 Note 12 – Other liabilities
159 Note 13 – Derivative instruments
164 Note 14 – Designated accounting hedges
168 Note 15 – Subordinated indebtedness
169 Note 16 – Common and preferred shares and other
equity instruments
Income taxes
173 Note 17 – Capital Trust securities
174 Note 18 – Share-based payments
176 Note 19 – Post-employment benefits
181 Note 20 –
183 Note 21 – Earnings per share
184 Note 22 – Commitments, guarantees and pledged assets
185 Note 23 – Contingent liabilities and provisions
189 Note 24 – Concentration of credit risk
190 Note 25 – Related-party transactions
191 Note 26 –
Investments in equity-accounted associates and
joint ventures
192 Note 27 – Significant subsidiaries
193 Note 28 – Financial instruments – disclosures
194 Note 29 – Offsetting financial assets and liabilities
194 Note 30 –
195 Note 31 – Segmented and geographic information
197 Note 32 – Future accounting policy changes
Interest income and expense
CIBC 2021 ANNUAL REPORT 107
Consolidated financial statements
Financial reporting responsibility
Management of Canadian Imperial Bank of Commerce (CIBC) is responsible for the preparation, presentation, accuracy and reliability of the Annual
Report, which includes the consolidated financial statements and management’s discussion and analysis (MD&A). The consolidated financial
statements have been prepared in accordance with Section 308(4) of the Bank Act (Canada), which requires that the financial statements be
prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
The MD&A has been prepared in accordance with the requirements of applicable securities laws.
The consolidated financial statements and MD&A contain items that reflect the best estimates and judgments of the expected effects of current
events and transactions with appropriate consideration to materiality. Financial information appearing throughout the Annual Report is consistent
with the consolidated financial statements.
Management has developed and maintained effective systems, controls and procedures to ensure that information used internally and
disclosed externally is reliable and timely. CIBC’s system of internal controls and supporting procedures are designed to provide reasonable
assurance that transactions are authorized, assets are safeguarded and proper records are maintained. These internal controls and supporting
procedures include the communication of policies and guidelines, the establishment of an organizational structure that provides appropriate and
well-defined responsibilities and accountability, and the careful selection and training of qualified staff. Management has assessed the effectiveness
of CIBC’s internal control over financial reporting as at year-end using the Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework). Based upon this assessment, we have determined that internal control
over financial reporting is effective in all material respects and CIBC is in compliance with the requirements set by the U.S. Securities and Exchange
Commission (SEC) under the U.S. Sarbanes-Oxley Act.
CIBC’s Chief Executive Officer and Chief Financial Officer have certified CIBC’s annual filings with the SEC under the U.S. Sarbanes-Oxley Act
and with the Canadian Securities Administrators under Canadian securities laws.
The Internal Audit department reviews and reports on the effectiveness of CIBC’s internal control, risk management and governance systems
and processes, including accounting and financial controls, in accordance with the audit plan approved by the Audit Committee. Our Chief Auditor
has unfettered access to the Audit Committee.
The Board of Directors oversees management’s responsibilities for financial reporting through the Audit Committee, which is composed of
independent directors. The Audit Committee reviews CIBC’s interim and annual consolidated financial statements and MD&A and recommends
them for approval by the Board of Directors. Other key responsibilities of the Audit Committee include monitoring CIBC’s system of internal control,
and reviewing the qualifications, independence and service quality of the shareholders’ auditor and the performance of CIBC’s internal auditors.
Ernst & Young LLP, the shareholders’ auditor, obtains an understanding of CIBC’s internal controls and procedures for financial reporting to
plan and conduct such tests and other audit procedures as they consider necessary in the circumstances to express their opinions in the reports
that follow. Ernst & Young LLP has unrestricted access to the Audit Committee to discuss their audit and related matters.
The Office of the Superintendent of Financial Institutions (OSFI) Canada is mandated to protect the rights and interest of depositors and
creditors of CIBC. Accordingly, OSFI examines and enquires into the business and affairs of CIBC, as deemed necessary, to ensure that the
provisions of the Bank Act (Canada) are being complied with and that CIBC is in sound financial condition.
Victor G. Dodig
President and Chief Executive Officer
Hratch Panossian
Chief Financial Officer
December 1, 2021
108 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Independent auditor’s report
To the shareholders and directors of Canadian Imperial Bank of Commerce
Opinion
We have audited the consolidated financial statements of Canadian Imperial Bank of Commerce (CIBC), which comprise the consolidated balance
sheets as at October 31, 2021 and 2020, and the consolidated statements of income, consolidated statements of comprehensive income,
consolidated statements of changes in equity and the consolidated statements of cash flows for each of the years in the three-year period ended
October 31, 2021, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to
as the “consolidated financial statements”).
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of
CIBC as at October 31, 2021 and 2020, and its consolidated financial performance and its consolidated cash flows for each of the years in the
three-year period ended October 31, 2021 in accordance with International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further
described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our report. We are independent of CIBC
in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements for the year ended October 31, 2021. These matters were addressed in the context of our audit of the consolidated financial statements
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the “Auditor’s responsibilities for the audit of the consolidated financial statements” section of our
report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial
statements.
CIBC 2021 ANNUAL REPORT 109
Consolidated financial statements
Key audit matter
Allowance for credit losses
As described in Note 1 and Note 6 to the consolidated financial statements, CIBC has used an expected credit loss (ECL)
model to recognize $3.0 billion in allowances for credit losses on its consolidated balance sheet. ECL allowances
represent an unbiased and probability-weighted amount, which is determined by evaluating a range of possible outcomes
and reasonable and supportable information about past events, current conditions, and forecasts of future economic
conditions. Forward-looking information (FLI), which involves significant judgment, is explicitly incorporated into the
estimation of ECL allowances. ECL allowances are measured at amounts equal to either (i) 12-month ECL; or (ii) lifetime
ECL for those financial instruments that have experienced a significant increase in credit risk (SICR) since initial
recognition or when there is objective evidence of impairment.
Auditing the allowance for credit losses was complex, involved significant auditor judgment, and required the involvement
of specialists due to the inherent complexity of the models, the large volume of data used, assumptions, judgments, and
the interrelationship of these variables in measuring the ECL. Significant assumptions and judgments with respect to the
estimation of the allowance for credit losses include (i) the determination of when a loan has experienced a SICR; (ii) the
forecast of FLI for multiple economic scenarios and the probability weighting of those scenarios; (iii) the calculation of both
12-month and lifetime credit losses; and (iv) the application of expert credit judgment. Management has applied a
heightened use of judgment in the areas noted above, when assessing the impact of COVID-19 on the allowance for credit
losses. Specifically, management has applied judgment in assessing the effect of certain credit metrics and forward-
looking information in the current environment given the impact of COVID-19.
How our audit
addressed the
key audit matter
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls,
including those related to technology, over the allowance for credit losses. The controls we tested included, amongst
others, controls over model development, validation and monitoring, economic forecasting, data completeness and
accuracy, the determination of internal risk ratings for non-retail loans, and the governance and oversight controls over the
review of the overall ECL, including the application of expert credit judgment.
To test the allowance for credit losses, amongst other procedures, we assessed, with the assistance of our credit risk
specialists, whether the methodology and assumptions used in significant models that estimate ECL are consistent with the
requirements of IFRS and industry standards. For a sample of models, our credit risk specialists reperformed the model
validation and monitoring tests performed by management. This included an assessment of the thresholds used to
determine a SICR. For a sample of FLI variables, with the assistance of our economic specialists, we evaluated
management’s forecasting methodology and compared management’s FLI to independently derived forecasts and
publicly available information. We also evaluated the scenario probability weights used in the ECL models. With the
assistance of our credit risk specialists, we also evaluated management’s methodology and governance over the
application of expert credit judgment by evaluating that the amounts recorded were reflective of underlying credit and/or
economic conditions including the impact of COVID-19. We tested the completeness and accuracy of data used in the
measurement of the ECL by agreeing to documents and systems and evaluated a sample of non-retail borrower risk
ratings against CIBC’s risk rating scale. On a sample basis, we recalculated the ECL to test the mathematical accuracy of
management’s models. We also assessed the adequacy of the allowance for credit loss financial statement note
disclosures.
Fair value measurement of derivatives
As described in Note 3 and Note 13 of the consolidated financial statements, CIBC has recognized $35.9 billion in
derivative assets and $32.1 billion in derivative liabilities. The portfolio of derivative instruments is presented by level within
the fair value hierarchy, with the majority of the portfolio classified as Level 2. While derivative instruments classified as
Level 1 have quoted market prices, those classified as Level 2 and 3 require valuation techniques that use observable and
non-observable market inputs and involve the application of management judgment.
Auditing the valuation of derivatives was complex and required the application of significant auditor judgment and
involvement of valuation specialists where the fair value was determined based on complex models and/or significant
non-observable market inputs, including any significant valuation adjustments. The inputs and modelling assumptions
used to determine fair value that were subject to significant auditor judgment included, amongst others, correlations,
volatilities and credit spreads. The valuation of derivatives is sensitive to these inputs as they are forward-looking and
could be affected by future economic and market conditions.
Key audit matter
How our audit
addressed the
key audit matter
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls
over the valuation of CIBC’s derivatives portfolio, including those related to technology. The controls we tested included,
amongst others, controls over the development and validation of models used to determine the fair value of derivatives,
controls over the independent price verification process, including the integrity of significant inputs described above, and
controls over the review of significant valuation adjustments applied.
To test the valuation of these derivatives, our audit procedures included, amongst others, an evaluation of the methodologies
and significant inputs used by CIBC. With the assistance of our valuation specialists, we performed an independent valuation
for a sample of derivatives and valuation adjustments to assess the modelling assumptions and significant inputs used by
CIBC to estimate the fair value. We independently obtained significant inputs from external market data in performing our
independent valuation. For a sample of models, and with the assistance of our valuation specialists, we assessed the
valuation methodologies used by CIBC to determine fair value. We also assessed the adequacy of the disclosures related to
the fair value measurement of derivatives.
110 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Key audit matter
Measurement of uncertain tax provisions
As described in Note 20 of the consolidated financial statements, CIBC has disclosed its significant accounting judgments,
estimates and assumptions in relation to accounting for uncertainty in income taxes. CIBC operates in a tax environment
with constantly evolving and complex tax legislation for financial institutions. Uncertainty in tax positions may arise as tax
legislation is subject to interpretation. Estimating uncertain tax provisions requires management judgment to be applied in
the interpretation of tax laws across the various jurisdictions in which CIBC operates. This includes significant judgment in
the determination of whether it is probable that CIBC’s tax filing positions will be sustained relating to certain complex tax
positions and the measurement of such provision when recognized.
Auditing CIBC’s uncertain tax provisions required the involvement of our tax professionals and the application of judgment,
including the interpretation of applicable tax legislation and jurisprudence.
How our audit
addressed the
key audit matter
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls
over CIBC’s uncertain tax provisions. This included, amongst others, controls over management’s assessment of the
technical merits of tax positions and the process related to the measurement of any related income tax provisions.
With the assistance of our tax professionals, our audit procedures included, amongst others, an assessment of the
technical merits of income tax positions taken by CIBC and the measurement of any related uncertain tax provisions
recorded. We inspected and evaluated correspondence from the relevant income tax authorities, income tax advice
obtained by CIBC from external advisors including income tax opinions, CIBC’s interpretations of tax laws and the
assessment thereof with respect to uncertain tax positions. We evaluated the reasonability of CIBC’s treatment of any new
information received during the year relating to the amounts recorded. We also assessed the adequacy of the disclosures
related to uncertain tax positions.
Other information
Management is responsible for the other information. The other information comprises:
Management’s discussion and analysis; and
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion
thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
We obtained management’s discussion and analysis and the Annual Report prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report. We
have nothing to report in this regard.
Responsibilities of management and those charged with governance for the consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, 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.
In preparing the consolidated financial statements, management is responsible for assessing CIBC’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to
liquidate CIBC or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing CIBC’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of CIBC’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on CIBC’s ability to continue as a going
CIBC 2021 ANNUAL REPORT 111
Consolidated financial statements
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in
the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause CIBC to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within CIBC to express an
opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Helen Mitchell.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
December 1, 2021
112 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Report of independent registered public accounting firm
To the shareholders and directors of Canadian Imperial Bank of Commerce
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheets of Canadian Imperial Bank of Commerce (CIBC) as of October 31, 2021 and
2020, 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, 2021, and the related notes (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 CIBC at October 31,
2021 and 2020, and its consolidated financial performance and its consolidated cash flows for each of the years in the three-year period ended
October 31, 2021 in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), CIBC’s
internal control over financial reporting as of October 31, 2021, based on criteria established in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 1, 2021 expressed an
unqualified opinion thereon.
Basis for opinion
These consolidated financial statements are the responsibility of CIBC’s management. Our responsibility is to express an opinion on CIBC’s
consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to CIBC in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
CIBC 2021 ANNUAL REPORT 113
Consolidated financial statements
Description of
the matter
Allowance for credit losses
As described in Note 1 and Note 6 to the consolidated financial statements, CIBC has used an expected credit loss (ECL)
model to recognize $3.0 billion in allowances for credit losses on its consolidated balance sheet. ECL allowances represent an
unbiased and probability-weighted amount, which is determined by evaluating a range of possible outcomes and reasonable
and supportable information about past events, current conditions, and forecasts of future economic conditions. Forward-
looking information (FLI), which involves significant judgment, is explicitly incorporated into the estimation of ECL allowances.
ECL allowances are measured at amounts equal to either (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments that
have experienced a significant increase in credit risk (SICR) since initial recognition or when there is objective evidence of
impairment.
Auditing the allowance for credit losses was complex, involved significant auditor judgment, and required the involvement of
specialists due to the inherent complexity of the models, the large volume of data used, assumptions, judgments, and the
interrelationship of these variables in measuring the ECL. Significant assumptions and judgments with respect to the estimation
of the allowance for credit losses include (i) the determination of when a loan has experienced a SICR; (ii) the forecast of FLI for
multiple economic scenarios and the probability weighting of those scenarios; (iii) the calculation of both 12-month and lifetime
credit losses; and (iv) the application of expert credit judgment. Management has applied a heightened use of judgment in the
areas noted above, when assessing the impact of COVID-19 on the allowance for credit losses. Specifically, management has
applied judgment in assessing the effect of certain credit metrics and forward-looking information in the current environment
given the impact of COVID-19.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls,
including those related to technology, over the allowance for credit losses. The controls we tested included, amongst others,
controls over model development, validation and monitoring, economic forecasting, data completeness and accuracy, the
determination of internal risk ratings for non-retail loans, and the governance and oversight controls over the review of the overall
ECL, including the application of expert credit judgment.
To test the allowance for credit losses, amongst other procedures, we assessed, with the assistance of our credit risk
specialists, whether the methodology and assumptions used in significant models that estimate ECL are consistent with the
requirements of IFRS and industry standards. For a sample of models, our credit risk specialists reperformed the model
validation and monitoring tests performed by management. This included an assessment of the thresholds used to determine a
SICR. For a sample of FLI variables, with the assistance of our economic specialists, we evaluated management’s forecasting
methodology and compared management’s FLI to independently derived forecasts and publicly available information. We also
evaluated the scenario probability weights used in the ECL models. With the assistance of our credit risk specialists, we also
evaluated management’s methodology and governance over the application of expert credit judgment by evaluating that the
amounts recorded were reflective of underlying credit and/or economic conditions including the impact of COVID-19. We tested
the completeness and accuracy of data used in the measurement of the ECL by agreeing to documents and systems and
evaluated a sample of non-retail borrower risk ratings against CIBC’s risk rating scale. On a sample basis, we recalculated the
ECL to test the mathematical accuracy of management’s models. We also assessed the adequacy of the allowance for credit
loss financial statement note disclosures.
Description of
the matter
Fair value measurement of derivatives
As described in Note 3 and Note 13 of the consolidated financial statements, CIBC has recognized $35.9 billion in derivative
assets and $32.1 billion in derivative liabilities. The portfolio of derivative instruments is presented by level within the fair value
hierarchy, with the majority of the portfolio classified as Level 2. While derivative instruments classified as Level 1 have quoted
market prices, those classified as Level 2 and 3 require valuation techniques that use observable and non-observable market
inputs and involve the application of management judgment.
Auditing the valuation of derivatives was complex and required the application of significant auditor judgment and involvement of
valuation specialists where the fair value was determined based on complex models and/or significant non-observable market
inputs, including any significant valuation adjustments. The inputs and modelling assumptions used to determine fair value that were
subject to significant auditor judgment included, amongst others, correlations, volatilities and credit spreads. The valuation of
derivatives is sensitive to these inputs as they are forward-looking and could be affected by future economic and market conditions.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over the
valuation of CIBC’s derivatives portfolio, including those related to technology. The controls we tested included, amongst others,
controls over the development and validation of models used to determine the fair value of derivatives, controls over the
independent price verification process, including the integrity of significant inputs described above, and controls over the review
of significant valuation adjustments applied.
To test the valuation of these derivatives, our audit procedures included, amongst others, an evaluation of the methodologies and
significant inputs used by CIBC. With the assistance of our valuation specialists, we performed an independent valuation for a
sample of derivatives and valuation adjustments to assess the modelling assumptions and significant inputs used by CIBC to
estimate the fair value. We independently obtained significant inputs from external market data in performing our independent
valuation. For a sample of models, and with the assistance of our valuation specialists, we assessed the valuation methodologies
used by CIBC to determine fair value. We also assessed the adequacy of the disclosures related to the fair value measurement of
derivatives.
114 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Description of
the matter
Measurement of uncertain tax provisions
As described in Note 20 of the consolidated financial statements, CIBC has disclosed its significant accounting judgments,
estimates and assumptions in relation to accounting for uncertainty in income taxes. CIBC operates in a tax environment with
constantly evolving and complex tax legislation for financial institutions. Uncertainty in tax positions may arise as tax legislation
is subject to interpretation. Estimating uncertain tax provisions requires management judgment to be applied in the interpretation
of tax laws across the various jurisdictions in which CIBC operates. This includes significant judgment in the determination of
whether it is probable that CIBC’s tax filing positions will be sustained relating to certain complex tax positions and the
measurement of such provision when recognized.
Auditing CIBC’s uncertain tax provisions required the involvement of our tax professionals and the application of judgment,
including the interpretation of applicable tax legislation and jurisprudence.
How we
addressed the
matter in our
audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of management’s controls over
CIBC’s uncertain tax provisions. This included, amongst others, controls over management’s assessment of the technical merits
of tax positions and the process related to the measurement of any related income tax provisions.
With the assistance of our tax professionals, our audit procedures included, amongst others, an assessment of the technical
merits of income tax positions taken by CIBC and the measurement of any related uncertain tax provisions recorded. We
inspected and evaluated correspondence from the relevant income tax authorities, income tax advice obtained by CIBC from
external advisors including income tax opinions, CIBC’s interpretations of tax laws and the assessment thereof with respect to
uncertain tax positions. We evaluated the reasonability of CIBC’s treatment of any new information received during the year
relating to the amounts recorded. We also assessed the adequacy of the disclosures related to uncertain tax positions.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
We have served as CIBC’s auditor since 2002.
Toronto, Canada
December 1, 2021
CIBC 2021 ANNUAL REPORT 115
Consolidated financial statements
Report of independent registered public accounting firm
To the shareholders and directors of Canadian Imperial Bank of Commerce
Opinion on internal control over financial reporting
We have audited Canadian Imperial Bank of Commerce’s (CIBC) internal control over financial reporting as of October 31, 2021, based on criteria
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). In our opinion, CIBC maintained, in all material respects, effective internal control over financial reporting as of
October 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of CIBC as of October 31, 2021 and 2020, and 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, 2021, and the related notes and our report dated
December 1, 2021 expressed an unqualified opinion thereon.
Basis for opinion
CIBC’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 “Management’s annual report on internal control over financial reporting” section contained in
the accompanying management’s discussion and analysis. Our responsibility is to express an opinion on CIBC’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 CIBC
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
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 included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and 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.
/s/ Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
December 1, 2021
116 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Consolidated balance sheet
Millions of Canadian dollars, as at October 31
ASSETS
Cash and non-interest-bearing deposits with banks
Interest-bearing deposits with banks
Securities (Note 5)
Cash collateral on securities borrowed
Securities purchased under resale agreements
Loans (Note 6)
Residential mortgages
Personal
Credit card
Business and government
Allowance for credit losses
Other
Derivative instruments (Note 13)
Customers’ liability under acceptances
Property and equipment (Note 8)
Goodwill (Note 9)
Software and other intangible assets (Note 9)
Investments in equity-accounted associates and joint ventures (Note 26)
Deferred tax assets (Note 20)
Other assets (Note 10)
LIABILITIES AND EQUITY
Deposits (Note 11)
Personal
Business and government
Bank
Secured borrowings
Obligations related to securities sold short
Cash collateral on securities lent
Obligations related to securities sold under repurchase agreements
Other
Derivative instruments (Note 13)
Acceptances
Deferred tax liabilities (Note 20)
Other liabilities (Note 12)
Subordinated indebtedness (Note 15)
Equity
Preferred shares and other equity instruments (Note 16)
Common shares (Note 16)
Contributed surplus
Retained earnings
Accumulated other comprehensive income (AOCI)
Total shareholders’ equity
Non-controlling interests
Total equity
2021
2020
$
34,573
$
43,531
22,424
161,401
12,368
67,572
251,526
41,897
11,134
150,213
(2,849)
451,921
35,912
10,958
3,286
4,954
2,029
658
402
29,225
87,424
18,987
149,046
8,547
65,595
221,165
42,222
11,389
135,546
(3,540)
406,782
32,730
9,606
2,997
5,253
1,961
658
650
23,208
77,063
$ 837,683
$ 769,551
$ 213,932
344,388
20,246
42,592
$ 202,152
311,426
17,011
40,151
621,158
570,740
22,790
2,463
71,880
32,101
10,961
38
24,923
68,023
5,539
4,325
14,351
110
25,793
1,069
45,648
182
45,830
15,963
1,824
71,653
30,508
9,649
33
22,134
62,324
5,712
3,575
13,908
117
22,119
1,435
41,154
181
41,335
$ 837,683
$ 769,551
The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.
Victor G. Dodig
President and Chief Executive Officer
Nicholas D. Le Pan
Director
CIBC 2021 ANNUAL REPORT 117
Consolidated financial statements
Consolidated statement of income
Millions of Canadian dollars, except as noted, for the year ended October 31
2021
2020
2019
Interest income (Note 30) (1)
Loans
Securities
Securities borrowed or purchased under resale agreements
Deposits with banks
Interest expense (Note 30)
Deposits
Securities sold short
Securities lent or sold under repurchase agreements
Subordinated indebtedness
Other
Net interest income
Non-interest income
Underwriting and advisory fees
Deposit and payment fees
Credit fees
Card fees
Investment management and custodial fees
Mutual fund fees
Insurance fees, net of claims
Commissions on securities transactions
Gains (losses) from financial instruments measured/designated at fair value through profit or loss (FVTPL), net
Gains (losses) from debt securities measured at fair value through other comprehensive income (FVOCI)
and amortized cost, net
Foreign exchange other than trading (FXOTT)
Income from equity-accounted associates and joint ventures (Note 26)
Other
Total revenue
Provision for credit losses (Note 6)
Non-interest expenses
Employee compensation and benefits
Occupancy costs
Computer, software and office equipment
Communications
Advertising and business development
Professional fees
Business and capital taxes
Other (Notes 4 and 9)
Income before income taxes
Income taxes (Note 20)
Net income
Net income attributable to non-controlling interests
Preferred shareholders and other equity instrument holders
Common shareholders
Net income attributable to equity shareholders
Earnings per share (EPS) (in dollars) (Note 21)
Basic
Diluted
Dividends per common share (in dollars) (Note 16)
$ 12,150
2,141
319
131
$ 13,863
2,568
842
249
$ 16,048
2,779
1,474
396
14,741
17,522
20,697
2,651
236
208
122
65
3,282
5,326
254
656
159
83
6,478
11,459
11,044
713
797
1,152
460
1,621
1,772
358
426
607
90
276
55
229
8,556
20,015
158
6,450
916
2,030
318
237
277
111
1,196
468
781
1,020
410
1,382
1,586
386
362
694
9
234
79
286
7,697
18,741
2,489
6,259
944
1,939
308
271
203
117
1,321
11,535
11,362
8,322
1,876
6,446
17
158
6,271
$
$
$
4,890
1,098
3,792
2
122
3,668
$
$
$
8,422
291
1,198
198
37
10,146
10,551
475
908
958
458
1,305
1,595
430
313
761
34
304
92
427
8,060
18,611
1,286
5,726
892
1,874
303
359
226
110
1,366
10,856
6,469
1,348
$
5,121
$
$
25
111
4,985
$
6,429
$
3,790
$
5,096
$
13.97
13.93
5.84
$
8.23
8.22
5.82
$
11.22
11.19
5.60
(1) Interest income included $13.2 billion for the year ended October 31, 2021 (2020: $15.7 billion; 2019: $18.8 billion) calculated based on the effective interest rate method.
The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.
118 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Consolidated statement of comprehensive income
Millions of Canadian dollars, for the year ended October 31
Net income
2021
2020
2019
$ 6,446
$ 3,792
$ 5,121
Other comprehensive income (loss) (OCI), net of income tax, that is subject to subsequent reclassification
to net income
Net foreign currency translation adjustments
Net gains (losses) on investments in foreign operations
Net gains (losses) on hedges of investments in foreign operations
Net change in debt securities measured at FVOCI
Net gains (losses) on securities measured at FVOCI
Net (gains) losses reclassified to net income
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges
Net (gains) losses reclassified to net income
OCI, net of income tax, that is not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans
Net gains (losses) due to fair value change of fair value option (FVO) liabilities attributable to
changes in credit risk
Net gains (losses) on equity securities designated at FVOCI
Total OCI (1)
Comprehensive income
Comprehensive income attributable to non-controlling interests
Preferred shareholders and other equity instrument holders
Common shareholders
Comprehensive income attributable to equity shareholders
(2,610)
1,495
(1,115)
(50)
(66)
(116)
178
(315)
(137)
917
12
100
1,029
382
(202)
180
254
(22)
232
142
19
161
80
(56)
50
74
(339)
647
(21)
(10)
(31)
244
(28)
216
137
(6)
131
(220)
28
(2)
(194)
122
$ 6,107
$ 4,439
$ 5,243
$
$
17
158
5,932
$
$
2
122
4,315
$
$
2
5
111
5,107
$ 6,090
$ 4,437
$ 5,218
(1) Includes $43 million of losses for 2021 (2020: $44 million of gains; 2019: $44 million of gains) relating to our investments in equity-accounted associates and joint ventures.
Millions of Canadian dollars, for the year ended October 31
Income tax (expense) benefit allocated to each component of OCI
Subject to subsequent reclassification to net income
Net foreign currency translation adjustments
Net gains (losses) on investments in foreign operations
Net gains (losses) on hedges of investments in foreign operations
Net change in debt securities measured at FVOCI
Net gains (losses) on securities measured at FVOCI
Net (gains) losses reclassified to net income
Net change in cash flow hedges
Net gains (losses) on derivatives designated as cash flow hedges
Net (gains) losses reclassified to net income
Not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans
Net gains (losses) due to fair value change of FVO liabilities attributable to changes in credit risk
Net gains (losses) on equity securities designated at FVOCI
2021
2020
2019
$
45
(53)
(8)
(11)
23
12
(64)
112
48
(311)
(4)
(34)
(349)
$
42
(46)
(4)
(59)
7
(52)
(51)
(7)
(58)
(19)
20
(17)
(16)
$
–
(16)
(16)
(36)
10
(26)
(49)
2
(47)
77
(10)
–
67
$
(297)
$
(130)
$
(22)
The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.
CIBC 2021 ANNUAL REPORT 119
Consolidated financial statements
Consolidated statement of changes in equity
Millions of Canadian dollars, for the year ended October 31
Preferred shares and other equity instruments (Note 16)
Balance at beginning of year
Issue of preferred shares and limited recourse capital notes (LRCNs)
Balance at end of year
Common shares (Note 16)
Balance at beginning of year
Issue of common shares
Purchase of common shares for cancellation
Treasury shares
Balance at end of year
Contributed surplus
Balance at beginning of year
Compensation expense arising from equity-settled share-based awards
Exercise of stock options and settlement of other equity-settled share-based awards
Other
Balance at end of year
Retained earnings
Balance at beginning of year before accounting policy changes
Impact of adopting IFRS 15 at November 1, 2018
Impact of adopting IFRS 16 at November 1, 2019
Balance at beginning of year after accounting policy changes
Net income attributable to equity shareholders
Dividends and distributions (Note 16)
Preferred and other equity instruments
Common
Premium on purchase of common shares for cancellation
Realized gains (losses) on equity securities designated at FVOCI reclassified from AOCI
Other
Balance at end of year
AOCI, net of income tax
AOCI, net of income tax, that is subject to subsequent reclassification to net income
Net foreign currency translation adjustments
Balance at beginning of year
Net change in foreign currency translation adjustments
Balance at end of year
Net gains (losses) on debt securities measured at FVOCI
Balance at beginning of year
Net change in debt securities measured at FVOCI
Balance at end of year
Net gains (losses) on cash flow hedges
Balance at beginning of year
Net change in cash flow hedges
Balance at end of year
AOCI, net of income tax, that is not subject to subsequent reclassification to net income
Net gains (losses) on post-employment defined benefit plans
Balance at beginning of year
Net change in post-employment defined benefit plans
Balance at end of year
Net gains (losses) due to fair value change of FVO liabilities attributable to changes in credit risk
Balance at beginning of year
Net change attributable to changes in credit risk
Balance at end of year
Net gains (losses) on equity securities designated at FVOCI
Balance at beginning of year
Net gains (losses) on equity securities designated at FVOCI
Realized gains (losses) on equity securities designated at FVOCI reclassified to retained earnings
Balance at end of year
Total AOCI, net of income tax
Non-controlling interests
Balance at beginning of year
Net income attributable to non-controlling interests
Dividends
Other
Balance at end of year
Equity at end of year
n/a Not applicable.
2021
3,575
750
4,325
$
$
$ 13,908
458
–
(15)
$ 14,351
$
$
117
19
(43)
17
110
n/a
n/a
n/a
$ 22,119
6,429
(158)
(2,622)
–
27
(2)
$ 25,793
2020
2,825
750
3,575
$
$
$ 13,591
371
(68)
14
$ 13,908
$
$
125
14
(20)
(2)
117
$ 20,972
n/a
148
21,120
3,790
(122)
(2,592)
(166)
93
(4)
$ 22,119
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,173
(1,115)
$
58
$
993
180
1,173
309
(116)
193
274
(137)
137
(283)
917
634
(40)
12
(28)
2
100
(27)
75
1,069
181
17
(9)
(7)
182
$
$
$
$
$
$
$
$
$
$
$
$
$
77
232
309
113
161
274
(363)
80
(283)
16
(56)
(40)
45
50
(93)
2
1,435
186
2
(15)
8
181
2019
2,250
575
2,825
$
$
$ 13,243
377
(30)
1
$ 13,591
$
$
136
16
(27)
–
125
$ 18,537
6
n/a
18,543
5,096
(111)
(2,488)
(79)
18
(7)
$ 20,972
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,024
(31)
993
(139)
216
77
(18)
131
113
(143)
(220)
(363)
(12)
28
16
65
(2)
(18)
45
881
173
25
(11)
(1)
186
$ 45,830
$ 41,335
$ 38,580
The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.
120 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Consolidated statement of cash flows
Millions of Canadian dollars, for the year ended October 31
2021
2020
2019
Cash flows provided by (used in) operating activities
Net income
Adjustments to reconcile net income to cash flows provided by (used in) operating activities:
$ 6,446
$ 3,792
$ 5,121
Provision for credit losses
Amortization and impairment (1)
Stock options and restricted shares expense
Deferred income taxes
Losses (gains) from debt securities measured at FVOCI and amortized cost
Net losses (gains) on disposal of property and equipment
Other non-cash items, net
Net changes in operating assets and liabilities
Interest-bearing deposits with banks
Loans, net of repayments
Deposits, net of withdrawals
Obligations related to securities sold short
Accrued interest receivable
Accrued interest payable
Derivative assets
Derivative liabilities
Securities measured at FVTPL
Other assets and liabilities measured/designated at FVTPL
Current income taxes
Cash collateral on securities lent
Obligations related to securities sold under repurchase agreements
Cash collateral on securities borrowed
Securities purchased under resale agreements
Other, net (2)
Cash flows provided by (used in) financing activities
Issue of subordinated indebtedness
Redemption/repurchase/maturity of subordinated indebtedness
Issue of preferred shares and limited recourse capital notes, net of issuance cost
Issue of common shares for cash
Purchase of common shares for cancellation
Net sale (purchase) of treasury shares
Dividends and distributions paid
Repayment of lease liabilities
Cash flows provided by (used in) investing activities
Purchase of securities measured/designated at FVOCI and amortized cost
Proceeds from sale of securities measured/designated at FVOCI and amortized cost
Proceeds from maturity of debt securities measured at FVOCI and amortized cost
Cash used in acquisitions, net of cash acquired
Net sale (purchase) of property, equipment, software and other intangibles (2)
Effect of exchange rate changes on cash and non-interest-bearing deposits with banks
Net increase (decrease) in cash and non-interest-bearing deposits with banks during the year
Cash and non-interest-bearing deposits with banks at beginning of year
Cash and non-interest-bearing deposits with banks at end of year (3)
Cash interest paid
Cash interest received
Cash dividends received
Cash income taxes paid
158
1,017
19
(41)
(90)
–
927
(3,437)
(46,883)
47,521
6,827
46
(419)
(3,172)
1,582
(9,552)
7,277
543
639
(2,248)
(3,821)
(1,977)
(4,694)
(3,332)
1,000
(1,008)
748
284
–
(15)
(2,649)
(305)
(1,945)
(49,896)
23,917
23,312
–
(839)
(3,506)
(175)
(8,958)
43,531
2,489
1,311
14
(228)
(9)
4
(767)
(5,468)
(18,891)
82,120
328
97
(238)
(8,832)
5,184
(8,296)
1,563
1,287
2
19,852
(4,883)
(9,394)
(270)
60,767
1,000
(33)
747
163
(234)
14
(2,571)
(307)
(1,221)
(54,075)
11,883
23,093
–
(781)
(19,880)
25
39,691
3,840
1,286
838
16
108
(34)
(7)
(229)
(208)
(17,653)
19,838
1,853
(122)
138
(2,484)
4,037
(1,826)
1,222
(309)
(909)
20,961
1,824
(10,785)
(3,590)
19,086
1,500
(1,001)
568
157
(109)
1
(2,406)
–
(1,290)
(42,304)
13,764
10,948
(25)
(723)
(18,340)
4
(540)
4,380
$ 34,573
$ 3,701
13,890
897
1,374
$ 43,531
$ 6,716
16,774
845
39
$ 3,840
$ 10,008
19,840
735
1,549
(1) Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets, and goodwill.
(2) Certain information has been reclassified to conform to the presentation adopted in the current year.
(3) Includes restricted cash of $446 million (2020: $463 million; 2019: $479 million) and interest-bearing demand deposits with Bank of Canada.
The accompanying notes and shaded sections in “MD&A – Management of risk” are an integral part of these consolidated financial statements.
CIBC 2021 ANNUAL REPORT 121
Consolidated financial statements
Notes to the consolidated financial statements
Canadian Imperial Bank of Commerce (CIBC) is a diversified financial institution governed by the Bank Act (Canada). CIBC was formed through the
amalgamation of the Canadian Bank of Commerce and Imperial Bank of Canada in 1961. Through our four strategic business units (SBUs) –
Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial Banking and Wealth
Management, and Capital Markets – CIBC provides a full range of financial products and services to 11 million personal banking, business, public
sector and institutional clients in Canada, the U.S. and around the world. Refer to Note 31 for further details on our business units. CIBC is
incorporated and domiciled in Canada, with our registered and principal business offices located at CIBC Square, Toronto, Ontario effective
November 1, 2021.
Note 1
Basis of preparation and summary of significant accounting policies
Basis of preparation
The consolidated financial statements of CIBC have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB). These consolidated financial statements also comply with Section 308(4) of the Bank Act
(Canada) and the requirements of the Office of the Superintendent of Financial Institutions (OSFI).
CIBC has consistently applied the same accounting policies throughout all periods presented, except for the adoption of the “Conceptual
Framework for Financial Reporting” effective November 1, 2020, the adoption of “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16” (the Phase 2 amendments) effective November 1, 2020, the adoption of “Interest Rate Benchmark Reform:
Amendments to IFRS 9, IAS 39 and IFRS 7” (the Phase 1 amendments) effective November 1, 2019, the adoption of IFRS 16 “Leases” effective
November 1, 2019, and the adoption of International Financial Reporting Interpretations Committee (IFRIC) 23 “Uncertainty over Income Tax
Treatments” effective November 1, 2019, each of which were adopted without restatement of comparative periods as discussed below under the
sections titled “Conceptual Framework for Financial Reporting (Conceptual Framework)”, “Interest Rate Benchmark Reform”, “Leases”, and
“International Financial Reporting Interpretations Committee 23: Uncertainty over Income Tax Treatments (IFRIC 23)”.
These consolidated financial statements are presented in millions of Canadian dollars, unless otherwise indicated.
These consolidated financial statements were authorized for issue by the Board of Directors (the Board) on December 1, 2021.
Summary of significant accounting policies
The following paragraphs describe our significant accounting policies.
Use of estimates and assumptions
The preparation of the consolidated financial statements in accordance with IFRS requires management to make estimates and assumptions that
affect the recognized and measured amounts of assets, liabilities, net income, comprehensive income and related disclosures. Significant estimates
and assumptions are made in the areas of the valuation of financial instruments, allowance for credit losses, the evaluation of whether to consolidate
structured entities (SEs), asset impairment, income taxes, provisions and contingent liabilities, post-employment and other long-term benefit plan
assumptions and the valuation of self-managed loyalty points programs. Actual results could differ from these estimates and assumptions.
Basis of consolidation
We consolidate entities over which we have control. We have control over another entity when we have: (i) power to direct relevant activities of the
entity; (ii) exposure, or rights, to variable returns from our involvement with the entity; and (iii) the ability to affect those returns through our power
over the entity.
Subsidiaries
Subsidiaries are entities over which CIBC has control. Generally, CIBC has control of its subsidiaries through a shareholding of more than 50% of
the voting rights, and has significant exposure to the subsidiaries based on its ownership interests of more than 50%. The effects of potential voting
rights that CIBC has the practical ability to exercise are considered when assessing whether control exists. Subsidiaries are consolidated from the
date control is obtained by CIBC and are deconsolidated from the date control is lost. Consistent accounting policies are applied for all
consolidated subsidiaries. Details of our significant subsidiaries are provided in Note 27.
Structured entities
A SE is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when
any voting rights relate to administrative tasks only and the significant relevant activities are directed by contractual arrangements. SEs often have
some or all of the following features or attributes: (i) restricted activities; (ii) a narrow and well-defined objective, such as to securitize our own
financial assets or third-party financial assets to provide sources of funding or to provide investment opportunities for investors by passing on risks
and rewards associated with the assets of the SE to investors; (iii) insufficient equity to permit the SE to finance its activities without subordinated
financial support; or (iv) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other
risks. Examples of SEs include securitization vehicles, asset-backed financings, and investment funds.
When voting rights are not relevant in deciding whether CIBC has power over an entity, particularly for complex SEs, the assessment of control
considers all facts and circumstances, including the purpose and design of the investee, its relationship with other parties and each party’s ability to
make decisions over significant activities, and whether CIBC is acting as a principal or as an agent.
We do not have control over an investee when we are acting as the agent for a third-party. In assessing whether we are an agent we determine
(i) the scope of our decision-making authority, (ii) the rights held by other parties, (iii) the remuneration to which we are entitled and (iv) our exposure
to variability of returns from other interests that we hold in the investee.
Consolidation conclusions are reassessed whenever there is a change in the specific facts and circumstances relevant to one or more of the
three elements of control. Factors that trigger the reassessment include, but are not limited to, significant changes in ownership structure of the
122 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
entities, changes in contractual or governance arrangements, provision of a liquidity facility beyond the original terms, transactions with the entities
that were not contemplated originally and changes in the financing structure of the entities.
Transactions eliminated on consolidation
All intercompany transactions, balances and unrealized gains and losses on transactions are eliminated on consolidation.
Non-controlling interests
Non-controlling interests are presented on the consolidated balance sheet as a separate component of equity that is distinct from CIBC’s
shareholders’ equity. The net income attributable to non-controlling interests is presented separately in the consolidated statement of income.
Associates and joint ventures
We classify investments in entities over which we have significant influence, and that are neither subsidiaries nor joint ventures, as associates.
Significant influence is presumed to exist where we hold, either directly or indirectly, between 20% and 50% of the voting rights of an entity, or, in the
case of a limited partnership, where CIBC is a co-general partner. Significant influence also may exist where we hold less than 20% of the voting
rights of an entity, for example if we have influence over policy-making processes through representation on the entity’s Board of Directors, or by
other means. Where we are a party to a contractual arrangement whereby we undertake an economic activity that is subject to joint control together
with one or more parties, we classify our interest in the venture as a joint venture.
Investments in associates and interests in joint ventures are accounted for using the equity method. Under the equity method, such
investments are initially measured at cost, including attributable goodwill and intangible assets, and are adjusted thereafter for the post-acquisition
change in our share of the net assets of the investment.
In applying the equity method for an investment that has a different reporting period from that of CIBC, adjustments are made for the effects of
any significant events or transactions that occur between the reporting date of the investment and CIBC’s reporting date.
Foreign currency translation
Monetary assets and liabilities and non-monetary assets and liabilities measured at fair value that are denominated in foreign currencies are
translated into the functional currencies of operations at prevailing exchange rates at the date of the consolidated balance sheet. Revenue and
expenses are translated using average monthly exchange rates. Realized and unrealized gains and losses arising from translation into functional
currencies are included in the consolidated statement of income, with the exception of unrealized foreign exchange gains and losses on FVOCI
equity securities, which are included in AOCI.
Assets and liabilities of foreign operations with a functional currency other than the Canadian dollar, including goodwill and fair value
adjustments arising on acquisition, are translated into Canadian dollars at the exchange rates prevailing as at the consolidated balance sheet date,
while revenue and expenses of these foreign operations are translated into Canadian dollars at the average monthly exchange rates. Exchange
gains and losses arising from the translation of these foreign operations and from the results of hedging the net investment in these foreign
operations, net of applicable taxes, are included in Net foreign currency translation adjustments, in AOCI.
Any accumulated exchange gains and losses, including the impact of hedging, and any applicable taxes in AOCI are reclassified into the
consolidated statement of income when there is a disposal of a foreign operation, including a partial disposal of a foreign operation that involves the
loss of control. On partial disposal of a foreign operation that does not involve the loss of control, the proportionate share of the accumulated
exchange gains and losses, including the impact of hedging, and any applicable taxes previously recognized in AOCI are reclassified into the
consolidated statement of income.
Accounting for financial instruments
Classification and measurement of financial instruments
All financial assets must be classified at initial recognition as financial instruments mandatorily measured at FVTPL (trading and non-trading),
financial instruments measured at amortized cost, debt financial instruments measured at FVOCI, equity financial instruments designated at FVOCI,
or financial instruments designated at FVTPL (fair value option), based on the contractual cash flow characteristics of the financial assets and the
business model under which the financial assets are managed. All financial assets and derivatives are required to be measured at fair value with the
exception of financial assets measured at amortized cost. Financial assets are required to be reclassified when and only when the business model
under which they are managed has changed. All reclassifications are to be applied prospectively from the reclassification date.
The classification and measurement model requires that all debt instrument financial assets that do not meet a “solely payment of principal and
interest” (SPPI) test, including those that contain embedded derivatives, be classified at initial recognition as FVTPL. The SPPI test is conducted to
identify whether the contractual cash flows of a financial instrument are “solely payments of principal and interest” such that any variability in the
contractual cash flows is consistent with a “basic lending arrangement”. “Principal” for the purpose of this test is defined as the fair value of the
financial asset at initial recognition and may change over the life of the financial asset, for example, due to repayments of principal or amortization of
the premium/discount. “Interest” for the purpose of this test is defined as the consideration for the time value of money and credit risk, which are the
most significant elements of interest within a lending arrangement. Contractual terms that introduce a more than de minimis exposure to risks or
volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely
payments of principal and interest on the amount outstanding. The intent of the SPPI test is to ensure that debt instruments that contain non-basic
lending features, such as conversion options and equity-linked payouts, are measured at FVTPL.
For debt instrument financial assets that meet the SPPI test, classification at initial recognition is determined based on the business model
under which these instruments are managed. Debt instruments that are managed on a “held for trading” or “fair value” basis are classified as
FVTPL. Debt instruments that are managed on a “hold to collect and for sale” basis are classified as FVOCI for debt. Debt instruments that are
managed on a “hold to collect” basis are classified as amortized cost. We consider the following in our determination of the applicable business
model for financial assets:
I)
II)
III) The basis on which performance of the portfolio is being evaluated; and
IV) The frequency and significance of sales activity.
The business purpose of the portfolio;
The risks that are being managed and the type of business activities that are being carried out on a day-to-day basis to manage the risks;
All equity instrument financial assets are classified at initial recognition as FVTPL unless they are not held with the intent for short-term profit-taking
and an irrevocable designation is made to classify the instrument as FVOCI for equities.
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Consolidated financial statements
Financial liabilities, other than derivatives, obligations related to securities sold short and FVO liabilities, are measured at amortized cost.
Derivatives, obligations related to securities sold short and FVO financial liabilities are measured at fair value.
Derivatives are measured at FVTPL, except to the extent that they are designated in a hedging relationship, in which case the International
Accounting Standard (IAS) 39 “Financial Instruments: Recognition and Measurement” (IAS 39) hedge accounting requirements continue to apply.
Financial instruments mandatorily measured at FVTPL (trading and non-trading)
Trading financial instruments are mandatorily measured at FVTPL as they are held for trading purposes or are part of a managed portfolio with a
pattern of short-term profit-taking. Non-trading financial assets are also mandatorily measured at fair value if their contractual cash flow
characteristics do not meet the SPPI test or if they are managed together with other financial instruments on a fair value basis.
Trading and non-trading financial instruments mandatorily measured at FVTPL are remeasured at fair value as at the consolidated balance
sheet date. Gains and losses realized on disposition and unrealized gains and losses from changes in fair value are included in Non-interest income
as Gains (losses) from financial instruments measured/designated at FVTPL, net. Interest income and dividends earned on trading and non-trading
securities and dividends and interest expense incurred on securities sold short are included in Interest income and Interest expense, respectively.
Financial instruments designated at FVTPL (fair value option)
Financial instruments designated at FVTPL are those that we voluntarily designate at initial recognition as instruments that we will measure at fair value
through the consolidated statement of income that would otherwise fall into a different accounting category. The FVO designation, once made, is
irrevocable and can only be applied if reliable fair values are available, when doing so eliminates or significantly reduces the measurement
inconsistency that would otherwise arise from measuring assets or liabilities on a different basis and if certain OSFI requirements pertaining to certain
loans are met. Financial liabilities may also be designated at FVTPL when they are part of a portfolio which is managed on a fair value basis, in
accordance with our investment strategy, and are reported internally on that basis. Designation at FVTPL may also be applied to financial liabilities that
have one or more embedded derivatives that would otherwise require bifurcation. We apply the FVO to certain mortgage commitments.
Gains and losses realized on dispositions and unrealized gains and losses from changes in the fair value of FVO financial instruments are
treated in the same manner as financial instruments which are mandatorily measured at FVTPL, except that changes in the fair value of FVO
liabilities that are attributable to changes in own credit risk are recognized in OCI. Dividends and interest earned and interest expense incurred on
FVO assets and liabilities are included in Interest income and Interest expense, respectively.
Financial assets measured at amortized cost
Financial assets measured at amortized cost are debt financial instruments with contractual cash flows that meet the SPPI test and are managed on
a “hold to collect” basis. These financial assets are recognized initially at fair value plus or minus direct and incremental transaction costs, and are
subsequently measured at amortized cost, using the effective interest rate method, net of an allowance for expected credit losses (ECL).
Loans measured at amortized cost include residential mortgages, personal loans, credit cards and most business and government loans.
Certain portfolios of treasury securities that are managed on a “hold to collect” basis are also classified as amortized cost. Most deposits with
banks, securities purchased under resale agreements, cash collateral on securities borrowed and most customers’ liability under acceptances are
accounted for at amortized cost.
Debt financial assets measured at FVOCI
Debt financial instruments measured at FVOCI are non-derivative financial assets with contractual cash flows that meet the SPPI test and are
managed on a “hold to collect and for sale” basis.
FVOCI debt instruments are measured initially at fair value, plus direct and incremental transaction costs. Subsequent to initial recognition,
FVOCI debt instruments are remeasured at fair value, with the exception that changes in ECL allowances in addition to related foreign exchange
gains or losses are recognized in the consolidated statement of income. Cumulative gains and losses previously recognized in OCI are transferred
from AOCI to the consolidated statement of income when the debt instrument is sold. Realized gains and losses on sale, determined on an average
cost basis, and changes in ECL allowances, are included in Gains (losses) from debt securities measured at FVOCI and amortized cost, net in the
consolidated statement of income. Interest income from FVOCI debt instruments is included in Interest income. FVOCI debt instruments include our
treasury securities which are managed on a “hold to collect and for sale” basis.
A debt financial instrument is classified as impaired (stage 3) when one or more events that have a detrimental impact on the estimated future
cash flows of that financial instrument have occurred after its initial recognition. Evidence of impairment includes indications that the borrower is
experiencing significant financial difficulty, or a default or delinquency has occurred.
Equity financial instruments designated at FVOCI
Equity financial instruments are measured at FVTPL unless an irrevocable designation is made to measure them at FVOCI. Gains or losses from
changes in the fair value of equity instruments designated at FVOCI, including any related foreign exchange gains or losses, are recognized in OCI.
Amounts recognized in OCI will not be subsequently recycled to profit or loss, with the exception of dividends that are not considered a return of
capital, which are recognized as interest income when received in the consolidated statement of income. Instead, cumulative gains or losses upon
derecognition of the equity instrument will be transferred within equity from AOCI to retained earnings and presented in Realized gains (losses) on
equity securities designated at FVOCI reclassified to retained earnings in the consolidated statement of changes in equity. Financial assets
designated as FVOCI include non-trading equity securities, primarily related to our investment in private companies and limited partnerships.
Impairment of financial assets
ECL allowances are recognized on all financial assets that are debt instruments classified either as amortized cost or FVOCI and for all loan
commitments and financial guarantees that are not measured at FVTPL. ECL allowances represent credit losses that reflect an unbiased and
probability-weighted amount which is determined by evaluating a range of possible outcomes, the time value of money and reasonable and
supportable information about past events, current conditions and forecasts of future economic conditions. Forward-looking information is explicitly
incorporated into the estimation of ECL allowances, which involves significant judgment (see Note 6 for additional details).
ECL allowances for loans and acceptances are included in Allowance for credit losses on the consolidated balance sheet. ECL allowances for
FVOCI debt securities are included as a component of the carrying value of the securities, which are measured at fair value. ECL allowances for
other financial assets are included in the carrying value of the instrument. ECL allowances for guarantees and loan commitments are included in
Other liabilities.
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Consolidated financial statements
ECL allowances are measured at amounts equal to either: (i) 12-month ECL; or (ii) lifetime ECL for those financial instruments which have
experienced a significant increase in credit risk since initial recognition or when there is objective evidence of impairment.
The calculation of ECL allowances is based on the expected value of three probability-weighted scenarios to measure the expected cash
shortfalls, discounted at the effective interest rate. A cash shortfall is the difference between the contractual cash flows that are due and the cash
flows that we expect to receive. The key inputs in the measurement of ECL allowances are as follows:
The probability of default (PD) is an estimate of the likelihood of default over a given time horizon;
The loss given default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time; and
The exposure at default (EAD) is an estimate of the exposure at a future default date.
Lifetime ECL is the expected credit losses that result from all possible default events over the expected life of a financial instrument. 12-month ECL
is the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on the financial instrument
that are possible within the 12 months after the reporting date.
Stage migration and significant increase in credit risk
As a result of the requirements above, financial instruments subject to ECL allowances are categorized into three stages.
For performing financial instruments:
Stage 1 is comprised of all performing financial instruments which have not experienced a significant increase in credit risk since initial
recognition. We recognize 12 months of ECL for stage 1 financial instruments. In assessing whether credit risk has increased significantly, we
compare the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of its initial recognition.
Stage 2 is comprised of all performing financial instruments which have experienced a significant increase in credit risk since initial
recognition. We recognize lifetime ECL for stage 2 financial instruments. In subsequent reporting periods, if the credit risk of the financial instrument
improves such that there is no longer a significant increase in credit risk since initial recognition, then we revert to recognizing 12 months of ECL as
the financial instrument has migrated back to stage 1.
We determine whether a financial instrument has experienced a significant increase in credit risk since its initial recognition on an individual
financial instrument basis. Changes in the required ECL allowance, including the impact of financial instruments migrating between stage 1 and
stage 2, are recorded in Provision for credit losses in the consolidated statement of income. Significant judgment is required in the application of
significant increase in credit risk (see Note 6 for additional details).
Stage 3 financial instruments are those that we have classified as impaired. We recognize lifetime ECL for all stage 3 financial instruments. We
classify a financial instrument as impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial instrument have occurred after its initial recognition. Evidence of impairment includes indications that the borrower is experiencing
significant financial difficulties, or a default or delinquency has occurred. All financial instruments on which repayment of principal or payment of
interest is contractually 90 days in arrears are automatically considered impaired, except for credit card loans, which are classified as impaired and
are fully written off when payments are contractually 180 days in arrears or at the earlier of the notice of bankruptcy, settlement proposal, or
enlistment of credit counselling services.
A financial instrument is no longer considered impaired when all past due amounts, including interest, have been recovered, and it is
determined that the principal and interest are fully collectable in accordance with the original contractual terms or revised market terms of the
financial instrument with all criteria for the impaired classification having been remedied.
Financial instruments are written off, either partially or in full, against the related allowance for credit losses when we judge that there is no
realistic prospect of future recovery in respect of those amounts. When financial instruments are secured, this is generally after all collateral has
been realized or transferred to CIBC, or in certain circumstances, when the net realizable value of any collateral and other available information
suggests that there is no reasonable expectation of further recovery. In subsequent periods, any recoveries of amounts previously written off are
credited to the provision for credit losses.
Purchased loans
Both purchased performing and purchased credit-impaired loans are initially measured at their acquisition date fair values. As a result of recording
these loans at fair value, no allowance for credit losses is recognized in the purchase equation at the acquisition date. Fair value is determined by
estimating the principal and interest cash flows expected to be collected and discounting those cash flows at a market rate of interest. At the
acquisition date, we classify a loan as performing where we expect timely collection of all amounts in accordance with the original contractual terms
of the loan and as credit-impaired where it is probable that we will not be able to collect all contractually required payments.
For purchased performing loans, the acquisition date fair value adjustment on each loan is amortized to interest income over the expected
remaining life of the loan using the effective interest rate method. The remaining unamortized amounts relating to those loans are recorded in
income in the period that the loan is repaid. ECL allowances are established in Provision for credit losses in the consolidated statement of income
immediately after the acquisition date based on classifying each loan in stage 1, since the acquisition date is established as the initial recognition
date of purchased performing loans for the purpose of assessing whether a significant increase in credit risk has occurred. Subsequent to the
acquisition date, ECL allowances are estimated in a manner consistent with our significant increase in credit risk and impairment policies that we
apply to loans that we originate.
For purchased credit-impaired loans, the acquisition date fair value adjustment on each loan consists of management’s estimate of the shortfall
of principal and interest cash flows expected to be collected and the time value of money. The time value of money component of the fair value
adjustment is amortized to interest income over the expected remaining life of the loan using the effective interest rate method. Subsequent to the
acquisition date, we regularly re-estimate the expected cash flows for purchased credit-impaired loans. Decreases in the expected cash flows will
result in an increase in our ECL allowance. Increases in the expected cash flows will result in a recovery of the ECL allowance. ECL allowances for
purchased credit-impaired loans are reported in stage 3.
Originated credit-impaired financial assets
The accounting for originated credit-impaired financial assets operates in a similar manner to the accounting for purchased credit-impaired loans in
that originated credit-impaired assets are initially recognized at fair value with no initial ECL allowance as concerns about the collection of future
cash flows are instead reflected in the origination date discount. The time value of money component of the discount is amortized to interest income
over the expected remaining life of the financial asset using the effective interest rate method. Changes in expectation regarding the contractual
CIBC 2021 ANNUAL REPORT 125
Consolidated financial statements
cash flows for loans are recognized immediately in Provision for credit losses and for securities are recognized in Gains (losses) from debt
securities measured at FVOCI and amortized cost, net.
This accounting generally applies to financial assets that result from debt restructuring arrangements in which a previously impaired financial
asset is exchanged for a new financial asset that is either recognized at a fair value that represents a deep discount to par or for which there are
significant concerns over the ability to collect the contractual cash flows.
Determination of fair value
Fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in an orderly transaction in the
principal market at the measurement date under current market conditions (i.e., the exit price). Fair value measurements are categorized into three
levels within a fair value hierarchy (Level 1, 2 or 3) based upon the market observability of the valuation inputs used in measuring the fair value. See
Note 3 for more details about fair value measurement subsequent to initial recognition by type of financial instrument.
Transaction costs
Transaction costs relating to financial instruments mandatorily measured or designated at FVTPL are expensed as incurred. Transaction costs are
amortized over the expected life of the instrument using the effective interest rate method for instruments measured at amortized cost, and debt
instruments measured at FVOCI. For equity instruments designated at FVOCI, transaction costs are included in the instrument’s carrying value.
Date of recognition of securities
We account for all securities transactions on our consolidated balance sheet using settlement date accounting.
Effective interest rate
Interest income and expense for all financial instruments measured at amortized cost and for debt securities measured at FVOCI are recognized in
Interest income and Interest expense using the effective interest rate method. The effective interest rate is the rate that exactly discounts estimated
future cash receipts or payments through the expected life of the financial instrument to the net carrying value of the financial asset or liability upon
initial recognition. When calculating the effective interest rate, we estimate future cash flows considering all contractual terms of the financial
instrument, but not future credit losses.
Fees relating to loan origination, including commitment, restructuring and renegotiation fees, are considered an integral part of the yield
earned on the loan and are accounted for using the effective interest rate method. Fees received for commitments that are not expected to result in
a loan are included in Non-interest income over the commitment period. Loan syndication fees are included in Non-interest income on completion of
the syndication arrangement, provided that the yield on the portion of the loan we retain is at least equal to the average yield earned by the other
lenders involved in the financing; otherwise, an appropriate portion of the fee is deferred as unearned income and amortized to interest income
using the effective interest rate method.
Interest income is recognized on stage 1 and stage 2 financial assets measured at amortized cost by applying the effective interest rate to the
gross carrying amount of the financial instrument. For stage 3 financial instruments, interest income is recognized using the rate of interest used to
discount the estimated future cash flows for the purpose of measuring the impairment loss and applied to the net carrying value of the financial
instrument.
Securitizations and derecognition of financial assets
Securitization of our own assets provides us with an additional source of liquidity. As we generally retain substantially all of the risks and rewards of
the transferred assets, assets remain on the consolidated balance sheet and funding from these transactions is accounted for as Deposits –
secured borrowings.
Our contractual right to receive cash flows from the assets has expired;
Securitizations to non-consolidated SEs are accounted for as sales, with the related assets being derecognized, only where:
We transfer our contractual rights to receive the cash flows of the financial asset, and have: (i) transferred substantially all the risks and
rewards of ownership, or (ii) neither retained nor transferred substantially all the risks and rewards, but have not retained control; or
The transfer meets the criteria of a qualifying pass-through arrangement.
Derecognition of financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged, cancelled or expires. If an existing financial liability is
replaced by another liability from the same lender on substantially different terms, or the terms of the existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference in the
respective carrying values is recognized in the consolidated statement of income. The repurchase of a debt instrument is considered an
extinguishment of that debt instrument even if we intend to resell the instrument in the near term.
Financial guarantees
Financial guarantees are financial contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.
Financial guarantee contracts issued by CIBC that are not classified as insurance contracts are initially recognized as a liability at fair value,
adjusted for transaction costs that are directly attributable to the issuance of the guarantees, which is generally the premium received or receivable
on the date the guarantee was given. Subsequently, financial guarantee liabilities are measured at the higher of the initial fair value, less cumulative
amortization, and the applicable ECL allowances. A financial guarantee that qualifies as a derivative is remeasured at fair value as at each reporting
date and reported as Derivative instruments in assets or liabilities, as appropriate.
Mortgage commitments
Mortgage interest rate commitments are extended to our retail clients in contemplation of borrowing to finance the purchase of homes under
mortgages to be funded by CIBC in the future. These commitments are usually for periods of up to 120 days and generally entitle the borrower to
receive funding at the lower of the interest rate at the time of the commitment and the rate applicable at the funding date. We use financial
instruments, such as interest rate derivatives, to economically hedge our exposure to an increase in interest rates. Based on our estimate of the
commitments expected to be exercised, a financial liability would be recognized on our consolidated balance sheet, to which we apply the FVO. We
126 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
also carry the associated economic hedges at fair value on the consolidated balance sheet. Changes in the fair value of the FVO commitment
liability and the associated economic hedges are included in Gains (losses) from financial instruments measured/designated at FVTPL, net. In
addition, since the fair value of the commitments is priced into the mortgage, the difference between the mortgage amount and its fair value at
funding is recognized in the consolidated statement of income to offset the carrying value of the mortgage commitment that is released upon its
expiry.
Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset, and the amount presented net, when we have a legally enforceable right to set off the recognized
amounts and intend to settle on a net basis or to realize the asset and settle the liability simultaneously.
Acceptances and customers’ liability under acceptances
Acceptances constitute a liability of CIBC on negotiable instruments issued to third parties by our customers. We earn a fee for guaranteeing and
then making the payment to the third parties. The amounts owed to us by our customers in respect of these guaranteed amounts are reflected in
assets as Customers’ liability under acceptances.
Securities purchased under resale agreements and obligations related to securities sold under repurchase agreements
Securities purchased under resale agreements are treated as collateralized lending transactions as they represent the purchase of securities
affected with a simultaneous agreement to sell them back at a future date at a fixed price, which is generally near term. These transactions are
classified and measured at amortized cost, as they meet the SPPI criteria and are managed under a hold to collect business model, unless they
were classified at FVTPL or designated under the FVO. For Securities purchased under resale agreements that are classified at amortized cost, an
ECL is applied. Interest income is accrued using the effective interest rate method and is included in Interest income – Securities borrowed or
purchased under resale agreements in the consolidated statement of income.
Similarly, securities sold under agreements to repurchase are treated as collateralized borrowing transactions at amortized cost with interest
expense accrued using the effective interest rate method and are included in Interest expense – Securities lent or sold under repurchase
agreements in the consolidated statement of income. Certain obligations related to securities sold under repurchase agreements are designated at
FVTPL under the FVO.
Cash collateral on securities borrowed and securities lent
The right to receive back cash collateral paid and the obligation to return cash collateral received on borrowing and lending of securities, which is
generally near term, is recognized as cash collateral on securities borrowed and securities lent, respectively. These transactions are classified and
measured at amortized cost as they meet the SPPI criteria and are managed under a hold to collect business model. For Cash collateral on
securities borrowed classified at amortized cost, an ECL is applied. Interest income on cash collateral paid and interest expense on cash collateral
received together with the security borrowing fees and security lending income are included in Interest income – Securities borrowed or purchased
under resale agreements and Interest expense – Securities lent or sold under repurchase agreements, respectively. For securities borrowing and
lending transactions where securities are pledged or received as collateral, securities pledged by CIBC remain on the consolidated balance sheet
and securities received by CIBC are not recognized on the consolidated balance sheet.
Derivatives
We use derivative instruments for both asset/liability management (ALM) and trading purposes. The derivatives used for ALM purposes allow us to
manage financial risks, such as movements in interest and foreign exchange rates, while our derivative trading activities are primarily driven by
client activities. We may also take proprietary trading positions within prescribed risk limits with the objective of earning income.
All derivative instruments are recognized initially, and are measured subsequently, at fair value and are reported as assets where they have a
positive fair value and as liabilities where they have a negative fair value, in both cases as derivative instruments. Any realized and unrealized gains
or losses on derivatives used for trading purposes are recognized immediately in Gains (losses) from financial instruments measured/designated at
FVTPL, net. The accounting for derivatives used for ALM purposes depends on whether they qualify for hedge accounting as discussed below.
Fair values of exchange-traded derivatives are based on quoted market prices. Fair values of over-the-counter (OTC) derivatives, including
OTC derivatives that are centrally cleared, are obtained using valuation techniques, including discounted cash flow models and option pricing
models. See Note 13 for further information on the valuation of derivatives.
Derivatives used for ALM purposes that qualify for hedge accounting
As permitted at the time of transition to IFRS 9 “Financial Instruments” (IFRS 9), we previously elected to continue to apply the hedge accounting
requirements of IAS 39. We adopted the Phase 1 and Phase 2 amendments to IAS 39, together with the associated IFRS 7 “Financial Instruments:
Disclosures” (IFRS 7) disclosure requirements, relating to interest rate benchmark reform for hedge accounting relationships impacted by the
reform. See the “Interest Rate Benchmark Reform” section below for further detail.
We apply hedge accounting for derivatives held for ALM purposes that meet specified criteria. There are three types of hedges: fair value,
cash flow and hedges of net investments in foreign operations (NIFOs). When hedge accounting is not applied, the change in the fair value of the
derivative is recognized in the consolidated statement of income (see “Derivatives used for ALM purposes that are not designated for hedge
accounting” below).
In order for derivatives to qualify for hedge accounting, the hedge relationship must be designated and formally documented at its inception in
accordance with IAS 39. The particular risk management objective and strategy, the specific asset, liability or cash flow being hedged, as well as
how hedge effectiveness is assessed, are documented. Hedge effectiveness requires a high correlation of changes in fair values or cash flows
between the hedged and hedging items.
We assess the effectiveness of derivatives in hedging relationships, both at inception and on an ongoing basis. Ineffectiveness results to the
extent that the change in the fair value of the hedging derivative differs from the change in the fair value of the hedged risk in the hedged item, or
the cumulative change in the fair value of the hedging derivative exceeds the cumulative change in the fair value of expected future cash flows of
the hedged item. The amount of ineffectiveness of hedging instruments is recognized immediately in the consolidated statement of income.
Fair value hedges
We designate fair value hedges primarily as part of interest rate risk management strategies that use derivatives to hedge changes in the fair value
of financial instruments with fixed interest rates. Changes in fair value attributed to the hedged interest rate risk are accounted for as basis
adjustments to the hedged financial instruments and are included in Net interest income. Changes in fair value from the hedging derivatives are also
included in Net interest income. Any differences between the two represent hedge ineffectiveness that is included in Net interest income.
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Consolidated financial statements
Similarly, for hedges of foreign exchange risk, changes in the fair value from the hedging derivatives and non-derivatives are included in
FXOTT. Changes in the fair value of the hedged item from the hedged foreign exchange risk are accounted for as basis adjustments and are also
included in FXOTT. Any difference between the two represents hedge ineffectiveness.
If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the
hedge relationship is terminated and the basis adjustment applied to the hedged item is amortized over the remaining term of the hedged item. If
the hedged item is derecognized, the unamortized basis adjustment is recognized immediately in the consolidated statement of income.
Cash flow hedges
We designate cash flow hedges as part of interest rate risk management strategies that use derivatives to mitigate our risk from variable cash flows
by effectively converting certain variable-rate financial instruments to fixed-rate financial instruments, and as part of foreign exchange rate risk
management strategies to hedge forecasted foreign currency denominated cash flows. We also designate cash flow hedges to hedge changes in
CIBC’s share price in respect of certain cash-settled share-based payment awards.
The effective portion of the change in fair value of the derivative instrument is recognized in OCI until the variability in cash flows being hedged
is recognized in the consolidated statement of income in future accounting periods, at which time an appropriate portion of the amount that was in
AOCI is reclassified into the consolidated statement of income. The ineffective portion of the change in fair value of the hedging derivative is
included in Net interest income, FXOTT, or Non-interest expenses immediately as it arises.
If the hedging instrument expires or is sold, terminated or exercised, or where the hedge no longer meets the criteria for hedge accounting, the
hedge relationship is terminated. Upon termination of the hedge relationship, any remaining amount in AOCI remains therein until it is recognized in
the consolidated statement of income when the variability in cash flows hedged or the hedged forecast transaction is ultimately recognized in the
consolidated statement of income. When the forecasted transaction is no longer expected to occur, the related cumulative gain or loss in AOCI is
recognized immediately in the consolidated statement of income.
Hedges of NIFOs with a functional currency other than the Canadian dollar
We may designate NIFO hedges to mitigate the foreign exchange risk on our NIFOs with a functional currency other than the Canadian dollar.
These hedges are accounted for in a similar manner to cash flow hedges. The change in fair value of the hedging instrument relating to the
effective portion is recognized in OCI. The change in fair value of the hedging instrument attributable to the forward points and relating to the
ineffective portion is recognized immediately in FXOTT. Gains and losses in AOCI are reclassified to the consolidated statement of income upon the
disposal or partial disposal of the investment in the foreign operation that involves the loss of control, as explained in the “Foreign currency
translation” policy above.
Derivatives used for ALM purposes that are not designated for hedge accounting
The change in fair value of the derivatives not designated as accounting hedges but used to economically hedge FVO assets or liabilities is
included in Gains (losses) from financial instruments measured/designated at FVTPL, net. The change in fair value of other derivatives not
designated as accounting hedges but used for other economic hedging purposes is included in Non-interest income as FXOTT or Other, as
appropriate, or in the case of economic hedges of cash-settled share-based payment obligations, in compensation expense.
Embedded derivatives
Derivatives embedded in financial liabilities are accounted for as separate derivatives when their economic characteristics and risks are not closely
related to those of the host instrument and the terms of the embedded derivative represent those of a freestanding derivative in situations where the
combined instrument is not classified as FVTPL or FVO. These embedded derivatives, which are classified together with the host instrument on the
consolidated balance sheet, are measured at fair value, with changes therein included in the consolidated statement of income. The residual amount
of the host liability is accreted to its maturity value through Interest income and Interest expense, respectively, using the effective interest rate method.
Gains at inception on derivatives embedded in financial instruments bifurcated for accounting purposes are not recognized at inception;
instead they are recognized over the life of the residual host instrument. Where an embedded derivative is separable from the host instrument but
the fair value, as at the acquisition or reporting date, cannot be reliably measured separately or is otherwise not bifurcated, the entire combined
contract is measured at FVTPL.
Financial assets with embedded derivatives are classified in their entirety into the appropriate classification at initial recognition through an
assessment of the contractual cash flow characteristics of the asset and the business model under which it is managed.
Accumulated other comprehensive income
AOCI is included on the consolidated balance sheet as a separate component of total equity, net of income tax. It includes net unrealized gains and
losses on FVOCI debt and equity securities, the effective portion of gains and losses on derivative instruments designated within effective cash flow
hedges under IAS 39, unrealized foreign currency translation gains and losses on foreign operations with a functional currency other than the
Canadian dollar net of gains or losses on related hedges, net gains (losses) related to fair value changes of FVO liabilities attributable to changes in
own credit risk, and net gains (losses) on post-employment defined benefit plans.
Treasury shares
Where we repurchase our own equity instruments, these instruments are treated as treasury shares and are deducted from equity at their cost with
any gain or loss recognized in Contributed surplus or Retained earnings as appropriate. No gain or loss is recognized in the consolidated statement
of income on the purchase, sale, issue or cancellation of our own equity instruments. Any difference between the carrying value and the
consideration, if reissued, is also included in Contributed surplus.
Liabilities and equity
We classify financial instruments as a liability or equity based on the substance of the contractual arrangement. An instrument is classified as a
liability if it is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities at potentially
unfavourable terms. A contract is also classified as a liability if it is a non-derivative and could obligate us to deliver a variable number of our own
shares or it is a derivative other than one that can be settled by the delivery of a fixed amount of cash or another financial asset for a fixed number of
our own equity instruments. An instrument is classified as equity if it evidences a residual interest in our assets after deducting all liabilities. The
components of a compound financial instrument are classified and accounted for separately as assets, liabilities, or equity as appropriate.
Incremental costs directly attributable to the issuance of equity instruments are shown in equity, net of income tax.
128 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Property and equipment
Land is recognized initially at cost and is subsequently measured at cost less any accumulated impairment losses. Buildings, furniture, equipment
and leasehold improvements are recognized initially at cost and are subsequently measured at cost less accumulated depreciation and any
accumulated impairment losses.
Depreciation commences when the assets are available for use and is recognized on a straight-line basis to depreciate the cost of these
assets to their estimated residual value over their estimated useful lives. The estimated useful lives are as follows:
Buildings – 40 years
Computer equipment – 3 to 7 years
Office furniture, equipment and other – 4 to 15 years
Leasehold improvements – over the estimated useful life
Depreciation methods, useful lives and residual values are reviewed at each annual reporting date and are adjusted if appropriate.
Gains and losses on disposal are included in Non-interest income – Other.
Leases
CIBC adopted IFRS 16 “Leases” (IFRS 16) in place of IAS 17 “Leases” as of November 1, 2019. We applied IFRS 16 on a modified retrospective
basis. As permitted, we did not restate our prior period comparative consolidated financial statements, which were reported under the prior
guidance. The impact of adopting IFRS 16 is discussed below.
As a lessee, we recognize a right-of-use asset and a corresponding lease liability based on the present value of future lease payments, less
any lease incentives receivable, when the lessor makes the leased asset available for use to CIBC, based on the non-cancellable portion of the
lease term, adjusted for any renewal or termination options that are reasonably certain to be exercised. Measurement of the right-of-use asset also
includes any initial direct costs of procuring the lease, and any lease payments made or lease incentives received prior to lease commencement.
Discount rates are based on the rate implicit in the lease, if determinable, or on CIBC’s incremental borrowing rate. Where a property lease contains
both a lease and non-lease component, we have elected not to allocate the consideration in the contract to each of the components. Subsequent to
initial measurement, CIBC measures the lease liability by increasing the carrying amount to reflect interest on the lease liability based on the
discount rate at the time of recognition and reducing the carrying amount to reflect lease payments made during the period, net of any
remeasurements for lease reassessment or modifications. The right-of-use asset is measured using the cost model, and amortized on a straight-line
basis over the lease term. Right-of-use assets and the corresponding lease liabilities are recognized in Property and equipment and Other liabilities,
respectively, on our consolidated balance sheet.
The right-of-use asset and the corresponding lease liability are remeasured when there is a change in lease term, a change in the assessment
of an option to purchase a leased asset, a change in the expected residual value guarantee (if any), or a change in future lease payments due to a
change in the index or rate applicable to the payment. Right-of-use assets are tested for impairment as required under IAS 36 “Impairment of
Assets” (IAS 36). In addition, the evaluation of the useful life for depreciation is assessed under IAS 36.
Lease payments for low-value assets, short-term leases and variable leases are systematically recognized in Non-interest expenses based on
the nature of the expense.
As an intermediate lessor, we classify a sublease as an operating or finance sublease based on whether substantially all of the risks and
rewards related to the underlying right-of-use asset are transferred to the sub-lessee. If classified as a finance sublease, the related right-of-use
asset is derecognized and an investment in sublease is recognized, with the difference recognized in the consolidated statement of income as a
gain or loss. In measuring the investment in sublease, we apply the head lease discount rate unless the rate implicit in the sublease is determinable.
Where a finance sublease includes lease and non-lease components, we allocate the total consideration in the contract to each component based
on the standalone prices for each of these components. The investment in sublease is recognized in Other assets on our consolidated balance
sheet, and is subsequently measured using the effective interest rate method, with interest income recognized over the term of the sublease. Rental
income from operating subleases is recognized on a systematic basis over the lease term.
Transition impact from adoption of IFRS 16
The adoption of IFRS 16 resulted in the recognition of approximately $1.7 billion of lease liabilities and $1.6 billion of right-of-use assets as at November 1,
2019. The amount of the right-of-use assets recognized was determined based on the amount of the lease liabilities less the existing deferred rent
liabilities as at October 31, 2019. Furthermore, the reassessment of certain subleases related to a previously recognized finance lease property, a portion
of which is rented out and considered investment property, resulted in an increase in net assets as a result of the recognition of additional sublease-
related assets, net of the derecognition of amounts related to the corresponding head lease. The after-tax impact to retained earnings as a result of
adopting IFRS 16 was an increase of $0.1 billion. The following permitted recognition exemptions and practical expedients were applied:
A single discount rate curve was applied to portfolios of leases with reasonably similar characteristics at the date of application. The weighted
average incremental borrowing rate applied on our existing lease portfolio was 2.31%.
In contracts where we are the lessee, we did not reassess contracts that were identified as finance leases under the previous accounting
standard (IAS 17).
We elected to exclude leases of assets considered as low value and short-term leases with a remaining term of less than 12 months.
We applied the onerous lease provisions recognized as at October 31, 2019 as an alternative to performing an impairment review of our right-
of-use assets as at November 1, 2019. Where an onerous lease provision was recorded on a lease, the right-of-use asset was reduced by the
amount of that provision on transition and no further impairment review was performed.
We elected not to separate lease and non-lease components of a lease contract when calculating the lease liability and corresponding right-
of-use asset for certain classes of assets. Non-lease components may consist of, but are not limited to, common area maintenance expenses
and utility charges. Other occupancy costs not within the scope of IFRS 16 continue to be recorded as operating expenses.
Goodwill, software and other intangible assets
Goodwill represents the excess of the purchase price over the fair value of the net identifiable assets, liabilities and contingent liabilities acquired in
business combinations. Identifiable intangible assets are recognized separately from goodwill when they are separable or arise from contractual or
other legal rights, and have fair values that can be reliably measured.
Goodwill is not amortized, but is subject to impairment review at least annually or more frequently if there are indicators that the goodwill may
be impaired. Refer to the “Impairment of non-financial assets” policy below.
Intangible assets represent software and customer relationships, core deposit intangibles, investment management contracts, and brand
names recognized as part of past acquisitions. Intangible assets with definite useful lives are measured at cost less accumulated amortization and
CIBC 2021 ANNUAL REPORT 129
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accumulated impairment losses. Each intangible asset is assessed for legal, regulatory, contractual, competitive or other factors to determine if the
useful life is definite. Intangible assets with definite useful lives are amortized over their estimated useful lives, which are as follows:
Software – 5 to 10 years
Contract-based intangibles – 8 to 15 years
Core deposit and customer relationship intangibles – 3 to 16 years
Intangible assets with indefinite useful lives are measured at cost less any accumulated impairment losses. Indefinite-life intangible assets are
tested for impairment at least annually and whenever there is an indication that the asset may be impaired. Refer to the “Impairment of non-financial
assets” policy below.
Impairment of non-financial assets
The carrying values of non-financial assets with definite useful lives, including right-of-use assets, buildings and equipment, and intangible assets
with definite useful lives are reviewed to determine whether there is any indication of impairment. Goodwill and intangible assets with indefinite
useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. If any such indication of
impairment exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
For the purpose of reviewing non-financial assets with definite useful lives for impairment, asset groups are reviewed at their lowest level for
which identifiable cash inflows are largely independent of cash inflows of other assets or groups of assets. This grouping is referred to as a cash-
generating unit (CGU).
Corporate assets do not generate separate cash inflows. Corporate assets are tested for impairment at the minimum collection of CGUs to
which the corporate asset can be allocated reasonably and consistently.
The recoverable amount is the greater of fair value less costs to sell and value in use. Value in use is the present value of the future cash flows
expected to be derived from the asset or CGU. When the carrying value exceeds its recoverable amount, an impairment loss equal to the difference
between the two amounts is recognized in the consolidated statement of income. If an impairment subsequently reverses, the carrying value of the
asset is increased to the extent that the carrying value of the underlying assets does not exceed the carrying value that would have been
determined, net of depreciation or amortization, if no impairment had been recognized. Any impairment reversal is recognized in the consolidated
statement of income in the period in which it occurs.
Goodwill is assessed for impairment based on the group of CGUs expected to benefit from the synergies of the business combination, and the
lowest level at which management monitors the goodwill. Any potential goodwill impairment is identified by comparing the recoverable amount of
the CGU grouping to which the goodwill is allocated to its carrying value including the allocated goodwill. If the recoverable amount is less than its
carrying value, an impairment loss is recognized in the consolidated statement of income in the period in which it occurs. Impairment losses on
goodwill are not subsequently reversed if conditions change.
Income taxes
Income tax comprises current tax and deferred tax. Income tax is recognized in the consolidated statement of income, except to the extent that it
relates to items recognized in OCI or directly in equity, in which case it is recognized accordingly.
Current tax is the tax expected to be payable on the taxable profit for the year, calculated using tax rates enacted or substantively enacted as
at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax assets and liabilities are offset when CIBC intends
to settle on a net basis and the legal right to offset exists.
Deferred tax is recognized on temporary differences between the carrying value of assets and liabilities on the consolidated balance sheet
and the corresponding amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognized for all
taxable temporary differences unless the temporary differences relate to our NIFOs and will not reverse in the foreseeable future. Deferred tax
assets, other than those arising from our NIFOs, are recognized to the extent that it is probable that future taxable profits will be available against
which deductible temporary differences can be utilized. Deferred tax assets arising from our NIFOs are recognized for deductible temporary
differences which are expected to reverse in the foreseeable future to the extent that it is probable that future taxable profits will be available against
which these deductible temporary differences can be utilized. Deferred tax is not recognized for temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable income, or for taxable
temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted as at the reporting date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and they relate to
income taxes levied by the same tax authority on the same taxable entity or tax reporting group.
We are subject to income tax laws in the various jurisdictions where we operate, and the tax laws in those jurisdictions are potentially subject to
different interpretations by us and the relevant taxation authority, which gives rise to uncertainty. For tax positions where there is uncertainty
regarding the ultimate determination of the tax impact, including positions which are under audit, dispute or appeal, we recognize provisions to
consider this uncertainty based on our best estimate of the amount expected to be paid based on an assessment of the relevant factors.
Pension and other post-employment benefits
We are the sponsor of a number of employee benefit plans. These plans include both defined benefit and defined contribution pension plans, and
various other post-employment benefit plans including post-retirement medical and dental benefits.
Defined benefit plans
The cost of pensions and other post-employment benefits earned by employees is actuarially determined separately for each plan using the
projected unit credit method and our best estimate of salary escalation, retirement ages of employees, mortality and expected health-care costs.
This represents CIBC’s defined benefit obligation, which is measured as at the reporting date. The discount rate used to measure the defined
benefit obligation is based on the yield of a portfolio of high-quality corporate bonds denominated in the same currency in which the benefits are
expected to be paid and with terms to maturity that, on average, match the terms of the defined benefit obligation.
Plan assets are measured at fair value as at the reporting date.
The net defined benefit asset (liability) represents the present value of the defined benefit obligation less the fair value of plan assets. The net
defined benefit asset (liability) is included in Other assets and Other liabilities, respectively.
130 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Current service cost reflects the cost of providing post-employment benefits earned by employees in the current period. Current service cost is
calculated as the present value of the benefits attributed to the current year of service and is recognized in the consolidated statement of income.
The current service cost is calculated using a separate discount rate to reflect the longer duration of future benefit payments associated with the
additional year of service to be earned by the plan’s active participants.
Past service costs arising from plan amendments or curtailments are recognized in net income in the period in which they arise.
Net interest income or expense comprises interest income on plan assets and interest expense on the defined benefit obligation. Interest
income is calculated by applying the discount rate to the plan assets, and interest expense is calculated by applying the discount rate to the
defined benefit obligation. Net interest income or expense is recognized in the consolidated statement of income.
Actuarial gains and losses represent changes in the present value of the defined benefit obligation which result from changes in actuarial
assumptions and differences between previous actuarial assumptions and actual experience, and from differences between the actual return on
plan assets and assumed interest income on plan assets. Net actuarial gains and losses are recognized in OCI in the period in which they arise and
are not subject to subsequent reclassification to net income. Cumulative net actuarial gains and losses are included in AOCI.
When the calculation results in a net defined benefit asset, 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). For plans where we do not have an unconditional
right to a refund of surplus, we determine the asset ceiling by reference to future economic benefits available in the form of reductions in future
contributions to the plan, in which case the present value of economic benefits is calculated giving consideration to minimum funding requirements for
future service that apply to the plan. Where a reduction in future contributions to the plan is not currently realizable at the reporting date, we estimate
whether we will have the ability to reduce contributions for future service at some point during the life of the plan by taking into account, among other
things, expected future returns on plan assets. If it is anticipated that we will not be able to recover the value of the net defined benefit asset, after
considering minimum funding requirements for future service, the net defined benefit asset is reduced to the amount of the asset ceiling.
When the payment in the future of minimum funding requirements related to past service would result in a net defined benefit surplus, or an
increase in a net defined benefit surplus, the minimum funding requirements are recognized as a liability to the extent that the surplus would not be
fully available as a refund or a reduction in future contributions. Any funded status surplus is limited to the present value of future economic benefits
available in the form of refunds from the plan or reductions in future contributions to the plan.
Defined contribution plans
Costs for defined contribution plans are recognized during the year in which the service is provided.
Other long-term employee benefits
CIBC sponsors a closed long-term disability plan that is classified as a long-term defined benefit arrangement. As the amount of the long-term
disability benefit does not depend on the length of service, the obligation is recognized when an event occurs that gives rise to an obligation to
make payments. CIBC also offers other medical and dental benefits to employees while on long-term disability.
The amount of other long-term employee benefits is actuarially calculated using the projected unit credit method. Under this method, the
benefit is discounted to determine its present value. The methodology used to determine the discount rate used to value the long-term employee
benefit obligation is consistent with that for pension and other post-employment benefit plans. Actuarial gains and losses and past service costs are
recognized in the consolidated statement of income in the period in which they arise.
Share-based payments
We provide compensation to certain employees and directors in the form of share-based awards.
Compensation expense for share-based awards is recognized from the service commencement date to the earlier of the contractual vesting date
or the employee’s retirement eligible date. For grants regularly awarded in the annual incentive compensation cycle (annual incentive grant), the service
commencement date is considered to be the start of the fiscal year that precedes the fiscal year in which the grant is made. The service commencement
date in respect of special awards granted outside of the annual cycle is the grant date. The amount of compensation expense recognized is based on
management’s best estimate of the number of share-based awards expected to vest, including estimates of expected forfeitures, which are revised
periodically as appropriate. For the annual incentive grant, compensation expense is recognized from the service commencement date based on the
estimated fair value of the forthcoming grant with the estimated fair value adjusted to the actual fair value at the grant date.
Under the Restricted Share Award (RSA) plan, where grants are settled in the cash equivalent of common shares, changes in the obligation
which arise from fluctuations in the market price of common shares, net of related hedges, are recognized in the consolidated statement of income
as compensation expense in proportion to the award recognized.
Under the Performance Share Unit (PSU) plan, where grants are settled in the cash equivalent of common shares, changes in the obligation
which arise from fluctuations in the market price of common shares, and revised estimates of the performance factor, net of related hedges, are
recognized in the consolidated statement of income as compensation expense in proportion to the award recognized. The performance factor
ranges from 75% to 125% of the initial number of units awarded based on CIBC’s performance relative to the other major Canadian banks.
Compensation expense in respect of the Employee Stock Option Plan (ESOP) is based on the grant date fair value. Where the service
commencement date precedes the grant date, compensation expense is recognized from the service commencement date based on the estimated
fair value of the award at the grant date, with the estimated fair value adjusted to the actual fair value at the grant date. Compensation expense
results in a corresponding increase to contributed surplus. If the ESOP award is exercised, the proceeds we receive, together with the amount
recognized in Contributed surplus, are credited to common share capital. If the ESOP award expires unexercised, the compensation expense
remains in Contributed surplus.
As part of our acquisition of Wellington Financial Fund V LP (Wellington Financial) in the first quarter of 2018, equity-settled awards in the form
of exchangeable shares with specific service and non-market performance vesting conditions were issued to selected employees. Compensation
expense in respect of the exchangeable shares is based on the grant date fair value, adjusted for changes in the estimated impact of the non-
market performance conditions.
Compensation in the form of Deferred Share Units (DSUs) issued pursuant to the Deferred Share Unit Plan, the Deferred Compensation Plan
(DCP), and the Directors’ Plan, entitles the holder to receive the cash equivalent of a CIBC common share. At the time DSUs are granted, the related
expense in respect of the cash compensation that an employee or director would otherwise receive would have been fully recognized. Changes in
the obligations which arise from fluctuations in the market price of common shares, net of related hedges, are recognized in the consolidated
statement of income as compensation expense for employee DSUs and as Non-interest expense – Other for Directors’ DSUs.
Our contributions under the Employee Share Purchase Plan (ESPP) are expensed as incurred.
CIBC 2021 ANNUAL REPORT 131
Consolidated financial statements
The impact due to our changes in common share price in respect of cash-settled share-based compensation under the RSA and PSU plans is
hedged through the use of derivatives. We designate these derivatives within cash flow hedge accounting relationships. The effective portion of the
change in fair value of these derivatives is recognized in OCI and is reclassified into compensation expense, within the consolidated statement of
income, over the period that the hedged awards impact the consolidated statement of income. The ineffective portion of the change in fair value of
the hedging derivatives is recognized in the consolidated statement of income immediately as it arises.
Provisions and contingent liabilities
Provisions are liabilities of uncertain timing or amount. A provision is recognized when we have a present legal or constructive obligation as a result
of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The provision is recognized as the best estimate of the amount required to settle the obligation at the reporting date,
taking into account the risk and uncertainties related to the obligation. Where material, provisions are discounted to reflect the time value of money,
and the increase in the obligation due to the passage of time is presented as Interest expense in the consolidated statement of income.
Contingent liabilities are possible obligations that arise from past events whose existence will be confirmed only by the occurrence, or non-
occurrence, of one or more uncertain future events not wholly within the control of CIBC, or are present obligations that have arisen from past events
but are not recognized because it is not probable that settlement will require the outflow of economic benefits.
Provisions and contingent liabilities are disclosed in the consolidated financial statements.
Earnings per share
We present basic and diluted EPS for our common shares.
Basic EPS is computed by dividing net income for the period attributable to CIBC common shareholders by the weighted-average number of
common shares outstanding during the period. The net income attributable to CIBC common shareholders is determined after deducting the after-
tax amount of dividends on preferred shares and distributions on other equity instruments, which are accounted for in retained earnings, from the
net income attributable to equity shareholders.
Diluted EPS is computed by dividing net income for the period attributable to CIBC common shareholders by the weighted-average number of
diluted common shares outstanding for the period. Diluted common shares reflect the potential dilutive effect of contingently issuable shares and
the exercise of stock options based on the treasury stock method. The number of contingently issuable shares included in diluted EPS is based on
the number of shares that would be issuable if the end of the reporting period were the end of the contingency period. For stock options, the
treasury stock method determines the number of incremental common shares by assuming that outstanding stock options, whose exercise price is
less than the average market price of common shares during the period, are exercised and then reduced by the number of common shares
assumed to be repurchased with the exercise proceeds from the assumed exercise of the options. Instruments determined to have an antidilutive
effect for the period are excluded from the calculation of diluted EPS.
Fee and commission income
The recognition of fee and commission income is determined by the purpose of the fee or commission and the terms specified in the contract with
the customer. Revenue is recognized when, or as, a performance obligation is satisfied by transferring control of the service to the customer, in the
amount of the consideration to which we expect to be entitled. Revenue may therefore be recognized at a point in time upon completion of the
service or over time as the services are provided. When revenue is recognized over time, we are generally required to provide the services each
period, such that control of the services is transferred evenly to the customer, and we therefore measure our progress towards completion of the
service based upon the time elapsed. For contracts where the transaction price includes variable consideration, revenue is only recognized to the
extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty
associated with the variable consideration is resolved, which typically occurs by the end of the reporting period. When another party is involved in
providing a service to a customer, we determine whether the nature of our performance obligation is that of a principal or an agent. If we control the
service before it is transferred to the customer, we are acting as the principal and present revenue separately from the amount paid to the other
party; otherwise we are the agent and present revenue net of the amount paid to the other party. Our performance obligations typically have a term
of one year or less, with payment received upon satisfaction of the performance obligation or shortly afterwards, and as a result there is no
significant financing component and we do not typically capitalize the costs of obtaining contracts with our customers. Income which forms an
integral part of the effective interest rate of a financial instrument is recognized as an adjustment to the effective interest rate.
In addition to these general principles, the following specific policies are also applied:
Underwriting and advisory fees are earned on debt and equity securities placements and transaction-based advisory services. Underwriting
fees are typically recognized at the point in time when the transaction is completed. Advisory fees are generally recognized as revenue over the
period of the engagement as the related services are provided or at the point in time when the transaction is completed.
Deposit and payment fees arise from personal and business deposit accounts and cash management services. Monthly and annual fees are
recognized over the period that the related services are provided. Transactional fees are recognized at the point in time when the related services
are provided.
Credit fees consist of loan syndication fees, loan commitment fees, letter of credit fees, banker’s acceptance stamping fees, and securitization
fees. Credit fees are generally recognized over the period that the related services are provided, except for loan syndication fees, which are
typically recognized at the point in time that the financing placement is completed.
Card fees primarily include interchange income, overlimit fees, cash advance fees, and annual fees. Card fees are recognized at the point in
time that the related services are provided, except for annual fees, which are recognized over the 12-month period to which they relate. The cost of
credit card loyalty points is recognized as a reduction of interchange income when the loyalty points are issued for both self-managed and third-
party loyalty points programs. Credit card loyalty point liabilities are recognized for self-managed loyalty point programs and are subject to periodic
remeasurement to reflect the expected cost of redemption as this expectation changes over time.
Commissions on securities transactions include brokerage commissions for transactions executed on behalf of clients, trailer fees and mutual
fund sales commissions. Brokerage commissions and mutual fund sales commissions are generally recognized at the point in time that the related
transaction is executed. Trailer fees are typically calculated based upon the average daily net asset value of the mutual fund units held by clients
and are recognized over time as the related services are provided.
Investment management fees are primarily based on the respective value of the assets under management (AUM) or assets under
administration (AUA) and are recognized over the period that the related services are provided. Investment management fees relating to our asset
management and private wealth management business are generally calculated based on point-in-time AUM balances, and investment
132 CIBC 2021 ANNUAL REPORT
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management fees relating to our retail brokerage business are generally calculated based on point-in-time AUM or AUA balances. Custodial fees
are recognized as revenue over the applicable service period, which is generally the contract term.
Mutual fund fees and administration fees are earned on fund management services and are recognized over the period that the mutual funds
are managed based upon a specified percentage of the daily net asset values of the respective mutual funds. In certain circumstances, CIBC may,
on a discretionary basis, elect to absorb certain expenses that would otherwise be payable by the mutual funds directly. These expenses are
recognized in Non-interest expenses on the consolidated statement of income.
Interest Rate Benchmark Reform
Various interest rate and other indices that are deemed to be “benchmarks” including the London Interbank Offered Rate (LIBOR) are the subject of
international regulatory guidance and proposals for reform. Regulators in various jurisdictions have advocated for the transition from Interbank
Offered Rates (IBORs) to alternative benchmark rates (alternative rates), based upon risk-free rates determined using actual market transactions.
The United Kingdom’s (U.K.’s) Financial Conduct Authority (FCA) originally announced in July 2017 that it would not compel banks to submit LIBOR
rates after December 2021. In March 2021, the FCA and the ICE Benchmark Administration (IBA) announced the dates for the cessation or loss of
representativeness of various LIBOR rates including that the GBP, EUR, CHF and JPY LIBORs will cease on December 31, 2021 and that most USD
LIBOR tenors will cease on June 30, 2023. This announcement results in a fixed spread between the LIBOR rate and the alternative rate for a given
tenor which will apply on the cessation of the relevant LIBOR rates. While the extension for most USD LIBOR tenors until June 30, 2023 allows for
many legacy contracts to mature before the cessation date, originations of new USD LIBOR linked products are expected to cease after the end of
calendar 2021. In June 2021, OSFI announced its expectations for the cessation of IBOR rates, which are consistent with the announcements
previously made by the FCA and IBA. OSFI also expects financial institutions to prioritize system and model updates to accommodate alternative
rates and to be able to transact in alternative rates by the end of 2021. We expect to be compliant with these regulatory expectations.
In an effort to increase the liquidity of swaps indexed to alternative rates and to accelerate the progress of transitioning away from USD LIBOR,
in June 2021, the Alternative Reference Rates Committee (ARRC) endorsed the Secured Overnight Financing Rate (SOFR) First initiative announced
by the Commodity Futures Trading Commission. As a result of this initiative, interdealer brokers are recommended to trade swaps that are indexed to
risk-free rates in place of swaps indexed to LIBOR commencing July 26, 2021. Subsequent to this change in interdealer trading conventions, ARRC
formally recommended the Chicago Mercantile Exchange (CME) Group’s forward-looking SOFR term rate (Term SOFR), which is expected to provide
entities with greater certainty over SOFR based lending rates since term rates are established at the beginning of a contractual interest reset period in
contrast to overnight rates such as SOFR that are reset each day. As a participant in the interdealer broker market, CIBC has the necessary
processes, systems and models to comply with the SOFR First initiative and will continue to monitor the development of Term SOFR as we manage
IBOR transition.
In November 2021, the FCA announced that it will require the LIBOR benchmark administrator to publish certain sterling and Japanese yen
LIBOR settings on a non-representative synthetic basis during 2022, which would allow certain legacy contracts to continue to use certain LIBOR
settings for a limited time period after the December 31, 2021 cessation date. We do not expect the FCA announcement to materially affect our
transition to alternative rates and expect to achieve substantial completion of our remediation of non-USD LIBOR contracts before
December 31, 2021 in a manner consistent with regulatory expectations.
In response to interest rate benchmark reform, the IASB issued “Interest Rate Benchmark Reform: Phase 2 Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4, and IFRS 16” (Phase 2 amendments) in August 2020. These amendments address issues that affect financial reporting once an
existing rate is replaced with an alternative rate and conclude the IASB’s amendments to financial reporting standards due to the effects of interest
rate benchmark reform. While the Phase 2 amendments are effective for annual periods beginning on or after January 1, 2021, we elected to early
adopt the Phase 2 amendments effective November 1, 2020. Only the amendments to the classification and measurement sections of IFRS 9, the
hedge accounting sections of IAS 39 “Financial Instruments: Recognition and Measurement” (IAS 39), and to IFRS 7 “Financial Instruments:
Disclosures”, IFRS 4 “Insurance Contracts”, and IFRS 16 “Leases” apply to us because we elected to continue to apply the hedge accounting
requirements of IAS 39 upon the adoption of IFRS 9 “Financial Instruments” (IFRS 9).
The Phase 2 amendments permit modifications of amortized cost financial assets and financial liabilities, and lessee lease liabilities that are
made as a direct consequence of IBOR reform, and on an economically equivalent basis to be accounted for by updating the effective interest rate
prospectively with no immediate gain or loss recognition. The amendments also provide temporary relief that allows for hedging relationships to
continue upon the replacement of an existing interest rate benchmark with an alternative rate under certain qualifying conditions, including the
amendment of the hedge designation and documentation to reflect the new rate without discontinuing the hedge relationship and provide relief in
establishing new hedging relationships based upon alternative rates. The amendments also provide temporary relief that allows entities to designate
an alternative rate as a risk component to hedge provided that the entity reasonably expects that the alternative rate will become separately
identifiable within 24 months of its first designation. Further relief is also provided for cash flow hedges, where the amounts accumulated in the cash
flow reserve are deemed to be based on the alternative rates on which the hedged future cash flows are determined. As a result of the adoption of the
Phase 2 amendments, we have provided additional disclosures related to our exposures to significant benchmark rates subject to the reform below.
The IASB had previously issued “Interest Rate Benchmark Reform: Amendments to IFRS 9, IAS 39 and IFRS 7” (Phase 1 amendments) in
September 2019. The Phase 1 amendments provide temporary relief for specific hedge accounting requirements to address uncertainties in the
period prior to replacement of IBORs, and provide specific disclosure requirements for the affected hedging relationships. These amendments allow
for hedge accounting to continue before the replacement of existing interest rate benchmark with an alternative rate, and provide an exemption from
the requirement to discontinue hedge accounting if a hedge relationship does not meet the hedge effectiveness requirements solely as a result of
IBOR transition. The application of this relief will end at the earlier of the discontinuation of the impacted hedge relationship and when the uncertainty
arising from the reform is no longer present with respect to the timing and amount of cash flows of the hedged item and hedging instrument, which is
expected to occur on the cessation date of the relevant LIBOR rate. We adopted the Phase 1 amendments effective November 1, 2019.
As IBORs are widely referenced by large volumes of derivative, loan and cash products, the transition presents a number of risks to us, and
the industry as a whole. These transition risks include market risk (as new basis risks emerge), model risk, operational risk (as processes are
changed or newly introduced), legal risk (as contracts are revised) and conduct risk (in ensuring clients are adequately informed/prepared). In
response to the proposed reforms to interest rate benchmarks, we have established an Enterprise IBOR Transition Program (Program), which is
supported by a formal governance structure and dedicated working groups that include stakeholders from frontline businesses as well as functional
groups such as Treasury, Technology and Operations, Risk Management, Legal and Finance, to manage and coordinate all aspects of the
transition, including the identification and mitigation of the risks. An IBOR Steering Committee has been established with responsibility for oversight
and execution of the Program. The IBOR Steering Committee manages the impact of the transition risks through appropriate mitigating actions. We
also continue to engage with industry associations to incorporate recent developments into our project plan. The Program provides regular updates
to the senior management including the Executive Committee, and the Board of Directors.
CIBC 2021 ANNUAL REPORT 133
Consolidated financial statements
As a part of the Program, we are transitioning our existing IBOR based contracts to those that reference the new alternative rates, and have
developed business processes to support the transition. We are on track to substantially complete the remediation of our non-USD LIBOR
referenced contracts by incorporating appropriate fallback language or by replacing the LIBOR referenced rates to the corresponding alternative
rates with appropriate spread adjustments. We have ceased the issuance of GBP and JPY LIBOR linked products earlier this year, and expect to
cease origination of new USD LIBOR products by the end of calendar year 2021 in a manner consistent with regulatory expectations. We are also
working with clearing houses to transition our existing non-USD LIBOR referenced derivatives cleared by them to alternative rates, which is
expected to occur in December 2021. We have also started to offer products based upon alternative rates to our clients, and have continued to
make information available to them, advising on developments on IBOR transition.
The following table presents the approximate notional amounts of our derivatives and the gross outstanding balances of our non-derivative
financial assets and financial liabilities that are indexed to USD LIBOR, GBP LIBOR and other benchmark rates with a maturity date beyond June 30,
2023 for USD LIBOR, and December 31, 2021 for other benchmark rates expected to be affected by IBOR reform.
Notional/gross outstanding amounts (1)(2)(3)
October 31, 2021
November 1, 2020 (4)
(billions of Canadian dollars)
USD LIBOR
GBP LIBOR
Others (5)
USD LIBOR
GBP LIBOR
Others (5)
Maturing after
June 2023
Maturing after
December 2021
Maturing after
June 2023
Maturing after
December 2021
Non-derivative financial assets
Securities
Loans
Non-derivative financial liabilities
Secured borrowing deposits and subordinated
indebtedness
Other deposits
Derivatives
$
1.6
36.9
38.5
0.1
1.0
1.1
735.7
$
– $
–
2.3
2.3
1.1
–
1.1
89.9
–
–
–
–
–
36.8
$
1.9
21.2
23.1
0.1
1.0
1.1
478.5
$
– $
–
2.4
2.4
1.1
–
1.1
70.4
–
–
–
–
–
33.4
(1) Excludes financial instruments which reference rates in multi-rate jurisdictions, including Canadian Dollar Offered Rate (CDOR), Euro Interbank Offered Rate (EURIBOR)
and Australian Bank Bill Swap Rate. While the 6-month and 12-month tenors of CDOR discontinued on May 17, 2021, we did not hold material positions referencing these
tenors as at November 1, 2020. Other tenors of CDOR are expected to continue.
(2) The table excludes undrawn loan commitments. As at October 31, 2021, the total outstanding undrawn loan commitments that are potentially subject to the transition are
estimated to be $47.9 billion (November 1, 2020: $27.7 billion) which can be drawn in USD LIBOR and have a maturity date beyond June 30, 2023 and $1.4 billion
(November 1, 2020: $1.0 billion) which can be drawn in GBP LIBOR and have a maturity date beyond December 31, 2021.
(3) For cross-currency swaps for which both legs reference benchmark rates that are subject to transition, the relevant notional amount for each leg has been included in the
table above.
(4) Certain prior period amounts were restated.
(5) Includes exposures indexed to JPY LIBOR, CHF LIBOR and EUR LIBOR.
International Financial Reporting Interpretations Committee 23 “Uncertainty over Income Tax Treatments” (IFRIC 23)
CIBC adopted IFRIC 23 as at November 1, 2019. IFRIC 23 clarifies the accounting for uncertainties in income taxes. There was no impact to our
consolidated financial statements and no changes in our accounting policies as a result of adopting IFRIC 23.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The Conceptual Framework sets out the fundamental concepts that underlie the preparation and presentation of financial statements and serves to
guide the IASB in developing IFRS standards. The Conceptual Framework is effective for annual periods beginning on or after January 1, 2020. As a
result, CIBC adopted the Conceptual Framework as at November 1, 2020.
There was no impact to our consolidated financial statements and no changes in our accounting policies as a result of adopting the
Conceptual Framework.
134 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 2
Impact of COVID-19
Progress towards containing outbreaks of the COVID-19 pandemic through vaccination campaigns and less restrictive public health measures
provided an improving economic backdrop for CIBC. However, the pandemic, fueled by more contagious variants, continues to pose a risk to the
recovery. As a result, we continue to operate in an uncertain environment. This gives rise to heightened uncertainty as it relates to our critical
accounting estimates and increases the need to apply judgment in evaluating the economic and market environment and its impact on significant
estimates. This particularly impacts estimates relating to the allowance for credit losses. See Note 6 for more information.
A summary of significant accounting policies is presented in Note 1 to the consolidated financial statements. Changes in the judgments and
estimates required in the critical accounting policies discussed below could have a material impact on our financial results. We have established
control procedures to ensure accounting policies are applied consistently and processes for changing methodologies are well controlled.
Government lending programs in response to COVID-19
At the onset of the COVID-19 pandemic, the Government of Canada introduced the Canada Emergency Business Account (CEBA) program and a
number of lending programs to improve access to credit and financing for Canadian businesses facing operational cash flow and liquidity
challenges. In addition, the U.S. federal government introduced the Paycheck Protection Program (PPP) under the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act). Further details about the programs in which we have more significant participation, and the associated
accounting impacts, are described below.
Canada Emergency Business Account program
The purpose of the CEBA program is to provide interest-free, partially forgivable loans of up to $60,000 to qualifying small businesses and not-for-
profit organizations to help cover their operating costs during a period when their revenues have been temporarily reduced. The CEBA program is
underwritten by Export Development Canada (EDC) and was available to borrowers until June 30, 2021. The program utilized the infrastructure of
eligible financial institutions, including CIBC, to provide loans that were partially forgivable to existing clients of these financial institutions, including
CIBC, that met the underwriting standards of EDC. Loans advanced under the CEBA program are not recognized on our consolidated balance
sheet because they are funded by EDC and all of the resulting cash flows and associated risks and rewards, including any exposure to payment
defaults and principal forgiveness, are assumed by EDC. EDC provides a fee to participating financial institutions which is intended to reimburse the
costs associated with administering the loans, which we recognized as a reduction of other non-interest expenses. The CEBA program was
launched in the second quarter of 2020 and expanded subsequently to facilitate the application of the program to certain borrowers that would not
have otherwise qualified. As at October 31, 2021, loans of $4.5 billion (2020: $2.9 billion), net of repayments, had been provided to CIBC clients
under the CEBA program, and the program is now closed to new applicants, although we continue to facilitate this program.
EDC-guaranteed loans and Highly Affected Sectors Credit Availability Program (HASCAP) for small and medium-sized enterprises
Both of these programs are designed to encourage lending to existing clients. Under the EDC-guaranteed loan program, EDC guarantees 80% of
new qualifying operating credit and cash flow term loans of up to $6.25 million to small and medium-sized enterprises. Under HASCAP, Business
Development Bank of Canada (BDC) guarantees 100% of new qualifying term loans for amounts ranging from $25,000 to $1 million. Loans provided
under both programs are recognized on our consolidated balance sheet as business and government loans classified at amortized cost. Similar to
existing guarantee arrangements, the guarantee from EDC and BDC on these loans is reflected in our estimate of ECL. Associated fees paid or
received under these programs are accounted for over the expected life of the loan using the effective interest rate method. As at October 31, 2021,
$293 million (2020: $252 million) of loans have been authorized under these programs, of which $246 million (2020: $175 million), net of repayments,
was outstanding on our consolidated balance sheet.
Co-lending program for small and medium-sized enterprises (co-lend program)
Under the co-lend program, the BDC and participating financial institutions co-lend term loans to help qualifying businesses meet their operational
cash flow requirements. BDC finances 80% of the loans, with CIBC financing the remaining 20%. The program offers differing maximum financing
amounts based on business revenues. Loans originated under this program are interest-only for the first 12 months. We recognize our 20% interest
in loans originated under this program on our consolidated balance sheet as business and government loans classified at amortized cost, to which
ECL are applied. The remaining 80% interest financed by BDC is not recognized on our consolidated balance sheet as the risks and rewards,
including all interest and credit losses, are passed to BDC. The servicing fee paid by BDC to CIBC for administering their share of the loans is
recognized over the servicing period. As at October 31, 2021, $380 million (2020: $368 million) of loans have been authorized under this program,
of which $73 million (2020: $73 million), representing CIBC’s 20% pro-rata share, remains outstanding on our consolidated balance sheet.
Paycheck Protection Program
In the U.S., the PPP was temporarily added to the U.S. Small Business Administration’s (SBA) Loan Program, under the U.S. federal government’s
CARES Act, to help businesses to keep their workforces employed during the COVID-19 pandemic. The PPP ended on May 31, 2021 for new loan
applications. Loans provided under the PPP are forgivable by the SBA if employee and compensation levels are maintained, and the loan proceeds
are primarily applied towards payroll, rent, mortgage interest, or utilities. The SBA reimburses CIBC for all loans forgiven pursuant to the program
and for all payment defaults. Loans originated under the PPP are recognized on our consolidated balance sheet as business and government loans
classified at amortized cost. As the SBA’s guarantee is integral to the origination of these loans, it is reflected in our estimate of the ECL associated
with these loans. As at October 31, 2021, the outstanding balance of loans provided to our clients under this program was US$0.5 billion
(2020: US$1.9 billion).
CIBC 2021 ANNUAL REPORT 135
Consolidated financial statements
Note 3
Fair value measurement
This note presents the fair values of financial instruments and explains how we determine those values. Note 1, “Basis of preparation and summary
of significant accounting policies”, sets out the accounting treatment for each measurement category of financial instruments.
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, between market participants in an orderly
transaction in the principal market at the measurement date under current market conditions (i.e., the exit price). The determination of fair value
requires judgment and is based on market information, where available and appropriate. Fair value measurements are categorized into three levels
within a fair value hierarchy (Level 1, 2 or 3) based on the valuation inputs used in measuring the fair value, as outlined below.
Level 1 – Unadjusted quoted market prices in active markets for identical assets or liabilities we can access at the measurement date. Bid
prices, ask prices or prices within the bid and ask, which are the most representative of the fair value, are used as appropriate to measure fair
value. Fair value is best evidenced by an independent quoted market price for the same instrument in an active market. An active market is
one where transactions are occurring with sufficient frequency and volume to provide quoted prices on an ongoing basis.
Level 2 – Quoted prices for identical assets or liabilities in markets that are inactive or observable market quotes for similar instruments, or use
of valuation techniques where all significant inputs are observable. Inactive markets may be characterized by a significant decline in the
volume and level of observed trading activity or through large or erratic bid/offer spreads. In instances where traded markets do not exist or
are not considered sufficiently active, we measure fair value using valuation models.
Level 3 – Non-observable or indicative prices or use of valuation techniques where one or more significant inputs are non-observable.
For a significant portion of our financial instruments, quoted market prices are not available because of the lack of traded markets, and even where
such markets do exist, they may not be considered sufficiently active to be used as a final determinant of fair value. When quoted market prices in
active markets are not available, we would consider using valuation models. The valuation model and technique we select maximizes the use of
observable market inputs to the extent possible and appropriate in order to estimate the price at which an orderly transaction would take place at
the measurement date. In an inactive market, we consider all reasonably available information, including any available pricing for similar
instruments, recent arm’s-length market transactions, any relevant observable market inputs, indicative dealer or broker quotations, and our own
internal model-based estimates.
Valuation adjustments are an integral component of our fair valuation process. We apply judgment in establishing valuation adjustments that
take into account various factors that may have an impact on the valuation. Such factors primarily include, but are not limited to, the bid-offer
spreads, illiquidity due to lack of market depth, parameter uncertainty and other market risk, model risk and credit risk of our derivative assets and
liabilities, as well as adjustments for valuing our uncollateralized derivative assets and liabilities based on an estimated market cost of funds curve.
Generally, the unit of account for a financial instrument is the individual instrument, and valuation adjustments are applied at an individual
instrument level, consistent with that unit of account. In cases where we manage a group of financial assets and liabilities that consist of substantially
similar and offsetting risk exposures, the fair value of the group of financial assets and liabilities is measured on the basis of the net open risks.
We apply judgment in determining the most appropriate inputs and the weighting we ascribe to each such input as well as in our selection of
valuation methodologies. Regardless of the valuation technique we use, we incorporate assumptions that we believe market participants would
make for credit, funding, and liquidity considerations. When the fair value of a financial instrument at inception is determined using a valuation
technique that incorporates one or more significant inputs that are non-observable, no inception profit or loss (the difference between the
determined fair value and the transaction price) is recognized at the time the asset or liability is initially recorded. Any gains or losses at inception
are deferred and recognized only in future periods over the term of the instruments or when the inputs become significantly observable.
We have an ongoing process for evaluating and enhancing our valuation techniques and models. Where enhancements are made, they are
applied prospectively, so that fair values reported in prior periods are not recalculated on the new basis. Valuation models used, including analytics
for the construction of yield curves and volatility surfaces, are vetted and approved, consistent with our model risk policy.
To ensure that valuations are appropriate, we have established internal guidance on fair value measurement, which is reviewed periodically in
recognition of the dynamic nature of markets and the constantly evolving pricing practices in the market. A number of policies and controls are put
in place to ensure that the internal guidance on fair value measurement is being applied consistently and appropriately, including independent
validation of valuation inputs to external sources such as exchange quotes, broker quotes or other management-approved independent pricing
sources. Key model inputs, such as yield curves and volatilities, are independently verified. The results from the independent price validation and
any valuation adjustments are reviewed by the Independent Price Verification Committee on a monthly basis. This includes, but is not limited to,
reviewing fair value adjustments and methodologies, independent price verification results, limits and valuation uncertainty.
Due to the judgment used in applying a wide variety of acceptable valuation techniques and models, as well as the use of estimates inherent
in this process, estimates of fair value for the same or similar assets may differ among financial institutions. The calculation of fair value is based on
market conditions as at each consolidated balance sheet date and may not be reflective of ultimate realizable value.
Methods and assumptions
Financial instruments with fair value equal to carrying value
For financial instruments that are not carried on the consolidated balance sheet at fair value and where we consider the carrying value to be a
reasonable approximation of fair value due to their short-term nature and generally negligible credit risk, the fair values disclosed for these financial
instruments are assumed to equal their carrying values. These financial instruments are: cash and non-interest-bearing deposits with banks; short-
term interest-bearing deposits with banks; cash collateral on securities borrowed; securities purchased under resale agreements; customers’
liability under acceptances; cash collateral on securities lent; obligations related to securities sold under repurchase agreements; acceptances;
deposits with demand features; and certain other financial assets and liabilities.
Securities
The fair value of debt or equity securities and obligations related to securities sold short is based on quoted bid or ask market prices where
available in an active market.
Securities for which quotes in an active market are not available are valued using all reasonably available market information as described below.
The fair value of government issued or guaranteed securities that are not traded in an active market is calculated by applying valuation
techniques such as discounted cash flow models using implied yields derived from the prices of actively traded government securities and most
recently observable spread differentials.
The fair value of corporate debt securities is determined using the most recently executed transaction prices, and where appropriate, adjusted
to the price of these securities obtained from independent dealers, brokers, and third-party multi-contributor consensus pricing sources. When
observable price quotations are not available, fair value is determined based on discounted cash flow models using observable discounting curves
136 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
such as benchmark and government yield curves and spread differentials observed through independent dealers, brokers, and third-party multi-
contributor consensus pricing sources.
Asset-backed securities (ABS) and mortgage-backed securities (MBS) not issued or guaranteed by a government are valued using
discounted cash flow models making maximum use of market observable inputs, such as broker quotes on identical or similar securities and other
pricing information obtained from third-party pricing sources adjusted for the characteristics and the performance of the underlying collateral. Other
key inputs used include prepayment and liquidation rates, credit spreads, and discount rates commensurate with the risks involved. These
assumptions factor in information that is derived from actual transactions, underlying reference asset performance, external market research, and
market indices, where appropriate.
Privately issued debt and equity securities, which include certain Community Reinvestment Act equity investments and Federal Home Loan
Bank (FHLB) stock, are valued using recent market transactions, where available. Otherwise, fair values are derived from valuation models using a
market or income approach. These models consider various factors, including projected cash flows, earnings, revenue or 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 and is
adjusted for more recent information, where available and appropriate. The carrying value of Community Reinvestment Act equity investments and
FHLB stock approximates fair value.
Loans
The fair value of variable-rate loans and loans for which interest rates are repriced or reset frequently is assumed to be equal to their carrying value.
The fair value for fixed-rate loans is estimated using a discounted cash flow calculation that uses market interest rates.
The ultimate fair value of loans disclosed is net of the associated allowance for credit losses. The fair value of loans is not adjusted for the
value of any credit derivatives used to manage the credit risk associated with them. The fair value of these credit derivatives is disclosed separately.
Other assets and other liabilities
Other assets and other liabilities mainly comprise accrued interest receivable or payable, brokers’ client accounts receivable or payable, precious
metals and accounts receivable or payable.
The fair values of other assets and other liabilities are primarily assumed to be at cost or amortized cost as we consider the carrying value to be a
reasonable approximation of fair value, except for the fair value of precious metals, which is quoted in an active market. Other assets also include
investment in bank-owned life insurance carried at the cash surrender value, which is assumed to be a reasonable approximation of fair value.
Deposits
The fair values of floating-rate deposits and demand deposits are assumed to be equal to their amortized cost. The fair value of fixed-rate deposits
is determined by discounting the contractual cash flows using either current market interest rates with similar remaining terms or rates estimated
using internal models and broker quotes. The fair value of deposit notes issued to CIBC Capital Trust is determined by reference to the quoted
market prices of CIBC Tier 1 Notes – Series B issued by CIBC Capital Trust. The fair value of deposit liabilities with embedded optionality includes
the fair value of those options. The fair value of equity- and commodity-linked notes includes the fair value of embedded equity and commodity
derivatives.
Certain deposits designated at FVTPL are structured notes that have coupons or repayment terms linked to the performance of commodities,
debt or equity securities. The fair value of these structured notes is estimated using internally vetted valuation models for the debt and embedded
derivative portions of the notes by incorporating market observable prices of the referenced securities or comparable securities, and other inputs
such as interest rate yield curves, equity prices or indices, market volatility levels, foreign exchange rates and changes in our own credit risk, where
appropriate. Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing other
relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation and interpolation
techniques. Appropriate market risk valuation adjustments for such inputs are assessed in all such instances.
The fair value of secured borrowings, which comprises liabilities issued by or as a result of activities associated with the securitization of
residential mortgages, the Covered Bond Programme, and consolidated securitization vehicles, is based on identical or proxy market observable
quoted bond prices or determined by discounting the contractual cash flows using maximum market observable inputs, such as market interest
rates, or credit spreads implied by debt instruments of similar credit quality, as appropriate.
Subordinated indebtedness
The fair value of subordinated indebtedness is determined by reference to market prices for the same or similar debt instruments.
Derivative instruments
The fair value of exchange-traded derivatives such as options and futures is based on quoted market prices. OTC derivatives primarily consist of interest
rate swaps, foreign exchange forwards, equity and commodity derivatives, interest rate and currency derivatives, and credit derivatives. For such
instruments, where quoted market prices or third-party consensus pricing information are not available, valuation techniques are employed to estimate
fair value on the basis of pricing models. Such vetted pricing models incorporate current market measures for interest rates, foreign exchange rates,
equity and commodity prices and indices, credit spreads, corresponding market volatility levels, and other market-based pricing factors.
In order to reflect the observed market practice of pricing collateralized and uncollateralized derivatives, our valuation approach uses
overnight indexed swap (OIS) curves as the discount rate for valuing collateralized derivatives and uses an estimated market cost of funds curve as
the discount rate for valuing uncollateralized derivatives. For most collateralized derivatives that are cleared through central clearing houses,
changes to market discounting conventions were implemented in 2020 to support the global market efforts to transition IBOR to the new benchmark
rates. Certain centrally cleared collateralized derivatives have transitioned to the use of the new benchmark replacement rates as the overnight
index discount rates, including USD derivatives cleared through London Clearing House (LCH) or Chicago Mercantile Exchange (CME), which have
transitioned their discounting from the US Fed Funds rate to the SOFR. Uncollateralized derivatives are valued based on an estimated market cost of
funds curve, which reduces the fair value of uncollateralized derivative assets incremental to the reduction in fair value for credit risk already
reflected through the credit valuation adjustment (CVA). In contrast, the use of a market cost of funds curve reduces the fair value of uncollateralized
derivative liabilities in a manner that generally includes adjustments for our own credit. As market practices continue to evolve in regard to derivative
valuation, further adjustments may be required in the future.
In determining the fair value of complex and customized derivatives, such as equity, credit, and commodity derivatives written in reference to
indices or baskets of reference, we consider all reasonably available information including any relevant observable market inputs, third-party
consensus pricing inputs, indicative dealer and broker quotations, and our own internal model-based estimates, which are vetted and pre-approved
in accordance with our model risk policy, and are regularly and periodically calibrated. The 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 volatility
surfaces. Where observable prices or inputs are not available, management judgment is required to determine fair values by assessing other
CIBC 2021 ANNUAL REPORT 137
Consolidated financial statements
relevant sources of information such as historical data, proxy information from similar transactions, and through extrapolation and interpolation
techniques. Appropriate parameter uncertainty and market risk valuation adjustments for such inputs and other model risk valuation adjustments are
assessed in all such instances.
In addition to reflecting estimated market funding costs in our valuation of uncollateralized derivative receivables, we also consider whether a
CVA is required to recognize the risk that any given derivative counterparty may not ultimately be able to fulfill its obligations. The CVA is driven off
market-observed credit spreads or proxy credit spreads and our assessment of the net counterparty credit risk (CCR) exposure. In assessing this
exposure, we also take into account credit mitigants such as collateral, master netting arrangements, and settlements through clearing houses. As
noted above, the fair value of uncollateralized derivative liabilities based on market cost of funding generally includes adjustments for our own credit.
Mortgage commitments
The fair value of mortgage commitments designated at FVTPL is for fixed-rate residential mortgage commitments and is based on changes in
market interest rates for the loans between the commitment and the consolidated balance sheet dates. The valuation model takes into account the
expected probability that outstanding commitments will be exercised as well as the length of time the commitment is offered.
Fair value of financial instruments
$ millions, as at October 31
2021 Financial assets
Carrying value
Amortized
cost
Mandatorily
measured
at FVTPL
Designated
at FVTPL
Fair value
through
OCI
Cash and deposits with banks
Securities
Cash collateral on securities borrowed
Securities purchased under resale agreements
Loans
$
56,701 $
35,159
12,368
60,482
296
72,192
–
7,090
$
– $
53
–
–
–
–
–
332
–
–
–
251,230
41,129
10,509
123,054
–
10,958
21,054
16
–
–
25,651
35,912
–
–
$ 205,461 $
334,632
20,246
41,539
–
10,961
–
2,463
–
–
–
–
32,101
–
22,790
–
$ 8,471 $
9,756
–
1,053
–
–
–
–
67,905
16,854
5,539
–
113
–
3,975
51
–
$
– $
117
–
–
–
–
–
357
–
–
–
220,739
41,390
10,722
110,220
–
9,606
15,940
63
–
–
23,291
32,730
–
–
$ 199,593 $
301,546
17,011
39,560
–
9,649
–
1,824
–
–
–
–
30,508
–
15,963
–
$ 2,559 $
9,880
–
591
–
–
–
–
54,617
15,282
5,712
–
133
–
17,036
9
–
–
53,997
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
54,553
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
$
56,997 $
161,401
12,368
67,572
251,246
41,129
10,509
149,037
35,912
10,958
21,054
Fair
value
Fair value
over (under)
carrying value
56,997
161,712
12,368
67,572
249,786
41,114
10,509
148,960
35,912
10,958
21,054
$
–
311
–
–
(1,460)
(15)
–
(77)
–
–
–
$ 213,932 $ 213,949
345,533
20,246
42,838
32,101
10,961
22,790
2,463
344,388
20,246
42,592
32,101
10,961
22,790
2,463
71,880
17,018
5,539
$
62,518 $
149,046
8,547
65,595
220,802
41,390
10,722
133,868
32,730
9,606
15,940
71,880
17,018
5,820
62,518
149,599
8,547
65,595
222,920
41,452
10,722
134,097
32,730
9,606
15,940
$ 202,152 $ 202,345
312,279
17,011
40,586
30,508
9,649
15,963
1,824
311,426
17,011
40,151
30,508
9,649
15,963
1,824
71,653
15,424
5,712
71,653
15,424
5,993
$
$
$
17
1,145
–
246
–
–
–
–
–
–
281
–
553
–
–
2,118
62
–
229
–
–
–
193
853
–
435
–
–
–
–
–
–
281
Residential mortgages
Personal
Credit card
Business and government
Derivative instruments
Customers’ liability under acceptances
Other assets
Financial liabilities
Deposits
Personal
Business and government
Bank
Secured borrowings
Derivative instruments
Acceptances
Obligations related to securities sold short
Cash collateral on securities lent
Obligations related to securities sold under
repurchase agreements
Other liabilities
Subordinated indebtedness
Residential mortgages
Personal
Credit card
Business and government
Derivative instruments
Customers’ liability under acceptances
Other assets
Financial liabilities
Deposits
Personal
Business and government
Bank
Secured borrowings
Derivative instruments
Acceptances
Obligations related to securities sold short
Cash collateral on securities lent
Obligations related to securities sold under
repurchase agreements (1)
Other liabilities
Subordinated indebtedness
2020 Financial assets
Cash and deposits with banks
Securities
Cash collateral on securities borrowed
Securities purchased under resale agreements
Loans
$
61,570 $
31,800
8,547
58,090
948
62,576
–
7,505
(1) Includes obligations related to securities sold under repurchase agreements supported by bearer deposit notes that are pledged as collateral under the Bank of Canada
Term Repo Facility.
138 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Fair value of derivative instruments
$ millions, as at October 31
Held for trading
Interest rate derivatives
Over-the-counter
– Forward rate agreements
– Swap contracts
– Purchased options
– Written options
$
Exchange-traded
– Purchased options
Total interest rate derivatives
Foreign exchange derivatives
Over-the-counter
– Forward contracts
– Swap contracts
– Purchased options
– Written options
Total foreign exchange derivatives
Credit derivatives
Over-the-counter
– Credit default swap contracts –
protection purchased
– Credit default swap contracts –
protection sold
Total credit derivatives
Equity derivatives
Over-the-counter
Exchange-traded
Total equity derivatives
Precious metal derivatives
Over-the-counter
Total precious metal derivatives
Other commodity derivatives
Over-the-counter
Exchange-traded
Total other commodity derivatives
Total held for trading
Held for ALM
Interest rate derivatives
Over-the-counter
– Forward rate agreements
– Swap contracts
– Purchased options
– Written options
Total interest rate derivatives
Foreign exchange derivatives
Over-the-counter
– Forward contracts
– Swap contracts
Total foreign exchange derivatives
– Credit default swap contracts –
protection purchased
Credit derivatives
Over-the-counter
Total credit derivatives
Equity derivatives
Over-the-counter
Total equity derivatives
Other commodity derivatives
Over-the-counter
Total other commodity derivatives
Total held for ALM
Total fair value
Less: effect of netting
Positive
Negative
$
127
8,365
101
–
8,593
3
3
$
79
7,928
–
177
8,184
–
–
2021
Net
48
437
101
(177)
409
3
3
Positive
Negative
$
$
108
12,296
109
–
12,513
4
4
$
161
9,309
–
129
9,599
–
–
2020
Net
(53)
2,987
109
(129)
2,914
4
4
8,596
8,184
412
12,517
9,599
2,918
5,373
5,214
293
–
10,880
50
3
53
1,842
4,650
6,492
132
132
8,151
343
8,494
5,555
3,600
–
203
9,358
58
45
103
5,356
3,422
8,778
147
147
2,348
1,122
3,470
34,647
30,040
148
236
6
–
390
22
805
827
–
–
48
48
–
–
37
341
–
–
378
40
1,641
1,681
1
1
1
1
–
–
(182)
1,614
293
(203)
1,522
(8)
(42)
(50)
(3,514)
1,228
(2,286)
(15)
(15)
5,803
(779)
5,024
4,607
111
(105)
6
–
12
(18)
(836)
(854)
(1)
(1)
47
47
–
–
6,655
3,469
303
–
6,358
3,613
–
214
10,427
10,185
104
2
106
1,995
3,153
5,148
283
283
2,604
271
2,875
47
100
147
3,427
3,537
6,964
366
366
1,806
325
2,131
297
(144)
303
(214)
242
57
(98)
(41)
(1,432)
(384)
(1,816)
(83)
(83)
798
(54)
744
31,356
29,392
1,964
–
310
17
1
328
14
1,021
1,035
–
–
8
8
3
3
1
392
–
–
393
14
684
698
1
1
24
24
–
–
(1)
(82)
17
1
(65)
–
337
337
(1)
(1)
(16)
(16)
3
3
258
2,222
–
1,265
35,912
(16,585)
2,061
32,101
(16,585)
(796)
3,811
–
1,374
1,116
32,730
(19,347)
30,508
(19,347)
$
19,327
$
15,516
$
3,811
$ 13,383
$ 11,161
$ 2,222
CIBC 2021 ANNUAL REPORT 139
Consolidated financial statements
Assets and liabilities not carried on the consolidated balance sheet at fair value
The table below presents the fair values by level within the fair value hierarchy for those assets and liabilities in which fair value is not assumed to
equal the carrying value:
$ millions, as at October 31
Financial assets
Amortized cost securities
Loans
Residential mortgages
Personal
Credit card
Business and government
Investment in equity-accounted associates (1)
Financial liabilities
Deposits
Personal
Business and government
Bank
Secured borrowings
Subordinated indebtedness
Level 1
Level 2
Level 3
Quoted market price
Valuation technique –
observable market inputs
Valuation technique –
non-observable market inputs
2021
2020
2021
2020
2021
2020
Total
2021
Total
2020
$ –
$
–
$
34,878 $
31,773
$
592
$
580
$
35,470 $
32,353
–
–
–
–
–
$
$ –
–
–
–
–
–
–
–
–
10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
249,770
41,114
10,509
122,977
89
222,857
41,452
10,722
110,449
83
249,770
41,114
10,509
122,977
89
222,857
41,452
10,722
110,449
93
$
42,015 $
146,442
9,751
40,050
5,820
52,648
132,016
10,048
38,275
5,993
$
$
1,107
2,222
–
1,735
–
1,282
2,302
–
1,720
–
$
43,122 $
148,664
9,751
41,785
5,820
53,930
134,318
10,048
39,995
5,993
(1) See Note 26 for details of our equity-accounted associates.
Financial instruments carried on the consolidated balance sheet at fair value
The table below presents the fair values of financial instruments by level within the fair value hierarchy:
$ millions, as at October 31
Financial assets
Deposits with banks
Securities mandatorily measured and
designated at FVTPL
Government issued or guaranteed
Corporate equity
Corporate debt
Mortgage- and asset-backed
Loans mandatorily measured at FVTPL
Business and government
Residential mortgages
Debt securities measured at FVOCI
Government issued or guaranteed
Corporate debt
Mortgage- and asset-backed
Equity securities designated at FVOCI
Corporate equity
Securities purchased under resale agreements
measured at FVTPL
Derivative instruments
Interest rate
Foreign exchange
Credit
Equity
Precious metal
Other commodity
Total financial assets
Financial liabilities
Deposits and other liabilities (4)
Obligations related to securities sold short
Obligations related to securities sold under
repurchase agreements
Derivative instruments
Interest rate
Foreign exchange
Credit
Equity
Precious metal
Other commodity
Total financial liabilities
$
$
$
Level 1
Level 2
Level 3
Quoted market price
Valuation technique –
observable market inputs
2021
2020
2021
2020
Valuation technique –
non-observable market inputs
2020
2021
Total
2021
Total
2020
$
– $
–
$
296 $
948
$
–
$
–
$
296 $
948
3,015
37,981
–
–
40,996
–
–
–
5,309
–
–
5,309
125
125
–
3,917
27,919
–
–
31,836
–
–
–
3,912
–
–
3,912
41
41
–
24,737 (1)
219
3,997
2,235 (2)
31,188
25,091 (1)
47
3,525
2,018 (2)
30,681
24,945
16
24,961
38,122
7,833
1,897
47,852
319
319
23,022
63
23,085
41,269
6,224
2,563
50,056
304
304
7,090
7,505
3
–
–
4,650
–
343
4,996
4
–
–
3,153
–
271
3,428
51,426 $ 39,217
8,948
11,707
4
1,877
132
8,151
30,819
12,793
11,462
8
1,791
283
2,607
28,944
$ 142,525 $ 141,523
– $
(11,226)
–
(5,363)
$
(18,702) $
(11,564)
(13,176)
(10,600)
$
$
–
4
2
55
61
1,038 (3)
–
1,038
–
–
–
–
392
392
–
35
–
49
13
–
–
97
1,588
–
16
25
135
176
626 (3)
–
626
–
–
–
–
240
240
–
48
–
98
212
–
–
358
$ 1,400
(742)
–
$
–
–
(3,975)
(17,036)
–
–
–
–
(3,422)
–
(1,122)
(4,544)
(15,770) $
–
–
–
(3,537)
–
(325)
(3,862)
(9,225) $
(8,426)
(11,039)
(50)
(5,280)
(147)
(2,348)
(27,290)
(61,531) $
(9,964)
(10,883)
(41)
(3,288)
(366)
(1,806)
(26,348)
(67,160)
(136)
–
(54)
(77)
–
–
(267)
(1,009)
$
$
4
–
–
(28)
–
(107)
(163)
–
–
(298)
(294)
27,752
38,204
3,999
2,290
72,245
25,983
16
25,999
43,431
7,833
1,897
53,161
836
836
29,008
27,982
3,550
2,153
62,693
23,648
63
23,711
45,181
6,224
2,563
53,968
585
585
7,090
7,505
8,986
11,707
53
6,540
132
8,494
35,912
12,845
11,462
106
5,156
283
2,878
32,730
$ 195,539 $ 182,140
$
(19,444) $
(22,790)
(13,172)
(15,963)
(3,975)
(17,036)
(8,562)
(11,039)
(104)
(8,779)
(147)
(3,470)
(32,101)
(78,310) $
(9,992)
(10,883)
(148)
(6,988)
(366)
(2,131)
(30,508)
(76,679)
$
(1) Includes $49 million related to securities designated at FVTPL (2020: $57 million).
(2) Includes $4 million related to ABS designated at FVTPL (2020: $60 million).
(3) Includes $332 million related to loans designated at FVTPL (2020: $357 million).
(4) Comprises deposits designated at FVTPL of $18,530 million (2020: $13,419 million), net bifurcated embedded derivative liabilities of $750 million (2020: net bifurcated
embedded derivative assets of $389 million), other liabilities designated at FVTPL of $51 million (2020: $9 million), and other financial liabilities measured at fair value of
$113 million (2020: $133 million).
140 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Transfers between levels in the fair value hierarchy are deemed to have occurred at the beginning of the year in which the transfer occurred.
Transfers between levels can occur as a result of additional or new information regarding valuation inputs and changes in their observability. During
the year, we transferred $19 million of securities mandatorily measured at FVTPL (2020: $197 million) from Level 1 to Level 2 and $2 million (2020:
nil) from Level 2 to Level 1, and nil of securities sold short (2020: $1,851 million) from Level 1 to Level 2 and nil of securities sold short (2020: nil)
from Level 2 to Level 1 due to changes in the observability of the inputs used to value these securities. In addition, transfers between Level 2 and
Level 3 were made during 2021 and 2020, primarily due to changes in the assessment of the observability of certain correlation, market volatility
and probability inputs that were used in measuring the fair value of our fair value option liabilities and derivatives.
The following table presents the changes in fair value of financial assets and liabilities in Level 3. These instruments are measured at fair value
utilizing non-observable market inputs. We often hedge positions with offsetting positions that may be classified in a different level. As a result, the
gains and losses for assets and liabilities in the Level 3 category presented in the table below do not reflect the effect of offsetting gains and losses
on the related hedging instruments that are classified in Level 1 and Level 2.
$ millions, for the year ended October 31
2021
Securities mandatorily measured and designated at FVTPL
Corporate equity
Corporate debt
Mortgage- and asset-backed
Loans mandatorily measured at FVTPL
Business and government
Equity securities designated at FVOCI
Corporate equity
Derivative instruments
Interest rate
Credit
Equity
Total assets
Deposits and other liabilities (5)
Derivative instruments
Interest rate
Credit
Equity
Total liabilities
2020
Securities mandatorily measured and designated at FVTPL
Corporate equity
Corporate debt
Mortgage- and asset-backed
Loans mandatorily measured at FVTPL
Business and government
Debt securities measured at FVOCI
Corporate debt
Equity securities designated at FVOCI
Corporate equity
Derivative instruments
Interest rate
Credit
Equity
Total assets
Deposits and other liabilities (5)
Derivative instruments
Interest rate
Credit
Equity
Total liabilities
Net gains (losses)
included in income (1)
Opening
balance Realized (2) Unrealized (2)(3)
Net
gains (losses)
included in OCI (4)
Transfer
in to
Level 3
Transfer
out of
Level 3
Purchases/
Issuances
Sales/
Settlements
Closing
balance
$
$
16
25
135
626
240
48
98
212
$
–
–
–
–
–
–
(22)
(3)
$ 1,400
$
(25)
$
4
$ (340)
$
$
(28)
(107)
(163)
–
22
(41)
(5)
13
–
(3)
–
1
(27)
2
(19)
(541)
(28)
34
(6)
$
(294)
$ (359)
$
(541)
$
$
7
23
173
831
–
291
56
104
252
$ 1,737
$
(601)
$
$
(1)
(112)
(155)
$
(869)
$
–
–
–
–
–
–
–
(7)
–
(7)
–
–
7
–
7
$
$
$
(8)
2
–
–
–
–
32
1
(40)
(13)
512
(33)
(2)
14
$
491
$
$
$
$
$
$
$
$
–
–
–
(51)
80
–
–
–
29
–
–
–
–
–
–
–
–
3
(3)
63
–
–
–
63
–
–
–
–
_
$
$
$
–
–
–
–
–
–
–
–
–
$
$
–
–
–
–
–
(2)
–
(32)
23
2
44
556
137
3
–
10
$
(34) $
775
(15) $
(14) $
(93)
$
(30) $
(38)
(124)
4
2
55
(90)
1,038
(65)
392
(15)
–
(176)
35
49
13
$
$
(538) $
1,588
257
$
(742)
(26)
–
–
(6)
–
58
(31)
–
(69)
(17)
(3)
144
(136)
(54)
(77)
$
(41) $
38
$
(193)
$
381
$
(1,009)
$
7
–
–
–
20
–
–
–
–
27
$
–
–
–
–
–
–
–
–
–
–
$
$
$
$
$
10
–
118
$
–
–
(156)
1,270
(1,478)
1
50
6
–
53
$ 1,508
(18)
(164)
(46)
–
(53)
16
25
135
626
–
240
48
98
212
(42) $
29
$
(72)
$
$
(1,915) $
1,400
178
$
4
–
–
–
–
–
–
–
–
(60)
6
–
38
(28)
(107)
(163)
$
(42) $
29
$
(132)
$
222
$
(294)
(1) Cumulative AOCI gains or losses related to equity securities designated at FVOCI are reclassified from AOCI to retained earnings at the time of disposal or derecognition.
(2) Includes foreign currency gains and losses related to debt securities measured at FVOCI.
(3) Comprises unrealized gains and losses relating to these assets and liabilities held at the end of the reporting year.
(4) Foreign exchange translation on loans mandatorily measured at FVTPL held by foreign operations and denominated in the same currency as the foreign operations is
included in OCI.
(5) Includes deposits designated at FVTPL of $90 million (2020: $137 million), net bifurcated embedded derivative liabilities of $601 million (2020: net bifurcated embedded
derivative assets of $141 million) and other liabilities designated at FVTPL of $51 million (2020: nil).
CIBC 2021 ANNUAL REPORT 141
Consolidated financial statements
Quantitative information about significant non-observable inputs
Valuation techniques using one or more non-observable inputs are used for a number of financial instruments. The following table discloses the
valuation techniques and quantitative information about the significant non-observable inputs used in Level 3 financial instruments:
$ millions, as at October 31
Securities mandatorily measured and
designated at FVTPL
Corporate equity and debt
Mortgage- and asset-backed
2021
Valuation techniques
Key non-observable inputs
Low
High
Range of inputs
$
6
55
Earnings multiple
Credit spread
Market proxy or direct broker quote Market proxy or direct broker quote
Valuation multiple
Discounted cash flow
11.6
11.6
2.0 %
0.5
2.0 %
0.5
Equity securities designated at FVOCI
Corporate equity
Limited partnerships and private
companies
Loans mandatorily measured at FVTPL
Business and government
Derivative instruments
Interest rate
Credit
Equity
Total assets
$
392
Adjusted net asset value (1)
Valuation multiple
Proxy share price
Net asset value (3)
Earnings multiple
Proxy share price
n/a
8.6 x
n/a
n/a
10.6 x
n/a
1,038
Discounted cash flow
Credit spread
0.6 %
2.1 %
35
Proprietary model (2)
n/a
Market volatility
Probability assumption
49 Market proxy or direct broker quote Market proxy or direct broker quote
13
Market correlation
1,588
Option model
Option model
n/a
47.1 %
100.0 %
– %
33.9 %
n/a
90.2 %
100.0 %
40.6 %
92.0 %
Deposits and other liabilities
Deposits designated at FVTPL and
net bifurcated embedded derivative
liabilities
$
(691)
Other liabilities designated at FVTPL
(51)
Option model
Option model
Market volatility
Market correlation
Funding ratio
9.0 %
(18.0) %
32.7 %
18.6 %
100.0 %
32.7 %
Derivative instruments
Interest rate
Credit
Equity
Total liabilities
$
(136)
Proprietary model (2)
n/a
Market volatility
Probability assumption
(54) Market proxy or direct broker quote Market proxy or direct broker quote
(77)
Market correlation
(1,009)
Option model
Option model
n/a
47.1 %
100.0 %
– %
27.1 %
n/a
90.3 %
100.0 %
40.6 %
97.8 %
(1) Adjusted net asset value is determined using reported net asset values obtained from the fund manager or general partner of the limited partnership or the limited liability
company and may be adjusted for current market levels where appropriate.
(2) Using valuation techniques that we consider to be non-observable.
(3) The range of net asset value price or proxy share price has not been disclosed due to the wide range and diverse nature of the investments.
n/a Not applicable.
Sensitivity of Level 3 financial assets and liabilities
The following section describes the significant non-observable inputs identified in the table above, the interrelationships between those inputs,
where applicable, and the change in fair value if changing one or more of the non-observable inputs within a reasonably possible range would
impact the fair value significantly.
The fair value of our limited partnerships is determined based on the net asset value provided by the fund managers, adjusted as appropriate.
The fair value of limited partnerships is sensitive to changes in the net asset value, and by adjusting the net asset value within a reasonably possible
range, the aggregate fair value of our limited partnerships would increase or decrease by $90 million (2020: $63 million).
While our standalone derivatives are recorded as derivative assets or derivative liabilities, our derivatives embedded in our structured note deposit
liabilities or deposit liabilities designated at FVTPL are recorded within deposits and other liabilities. The determination of the fair value of certain Level 3
embedded derivatives and certain standalone derivatives requires significant assumptions and judgment to be applied to both the inputs and the
valuation techniques employed. These derivatives are sensitive to long-dated market volatility and correlation inputs, which we consider to be non-
observable. Market volatility is a measure of the anticipated future variability of a market price and is an important input for pricing options, which are
inherent in many of our Level 3 derivatives. A higher market volatility generally results in a higher option price, with all else held constant, due to the
higher probability of obtaining a greater return from the option, and results in an increase in the fair value of our Level 3 derivatives. Correlation inputs are
used to value those derivatives where the payout is dependent upon more than one market price. For example, the payout of an equity basket option is
based upon the performance of a basket of stocks, and the interrelationships between the price movements of those stocks. A positive correlation
implies that two inputs tend to change the fair value in the same direction, while a negative correlation implies that two inputs tend to change the fair value
in the opposite direction. Changes in market correlation could result in an increase or a decrease in the fair value of our Level 3 derivatives and
embedded derivatives. By adjusting the non-observable inputs by reasonably alternative amounts, the fair value of our net Level 3 standalone
derivatives and embedded derivatives would increase by $95 million or decrease by $86 million (2020: increase by $84 million or decrease by $74
million).
Financial instruments designated at FVTPL
Financial assets designated at FVTPL include certain debt securities and loans that were designated at FVTPL on the basis of being managed
together with derivatives to eliminate or significantly reduce financial risks.
Deposits and other liabilities designated at FVTPL include:
Certain business and government deposit liabilities, certain secured borrowings and certain obligations related to securities sold under
repurchase agreements that are economically hedged with derivatives and other financial instruments, and certain financial liabilities that have
one or more embedded derivatives that significantly modify the cash flows of the host liability but are not bifurcated from the host instrument; and
142 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Our mortgage commitments to retail clients to provide mortgages at fixed rates that are economically hedged with derivatives and other
financial instruments.
The carrying value of our securities designated at FVTPL represents our maximum exposure to credit risk related to these assets designated at
FVTPL. The change in fair value attributable to change in credit risk of these assets designated at FVTPL during the year is insignificant (2020:
insignificant). The fair value of a liability designated at FVTPL reflects the credit risk relating to that liability. For those liabilities designated at FVTPL
for which we believe changes in our credit risk would impact the fair value from the note holders’ perspective, the related fair value changes were
recognized in OCI. Changes in fair value attributable to changes in our own credit are measured as the difference between: (i) the period-over-
period change in the present value of the expected cash flows using a discount curve adjusted for our own credit; and (ii) the period-over-period
change in the present value of the same expected cash flows using a discount curve based on the benchmark curve adjusted for our own credit as
implied at inception of the liability designated at FVTPL. The pre-tax impact of changes in CIBC’s own credit risk on our liabilities designated at
FVTPL was gains of $16 million for the year and losses of $39 million cumulatively (2020: losses of $76 million for the year and losses of $55 million
cumulatively). A net gain of $50 million, net of hedges (2020: a net gain of $60 million), was realized for assets designated at FVTPL and liabilities
designated at FVTPL, which is included in the consolidated statement of income under Gains (losses) from financial instruments measured/
designated at FVTPL, net.
The estimated contractual amount payable at maturity of deposits designated at FVTPL, which is based on the par value and the intrinsic value
of the applicable embedded derivatives, is $872 million higher (2020: $786 million higher) than its fair value. The intrinsic value of the embedded
derivatives reflects the structured payoff of certain FVO deposit liabilities, which we hedge economically with derivatives and other FVTPL financial
instruments.
Note 4
Significant transactions
Acquisition of Canadian Costco credit card portfolio
On September 2, 2021, we announced that we entered into a long-term agreement to become the exclusive issuer of Costco-branded Mastercard
credit cards in Canada. We will also acquire the existing Canadian Costco credit card portfolio, which has over $3 billion in outstanding balances.
This transaction is expected to be completed in the first half of fiscal 2022, subject to customary closing conditions.
Sale of CIBC FirstCaribbean
On November 8, 2019, we announced that we had entered into a definitive agreement to sell 66.73% of the outstanding shares of CIBC
FirstCaribbean to GNB Financial Group Limited (GNB) for total consideration of approximately US$797 million, subject to closing adjustments to
reflect certain changes in CIBC FirstCaribbean’s book value. The closing of this transaction would have resulted in CIBC retaining a 24.9% minority
interest in CIBC FirstCaribbean.
In the fourth quarter of 2019, we recognized a goodwill impairment charge of $135 million as a result of the valuation implied from the definitive
agreement with GNB. Commencing in the first quarter of 2020, the assets and liabilities of CIBC FirstCaribbean were treated as held for sale, and
measured at the lower of their aggregate carrying amount and fair value less costs to sell, on the basis that the transaction was highly probable to close
in 2020 subject to regulatory approvals. In the second quarter of 2020, we recognized an additional goodwill impairment charge of $28 million based
on the estimated impact of the COVID-19 pandemic on the recoverable value of the 24.9% interest in CIBC FirstCaribbean that we expected to retain.
As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our
revised expectations regarding the likelihood and timing of closing of a potential transaction, we concluded in the fourth quarter of 2020 that held for
sale accounting was no longer appropriate. As a result, we were required to assess the recoverable amount of the remaining goodwill based on
current market conditions rather than the definitive agreement with GNB. This assessment reflected revised expectations concerning the impact of
the COVID-19 pandemic and led to the recognition of an additional goodwill impairment charge of $220 million.
On February 3, 2021, we announced that the proposed sale of CIBC FirstCaribbean to GNB did not receive approval from CIBC
FirstCaribbean’s regulators and that the transaction will not proceed.
For additional information, see Note 9.
Note 5
Securities
Securities
$ millions, as at October 31
Debt securities measured at FVOCI
Equity securities designated at FVOCI
Securities measured at amortized cost (1)
Securities mandatorily measured and designated at FVTPL
2021
2020
$
53,161
836
35,159
72,245
$ 161,401
$
53,968
585
31,800
62,693
$ 149,046
(1) During the year, $39 million of amortized cost debt securities were disposed of shortly before their maturity, resulting in a realized gain of less than $1 million (2020: a
realized gain of $2 million).
CIBC 2021 ANNUAL REPORT 143
Consolidated financial statements
$ millions, as at October 31
Within 1 year
1 to 5 years
5 to 10 years
Over 10 years
No specific
maturity
2021
Total
2020
Total
Carrying
Carrying
Carrying
Carrying
Carrying
Carrying
Carrying
value Yield (1)
value Yield (1)
value Yield (1)
value Yield (1)
value Yield (1)
value Yield (1)
value Yield (1)
Residual term to contractual maturity
Debt securities measured at FVOCI
Securities issued or guaranteed by:
Canadian federal government
Other Canadian governments
U.S. Treasury and agencies
Other foreign governments
Mortgage-backed securities (2)
Asset-backed securities
Corporate debt
$ 2,516
264
5,687
3,259
–
–
1,765
$ 13,491
0.9 % $ 5,664
7,508
2.2
8,317
0.2
3,303
0.5
401
–
–
–
5,672
0.7
0.9 % $
1.8
0.7
0.6
1.0
–
0.4
160
6,156
123
155
321
–
381
1.8 % $
2.3
0.2
5.2
2.5
–
0.5
–
261
–
58
823
352
15
– % $
2.4
–
5.9
1.1
1.3
3.6
$ 30,865
$ 7,296
$ 1,509
$
–
–
–
–
–
–
–
–
– % $
–
–
–
–
–
–
8,340
14,189
14,127
6,775
1,545
352
7,833
0.9 % $ 11,409
2.0
15,315
0.5
12,596
0.7
5,861
1.4
2,368
1.3
195
0.5
6,224
$ 53,161
$ 53,968
0.6 %
1.0
0.7
0.8
1.4
1.8
0.7
Equity securities designated at FVOCI
Corporate public equity
Corporate private equity
$
$
–
–
–
– % $
–
$
–
–
–
Securities measured at amortized cost
Securities issued or guaranteed by:
Canadian federal government
Other Canadian governments
U.S. Treasury and agencies
Other foreign governments
Mortgage-backed securities (3)
Asset-backed securities
Corporate debt
$
398
131
2,391
135
152
–
1,343
$ 4,550
$ 1,234
6,278
8,242
167
1,541
274
2,472
$ 20,208
– % $
–
$
$
–
–
–
36
5,611
2,241
31
1,062
–
366
– % $
–
$
$
–
–
–
–
–
–
362
657
35
–
$ 9,347
$ 1,054
Securities mandatorily measured and designated at FVTPL
Securities issued or guaranteed by:
Canadian federal government
Other Canadian governments
U.S. Treasury and agencies
Other foreign governments
Mortgage-backed securities (4)
Asset-backed securities
Corporate debt
$ 2,193
1,136
753
2,817
1
97
913
$ 2,218
2,025
3,208
1,129
1,771
190
2,234
$
909
1,075
788
48
184
39
630
Corporate public equity
$ 7,910
$ 12,775
$ 3,673
–
–
$
–
–
$
–
–
$
$ 3,132
6,098
186
37
1
7
222
$ 9,683
–
–
$
– % $
–
$
$
$
$
$
n/m
n/m
126
710
836
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38,204
$ 38,204
$
$
$
$
$
$
n/m
n/m
126
710
836
1,668
12,020
12,874
695
3,412
309
4,181
n/m
n/m
42
543
585
790
11,072
10,968
551
3,954
662
3,803
$ 35,159
$ 31,800
$
8,452
10,334
4,935
4,031
1,957
333
3,999
$ 34,041
38,204
$ 11,655
9,783
5,596
1,974
1,582
571
3,550
$ 34,711
27,982
$ 38,204
$ 27,982
Total securities (5)
$ 25,951
$ 63,848
$ 20,316
$ 12,246
$ 39,040
$ 161,401
$ 149,046
(1) Represents the weighted-average yield, which is determined by applying the weighted average of the yields of individual fixed income securities.
(2) Includes securities backed by mortgages insured by the Canada Mortgage and Housing Corporation (CMHC), with amortized cost of $301 million (2020: $410 million) and
fair value of $303 million (2020: $413 million); securities issued by Federal National Mortgage Association (Fannie Mae), with amortized cost of $537 million (2020:
$888 million) and fair value of $554 million (2020: $918 million); securities issued by Federal Home Loan Mortgage Corporation (Freddie Mac), with amortized cost of
$235 million (2020: $367 million) and fair value of $243 million (2020: $380 million); and securities issued by Government National Mortgage Association, a U.S.
government corporation (Ginnie Mae), with amortized cost of $443 million (2020: $655 million) and fair value of $445 million (2020: $657 million).
(3) Includes securities backed by mortgages insured by the CMHC, with amortized cost of $419 million (2020: $609 million) and fair value of $420 million (2020: $610 million);
securities issued by Fannie Mae, with amortized cost of $838 million (2020: $1,165 million) and fair value of $851 million (2020: $1,197 million); securities issued by Freddie
Mac, with amortized cost of $1,823 million (2020: $2,008 million) and fair value of $1,859 million (2020: $2,091 million); and securities issued by Ginnie Mae, with amortized
cost of $39 million (2020: $69 million) and fair value of $40 million (2020: $71 million).
(4) Includes securities backed by mortgages insured by the CMHC of $1,954 million (2020: $1,547 million).
(5) Includes securities denominated in U.S. dollars with carrying value of $80.2 billion (2020: $68.4 billion) and securities denominated in other foreign currencies with carrying
value of $4,611 million (2020: $2,616 million).
n/m Not meaningful.
Fair value of debt securities measured and equity securities designated at FVOCI
$ millions, as at October 31
Securities issued or guaranteed by:
Canadian federal government
Other Canadian governments
U.S. Treasury and agencies
Other foreign governments
Mortgage-backed securities
Asset-backed securities
Corporate debt
Corporate public equity (2)
Corporate private equity
Cost/
Amortized
cost (1)
Gross
unrealized
gains
Gross
unrealized
losses
$
8,310
14,007
14,157
6,750
1,516
354
7,820
52,914
67
663
730
$
31
182
23
30
29
–
15
310
60
84
144
$
(1) $
–
(53)
(5)
–
(2)
(2)
(63)
(1)
(37)
(38)
2021
Fair
value
8,340
14,189
14,127
6,775
1,545
352
7,833
53,161
126
710
836
Cost/
Amortized
cost (1)
Gross
unrealized
gains
Gross
unrealized
losses
2020
Fair
value
$ 11,379
15,187
12,533
5,825
2,320
197
6,194
53,635
30
546
576
$
32
128
63
38
49
–
31
341
15
43
58
$
(2) $ 11,409
15,315
–
12,596
–
5,861
(2)
2,368
(1)
195
(2)
6,224
(1)
(8)
(3)
(46)
(49)
53,968
42
543
585
$ 53,644
$ 454
$
(101) $ 53,997
$ 54,211
$ 399
$
(57) $ 54,553
(1) Net of allowance for credit losses for debt securities measured at FVOCI of $19 million (2020: $22 million).
(2) Includes restricted stock.
144 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Fair value of equity securities designated at FVOCI that were disposed of during the year was $25 million (2020: $88 million). Net realized
cumulative after-tax gains of $27 million for the year (2020: $93 million) were reclassified from AOCI to retained earnings, resulting from dispositions
of equity securities designated at FVOCI and return on capital distributions from limited partnerships designated at FVOCI.
Dividend income recognized on equity securities designated at FVOCI that were still held as at October 31, 2021 was $5 million (2020: $5 million).
Dividend income recognized on equity securities designated at FVOCI that were disposed of during the year was nil (2020: $2 million).
The table below presents profit or loss recognized on FVOCI securities:
$ millions, for the year ended October 31
Realized gains
Realized losses
(Provision for) reversal of credit losses on debt securities
2021
$
91
(2)
2
$
91
2020
$
30
(1)
(8)
$
21
2019
$
40
(2)
(3)
$
35
Allowance for credit losses
The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance for debt securities measured at
FVOCI:
$ millions, as at or for the year ended October 31
2021 Debt securities measured at FVOCI
Balance at beginning of year
Provision for (reversal of) credit losses (1)
Write-offs
Foreign exchange and other
Balance at end of year
2020 Debt securities measured at FVOCI
Balance at beginning of year
Provision for credit losses (1)(2)
Write-offs
Foreign exchange and other
Balance at end of year
Stage 1
Stage 2
Stage 3
Collective provision
12-month ECL
performing
Collective provision
lifetime ECL
performing
Collective and
individual provision
lifetime ECL
credit-impaired
$
$
18
(13)
–
(1)
4
$ 14
5
–
(1)
$ 18
$
4
11
–
–
$ 15
$ 3
2
–
(1)
$ 4
Total
$
22
(2)
–
(1)
1 9
$
$ –
–
–
–
$ –
$ 6
1
–
(7) (3)
$ –
$ 23
8
–
(9)
$ 22
(1) Included in the Gains (losses) from debt securities measured at FVOCI and amortized cost, net on our consolidated statement of income.
(2) Excludes stage 3 provisions for credit losses of $14 million for the year ended October 31, 2020 for originated credit-impaired amortized cost securities that are recognized
in the Gains (losses) from debt securities measured at FVOCI and amortized cost, net on our consolidated statement of income.
(3) Includes ECL of $8 million relating to Barbados U.S. dollar denominated securities that were derecognized in the third quarter of 2020 as a result of a U.S. dollar
denominated debt restructuring agreement completed with the Government of Barbados.
Note 6
Loans(1)(2)
$ millions, as at October 31
2021
2020
Residential mortgages (4)
Personal
Credit card
Business and government (4)
Gross
amount
$ 251,526
41,897
11,134
150,213
$ 454,770
Stage 3
allowance
$ 158
106
–
508
$ 772
$
Stages 1
and 2
allowance
122
662
625
668
$ 2,077
$
allowance (3)
Total
Net
total
280 $ 251,246
41,129
768
10,509
625
149,037
1,176
$ 2,849 $ 451,921
Gross
amount
$ 221,165
42,222
11,389
135,546
$ 410,322
Stages 1
and 2
allowance
Stage 3
allowance
Total
allowance (3)
Net
total
363 $ 220,802
41,390
832
10,722
667
133,868
1,678
$ 914 $ 2,626 $ 3,540 $ 406,782
$ 151 $
113
–
650
212 $
719
667
1,028
(1) Loans are net of unearned income of $591 million (2020: $530 million).
(2) Includes gross loans of $83.3 billion (2020: $76.6 billion) denominated in U.S. dollars and $9.3 billion (2020: $8.4 billion) denominated in other foreign currencies.
(3) Includes ECL allowances for customers’ liability under acceptances.
(4) Includes $16 million of residential mortgages (2020: $63 million) and $25,651 million of business and government loans (2020: $23,291 million) that are measured at
FVTPL.
CIBC 2021 ANNUAL REPORT 145
Consolidated financial statements
Allowance for credit losses
The following table provides a reconciliation of the opening balance to the closing balance of the ECL allowance:
$ millions, as at or for the year ended October 31
Stage 1
Stage 2
Collective provision
12-month ECL
performing
Collective provision
lifetime ECL
performing
Stage 3
Collective and
individual provision
lifetime ECL
credit-impaired
Residential mortgages
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Personal
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Credit card
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Business and government
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Total ECL allowance (4)
Comprises:
Loans
Undrawn credit facilities and other off-balance sheet exposures (5)
$
51
16
7
(123)
119
(9)
–
10
–
–
–
(2)
59
204
37
(19)
(309)
287
(47)
(1)
(52)
–
–
–
(2)
150
136
–
(14)
(259)
305
(31)
(1)
–
–
–
–
–
136
453
31
(12)
(302)
198
(63)
(4)
(152)
–
–
–
(24)
277
622
551
71
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
161
(13)
(8)
22
(104)
27
(16)
(92)
–
–
–
(6)
63
546
(47)
33
281
(281)
62
(47)
1
–
–
–
–
547
572
(66)
123
373
(305)
31
(211)
(55)
–
–
–
–
517
683
(35)
(26)
(19)
(173)
79
(30)
(204)
–
–
–
(30)
449
$
$ 1,576
$ 1,526
50
$
$
$
$
$
$
$
$
$
$
151
(21)
24
68
(15)
(18)
16
54
(27)
3
(17)
(6)
158
113
(9)
–
179
(6)
(15)
48
197
(266)
70
(4)
(4)
106
–
–
–
83
–
–
212
295
(414)
119
–
–
–
652
(35)
1
197
(25)
(16)
34
156
(279)
14
(20)
(15)
508
772
772
–
2021
Total
363
(18)
23
(33)
–
–
–
(28)
(27)
3
(17)
(14)
280
863
(19)
14
151
–
–
–
146
(266)
70
(4)
(6)
803
708
(66)
109
197
–
–
–
240
(414)
119
–
–
653
$
$
$
$
$
$
$ 1,788
(39)
(37)
(124)
–
–
–
(200)
(279)
14
(20)
(69)
$ 1,234
$ 2,970
$ 2,849
121
(1) Transfers represent stage movements of prior period ECL allowances to the current period stage classification. Net remeasurement represents the current period change
in ECL allowances for transfers, net write-offs, changes in forecasts of forward-looking information, parameter updates, and partial repayments in the period.
(2) Provision for (reversal of) credit losses for loans, and undrawn credit facilities and other off-balance sheet exposures is presented as Provision for (reversal of) credit losses
on our consolidated statement of income.
(3) We generally continue to pursue collection on the amounts that were written off. The degree of collection efforts varies from one jurisdiction to another, depending on the
local regulations and original agreements with customers.
(4) See Note 5 for the ECL allowance on debt securities measured at FVOCI. The table above excludes the ECL allowance on debt securities classified at amortized cost of
$15 million as at October 31, 2021 (2020: $16 million), $13 million of which was stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (2020:
$14 million). The ECL allowances for other financial assets classified at amortized cost were immaterial as at October 31, 2021 and were excluded from the table above.
Financial assets other than loans that are classified at amortized cost are presented on our consolidated balance sheet net of ECL allowances.
(5) Included in Other liabilities on our consolidated balance sheet.
(6) Includes the ECL allowance for purchased credit-impaired loans from the acquisition of The PrivateBank.
146 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
$ millions, as at or for the year ended October 31
Residential mortgages
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Personal
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Credit card
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Business and government
Balance at beginning of year
Originations net of repayments and other derecognitions
Changes in model
Net remeasurement (1)
Transfers (1)
– to 12-month ECL
– to lifetime ECL performing
– to lifetime ECL credit-impaired
Provision for (reversal of) credit losses (2)
Write-offs (3)
Recoveries
Interest income on impaired loans
Foreign exchange and other
Balance at end of year
Total ECL allowance (4)
Comprises:
Loans
Undrawn credit facilities and other off-balance sheet exposures (5)
See previous page for footnote references.
Stage 1
Stage 2
Collective provision
12-month ECL
performing
Collective provision
lifetime ECL
performing
Stage 3
Collective and
individual provision
lifetime ECL
credit-impaired (6)
$
$
28
9
(3)
(21)
61
(23)
–
23
–
–
–
–
51
$ 174
37
(13)
(186)
300
(108)
–
30
–
–
–
–
$ 204
$ 145
(3)
(6)
(223)
281
(58)
–
(9)
–
–
–
–
$ 136
$ 239
51
14
264
113
(201)
(21)
220
–
–
–
(6)
$ 453
$ 844
$ 735
109
$
$
$
$
$
$
$
43
(12)
30
123
(51)
39
(10)
119
–
–
–
(1)
161
271
(51)
181
378
(292)
126
(67)
275
–
–
–
–
546
340
(69)
59
674
(281)
58
(209)
232
–
–
–
–
572
158
(45)
(1)
594
(103)
210
(121)
534
–
–
–
(9)
$
683
$ 1,962
$ 1,891
71
$ 140
(17)
–
73
(10)
(16)
10
40
(16)
6
(19)
–
$ 151
$ 128
(12)
–
247
(8)
(18)
67
276
(353)
66
(5)
1
$ 113
$
$
–
–
–
89
–
–
209
298
(409)
111
–
–
–
$ 378
(20)
(1)
349
(10)
(9)
142
451
(157)
9
(21)
(8)
$ 652
$ 916
$ 914
2
2020
Total
211
(20)
27
175
–
–
–
182
(16)
6
(19)
(1)
363
573
(26)
168
439
–
–
–
581
(353)
66
(5)
1
863
485
(72)
53
540
–
–
–
521
(409)
111
–
–
708
775
(14)
12
1,207
$
$
$
$
$
$
$
–
–
–
1,205
(157)
9
(21)
(23)
$ 1,788
$ 3,722
$ 3,540
182
CIBC 2021 ANNUAL REPORT 147
Consolidated financial statements
Inputs, assumptions and model techniques
Our ECL allowances are estimated using complex models that incorporate inputs, assumptions and model techniques that involve a high degree of
management judgment. In particular, the following ECL elements are subject to a high level of judgment that can have a significant impact on the
level of ECL allowances provided:
Determining when a significant increase in credit risk (SICR) of a loan has occurred;
Measuring both 12-month and lifetime credit losses; and
Forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios driven by the
changes in the macroeconomic environment.
In addition, the interrelationship between these elements is also subject to a high degree of judgment which can also have a significant impact on
the level of ECL recognized.
The uncertainties inherent in the COVID-19 pandemic have increased the level of judgment applied in respect of all these elements as discussed
below. Actual credit losses could differ materially from those reflected in our estimates.
Determining when a significant increase in credit risk has occurred
The determination of whether a loan has experienced a SICR has a significant impact on the level of ECL allowance as loans that are in stage 1 are
measured at 12-month ECL, while loans in stage 2 are measured at lifetime ECL. Migration of loans between stage 1 and stage 2 can cause
significant volatility in the amount of the recognized ECL allowances and the provision for credit losses in a particular period.
For the majority of our retail loan portfolios, we determine a SICR based on relative changes in the loan’s lifetime PD since its initial recognition. The PDs
used for this purpose are the expected value of our upside, downside and base case lifetime PDs. Significant judgment is involved in determining the upside,
downside and base case lifetime PDs through the incorporation of forward-looking information into long-run PDs, in determining the probability weightings of
the scenarios, and in determining the relative changes in PDs that are indicative of a SICR for our various retail products. Increases in the expected PDs or
decreases in the thresholds for changes in PDs that are indicative of a SICR can cause significant migration of loans from stage 1 to stage 2, which in turn
can cause a significant increase in the amount of ECL allowances recognized. In contrast, decreases in the expected PDs or increases in the thresholds for
changes in PDs that are indicative of a SICR can cause significant migration of loans from stage 2 to stage 1.
For the majority of our business and government loan portfolios, we determine a SICR based on relative changes in internal risk ratings since
initial recognition. Significant judgment is involved in the determination of the internal risk ratings. Deterioration or improvement in the risk ratings or
adjustments to the risk rating downgrade thresholds used to determine a SICR can cause significant migration of loans and securities between
stage 1 and stage 2, which in turn can have a significant impact on the amount of ECL allowances recognized.
While potentially significant to the level of ECL allowances recognized, the thresholds for changes in PDs that are indicative of a SICR for our
retail portfolios and the risk rating downgrade thresholds used to determine a SICR for our business and government loan portfolios are not
expected to change significantly over time.
All loans on which repayment of principal or payment of interest is contractually 30 days in arrears and all business and government loans that
have migrated to the watch list risk rating are normally automatically migrated to stage 2 from stage 1.
As at October 31, 2021, if the ECL for the stage 2 performing loans were measured using stage 1 ECL as opposed to lifetime ECL, the
expected credit losses would be $731 million lower than the total recognized IFRS 9 ECL on performing loans (2020: $743 million).
Impact of the COVID-19 pandemic
The determination of whether a SICR has occurred in the COVID-19 pandemic required a heightened application of judgment in a number of areas,
including with respect to the evaluation of the evolving macroeconomic environment, and the impact of client relief programs and government support.
Consistent with guidance issued by the IASB, interest or principal deferments pursuant to various relief programs provided to both our retail
and business and government clients during the early stages of the pandemic had not automatically resulted in a SICR that would have triggered
migration to stage 2 by reason only that a deferral under the program was granted. However, the inclusion of a loan in a relief program did not
preclude its migration to stage 2 if we determined that there was a SICR based on our assessment of the changes in the risk of a default occurring
over the expected life of a loan.
For retail clients and consistent with our past practice, SICR was determined based on an evaluation of the relative increase in lifetime PDs
using forward-looking information reflective of our expectations. However, we applied judgment in the degree that our forecasts of certain forward-
looking information, including unemployment, should cause a SICR in light of the level of government support provided.
For the majority of our business and government clients, we continued to utilize risk ratings as the primary determinant of a SICR. We applied
judgment in the determination of the industries most impacted by the COVID-19 pandemic and assessed the associated impact on risk ratings after
considering the benefit of government support.
Measuring both 12-month and lifetime expected credit losses
Our ECL models leverage the PD, LGD, and EAD parameters, as well as the portfolio segmentation used to calculate Basel expected loss
regulatory adjustments for the portion of our retail and business and government portfolios under the advanced internal ratings-based (AIRB)
approach. Adjustments are made to the Basel parameters to meet IFRS 9 requirements, including the conversion of through-the-cycle and downturn
parameters used in the Basel regulatory calculations to point-in-time parameters used under IFRS 9 that consider forward-looking information. For
standardized business and government portfolios, available long-run PDs, LGDs and EADs are also converted to point-in-time parameters through
the incorporation of forward-looking information for the purpose of measuring ECL under IFRS 9.
Significant judgment is involved in determining which forward-looking information variables are relevant for particular portfolios and in
determining the extent by which through-the-cycle parameters should be adjusted for forward-looking information to determine point-in-time
parameters. While changes in the set of forward-looking information variables used to convert through-the-cycle PDs, LGDs and EADs into
point-in-time parameters can either increase or decrease ECL allowances in a particular period, changes to the mapping of forward-looking
information variables to particular portfolios are expected to be infrequent. However, changes in the particular forward-looking information
parameters used to quantify point-in-time parameters will be frequent as our forecasts are updated on a quarterly basis. Increases in the level of
pessimism in the forward-looking information variables will cause increases in ECL, while increases in the level of optimism in the forward-looking
information variables will cause decreases in ECL. These increases and decreases could be significant in any particular period and will start to
occur in the period where our outlook of the future changes.
148 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
With respect to the lifetime of a financial instrument, the maximum period considered when measuring ECL is the maximum contractual period
over which we are exposed to credit risk. For revolving facilities, such as credit cards, the lifetime of a credit card account is the expected
behavioural life. Significant judgment is involved in the estimate of the expected behavioural life. Increases in the expected behavioural life will
increase the amount of ECL allowances, in particular for revolving loans in stage 2.
Impact of the COVID-19 pandemic
The measurement of ECL in the COVID-19 pandemic required a heightened application of judgment in a number of areas, including with respect to
our expectations concerning the degree to which forward-looking information would correlate with credit losses in the COVID-19 environment which
was initially characterized by unprecedented levels of government support and continues to be characterized by low levels of consumer spending
and default rates relative to the historical experience in our models. We applied judgment with respect to the degree that certain industries and
portfolios would be negatively impacted by the COVID-19 pandemic, the degree that various government support programs will continue to limit
credit losses, and the degree that continued easing of pandemic-related constraints on economic activity is expected to impact business and
consumer credit.
Forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios
As indicated above, forward-looking information is incorporated into both our assessment of whether a financial asset has experienced a SICR since
its initial recognition and in our estimate of ECL. From analysis of historical data, our risk management function has identified and reflected in our
ECL allowance those relevant forward-looking information variables that contribute to credit risk and losses within our retail and business and
government loan portfolios. Within our retail loan portfolio, key forward-looking information variables include Canadian unemployment rates, housing
prices, gross domestic product (GDP) growth and household debt service ratios. In many cases these variables are forecasted at the provincial
level. Housing prices are also forecasted at the municipal level in some cases. Within our business and government loan portfolio, key drivers that
impact the credit performance of the entire portfolio include Standard & Poor’s (S&P) 500 growth rates, business credit growth rates, unemployment
rates and credit spreads, while forward-looking information variables such as commodity prices and mining activity are significant for certain
portfolios, and U.S. unemployment rates and U.S. GDP growth are significant for our U.S. portfolios.
For the majority of our loan portfolios, our forecast of forward-looking information variables is established from a “base case” or most likely
scenario that is used internally by management for planning and forecasting purposes. For most of the forward-looking information variables related
to our Canadian businesses, we have forecast scenarios by province. In forming the base case scenario, we consider the forecasts of international
organizations and monetary authorities such as the Organisation for Economic Co-operation and Development (OECD), the International Monetary
Fund (IMF), and the Bank of Canada, as well as private sector economists. We then derive reasonably possible “upside case” and “downside case”
scenarios using external forecasts that are above and below our base case and the application of management judgment. A probability weighting is
assigned to our base case, upside case and downside case scenarios based on management judgment.
The forecasting process is overseen by a governance committee consisting of internal stakeholders from across our bank including Risk
Management, Economics, Finance and the impacted SBUs and involves a significant amount of judgment both in determining the forward-looking
information forecasts for our various scenarios and in determining the probability weighting assigned to the scenarios. In general, a worsening of our
outlook on forecasted forward-looking information for each scenario, an increase in the probability of the downside case scenario occurring, or a
decrease in the probability of the upside case scenario occurring will increase the number of loans migrating from stage 1 to stage 2 and increase
the estimated ECL allowance. In contrast, an improvement in our outlook on forecasted forward-looking information, an increase in the probability of
the upside case scenario occurring, or a decrease in the probability of the downside case scenario occurring will have the opposite impact. It is not
possible to meaningfully isolate the impact of changes in the various forward-looking information variables for a particular scenario because of both
the interrelationship between the variables and the interrelationship between the level of pessimism inherent in a particular scenario and its
probability of occurring.
Impact of the COVID-19 pandemic
The forecasting of forward-looking information and the determination of scenario weightings in the COVID-19 pandemic continued to require a
heightened application of judgment in a number of areas as our forecast reflects numerous assumptions and uncertainties regarding the economic
impact of the COVID-19 pandemic.
The following table provides the base case, upside case and downside case scenario forecasts for select forward-looking information
variables used to estimate our ECL.
As at October 31, 2021
Real GDP year-over-year growth
Canada (2)
United States
Unemployment rate
Canada (2)
United States
Canadian Housing Price Index growth (2)
S&P 500 Index growth rate
Canadian household debt service ratio
West Texas Intermediate Oil Price (US$)
Base case
Upside case
Downside case
Average
value over
the next
12 months
Average
value over
the remaining
forecast period
(1)
Average
value over
the next
12 months
Average
value over
the remaining
forecast period (1)
Average
value over
the next
12 months
Average
value over
the remaining
forecast period (1)
4.2 %
4.7 %
6.4 %
4.4 %
6.1 %
6.1 %
13.6 %
69
$
2.4 %
2.2 %
5.9 %
3.9 %
2.8 %
4.6 %
14.4 %
64
$
5.6 %
5.8 %
6.0 %
3.8 %
10.7 %
10.3 %
13.0 %
74
$
2.8 %
3.3 %
5.5 %
3.4 %
6.3 %
8.6 %
14.2 %
81
$
3.1 %
2.8 %
7.3 %
6.0 %
2.2 %
(0.6)%
14.1 %
56
$
1.6 %
1.3 %
6.8 %
5.0 %
(2.2)%
(1.7)%
14.7 %
54
$
(1) The remaining forecast period is generally two to four years.
(2) National-level forward-looking forecasts are presented in the table above, which represent the aggregation of the provincial-level forecasts used to estimate our ECL.
Housing Price Index growth rates are also forecasted at the municipal level in some cases. As a result, the forecasts for individual provinces or municipalities reflected in
our ECL will differ from the national forecasts presented above.
CIBC 2021 ANNUAL REPORT 149
Consolidated financial statements
As at October 31, 2020
Real GDP year-over-year growth
Canada (2)
United States
Unemployment rate
Canada (2)
United States
Canadian Housing Price Index growth (2)
S&P 500 Index growth rate
Canadian household debt service ratio
West Texas Intermediate Oil Price (US$)
See previous page for footnote references.
Base case
Upside case
Downside case
Average
value over
the next
12 months
Average
value over
the remaining
forecast period (1)
Average
value over
the next
12 months
Average
value over
the remaining
forecast period (1)
Average
value over
the next
12 months
Average
value over
the remaining
forecast period (1)
1.6 %
1.7 %
8.7 %
7.4 %
2.4 %
5.6 %
13.9 %
42
$
3.8 %
3.5 %
6.7 %
4.7 %
3.0 %
4.8 %
14.0 %
53
$
3.6 %
3.0 %
7.4 %
5.1 %
11.2 %
11.2 %
12.8 %
51
$
4.6 %
4.2 %
5.9 %
3.5 %
10.4 %
7.7 %
13.5 %
60
$
0.03 %
(0.6)%
9.5 %
9.2 %
(6.9)%
(3.5)%
14.8 %
34
$
2.0 %
1.7 %
8.4 %
7.3 %
(0.8)%
(5.3)%
15.0 %
39
$
As required, the forward-looking information used to estimate expected credit losses reflects our expectations as at October 31, 2021 and
October 31, 2020, respectively, and does not reflect changes in expectation as a result of economic forecasts that may have subsequently
emerged. The base case, upside case and downside case amounts shown represent the average value of the forecasts over the respective
projection horizons. Our economic forecasts are made in the context of the continuing recovery underway from the severe downturn experienced in
the second calendar quarter of 2020. As at October 31, 2021, our underlying base case projection is characterized by a deceleration in economic
activity and a stall in the downward trend of the unemployment rate in the near term due to the likelihood of a modest rise in COVID-19 cases over
the winter and continuing global supply chain disruptions. Our base case outlook continues to assume that effective mass vaccinations will further
progress over the remainder of calendar 2021 and that the vaccination programs will be able to effectively respond to the new and emerging
variants and that governments will respond to future infections of the virus and its variants with targeted health measures rather than broader
economic closures. Our base case assumes that economic activity will return to the pre-COVID-19 levels in Canada in the first half of 2022, and that
the unemployment rate will reach pre-pandemic levels in the latter half of 2022. Due to the relatively quicker end to large-scale lockdowns in the U.S.
relative to Canada, our base case continues to assume that the U.S. will experience full economic recovery slightly before Canada.
The downside case forecast allows for a pullback in economic activity and a rise in the unemployment rate in the near term, if governments have to
respond to rising virus cases with stricter measures than assumed under the base case. It also reflects a slower recovery thereafter to a lower level
of sustained economic activity and an unemployment rate persistently above where it stood pre-pandemic. Meanwhile, the upside scenario
continues to reflect a quicker recovery, with the pre-pandemic level of activity reached in the fourth calendar quarter of 2021 and continuing at a
higher trend level than the base case thereafter.
As indicated above, forecasting forward-looking information for multiple scenarios and determining the probability weighting of the scenarios
involves a high degree of management judgment, particularly in light of the COVID-19 pandemic. Although the severity of the virus appears to be
diminishing where vaccination rates are high, it remains a threat as case counts continue to rise in some countries and uncertainties remain
regarding the pace of global vaccination efforts and the need for additional doses. Assumptions concerning the timing and effectiveness of mass
vaccination programs to contain the spread of COVID-19 and its potential new variants such that severe restrictions will no longer need to be
imposed by governments to limit the impact of subsequent waves of infection are material to these forecasts.
If we were to only use our base case scenario for the measurement of ECL for our performing loans, our ECL allowance would be $249 million lower
than the recognized ECL as at October 31, 2021 (2020: $204 million). If we were to only use our downside case scenario for the measurement of
ECL for our performing loans, our ECL allowance would be $414 million higher than the recognized ECL as at October 31, 2021 (2020: $938 million).
This sensitivity is isolated to the measurement of ECL and therefore did not consider changes in the migration of exposures between stage 1 and
stage 2 from the determination of the SICR that would have resulted in a 100% base case scenario or a 100% downside case scenario. As a result,
our ECL allowance on performing loans could exceed the amount implied by the 100% downside case scenario from the migration of additional
exposures from stage 1 to stage 2. Actual credit losses could differ materially from those reflected in our estimates.
Use of management overlays
Management overlays to ECL allowance estimates are adjustments which we use in circumstances where we judge that our existing inputs,
assumptions and model techniques do not capture all relevant risk factors. The emergence of new macroeconomic, microeconomic or political
events, along with expected changes to parameters, models or data that are not incorporated in our current parameters, internal risk rating
migrations, or forward-looking information are examples of such circumstances.
Impact of the COVID-19 pandemic
To address the uncertainties inherent in the COVID-19 environment, we utilized management overlays with respect to the impact that the COVID-19
pandemic was estimated to have on the migration of certain business and government exposures that we believed were the most susceptible to
these risks and the resulting measurement of the ECL for those exposures. The mitigating impact of government support measures was considered
in the determination of these overlays to the extent not already reflected in our models, particularly in the early stages of the pandemic in 2020. In
addition, management overlays were applied with respect to the impact of certain credit metrics and forward-looking information that are not
expected to be as indicative of improvements in the credit condition of the portfolios as the historical experience in our models would have
otherwise suggested, particularly during the recovery period in 2021.
The use of management overlays requires the application of significant judgment that impacts the amount of ECL allowances recognized.
Actual credit losses could differ materially from those reflected in our estimates.
150 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
The following tables provide the gross carrying amount of loans, and the contractual amounts of undrawn credit facilities and other off-balance
sheet exposures based on the application of our 12-month point-in-time PDs under IFRS 9 to our risk management PD bands within each respective
stage for retail exposures, and based on our internal risk ratings for business and government exposures. Refer to the “Credit risk” section of the
MD&A for details on the CIBC risk categories.
Loans(1)
$ millions, as at October 31
Residential mortgages
– Exceptionally low
– Very low
– Low
– Medium
– High
– Default
– Not rated
Stage 1
Stage 2
Stage 3 (2)(3)
$ 162,307 $
49,958
22,912
364
–
–
2,160
2021
Total
$ 162,401
50,598
29,459
5,035
840
443
2,750
251,526
280
251,246
18,609
5,183
12,480
3,763
1,055
109
698
41,897
768
41,129
2,065
715
5,000
2,788
435
–
131
11,134
625
10,509
66,525
90,363
3,052
1,033
198
161,171
1,176
159,995
Stage 1
Stage 2
Stage 3 (2)(3)
$
$ 146,139
45,678
12,491
232
–
–
1,810
206,350
51
206,299
$
2
1,166
6,042
4,924
1,054
–
818
14,006
161
13,845
23,302
1,618
8,662
1,265
331
–
513
35,691
179
35,512
3,285
1,388
2,340
1,778
–
–
135
8,926
125
8,801
50,691
80,471
447
–
218
131,827
380
131,447
–
157
2,497
2,768
769
–
159
6,350
540
5,810
–
–
–
1,973
472
–
18
2,463
542
1,921
307
7,319
4,291
–
49
11,966
648
11,318
–
–
–
–
–
654
155
809
151
658
–
–
–
–
–
140
41
181
113
68
–
–
–
–
–
–
–
–
–
–
–
–
–
1,359
–
1,359
650
709
2020
Total
$ 146,141
46,844
18,533
5,156
1,054
654
2,783
221,165
363
220,802
23,302
1,775
11,159
4,033
1,100
140
713
42,222
832
41,390
3,285
1,388
2,340
3,751
472
–
153
11,389
667
10,722
50,998
87,790
4,738
1,359
267
145,152
1,678
143,474
94
640
6,547
4,671
840
–
395
13,187
63
13,124
1
4
4,389
2,773
803
–
60
8,030
537
7,493
–
–
347
2,195
435
–
8
2,985
498
2,487
562
4,599
2,985
–
24
8,170
428
7,742
$
–
–
–
–
–
443
195
638
158
480
–
–
–
–
–
109
53
162
106
56
–
–
–
–
–
–
–
–
–
–
–
–
–
1,033
–
1,033
508
525
Gross residential mortgages (4)(5)
ECL allowance
Net residential mortgages
237,701
59
237,642
Personal
– Exceptionally low
– Very low
– Low
– Medium
– High
– Default
– Not rated
Gross personal (5)
ECL allowance
Net personal
Credit card
– Exceptionally low
– Very low
– Low
– Medium
– High
– Default
– Not rated
Gross credit card
ECL allowance
Net credit card
Business and government (6)
– Investment grade
– Non-investment grade
– Watch list
– Default
– Not rated
Gross business and government (4)(7)
ECL allowance
Net business and government
18,608
5,179
8,091
990
252
–
585
33,705
125
33,580
2,065
715
4,653
593
–
–
123
8,149
127
8,022
65,963
85,764
67
–
174
151,968
240
151,728
Total net amount of loans
$ 430,972 $ 30,846
$ 1,061
$ 462,879
$ 382,059
$ 32,894
$ 1,435
$ 416,388
(1) The table excludes debt securities measured at FVOCI, for which ECL allowances of $19 million (2020: $22 million) were recognized in AOCI. In addition, the table
excludes debt securities classified at amortized cost, for which ECL allowances of $15 million were recognized as at October 31, 2021 (2020: $16 million), $13 million of
which was stage 3 ECL allowance on originated credit-impaired amortized cost debt securities (2020: $14 million). Other financial assets classified at amortized cost were
also excluded from the table above as their ECL allowances were immaterial as at October 31, 2021 and October 31, 2020. Financial assets other than loans that are
classified as amortized cost are presented on our consolidated balance sheet net of ECL allowances.
(2) Excludes foreclosed assets of $18 million (2020: $23 million), which were included in Other assets on our consolidated balance sheet.
(3) As at October 31, 2021, 89% (2020: 93%) of stage 3 impaired loans were either fully or partially collateralized.
(4) Includes $16 million (2020: $63 million) of residential mortgages and $25,651 million (2020: $23,291 million) of business and government loans that are measured at
FVTPL.
(5) The internal risk rating grades presented for residential mortgages and certain personal loans do not take into account loan guarantees or insurance issued by the
Canadian government (federal or provincial), Canadian government agencies, or private insurers, as the determination of whether a significant increase in credit risk has
occurred for these loans is based on relative changes in the loans’ lifetime PD without considering collateral or other credit enhancements.
(6) Certain prior period amounts were restated.
(7) Includes customers’ liability under acceptances of $10,958 million (2020: $9,606 million).
CIBC 2021 ANNUAL REPORT 151
Consolidated financial statements
Undrawn credit facilities and other off-balance sheet exposures
$ millions, as at October 31
Retail
– Exceptionally low
– Very low
– Low
– Medium
– High
– Default
– Not rated
Gross retail
ECL allowance
Net retail
Business and government (1)
– Investment grade
– Non-investment grade
– Watch list
– Default
– Not rated
Gross business and government
ECL allowance
Net business and government
Total net undrawn credit facilities and
Stage 1
Stage 2
Stage 3
2021
Total
Stage 1
Stage 2
Stage 3
$
$ 130,212
12,868
7,937
740
73
–
375
152,205
34
152,171
111,877
58,652
19
–
346
170,894
37
170,857
12
59
1,811
896
495
–
8
3,281
29
3,252
524
1,714
734
–
9
2,981
21
2,960
$
$
– $ 130,224
12,927
–
9,748
–
1,636
–
568
–
34
34
383
–
$ 124,690
6,632
8,703
909
263
–
411
34
–
34
–
–
–
91
–
91
–
91
155,520
63
155,457
112,401
60,366
753
91
355
173,966
58
173,908
141,608
36
141,572
89,883
55,910
91
–
795
146,679
73
146,606
8
137
416
692
503
–
23
1,779
36
1,743
149
3,679
1,665
–
41
5,534
35
5,499
$
–
–
–
–
–
28
–
28
–
28
–
–
–
129
–
129
2
127
2020
Total
$ 124,698
6,769
9,119
1,601
766
28
434
143,415
72
143,343
90,032
59,589
1,756
129
836
152,342
110
152,232
other off-balance sheet exposures $ 323,028
$ 6,212
$ 125 $ 329,365
$ 288,178
$ 7,242
$ 155
$ 295,575
(1) Certain prior period amounts were restated.
Net interest income after provision for credit losses
$ millions, for the year ended October 31
Interest income
Interest expense
Net interest income
Provision for (reversal of) credit losses
Net interest income after provision for credit losses
2021
$ 14,741
3,282
11,459
158
2020
$ 17,522
6,478
11,044
2,489
2019
$ 20,697
10,146
10,551
1,286
$ 11,301
$ 8,555
$
9,265
Modified financial assets and client relief programs
During the early stages of the pandemic, CIBC had been actively engaged in lending activities to support our clients who were experiencing
financial hardship caused by the COVID-19 pandemic, including payment deferral options offered on cards, residential mortgages, personal
lending products, and business and government loans. Modification gains or losses resulting from client relief programs were not significant.
As part of CIBC’s usual lending business, from time to time we may modify the contractual terms of loans classified as stage 2 and stage 3 for which
the borrower has experienced financial difficulties, through the granting of a concession in the form of below-market rates or terms that we would not
otherwise have considered.
During the year ended October 31, 2021, loans classified as stage 2 or stage 3 with an amortized cost of $654 million (2020: $10,498 million) were
either modified through the granting of a financial concession in response to the borrower having experienced financial difficulties or were subject to
the client relief programs in response to COVID-19, in each case before the time of modification or deferral. In addition, the gross carrying amount of
previously modified or deferred stage 2 or stage 3 loans that have returned to stage 1 during the year ended October 31, 2021 was $1,461 million
(2020: $5,287 million).
152 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 7
Structured entities and derecognition of financial assets
Structured entities
SEs are entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as
when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements. SEs are
entities that are created to accomplish a narrow and well-defined objective. CIBC is involved with various types of SEs for which the business
activities include securitization of financial assets, asset-backed financings, and asset management.
We consolidate a SE when the substance of the relationship indicates that we control the SE.
Consolidated structured entities
We consolidate the following SEs:
Credit card securitization trust
We sell an ownership interest in a revolving pool of credit card receivables generated under certain credit card accounts to Cards II Trust (Cards II),
which purchases a proportionate share of credit card receivables on certain credit card accounts, with the proceeds received from the issuance of
notes. We consolidate this trust because we have the power to direct the relevant activities and have exposure to substantially all the variability of
returns for the excess spread (the deferred purchase price) that we receive over time.
Our credit card securitizations are revolving securitizations, with credit card receivable balances fluctuating from month to month as credit
card clients repay their balances and new receivables are generated.
The notes are presented as Secured borrowings within Deposits on the consolidated balance sheet.
As at October 31, 2021, $1.7 billion of credit card receivable assets with a fair value of $1.7 billion (2020: $1.7 billion with a fair value of
$1.7 billion) supported associated funding liabilities of $1.7 billion with a fair value of $1.7 billion (2020: $1.7 billion with a fair value of $1.7 billion).
Covered bond guarantor
Under the Legislative Covered Bond Programme, we transfer a pool of conventional uninsured mortgages to the CIBC Covered Bond (Legislative)
Guarantor Limited Partnership (the Guarantor LP). The Guarantor LP holds interest and title to these transferred mortgages and serves to guarantee
payment of principal and interest to bondholders. The covered bond liabilities are on-balance sheet obligations that are fully collateralized by the
mortgage assets over which bondholders enjoy a priority claim in the event of CIBC’s insolvency. We consolidate this entity because we have the
ability to direct the relevant activities and retain substantially all of the variability of returns on the underlying mortgages.
As at October 31, 2021, our Legislative Covered Bond Programme had outstanding covered bond liabilities of $23.8 billion with a fair value of
$24.0 billion (2020: $19.6 billion with a fair value of $19.7 billion).
CIBC-managed investment funds
We establish and manage investment funds such as mutual funds and pooled funds. We act as an investment manager and earn market-based
management fees, and for certain pooled funds, performance fees which are generally based on the performance of the funds. Seed capital is
provided from time to time to CIBC-managed investment funds for initial launch. We consolidate those investment funds in which we have power to
direct the relevant activities of the funds and in which our seed capital, or our units held, are significant relative to the total variability of returns of the
funds such that we are deemed to be a principal rather than an agent. As at October 31, 2021, the total assets and non-controlling interests in
consolidated CIBC-managed investment funds were $50 million and $14 million, respectively (2020: $7 million and $3 million, respectively).
Non-controlling interests in consolidated CIBC-managed investment funds are included in Other liabilities as the investment fund units are
mandatorily redeemable at the option of the investor.
Community-based tax-advantaged investments
We sponsor certain SEs that invest in community development projects in the U.S. through the issuance of below-market loans that generate a
return primarily through the realization of tax credits. As at October 31, 2021, the program had outstanding loans of $92 million (2020: $75 million).
We consolidate these entities because we have the ability to direct the relevant activities and retain substantially all of the variability of returns on the
underlying loans.
Non-consolidated structured entities
The following SEs are not consolidated by CIBC because we do not have control over these SEs:
Single-seller and multi-seller conduits
We manage and administer a single-seller conduit and several CIBC-sponsored multi-seller conduits in Canada. The multi-seller conduits acquire
direct or indirect ownership or security interests in pools of financial assets from our clients and finance the acquisitions by issuing asset-backed
commercial paper (ABCP) to investors. The single-seller conduit acquires financial assets and finances these acquisitions through a credit facility
provided by a syndicate of financial institutions. The sellers to the conduits may continue to service the assets and may be exposed to credit losses
realized on these assets, typically through the provision of over-collateralization or another form of credit enhancement. The conduits may also
obtain credit enhancement from third-party providers. As at October 31, 2021, the total assets in the single-seller conduit and multi-seller conduits
amounted to $0.6 billion and $7.6 billion, respectively (2020: $0.5 billion and $8.4 billion, respectively).
We generally provide the multi-seller conduits with commercial paper backstop liquidity facilities, securities distribution, and provide both the
single and multi-seller conduits with accounting, cash management, and operations services. The liquidity facilities for the managed and
administered multi-seller conduits require us to provide funding, subject to the satisfaction of certain conditions with respect to the conduits, for
ABCP not placed with external investors. We also may purchase ABCP issued by the multi-seller conduits for market-making purposes.
We are required to maintain certain short-term and/or long-term debt ratings with respect to the liquidity facilities that we provide to the
sponsored multi-seller conduits. If we are downgraded below the level specified under the terms of those facilities, we must provide alternative
satisfactory liquidity arrangements, such as procuring an alternative liquidity provider that meets the minimum rating requirements.
CIBC 2021 ANNUAL REPORT 153
Consolidated financial statements
We may also act as the counterparty to derivative contracts entered into by a multi-seller conduit in order to convert the yield of the underlying
assets to match the needs of the multi-seller conduit’s investors or to mitigate the interest rate, basis, and currency risk within the conduit.
All fees earned in respect of activities with the conduits are on a market basis.
Third-party structured vehicles
We have investments in and provide loans, liquidity and credit facilities to third-party SEs. We also have investments in limited partnerships in which
we generally are a passive investor of the limited partnerships as a limited partner, and in some cases, we are the co-general partner and have
significant influence over the limited partnerships. Similar to other limited partners, we are obligated to provide funding up to our commitment level
to these limited partnerships.
Loan Warehouse Financing
We provide interim senior financing to third-party SEs for the purpose of future securitization. The SE is established by a third-party investor, who
provides the initial investment into the SE (the equity investors). The senior financing enables the SE to purchase a loan portfolio at the direction of
a collateral manager during the warehousing phase of the securitization. When the securitization transaction closes, the senior lenders are repaid
by proceeds from the issuance of debt securities to investors.
Community Reinvestment Act investments
We hold debt and equity investments in limited liability entities to further our U.S. Community Reinvestment Act initiatives with a carrying value of
$338 million (2020: $328 million). These entities invest in qualifying community development projects, including affordable housing projects that
generate a return primarily by the realization of tax credits. Similar to other limited investors in these entities, we are obligated to provide funding up
to our commitment level to these limited liability entities. As at October 31, 2021, the total assets of these limited liability entities were $5.9 billion
(2020: $5.2 billion).
CIBC Capital Trust
We had issued senior deposit notes to CIBC Capital Trust, which funded the purchase of these notes through the issuance of CIBC Tier 1 Notes –
Series B (Notes) that match the term of the senior deposit notes. The Notes were eligible for Tier 1 regulatory capital treatment and were subject to
the phase-out rules for capital instruments that would be viewed as non-qualifying capital instruments.
On November 1, 2021, CIBC Capital Trust redeemed all $300 million of its 10.25% Notes. As a result of the redemption of the Notes by CIBC
Capital Trust, CIBC redeemed the corresponding senior deposit notes issued by CIBC to CIBC Capital Trust on November 1, 2021.
See Note 17 for additional details.
CIBC-managed investment funds
As indicated above, we establish investment funds, including mutual funds and pooled funds, to provide clients with investment opportunities and
we may receive management fees and performance fees. We may hold insignificant amounts of fund units in these CIBC-managed funds. We do
not consolidate these funds if we do not have significant variability of returns from our interests in these funds such that we are deemed to be an
agent through our capacity as the investment manager, rather than a principal. We do not guarantee the performance of CIBC-managed investment
funds. As at October 31, 2021, the total AUM in the non-consolidated CIBC-managed investment funds amounted to $152.5 billion (2020:
$125.2 billion).
CIBC structured collateralized debt obligation (CDO) vehicles
We hold exposures to structured CDO vehicles through investments in, or written credit derivatives referencing, these structured vehicles. The
structured vehicles are funded through the issuance of senior and subordinated tranches. We may hold a portion of those senior and/or
subordinated tranches.
We previously curtailed our business activity in structuring CDO vehicles within our structured credit run-off portfolio. Our exposures to CDO
vehicles mainly arose through our previous involvement in acting as structuring and placement agent for the CDO vehicles. As at October 31, 2021,
the assets in the CIBC structured CDO vehicles have a total principal amount of $181 million (2020: $214 million).
Our on-balance sheet amounts and maximum exposure to loss related to SEs that are not consolidated are set out in the table below. The maximum
exposure comprises the carrying value of unhedged investments, the notional amounts for liquidity and credit facilities, and the notional amounts
less accumulated fair value losses for unhedged written credit derivatives on SE reference assets. The impact of CVA is not considered in the table
below.
154 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
$ millions, as at October 31, 2021
On-balance sheet assets at carrying value (2)
Securities
Loans
Investments in equity-accounted associates and joint ventures
October 31, 2020
On-balance sheet liabilities at carrying value (2)
Deposits
Derivatives (3)
October 31, 2020
Maximum exposure to loss, net of hedges
Investments and loans
Notional of written derivatives, less fair value losses
Liquidity, credit facilities and commitments
Less: hedges of investments, loans and written derivatives exposure
October 31, 2020
Single-seller
and multi-seller
conduits
Third-party
structured
vehicles
Loan
Warehouse
Financing
$
$
$
$
$
$
$
35
106
–
141
107
–
–
–
$ 1,621
2,217
–
$ 3,838
$ 3,165
$
–
3,245
–
$ 3,245
$ 395
$
$
– $
–
–
–
$
–
–
– $
– $
–
141
–
7,539 (4)
–
$ 7,680
$ 8,497
$ 3,838
–
2,016
–
$ 5,854
$ 5,682
$ 3,245
–
921
–
$ 4,166
$ 758
Other (1)
$ 393
–
1
$ 394
$ 343
$
$
$
300
54
354
4
10
$ 394
33
129
(36)
$ 520
$ 492
(1) Includes Community Reinvestment Act-related investment vehicles, CIBC Capital Trust, CIBC-managed investment funds, CIBC structured CDO vehicles and third-party
structured vehicles related to structured credit run-off.
(2) Excludes SEs established by CMHC, Fannie Mae, Freddie Mac, Ginnie Mae, FHLB, Federal Farm Credit Bank, and Student Loan Marketing Association.
(3) Comprises written credit default swaps (CDS) and total return swaps (TRS) under which we assume exposures. Excludes foreign exchange derivatives, interest rate
derivatives and other derivatives provided as part of normal client facilitation.
(4) Excludes an additional $3.0 billion (2020: $2.1 billion) relating to our backstop liquidity facilities provided to the multi-seller conduits as part of their commitment to fund
purchases of additional assets. Also excludes $35 million (2020: $12 million) of our direct investments in the multi-seller conduits which we consider investment exposure.
We also hold investments in a variety of third-party investment funds, which include, but are not limited to, exchange-traded funds, mutual funds,
and investment trusts. We buy and sell units of these investment funds as part of trading activities or client facilitation businesses that are managed
as part of larger portfolios. We generally are a passive investor and are not the investment manager in any of these investment funds. We are not the
sponsor of any third-party investment funds, nor do we have the power over key decision-making activities of the funds. Our maximum exposure to
loss from our investments is limited to the carrying amounts of our investments and any unutilized commitment we have provided to these funds. In
addition, we issue certain structured notes and enter into equity derivatives that are referenced to the return of certain investment funds.
Accordingly, we do not include our interests in these third-party investment funds in the table above.
Derecognition of financial assets
We enter into transactions in the normal course of business in which we transfer recognized financial assets directly to third parties, but retain
substantially all of the risks and rewards of those assets. The risks include credit, interest rate, foreign exchange, pre-payment and other price risks
whereas the rewards include income streams associated with the assets. Due to the retention of risks, the transferred financial assets are not
derecognized and such transfers are accounted for as secured borrowing transactions.
The majority of our financial assets transferred to non-consolidated entities that do not qualify for derecognition are: (i) residential mortgage
loans under securitization transactions; (ii) securities held by counterparties as collateral under repurchase agreements; and (iii) securities lent
under securities lending agreements.
Residential mortgage securitizations
We securitize fully insured fixed- and variable-rate residential mortgage pools through the creation of National Housing Act (NHA) MBS under the
NHA MBS Program, sponsored by CMHC. Under the Canada Mortgage Bond Program, sponsored by CMHC, we sell MBS to a government-
sponsored securitization trust that issues securities to investors. We do not consolidate the securitization trust. We may act as a counterparty in
interest rate swap agreements where we pay the trust the interest due to investors and receive the interest on the MBS. We have also sold MBS
directly to CMHC under the Government of Canada’s Insured Mortgage Purchase Program.
The sale of mortgage pools that comprise the NHA MBS does not qualify for derecognition as we retain pre-payment, credit, and interest rate
risks associated with the mortgages, which represent substantially all the risks and rewards. As a result, the mortgages remain on our consolidated
balance sheet and are carried at amortized cost. We also recognize the cash proceeds from the securitization as Deposits – Secured borrowings.
Securities held by counterparties as collateral under repurchase agreements
We enter into arrangements whereby we sell securities but enter into simultaneous arrangements to repurchase the securities at a fixed price on a
future date thereby retaining substantially all the risks and rewards. As a result, the securities remain on our consolidated balance sheet.
Securities lent for cash collateral or for securities collateral
We enter into arrangements whereby we lend securities but with arrangements to receive the securities at a future date, thereby retaining
substantially all the risks and rewards. As a result, the securities remain on our consolidated balance sheet.
The following table provides the carrying amount and fair value of transferred financial assets that did not qualify for derecognition and the
associated financial liabilities:
$ millions, as at October 31
Residential mortgage securitizations (1)
Securities held by counterparties as collateral under repurchase agreements (2)
Securities lent for cash collateral (2)
Securities lent for securities collateral (2)
Associated liabilities (3)
Carrying
amount
2021
Fair
value
$ 17,121 $ 17,023
36,469
1
31,548
$ 85,139 $ 85,041
$ 85,061 $ 85,122
36,469
1
31,548
Carrying
amount
$ 17,550
36,720
13
20,226
$ 74,509
$ 75,853
2020
Fair
value
$ 17,726
36,720
13
20,226
$ 74,685
$ 76,080
(1) Consists mainly of Canadian residential mortgage loans transferred to Canada Housing Trust. Certain cash in transit balances related to the securitization process
amounting to $792 million (2020: $1,148 million) have been applied to reduce these balances.
(2) Does not include over-collateralization of assets pledged. Repurchase and securities lending arrangements are conducted with both CIBC-owned and third-party assets
on a pooled basis. The carrying amounts represent an estimated allocation related to the transfer of our own financial assets.
(3) Includes the obligation to return off-balance sheet securities collateral on securities lent and fair value hedge basis adjustments.
CIBC 2021 ANNUAL REPORT 155
Consolidated financial statements
Note 8
Property and equipment
Right-of-
use assets (1)
Land and
buildings
Computer
equipment
Office furniture,
equipment
and other (2)
Leasehold
improvements (2)
Total
$ millions, as at or for the year ended October 31
2021
Cost
Balance at beginning of year
Additions (3)
Disposals (4)
Adjustments (5)
Balance at end of year
$ 1,790
607
(61)
(33)
$ 681
33
(3)
(8)
$ 2,303
$ 703
$ 1,109
65
(28)
(11)
$ 1,135
2020
Balance at end of year
$ 1,790
$ 681
$ 1,109
2021
Accumulated depreciation
Balance at beginning of year
Depreciation (4)
Disposals (4)
Adjustments (5)
Balance at end of year
2020
Balance at end of year
Net book value
As at October 31, 2021
As at October 31, 2020
$
$
$
316
301
(55)
(12)
550
316
$ 305
15
(4)
(3)
$ 313
$ 305
$ 1,753
$ 1,474
$ 390
$ 376
$
$
$
$
$
869
102
(38)
(10)
923
869
212
240
$ 1,129
–
(131)
(16)
$ 982
$ 1,129
$ 553
48
(120)
(9)
$ 472
$ 553
$ 510
$ 576
$ 1,178
167
(29)
(14)
$ 5,887
872
(252)
(82)
$ 1,302
$ 6,425
$ 1,178
$ 5,887
$
$
$
$
$
847
64
(22)
(8)
881
847
421
331
$ 2,890
530
(239)
(42)
$ 3,139
$ 2,890
$ 3,286
$ 2,997
(1) Includes right-of-use assets with a net book value of $49 million as at November 1, 2019 that were rented out through operating sublease arrangements.
(2) Includes $234 million (2020: $306 million) of work-in-progress not subject to depreciation.
(3) Includes impact of lease modifications.
(4) Includes write-offs for properties that were vacated in the fourth quarter of 2021, and write-offs of fully depreciated assets.
(5) Includes foreign currency translation adjustments.
Cost of net additions and disposals during the year was: Canadian Personal and Business Banking net disposals of $70 million (2020: net additions
of $860 million); Canadian Commercial Banking and Wealth Management net disposals of $5 million (2020: nil); U.S. Commercial Banking and
Wealth Management net additions of $31 million (2020: net additions of $219 million); Capital Markets net additions of $20 million (2020: net
additions of $166 million); and Corporate and Other net additions of $644 million (2020: net disposals of $17 million).
Note 9
Goodwill, software and other intangible assets
Goodwill
The carrying amount of goodwill is reviewed for impairment annually as at August 1 and whenever there are events or changes in circumstances
which indicate that the carrying amount may not be recoverable. Goodwill is allocated to CGUs for the purposes of impairment testing based on the
lowest level for which identifiable cash inflows are largely independent of cash inflows from other assets or groups of assets. The goodwill
impairment test is performed by comparing the recoverable amount of the CGU to which goodwill has been allocated with the carrying amount of
the CGU including goodwill, with any deficiency recognized as impairment to goodwill. The recoverable amount of a CGU is defined as the higher of
its estimated fair value less cost to sell and value in use.
We have three significant CGUs to which goodwill has been allocated. The changes in the carrying amount of goodwill are allocated to each
CGU as follows:
CGUs
Canadian
Wealth
Management
U.S. Commercial
Banking and
Wealth
Management
$ 884
–
–
$ 884
$ 884
–
–
$ 884
$ 4,131
–
(293)
Other
$ 203
–
(3)
Total
$ 5,253
–
(299)
$ 3,838
$ 200
$ 4,954
$ 4,084
–
47
$ 203
–
–
$ 5,449
(248)
52
$ 4,131
$ 203
$ 5,253
$ millions, as at or for the year ended October 31
2021
Balance at beginning of year
Impairment
Foreign currency translation adjustments
Balance at end of year
2020
Balance at beginning of year
Impairment
Foreign currency translation adjustments
Balance at end of year
CIBC
FirstCaribbean
$
$
35
–
(3)
32
$ 278
(248)
5
$
35
156 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Impairment testing of goodwill and key assumptions
CIBC FirstCaribbean
CIBC acquired a controlling interest in CIBC FirstCaribbean in December 2006 and now holds 91.7% of its shares. CIBC FirstCaribbean is a major
Caribbean bank offering a full range of financial services in corporate and investment banking, retail and business banking, and wealth
management. CIBC FirstCaribbean, which has assets of approximately US$13 billion, operates in the Caribbean and is traded on the stock
exchanges of Barbados and Trinidad and Tobago. The results of CIBC FirstCaribbean, including goodwill impairment charges thereon, are included
in Corporate and Other.
On November 8, 2019 and as discussed in Note 4, we announced that we had entered into a definitive agreement to sell 66.73% of CIBC
FirstCaribbean’s outstanding shares to GNB. As a result of the valuation implied from the definitive agreement with GNB, we recognized a goodwill
impairment charge of $135 million in the fourth quarter of 2019. Commencing in the first quarter of 2020, the assets and liabilities of CIBC
FirstCaribbean were treated as held for sale, and measured at the lower of their aggregate carrying amount and fair value less costs to sell, on the
basis that the transaction was highly probable to close in 2020, subject to regulatory approvals. In the second quarter of 2020, we recognized an
additional goodwill impairment charge of $28 million based on the estimated impact of the COVID-19 pandemic on the recoverable value of the
24.9% interest in CIBC FirstCaribbean that we expected to retain.
As a result of the lengthy regulatory review process, the worsening impact of the COVID-19 pandemic on the Caribbean economy and our
revised expectations regarding the likelihood and timing of closing of a potential transaction, we concluded in the fourth quarter of 2020 that held for
sale accounting was no longer appropriate. As a result, we were required to assess the recoverable amount of the remaining goodwill based on
current market conditions rather than the definitive agreement with GNB. This assessment reflected revised expectations concerning the impact of
the COVID-19 pandemic and led to the recognition of an additional goodwill impairment charge of $220 million.
On February 3, 2021, we announced that the proposed sale of CIBC FirstCaribbean to GNB did not receive regulatory approval and that the
transaction will not proceed.
In the fourth quarter of 2021, we performed our annual impairment test as at August 1, 2021. The recoverable amount of CIBC FirstCaribbean
for 2021 is based on a value in use calculation that is estimated using a five-year cash flow projection approved by management of CIBC
FirstCaribbean and an estimate of the capital required to be maintained in the region to support ongoing operations. We have determined that the
estimated recoverable amount of the CIBC FirstCaribbean CGU was in excess of its carrying amount. As a result, no impairment charge was
recognized during 2021.
U.S. Commercial Banking and Wealth Management
The recoverable amount of the U.S. Commercial Banking and Wealth Management CGU (including The PrivateBank and Geneva Advisors) is based
on a value in use calculation. For our annual impairment test as at August 1, 2021, we reverted to using a five-year cash flow projection to estimate
the value in use, as compared to the ten-year cash flow projection utilized in the prior year, to reflect the partial recovery to more normal levels of
economic growth. The cash flows projections are based on the financial plans approved by management, and an estimate of the capital required to
be maintained to support ongoing operations.
We have determined that for the impairment testing performed as at August 1, 2021, the estimated recoverable amount of the U.S. Commercial
Banking and Wealth Management CGU was in excess of its carrying amount. As a result, no impairment charge was recognized during 2021.
A terminal growth rate of 4.3% as at August 1, 2021 (August 1, 2020: 4.0%) was applied to the years after the five-year forecast. All of the
forecasted cash flows were discounted at an after-tax rate of 9.3% as at August 1, 2021 (10.9% pre-tax) which we believe to be a risk-adjusted
discount rate appropriate to U.S. Commercial Banking and Wealth Management (we used an after-tax rate of 10.2% as at August 1, 2020). The
determination of a discount rate and a terminal growth rate require the exercise of judgment. The discount rate was determined based on the
following primary factors: (i) the risk-free rate; (ii) an equity risk premium; and (iii) beta adjustment to the equity risk premium based on a review of
betas of comparable publicly traded financial institutions in the region. The terminal growth rate was based on management’s expectations of real
growth and forecast inflation rates.
If alternative reasonably possible changes in key assumptions were applied, the result of the impairment test would not differ.
Estimation of the recoverable amount is an area of significant judgment. The recoverable amount is estimated using an internally developed
model which requires the use of significant assumptions including forecasted earnings, a discount rate, a terminal growth rate and forecasted
regulatory capital requirements. Reductions in the estimated recoverable amount could arise from various factors, such as reductions in forecasted
cash flows, an increase in the assumed level of required capital, and any adverse changes to the discount rate or terminal growth rate either in
isolation or in any combination thereof.
Canadian Wealth Management
The recoverable amount of the Canadian Wealth Management CGU is based on a fair value less cost to sell calculation. The fair value is estimated
using an earnings-based approach whereby the forecasted earnings are based on the Wealth Management internal plan which was approved by
management and covers a three-year period. The calculation incorporates the forecasted earnings multiplied by an earnings multiple derived from
observable price-to-earnings multiples of comparable wealth management institutions. The price-to-earnings multiples of those comparable wealth
management institutions ranged from 7.0 to 10.9 as at August 1, 2021 (August 1, 2020: 7.9 to 13.7).
We have determined that the estimated recoverable amount of the Wealth Management CGU was well in excess of its carrying amount as at
August 1, 2021. As a result, no impairment charge was recognized during 2021.
If alternative reasonably possible changes in key assumptions were applied, the result of the impairment test would not differ.
Other
The goodwill relating to the Other CGUs is comprised of amounts which individually are not considered to be significant. We have determined that for
the impairment testing performed as at August 1, 2021, the estimated recoverable amount of these CGUs was in excess of their carrying amounts.
Allocation to strategic business units
Goodwill of $4,954 million (2020: $5,253 million) is allocated to the SBUs as follows: Canadian Commercial Banking and Wealth Management of
$954 million (2020: $954 million), Corporate and Other of $95 million (2020: $98 million), U.S. Commercial Banking and Wealth Management of
$3,837 million (2020: $4,131 million), Capital Markets of $61 million (2020: $63 million), and Canadian Personal and Business Banking of $7 million
(2020: $7 million).
CIBC 2021 ANNUAL REPORT 157
Consolidated financial statements
Software and other intangible assets
The carrying amount of indefinite-lived intangible assets is provided in the following table:
$ millions, as at or for the year ended October 31
2021
Balance at beginning of year
Foreign currency translation adjustments
Balance at end of year
2020
Balance at beginning of year
Foreign currency translation adjustments
Balance at end of year
(1) Represents management contracts purchased as part of past acquisitions.
(2) Acquired as part of the CIBC FirstCaribbean acquisition.
The components of finite-lived software and other intangible assets are as follows:
Contract
based (1)
Brand name (2)
Total
$ 116
–
$ 116
$ 116
–
$ 116
$ 26
(2)
$ 24
$ 26
–
$ 26
$ 142
(2)
$ 140
$ 142
–
$ 142
$ millions, as at or for the year ended October 31
2021 Gross carrying amount
Balance at beginning of year
Additions
Disposals (5)
Adjustments (6)
Balance at end of year
2020
Balance at end of year
2021 Accumulated amortization
Balance at beginning of year
Amortization and impairment (5)
Disposals (5)
Adjustments (6)
Balance at end of year
2020
Balance at end of year
Net book value
As at October 31, 2021
As at October 31, 2020
Core deposit
Software (1)
intangibles (2)
Contract
based (3)
Customer
relationships (4)
$ 3,508
592
(19)
(20)
$ 4,061
$ 3,508
$ 1,983
408
(8)
(16)
$ 2,367
$ 1,983
$ 1,694
$ 1,525
$ 619
–
–
(44)
$ 575
$ 619
$ 457
51
–
(33)
$ 475
$ 457
$ 100
$ 162
$ 22
–
–
(2)
$ 20
$ 22
$ 12
3
–
(2)
$ 13
$ 12
7
$
$ 10
Total
$ 4,406
592
(19)
(84)
$ 4,895
$ 4,406
$ 2,587
487
(8)
(60)
$ 3,006
$ 2,587
$ 257
–
–
(18)
$ 239
$ 257
$ 135
25
–
(9)
$ 151
$ 135
88
$
$ 122
$ 1,889
$ 1,819
(1) Includes $659 million (2020: $620 million) of work-in-progress not subject to amortization.
(2) Acquired as part of the acquisitions of CIBC FirstCaribbean and The PrivateBank.
(3) Represents a combination of management contracts purchased as part of past acquisitions including The PrivateBank and Geneva Advisors in 2017, as well as
Lowenhaupt Global Advisors, LLC (LGA) and Cleary Gull in 2019.
(4) Represents customer relationships associated with past acquisitions including The PrivateBank and Geneva Advisors in 2017, and LGA in 2019.
(5) Includes write-offs of fully amortized assets.
(6) Includes foreign currency translation adjustments.
Net additions and disposals of gross carrying amount during the year were: Canadian Personal and Business Banking net disposals of $2 million
(2020: net additions of $1 million); Canadian Commercial Banking and Wealth Management net disposals of nil (2020: net disposals of nil); U.S.
Commercial Banking and Wealth Management net additions of $5 million (2020: net disposals of $8 million); Capital Markets net disposals of nil
(2020: net disposals of nil); and Corporate and Other net additions of $570 million (2020: net additions of $459 million).
Note 10 Other assets
$ millions, as at October 31
Accrued interest receivable
Defined benefit asset (Note 19)
Precious metals (1)
Brokers’ client accounts
Current tax receivable
Other prepayments
Derivative collateral receivable
Accounts receivable
Other (2)
$
2021
1,271
1,372
3,005
12,273
1,676
582
6,599
859
1,588
$
2020
1,317
247
2,731
9,153
2,201
557
4,950
519
1,533
$ 29,225
$ 23,208
(1) Includes gold and silver bullion that are measured at fair value using unadjusted market prices quoted in active markets.
(2) Includes investments in subleases of $664 million as at October 31, 2021 (2020: $749 million), related to certain subleases we have re-assessed as finance subleases as
part of the adoption of IFRS 16. For the year ended October 31, 2021, finance income related to our investment in sublease was $47 million (2020: $53 million). Future
lease payments receivable are $472 million over the next five years, and $683 million thereafter until expiry of the subleases.
158 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 11 Deposits(1)(2)
$ millions, as at October 31
Personal
Business and government (7)(8)
Bank
Secured borrowings (9)
Comprises:
Held at amortized cost
Designated at fair value
Total deposits include (10):
Non-interest-bearing deposits
Canada
U.S.
Other international
Interest-bearing deposits
Canada
U.S.
Other international
Payable on
Payable after
Payable on a
demand (3)
notice (4)
fixed date (5)(6)
2021
Total
$
16,339
100,719
10,334
–
$ 146,017
86,394
161
–
$
51,576
157,275
9,751
42,592
$ 213,932
344,388
20,246
42,592
2020
Total
$ 202,152
311,426
17,011
40,151
$ 127,392
$ 232,572
$ 261,194
$ 621,158
$ 570,740
$ 602,628
18,530
$ 557,321
13,419
$ 621,158
$ 570,740
$
93,850
16,522
5,601
$
71,122
13,833
5,798
406,642
70,312
28,231
389,439
66,399
24,149
$ 621,158
$ 570,740
(1) Includes deposits of $215.4 billion (2020: $185.2 billion) denominated in U.S. dollars and deposits of $37.1 billion (2020: $30.2 billion) denominated in other foreign
currencies.
(2) Net of purchased notes of $2.2 million (2020: $3.1 billion).
(3) Includes all deposits for which we do not have the right to require notice of withdrawal. These deposits are generally chequing accounts.
(4) Includes all deposits for which we can legally require notice of withdrawal. These deposits are generally savings accounts.
(5) Includes all deposits that mature on a specified date. These deposits are generally term deposits, guaranteed investment certificates, and similar instruments.
(6) Includes $32.6 billion (2020: $19.9 billion) of deposits which are subject to the bank recapitalization (bail-in) conversion regulations issued by the Department of Finance
Canada. These regulations provide certain statutory powers to the Canada Deposit Insurance Corporation (CDIC), including the ability to convert specified eligible shares
and liabilities of CIBC into common shares in the event that CIBC is determined to be non-viable.
(7) Includes $300 million (2020: $303 million) of Notes issued to CIBC Capital Trust. These Notes were redeemed on November 1, 2021. For additional information, see
Note 17.
(8) Includes $8.8 billion (2020: $9.1 billion) of structured note liabilities that were sold upon issuance to third-party financial intermediaries, who may resell the notes to retail
investors in foreign jurisdictions.
(9) Comprises liabilities issued by or as a result of activities associated with the securitization of residential mortgages, Covered Bond Programme, and consolidated
securitization vehicles.
(10) Classification is based on geographical location of the CIBC office.
Note 12 Other liabilities
$ millions, as at October 31
Accrued interest payable
Defined benefit liability (Note 19)
Gold and silver certificates
Brokers’ client accounts
Derivative collateral payable
Negotiable instruments
Accrued employee compensation and benefits
Accounts payable and accrued expenses
Other (1)
$
2021
781
602
113
5,809
6,662
1,149
2,961
2,259
4,587
$
2020
1,200
676
133
5,303
4,772
1,110
2,174
2,153
4,613
$ 24,923
$ 22,134
(1) Includes the carrying value of our lease liabilities, which was $2,134 million as at October 31, 2021 (2020: $1,866 million). The undiscounted cash flows related to the
contractual maturity of our lease liabilities is $363 million for the period less than 1 year, $1,074 million between years 1-5, and $1,107 million thereafter until expiry of the
leases. During the year ended October 31, 2021, interest expense on lease liabilities was $51 million (2020: $60 million).
Note 13 Derivative instruments
As described in Note 1, in the normal course of business, we use various derivative instruments for both trading and ALM purposes. These
derivatives limit, modify or give rise to varying degrees and types of risk.
$ millions, as at October 31
Trading (Note 3)
ALM (Note 3) (1)
2021
2020
Assets
Liabilities
Assets
Liabilities
$ 34,647
1,265
$ 30,040
2,061
$ 31,356
1,374
$ 29,392
1,116
$ 35,912
$ 32,101
$ 32,730
$ 30,508
(1) Comprised of derivatives that qualify for hedge accounting under IAS 39 and derivatives used for economic hedges.
CIBC 2021 ANNUAL REPORT 159
Consolidated financial statements
Derivatives used by CIBC
The majority of our derivative contracts are OTC transactions, which consist of: (i) contracts that are bilaterally negotiated and settled between CIBC
and the counterparty to the contract; and (ii) contracts that are bilaterally negotiated and then cleared through a central counterparty (CCP).
Bilaterally negotiated and settled contracts are usually traded under a standardized International Swaps and Derivatives Association (ISDA)
agreement with collateral posting arrangements between CIBC and its counterparties. Terms are negotiated directly with counterparties and the
contracts have industry-standard settlement mechanisms prescribed by ISDA. Centrally cleared contracts are generally bilaterally negotiated and
then novated to, and cleared through, a CCP. The industry promotes the use of CCPs to clear OTC trades. The central clearing of derivative
contracts generally facilitates the reduction of credit exposures due to the ability to net settle offsetting positions. Consequently, derivative contracts
cleared through CCPs generally attract less capital relative to those settled with non-CCPs.
The remainder of our derivative contracts are exchange-traded derivatives, which are standardized in terms of their amounts and settlement
dates, and are bought and sold on organized and regulated exchanges. These exchange-traded derivative contracts consist primarily of options
and futures.
Interest rate derivatives
Forward rate agreements are OTC contracts that effectively fix a future interest rate for a period of time. A typical forward rate agreement provides
that at a pre-determined future date, a cash settlement will be made between the counterparties based upon the difference between a contracted
rate and a market rate to be determined in the future, calculated on a specified notional principal amount. No exchange of principal amount takes
place. Certain forward rate agreements are bilaterally transacted and then novated and settled through a clearing house which acts as a CCP.
Interest rate swaps are OTC contracts in which two counterparties agree to exchange cash flows over a period of time based on rates applied
to a specified notional principal amount. A typical interest rate swap would require one counterparty to pay a fixed market interest rate in exchange
for a variable market interest rate determined from time to time, with both calculated on a specified notional principal amount. No exchange of
principal amount takes place. Certain interest rate swaps are bilaterally transacted and then novated and settled through a clearing house which
acts as a CCP.
Interest rate options are contracts in which one party (the purchaser of an option) acquires from another party (the writer of an option), in
exchange for a premium, the right, but not the obligation, to either buy or sell, on a specified future date or within a specified time, a specified
financial instrument at a contracted price. The underlying financial instrument has a market price which varies in response to changes in interest
rates. Options are transacted in both OTC and exchange-traded markets.
Interest rate futures are standardized contracts transacted on an exchange. They are based upon an agreement to buy or sell a specified
quantity of a financial instrument on a specified future date, at a contracted price. These contracts differ from forward rate agreements in that they
are in standard amounts with standard settlement dates and are transacted through an exchange.
Foreign exchange derivatives
Foreign exchange forwards are OTC contracts in which one counterparty contracts with another to exchange a specified amount of one currency for
a specified amount of a second currency, at a future date or range of dates.
Foreign exchange futures contracts are similar in mechanics to foreign exchange forward contracts except that they are in standard currency
amounts with standard settlement dates and are transacted through an exchange.
Foreign exchange swap contracts comprise foreign exchange swaps and cross-currency interest rate swaps. Foreign exchange swaps are
transactions in which a currency is simultaneously purchased in the spot market and sold for a different currency in the forward market, or vice
versa. Cross-currency interest rate swaps are transactions in which counterparties exchange principal and interest flows in different currencies over
a period of time. These contracts are used to manage both currency and interest rate exposures.
Credit derivatives
Credit derivatives are OTC contracts designed to transfer the credit risk in an underlying financial instrument (usually termed as a reference asset)
from one counterparty to another. The most common credit derivatives are CDS and certain TRS.
CDS contracts provide protection against the decline in value of a reference asset as a result of specified credit events such as default or
bankruptcy. These derivatives are similar in structure to an option whereby the purchaser pays a premium to the seller of the CDS contract in return
for payment contingent on the occurrence of a credit event. The protection purchaser has recourse to the protection seller for the difference
between the face value of the CDS contract and the fair value of the reference asset at the time of settlement. Neither the purchaser nor the seller
under the CDS contract has recourse to the entity that issued the reference asset. Certain CDS contracts are cleared through a CCP.
In credit derivative TRS contracts, one counterparty agrees to pay or receive cash amounts based on the returns of a reference asset,
including interest earned on these assets in exchange for amounts that are based on prevailing market funding rates. These cash settlements are
made regardless of whether there is a credit event. Upon the occurrence of a credit event, the parties may either exchange cash payments
according to the value of the defaulted assets or exchange cash based on the notional amount for physical delivery of the defaulted assets.
Equity derivatives
Equity swaps are OTC contracts in which one counterparty agrees to pay, or receive from the other, cash amounts based on changes in the value of
a stock index, a basket of stocks or a single stock in exchange for amounts that are based either on prevailing market funding rates or changes in
the value of a different stock index, basket of stocks or a single stock. These contracts generally include payments in respect of dividends.
Equity options give the purchaser of the option, for a premium, the right, but not the obligation, to buy from or sell to the writer of an option, an
underlying stock index, basket of stocks, or a single stock at a contracted price. Options are transacted in both OTC and exchange markets.
Equity index futures are standardized contracts transacted on an exchange. They are based on an agreement to pay or receive a cash
amount based on the difference between the contracted price level of an underlying stock index and its corresponding market price level at a
specified future date. There is generally no actual delivery of stocks that comprise the underlying index. These contracts are in standard amounts
with standard settlement dates.
Precious metal and other commodity derivatives
We also transact in other derivative products, including commodity forwards, futures, swaps and options, such as precious metal and energy-
related products in both OTC and exchange markets.
160 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Notional amounts
The notional amounts are not recorded as assets or liabilities, as they represent the face amount of the contract to which a rate or price is applied to
determine the amount of cash flows to be exchanged. In most cases, notional amounts do not represent the potential gain or loss associated with
market or credit risk of such instruments.
The following table presents the notional amounts of derivative instruments:
$ millions, as at October 31
2021
2020
Residual term to contractual maturity
Less
than
1 year
1 to
5 years
Over
5 years
Total
notional
amounts
Trading
ALM
Trading
ALM
$
9,679 $
3,081 $
– $
12,760 $
7,149 $
5,611 $
10,593 $
3,026
Interest rate derivatives
Over-the-counter
Forward rate agreements
Centrally cleared forward rate
agreements
Swap contracts
Centrally cleared swap contracts
Purchased options
Written options
Exchange-traded
Futures contracts
Purchased options
Written options
Total interest rate derivatives
Foreign exchange derivatives
Over-the-counter
Forward contracts
Swap contracts
Purchased options
Written options
Exchange-traded
Futures contracts
Total foreign exchange derivatives
Credit derivatives
Over-the-counter
Credit default swap contracts –
protection purchased
Centrally cleared credit default swap
contracts – protection purchased
Credit default swap contracts –
protection sold
Centrally cleared credit default swap
contracts – protection sold
Total credit derivatives
Equity derivatives
Over-the-counter
Exchange-traded
Total equity derivatives
Precious metal derivatives
Over-the-counter
Exchange-traded
Total precious metal derivatives
Other commodity derivatives
Over-the-counter
Centrally cleared commodity derivatives
Exchange-traded
Total other commodity derivatives
Total notional amount of which:
Over-the-counter (1)
Exchange-traded
87,710
46,976
1,064,805
5,794
7,384
1,222,348
134,137
5,251
10,251
149,639
1,371,987
695,383
128,433
18,224
20,529
862,569
6
862,575
1,102
97
874
–
2,073
59,281
75,276
134,557
6,678
406
7,084
17,510
119
21,810
39,439
12,488
132,683
1,752,039
6,429
5,573
1,912,293
30,507
–
–
30,507
1,942,800
19,864
260,439
1,685
2,090
284,078
–
87,201
642,217
1,440
1,216
732,074
–
–
–
–
732,074
1,318
155,259
22
7
156,606
100,198
266,860
3,459,061
13,663
14,173
3,866,715
164,644
5,251
10,251
180,146
4,046,861
716,565
544,131
19,931
22,626
1,303,253
100,198
243,655
2,998,139
13,319
13,912
3,376,372
164,644
5,251
10,251
180,146
3,556,518
709,628
491,884
19,843
21,887
1,243,242
–
284,078
–
156,606
6
1,303,259
6
1,243,248
149,428
264,184
2,840,793
9,188
9,370
–
29,852
445,189
1,754
766
3,283,556
480,587
269,670
3,060
5,060
277,790
–
–
–
–
3,561,346
480,587
1,071,423
486,689
19,008
22,229
1,599,349
8,751
42,326
–
454
51,531
3
–
1,599,352
51,531
–
23,205
460,922
344
261
490,343
–
–
–
–
490,343
6,937
52,247
88
739
60,011
–
60,011
27
123
–
–
150
574
561
334
68
1,537
25,562
18,097
43,659
140
4
144
23,142
–
12,151
35,293
561
989
96
309
1,955
600
191
791
–
–
–
558
–
412
970
2,237
1,647
1,304
377
5,565
2,210
1,524
1,304
377
5,415
1,907
2,424
614
1,309
6,254
85,443
93,564
83,612
93,564
179,007
177,176
1,831
–
1,831
86,865
89,824
176,689
6,818
410
7,228
41,210
119
34,373
75,702
6,818
410
7,228
41,210
119
34,373
75,702
–
–
–
–
–
–
–
9,681
524
10,205
34,142
55
18,700
52,897
29
160
9
–
198
4,914
–
4,914
–
–
–
8
–
–
8
$ 2,417,715 $ 2,307,511 $ 892,396 $ 5,617,622 $ 5,065,287 $ 552,335 $ 5,406,743 $ 537,238
537,238
–
4,756,788
308,499
2,246,752
60,759
5,309,123
308,499
2,170,578
247,137
5,019,902
386,841
552,335
–
891,793
603
(1) For OTC derivatives that are not centrally cleared, $1,622.2 billion (2020: $1,984.6 billion) are with counterparties that have two-way collateral posting arrangements,
$37.1 billion (2020: $44.9 billion) are with counterparties that have one-way collateral posting arrangements, and $88.4 billion (2020: $88.3 billion) are with counterparties
that have no collateral posting arrangements. Counterparties with whom we have more than insignificant OTC derivative portfolios and one-way collateral posting
arrangements are either sovereign entities or supra national financial institutions.
CIBC 2021 ANNUAL REPORT 161
Consolidated financial statements
Risk
In the following sections, we discuss the risks related to the use of derivatives and how we manage these risks.
Market risk
Derivatives are financial instruments where valuation is linked to changes in interest rates, foreign exchange rates, equity, commodity, credit prices
or indices. Changes in value as a result of the aforementioned risk factors are referred to as market risk.
Market risk arising from derivative trading activities is managed in order to mitigate risk in line with CIBC’s risk appetite. To manage market
risk, we set market risk limits and may enter into hedging transactions.
Credit risk
Credit risk arises from the potential for a counterparty to default on its contractual obligations and the possibility that prevailing market conditions are
such that a loss would occur in replacing the defaulted transaction.
We limit the credit risk of OTC derivatives through the use of ISDA master netting agreements, collateral, CCPs and other credit mitigation
techniques. We clear eligible derivatives through CCPs in accordance with various global initiatives. Where feasible, we novate existing bilaterally
negotiated and settled derivatives to a CCP in an effort to reduce CIBC’s credit risk exposure. We establish counterparty credit limits and limits for
CCP exposures based on a counterparty’s creditworthiness and the type of trading relationship with each counterparty (underlying agreements,
business volumes, product types, tenors, etc.).
We negotiate netting agreements to contain the build-up of credit exposure resulting from multiple transactions with more active
counterparties. Such agreements provide for the simultaneous close-out and netting of all transactions with a counterparty, in the case of a
counterparty default. A number of these agreements incorporate a Credit Support Annex, which is a bilateral security agreement that, among other
things, provides for the exchange of collateral between parties in the event that one party’s exposure to the other exceeds agreed upon thresholds.
Credit risk on exchange-traded futures and options is limited, as these transactions are standardized contracts executed on established
exchanges, whose CCPs assume the obligations of both counterparties. Similarly, swaps that are centrally cleared represent limited credit risk
because these transactions are novated to the CCP, which assumes the obligations of the original bilateral counterparty. All exchange-traded and
centrally cleared contracts are subject to initial margin and daily settlement of variation margins, designed to protect participants from losses
incurred from a counterparty default.
A CVA is determined using the fair value based exposure we have on derivative contracts. We believe that we have made appropriate fair
value adjustments to date. The establishment of fair value adjustments involves estimates that are based on accounting processes and judgments
by management. We evaluate the adequacy of the fair value adjustments on an ongoing basis. Market and economic conditions relating to
derivative counterparties may change in the future, which could result in significant future losses.
The following table summarizes our credit exposure arising from derivatives, which includes the current replacement cost, credit equivalent amount
and risk-weighted amount.
In the second quarter of 2020, we adopted the Internal Model Method (IMM) for the determination of the EAD amount for most of our
derivatives portfolios. The EAD amount is based on effective expected positive exposure (EEPE) which computes, through simulation, the expected
exposures with consideration to the expected movements in underlying risk factor and netting/collateral agreements. It is calculated as EEPE
multiplied by the prescribed alpha factor of 1.4 and is reduced by CVA losses. The EAD amount is then multiplied by counterparty risk variables to
arrive at the risk-weighted amount. The risk-weighted amount is used in determining the regulatory capital requirements for derivatives.
From the first quarter of 2019 to the second quarter of 2020, the Standardized Approach for Counterparty Credit Risk (SA-CCR) was used in
calculating the replacement cost, EAD amount and risk-weighted assets. The current replacement cost was the estimated cost to replace all
contracts that have a positive market value, representing an unrealized gain to us. The replacement cost of an instrument was dependent upon its
terms relative to prevailing market prices. Replacement cost included the impact of certain collateral amounts and the impact of master netting
agreements. The EAD amount was calculated as the sum of replacement cost and the potential future exposure, multiplied by an alpha of 1.4, and
was reduced by CVA losses. The potential future exposure was an estimate of the amount by which the current replacement cost could increase
over the remaining term of each transaction, based on a formula prescribed by OSFI. Similar to IMM, the EAD amount was then multiplied by
counterparty risk variables to arrive at the risk-weighted amount.
162 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
$ millions, as at October 31
Current replacement cost (2)
Credit
equivalent
Trading
ALM
Total
amount (3)
2021
Risk-
weighted
amount
Current replacement cost (2)
Credit
equivalent
Trading
ALM
Total
amount (3)
2020 (1)
Risk-
weighted
amount
35
4,182
26
8
4,251
332
4,583
4,027
2,684
156
50
6,917
105
18
123
3,910
6,298
Interest rate derivatives
Over-the-counter
Forward rate agreements
Swap contracts
Purchased options
Written options
$
– $
2,116
14
4
2,134
4
141
2
–
147
Exchange-traded
3
–
$
4 $
2,257
16
4
2,281
3
Foreign exchange derivatives
Over-the-counter
Forward contracts
Swap contracts
Purchased options
Written options
Credit derivatives
Over-the-counter
Credit default swap contracts
– protection purchased
– protection sold
Equity derivatives
Over-the-counter
Exchange-traded
Precious metal derivatives
Over-the-counter
Exchange-traded
Other commodity derivatives
Over-the-counter
Exchange-traded
RWA related to non-trade exposures
to central counterparties
RWA related to CVA charge
2,137
147
2,284
943
452
144
40
1,579
3
1
4
254
1,310
1,564
41
–
41
4,106
17
4,123
196
389
14
–
599
1
–
1
79
–
79
2
–
2
2
–
2
1,139
841
158
40
2,178
4
1
5
333
1,310
1,643
43
–
43
4,108
17
4,125
$
31
1,360
14
4
1,409
10
$
– $
16 $
16 $
3,974
17
9
4,000
–
237
6
–
259
–
4,211
23
9
4,259
–
135
6,744
35
5
6,919
309
$
12
2,705
26
2
2,745
9
1,419
4,000
259
4,259
7,228
2,754
1,335
751
54
19
2,159
851
358
116
47
1,372
364
481
1
–
846
1,215
839
117
47
2,218
7
10
17
275
579
854
58
–
58
1,293
3
1,296
9
–
9
55
–
55
–
–
–
25
–
25
16
10
26
330
579
909
58
–
58
1,318
3
1,321
16
7
23
935
195
10,208
1,130
128
53
181
6,246
2,506
8,752
88
2
90
1,788
100
1,888
306
7,174
4,974
2,324
182
44
7,524
144
13
157
3,100
3,929
7,029
136
20
156
2,365
1,291
3,656
1,423
700
65
20
2,208
21
6
27
658
120
778
55
1
56
866
52
918
213
7,202
Total derivatives
$ 9,448 $ 830 $ 10,278 $ 30,764 $ 14,189
$ 7,597 $ 1,194 $ 8,791 $ 25,750
$ 14,156
(1) Effective in the second quarter of 2020, we adopted the IMM approach for CCR for qualifying derivative transactions which impacted the calculation of EAD and risk-
weighted assets (RWA). Some derivatives are not eligible for IMM and remain under SA-CCR.
(2) Current replacement cost reflects the current mark-to-market (MTM) value of derivatives offset by eligible financial collateral, where present.
(3) Under IMM, EEPE is used, which computes, through simulation, the expected exposures with consideration to the expected movements in underlying risk factor and
netting/collateral agreements. The EAD is calculated as EEPE multiplied by the prescribed alpha factor of 1.4. The EAD under SA-CCR is calculated as the sum of
replacement cost and potential future exposure, multiplied by the prescribed alpha factor of 1.4.
The following table presents the current replacement cost of derivatives by geographic region based on the location of the derivative counterparty:
$ millions, as at October 31
2021
Canada
U.S.
Other
countries
Total
Canada
U.S.
Other
countries
2020
Total
Derivative instruments
By counterparty type
Financial institutions
Governments
Corporate
$
558
641
1,824
$ 1,693
1
3,445
$ 1,130
17
969
$
3,381
659
6,238
$
921
982
1,823
$
949
–
1,774
$ 1,156
4
1,182
$ 3,026
986
4,779
Total derivative instruments
$ 3,023
$ 5,139
$ 2,116
$ 10,278
$ 3,726
$ 2,723
$ 2,342
$ 8,791
CIBC 2021 ANNUAL REPORT 163
Consolidated financial statements
Note 14
Designated accounting hedges
Hedge accounting
We apply hedge accounting as part of managing the market risk of certain non-trading portfolios arising from changes due to interest rates, foreign
exchange rates, and equity market prices. See the shaded sections in “Non-trading activities” in the MD&A for further information on our risk
management strategy for these risks. See Note 13 for further information on the derivatives used by CIBC.
Interest rate risk
The majority of our derivative contracts used to hedge certain exposures to benchmark interest rate risk are interest rate swaps. For fair value
hedges, we convert our fixed interest rate exposures from the hedged financial instruments to floating interest rate exposures. For cash flow
hedges, we convert certain exposures to cash flow variability from our variable rate instruments to fixed interest rate exposures.
Foreign currency risk
For our fair value hedges, we mainly use various combinations of cross-currency interest rate swaps and interest rate swaps to hedge our
exposures to foreign currency risk together with interest rate risk, converting our fixed foreign currency rate exposures to floating functional currency
rate exposures.
For our cash flow hedges, the majority of our derivative contracts are used to hedge our exposures to cash flow variability arising from
fluctuations in foreign exchange rates, and mainly consist of cross-currency interest rate swaps.
For NIFO hedges, we use a combination of foreign denominated deposit liabilities and foreign exchange forwards to manage our foreign
currency exposure of our NIFOs with a functional currency other than the Canadian dollar.
Equity price risk
We use cash-settled total return swaps in designated cash flow hedge relationships to hedge changes in CIBC’s share price in respect of certain
cash-settled share-based compensation awards. Note 18 provides details on our cash-settled share-based compensation plans.
For the hedge relationships described above, hedge effectiveness is assessed at the inception of the hedge relationship and on an ongoing basis,
primarily using the dollar offset method. The sources of hedge ineffectiveness are mainly attributed to the following:
Utilization of hedging instruments that have a non-zero fair value at the inception of the hedge relationship;
Differences in fixed rates, when contractual coupons of the fixed rate hedged items are designated;
Differences in the discounting factors between the hedged item and the hedging instruments arising from different rate reset frequencies and
timing of cash flows; and
Differences in the discount curves to determine the basis adjustments of the hedged items and the fair value of the hedging derivatives,
including from the application of OIS and CVA to the valuation of derivatives when they are applicable.
164 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Designated hedging instruments
The following table provides a summary of financial instruments designated as hedging instruments:
$ millions, as at October 31
2021 Cash flow hedges
Foreign exchange risk
Notional
amount of
the hedging
instrument (1)(2)
Maturity range
Fair value of the
hedging derivatives
Less than
1 year
1-5
years
Over 5
years
Assets Liabilities
Gains (losses) on
changes in fair value
used for calculating
hedge ineffectiveness
Cross-currency interest rate swaps
$
13,002
$
6,605 $
6,397 $
– $
165 $
191
$
(55)
Interest rate risk
Interest rate swaps
Equity share price risk
Equity swaps
NIFO hedges
Foreign exchange risk
Foreign exchange forwards
Deposits (3)
Fair value hedges
Interest rate risk
Interest rate swaps
Foreign exchange / interest rate risk
Cross-currency interest rate swaps
Interest rate swaps
12,073
4,846
7,227
1,679
964
715
–
–
–
44
–
1
$
26,754
$
12,415 $
14,339 $
– $
209 $
192
$
226
24,116
$
226
24,116
$
$
24,342
$
24,342
$
–
–
–
$
$
–
–
–
$
$
$
1
n/a
1
$
1
n/a
1
(223)
529
251
14
1,534
1,548
$
$
$
$ 190,769
$
72,010 $
99,532 $ 19,227 $
152 $
162
$ 1,018
38,213
20,907
7,804
4,113
23,483
13,692
6,926
3,102
478
–
1,391
–
$ 249,889
$
83,927 $ 136,707 $ 29,255 $
630 $ 1,553
$ 300,985
$ 120,684 $ 151,046 $ 29,255 $
840 $ 1,746
48
(260)
$
806
$ 2,605
2020 Cash flow hedges
Foreign exchange risk
Cross-currency interest rate swaps
$
7,329
$
3,692 $
3,637 $
– $
134 $
161
$
43
Interest rate risk
Interest rate swaps
Equity share price risk
Equity swaps
NIFO hedges
Foreign exchange risk
Foreign exchange forwards
Deposits (3)
Fair value hedges
Interest rate risk
Interest rate swaps
Foreign exchange / interest rate risk
Cross-currency interest rate swaps
Interest rate swaps
15,104
6,085
9,019
1,171
1,012
159
–
–
13
5
–
23
320
(131)
$
23,604
$
10,789 $
12,815 $
– $
152 $
184
$
232
$
247
20,409
$
247 $
20,409
$
20,656
$
20,656 $
– $
–
– $
– $
–
– $
– $
n/a
– $
–
n/a
–
$
(2)
(154)
$
(156)
$ 205,518
$
61,911 $ 126,570 $ 17,037 $
170 $
194
$
(815)
34,329
17,025
2,185
–
26,689
14,311
5,455
2,714
795
–
$ 256,872
$ 301,132
$
$
64,096 $ 167,570 $ 25,206 $
965 $
95,541 $ 180,385 $ 25,206 $ 1,117 $
486
5
685
869
(26)
66
(775)
(699)
$
$
(1) For some hedge relationships, we apply a combination of derivatives to hedge the underlying exposures; therefore, the notional amounts of the derivatives generally
exceed the carrying amount of the hedged items.
(2) As at October 31, 2021, the notional amount of our derivatives in designated hedge accounting relationships that were indexed to U.S. LIBOR with a maturity date beyond
June 30, 2023, and CHF LIBOR and GBP LIBOR with a maturity date beyond December 31, 2021, was $39 billion and $9 billion, respectively. See “Interest Rate
Benchmark Reform” in Note 1 for details.
(3) Notional amount represents the principal amount of deposits as at October 31, 2021 and October 31, 2020.
n/a Not applicable.
CIBC 2021 ANNUAL REPORT 165
Consolidated financial statements
The following table provides the average rate or price of the hedging derivatives:
As at October 31
2021 Cash flow hedges
Foreign exchange risk
Cross-currency interest rate swaps
Interest rate risk
Interest rate swaps
Equity share price risk
Equity swaps
NIFO hedges
Foreign exchange risk
Foreign exchange forwards
Fair value hedges
Interest rate risk
Interest rate swaps
Foreign exchange / interest rate risk
Cross-currency interest rate swaps
Interest rate swaps
2020 Cash flow hedges
Foreign exchange risk
Cross-currency interest rate swaps
Interest rate risk
Interest rate swaps
Equity share price risk
Equity swaps
NIFO hedges
Foreign exchange risk
Foreign exchange forwards
Fair value hedges
Interest rate risk
Interest rate swaps
Foreign exchange / interest rate risk
Cross-currency interest rate swaps
Interest rate swaps
Average
exchange rate (1)
Average fixed
interest rate (1)
Average
share price
AUD – CAD
GBP – CAD
AUD – CAD
HKD – CAD
EUR – CAD
GBP – CAD
USD – CAD
AUD – CAD
EUR – CAD
GBP – CAD
AUD – CAD
HKD – CAD
EUR – CAD
GBP – CAD
USD – CAD
CAD
USD
0.94
1.72
n/a
n/a
n/a
0.92
0.16
n/a
1.57 %
0.77 %
n/a
n/a
n/a
n/a
CAD
1.37 %
1.50
1.66
1.27
n/a
n/a
n/a
0.97
1.51
1.68
n/a
n/a
n/a
0.93
0.17
CHF
EUR
GBP
0.08 %
1.31 %
1.29 %
(0.02)%
(0.39)%
0.71 %
n/a
n/a
CAD
USD
1.60 %
1.65 %
n/a
n/a
n/a
n/a
CAD
1.52 %
1.41
1.65
1.36
n/a
n/a
n/a
CHF
EUR
GBP
0.12 %
1.06 %
1.69 %
(0.41)%
0.00 %
0.71 %
n/a
n/a
n/a
$ 118.17
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$ 105.11
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(1) Includes average foreign exchange rates and interest rates relating to significant hedging relationships.
n/a Not applicable.
166 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Designated hedged items
The following table provides information on designated hedged items:
$ millions, as at or for the year ended October 31
Assets
Liabilities
Assets
Liabilities
Carrying amount of
the hedged item
Accumulated amount
of fair value hedge adjustments
on the hedged item
Gains (losses) on
change in fair
value used for
calculating hedge
ineffectiveness
2021 Cash flow hedges (1)
Foreign exchange risk
Deposits
Interest rate risk
Loans
Equity share price risk
Share-based payment
NIFO hedges
Fair value hedges (2)
Interest rate risk
Securities
Loans
Deposits
Subordinated indebtedness
Foreign exchange / interest rate risk
Deposits
2020 Cash flow hedges (1)
Foreign exchange risk
Deposits
Interest rate risk
Loans
Equity share price risk
Share-based payment
NIFO hedges
Fair value hedges (2)
Interest rate risk
Securities
Loans
Deposits
Subordinated indebtedness
Foreign exchange / interest rate risk
Loans
Deposits
$
–
$
5,514
12,070
–
$ 12,070
$ 24,342
$ 31,661
45,180
–
–
$
$
$
–
1,549
7,063
–
–
–
91,414
5,419
–
$ 76,841
19,662
$ 116,495
$
–
$
3,132
15,092
–
$ 15,092
$ 20,656
$ 33,319
62,171
–
–
$
$
$
–
1,061
4,193
–
–
–
90,597
4,632
5
–
$ 95,495
–
17,331
$ 112,560
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$
$
(243)
(583)
–
–
–
(826)
$
$
–
–
(261)
10
(154)
(405)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$ 1,347
1,005
–
–
–
–
$ 2,352
$
–
–
1,466
202
–
81
$ 1,749
$
54
223
(529)
$
(252)
$ (1,548)
$ (1,403)
(1,340)
1,568
192
217
(766)
$
$
(44)
(320)
131
(233)
156
783
1,161
(1,019)
(113)
–
(35)
777
$
$
$
$
(1) As at October 31, 2021, the amount remaining in AOCI related to discontinued cash flow hedges was a net gain of $73 million (2020: $134 million).
(2) As at October 31, 2021, the accumulated fair value hedge net asset adjustment remaining on the consolidated balance sheet related to discontinued fair value hedges was
$44 million (2020: net asset of $75 million).
n/a Not applicable.
Hedge accounting gains (losses) in the consolidated statement of comprehensive income
$ millions, for the year ended October 31
2021 Cash flow hedges
Foreign exchange risk
Interest rate risk
Equity share price risk
NIFO hedges – foreign exchange risk
Hedges of net investment in foreign operations
2020 Cash flow hedges
Foreign exchange risk
Interest rate risk
Equity share price risk
NIFO hedges – foreign exchange risk
Hedges of net investment in foreign operations
Beginning
balance of
AOCI – hedge
reserve (after-tax)
Change in
the value of the
hedging instrument
recognized in
OCI (before-tax)
Amount
reclassified from
accumulated
OCI to income
(before-tax) (1)
Tax
benefit
(expense)
Ending balance
of AOCI
hedge reserve
(after-tax)
Hedge
ineffectiveness
gains (losses)
recognized
in income
$
$
(2)
279
(3)
274
$
$
(64)
(223)
529
242
$
57
(63)
(421)
$ (427)
$
$
2
75
(29)
48
$
$
(7)
68
76
137
$
$
–
–
–
–
$
(1,341)
$ 1,548
$
$
(2)
98
17
113
$
$
4
320
(131)
193
$
(1,139)
$
(156)
$
$
$
$
–
$
(53)
$
154
$
–
(4)
(74)
104
26
$
$
–
(65)
7
(58)
$
$
(2)
279
(3)
274
$
(2)
–
–
$ (2)
–
$
(46)
$
(1,341)
$
–
(1) During the year ended October 31, 2021, the amount reclassified from AOCI to net income for cash flow hedges of forecasted transactions that were no longer expected to
occur was nil (2020: immaterial).
CIBC 2021 ANNUAL REPORT 167
Consolidated financial statements
Hedge accounting gains (losses) in the consolidated statement of income
$ millions, for the year ended October 31
2021
Fair value hedges
Interest rate risk
Foreign exchange / interest rate risk
2020
Fair value hedges
Interest rate risk
Foreign exchange / interest rate risk
Note 15
Subordinated indebtedness
Gains (losses)
on the hedging
instruments
Gains (losses) on
the hedged items
attributable
to hedged risk
Hedge
ineffectiveness
gains (losses)
recognized in income
$ 1,018
(212)
$
$
806
(815)
40
$
(775)
$
(983)
217
$
(766)
$
812
(35)
$
777
$ 35
5
$ 40
$
(3)
5
$
2
The debt issues included in the table below are outstanding unsecured obligations of CIBC and its subsidiaries and are subordinated to the claims
of depositors and other creditors as set out in their terms. Foreign currency denominated indebtedness funds foreign currency denominated assets.
All redemptions are subject to regulatory approval.
Terms of subordinated indebtedness
$ millions, as at October 31
Interest
rate %
Contractual
maturity date
Earliest date redeemable
At greater of
Canada Yield Price (1)
and par
At par
Denominated
in foreign
currency
TT$175 million
$
5.75 (3)
3.42 (5)(6)
3.45 (5)(8)
8.70
2.95 (5)(9)
2.01 (10)
11.60
1.96 (11)
10.80
8.70
8.70
8.70
Floating (12)
Floating (14)
July 11, 2024 (4)
January 26, 2026
April 4, 2028
May 25, 2029 (4)
June 19, 2029
July 21, 2030
January 7, 2031
April 21, 2031
May 15, 2031
May 25, 2032 (4)
May 25, 2033 (4)
May 25, 2035 (4)
July 31, 2084
August 31, 2085
January 26, 2021 (7)
April 4, 2023
June 19, 2024
July 21, 2025
April 21, 2026
January 7, 1996
May 15, 2021
July 27, 1990
August 20, 1991
US$38 million (13)
US$11 million (15)
2021
2020
Par
value
32
–
1,500
25
1,500
1,000
200
1,000
150
25
25
25
47
14
Carrying
value (2)
$
32
–
1,525
37
1,484
976
196
976
146
39
40
42
47
14
$
Par
value
35
1,000
1,500
25
1,500
1,000
200
–
150
25
25
25
59
17
Carrying
value (2)
$
35
1,001
1,568
40
1,535
1,000
214
–
160
44
45
48
59
17
Subordinated indebtedness sold short (held) for trading purposes
5,543
(15)
5,554
(15)
5,561
(54)
5,766
(54)
$ 5,528
$ 5,539
$ 5,507
$ 5,712
(1) Canada Yield Price: a price calculated at the time of redemption to provide a yield to maturity equal to the yield of a Government of Canada bond of appropriate maturity
plus a pre-determined spread.
(2) Carrying values of fixed-rate subordinated indebtedness notes reflect the impact of interest rate hedges in an effective hedge relationship.
(3) Guaranteed Subordinated Term Notes in Trinidad and Tobago dollars issued on July 11, 2018 by FirstCaribbean International Bank (Trinidad & Tobago) Limited, a
subsidiary of CIBC FirstCaribbean, and guaranteed on a subordinated basis by CIBC FirstCaribbean.
(4) Not redeemable prior to maturity date.
(5) Debentures are also subject to a non-viability contingent capital (NVCC) provision, necessary for the Debentures to qualify as Tier 2 regulatory capital under Basel III. As
such, the Debentures are automatically converted into common shares upon the occurrence of a Trigger Event as described in the capital adequacy guidelines. In such an
event, the Debentures are convertible into a number of common shares, determined by dividing 150% of the par value plus accrued and unpaid interest by the average
common share price (as defined in the relevant prospectus supplements) subject to a minimum price of $5.00 per share (subject to adjustment in certain events as defined
in the relevant prospectus supplements).
(6) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 2.57% above the three-month Canadian dollar
bankers’ acceptance rate.
(7) On January 26, 2021, we redeemed all $1.0 billion of our 3.42% Debentures due January 26, 2026. In accordance with their terms, the Debentures were redeemed at
100% of their principal amount, plus accrued and unpaid interest thereon.
(8) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.00% above the three-month Canadian dollar
bankers’ acceptance rate.
(9) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.18% above the three-month Canadian dollar
bankers’ acceptance rate.
(10) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 1.28% above the three-month Canadian dollar
bankers’ acceptance rate.
(11) Interest rate is fixed at the indicated rate until the earliest date redeemable at par by CIBC and, thereafter, at a rate of 0.56% above the three-month Canadian dollar
bankers’ acceptance rate.
(12) Interest rate is based on the six-month US$ LIBOR plus 0.25%.
(13) US$6 million (2020: US$21 million) of this issue was repurchased and cancelled during 2021.
(14) Interest rate is based on the six-month US$ LIBOR plus 0.125%.
(15) US$2 million (2020: US$4 million) of this issue was repurchased and cancelled during 2021.
168 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 16 Common and preferred shares and other equity instruments
The following table presents the number of common and preferred shares outstanding and dividends paid, and other equity instruments and
distributions paid thereon:
Common and preferred shares outstanding and other equity instruments
$ millions, except number of shares and per share
amounts, as at or for the year ended October 31
Shares outstanding
Number
2021
Dividends and
distributions paid
Shares outstanding
2020
Dividends and
distributions paid
Shares outstanding
2019
Dividends and
distributions paid
of shares Amount Amount
$ per
share
Number
of shares
Amount Amount
$ per
share
Number
of shares
Amount Amount
$ per
share
Common shares
450,829,278 $ 14,351 $ 2,622
$ 5.84 446,932,750 $ 13,892 $ 2,592
$ 5.82 445,325,744 $ 13,589 $ 2,488 $ 5.60
Class A Preferred Shares
Series 39
Series 41
Series 43
Series 45
Series 47
Series 49
Series 51
16,000,000
12,000,000
12,000,000
32,000,000
18,000,000
13,000,000
10,000,000
400
300
300
800
450
325
250
15
12
9
35
20
17
13
0.93 16,000,000
0.98 12,000,000
0.79 12,000,000
1.10 32,000,000
1.13 18,000,000
1.30 13,000,000
1.29 10,000,000
400
300
300
800
450
325
250
15
12
10
35
20
17
13
0.93 16,000,000
0.97 12,000,000
0.87 12,000,000
1.10 32,000,000
1.13 18,000,000
1.30 13,000,000
1.29 10,000,000
400
300
300
800
450
325
250
16
11
11
35
20
13
5
0.96
0.94
0.90
1.10
1.13
1.00
0.53
$ 2,825 $ 121
$ 2,825 $ 122
$ 2,825 $ 111
Treasury shares – common shares
Treasury shares – preferred shares
(1,302) $
(20)
–
–
152,579 $
–
16
–
15,931 $
–
2
–
Other Equity Instruments
Limited recourse capital notes
Series 1 (1)
Limited recourse capital notes
Series 2 (3)
$
$
750 $
37 4.375% (2)
750 $
– 4.000% (2)
$
$
750 $
– 4.375% (2)
– $
–
$
$
– $
– $
–
–
(1) See 4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness) section below for details.
(2) Represents the annual interest rate percentage applicable to the LRCNs issued as at October 31 for each respective year.
(3) See 4.000% Limited Recourse Capital Notes Series 2 (NVCC) (subordinated indebtedness) section below for details.
Common shares
CIBC’s authorized capital consists of an unlimited number of common shares, without nominal or par value.
Common shares issued
$ millions, except number of shares, as at or for the year ended October 31
Number
of shares
2021
Amount
Number
of shares
2020
Amount
Number
of shares
2019
Amount
Balance at beginning of year
Issuance pursuant to:
Equity-settled share-based compensation
plans (1)
Shareholder investment plan
Employee share purchase plan
Purchase of common shares for cancellation
Treasury shares
447,085,329
$ 13,908
445,341,675
$ 13,591
442,826,380
$ 13,243
1,705,070
1,011,279
1,180,179
450,981,857
–
(153,881)
176
132
150
823,502
1,534,320
1,457,784
87
144
140
511,567
1,777,738
1,213,078
52
194
131
$ 14,366
–
(15)
449,157,281
(2,208,600)
136,648
$ 13,962
(68)
14
446,328,763
(1,000,000)
12,912
$ 13,620
(30)
1
Balance at end of year
450,827,976
$ 14,351
447,085,329
$ 13,908
445,341,675
$ 13,591
(1) Includes the settlement of contingent consideration related to prior acquisitions.
Common shares reserved for issue
As at October 31, 2021, 13,470,943 common shares (2020: 14,996,337) were reserved for future issue pursuant to stock option plans, 11,837,505
common shares (2020: 12,848,784) were reserved for future issue pursuant to the Shareholder Investment Plan, 6,823,960 common shares (2020:
8,183,815) were reserved for future issue pursuant to the ESPP and other activities, and 2,397,018,750 common shares (2020: 2,246,208,750) were
reserved for future issue pursuant to instruments which include an NVCC provision requiring conversion into common shares upon the occurrence
of a Trigger Event as described in the capital adequacy guidelines.
Normal course issuer bid
On March 13, 2020, following the onset of the COVID-19 pandemic, OSFI imposed temporary measures on federally regulated financial institutions
to cease dividend increases and share buybacks in order to ensure that the additional capital available is used to support Canadian lending
activities. The temporary measures were lifted by OSFI effective November 4, 2021.
We intend to purchase for cancellation up to 10 million common shares, or approximately 2.2% of our outstanding common shares, under a
new NCIB, subject to the approval of the TSX. Our previous bid expired on June 3, 2020.
CIBC 2021 ANNUAL REPORT 169
Consolidated financial statements
Preferred shares and other equity instruments
CIBC is authorized to issue an unlimited number of Class A Preferred Shares and Class B Preferred Shares without nominal or par value, issuable in
series, provided that, for each class of preferred shares, the maximum aggregate consideration for all outstanding shares at any time does not
exceed $10 billion. There are no Class B Preferred Shares currently outstanding.
Preferred share and other equity instruments rights and privileges
Class A Preferred Shares
Each series of Class A Preferred Shares bears quarterly non-cumulative dividends. Non-cumulative Rate Reset Class A Preferred Shares Series 39,
41, 43, 45, 47, 49, and 51 (NVCC) are redeemable, subject to regulatory approval if required, for cash by CIBC on or after the specified redemption
dates at the cash redemption prices indicated in the terms of the preferred shares.
Non-cumulative Rate Reset Class A Preferred Shares Series 39 (NVCC) (Series 39 shares)
On June 11, 2014, we issued 16 million Series 39 shares with a par value of $25.00 per share, for gross proceeds of $400 million. For the initial five-
year period to the earliest redemption date of July 31, 2019, the Series 39 shares paid quarterly cash dividends, as declared, at a rate of 3.90%. The
dividend was reset to 3.713%, payable quarterly as and when declared by the Board, effective for the five-year period commencing July 31, 2019.
On July 31, 2024, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of
Canada bond yield plus 2.32%.
Holders of the Series 39 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 40 (NVCC) (Series 40 shares), subject to certain conditions, on July 31, 2019. As the conditions for conversion were not
met, no Series 40 shares were issued, and all of the Series 39 shares remain outstanding. Holders of the Series 39 shares will have the right to
convert their shares on a one-for-one basis into Series 40 shares, subject to certain conditions, on July 31, 2024 and on July 31 every five years
thereafter. Holders of the Series 40 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month
Government of Canada Treasury Bill yield plus 2.32%. Holders of the then outstanding Series 40 shares may convert their shares on a one-for-one
basis into Series 39 shares, subject to certain conditions, on July 31, 2029 and on July 31 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 39 shares at
par on July 31, 2024, and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 40 shares at par on
July 31, 2029, and on July 31 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 41 (NVCC) (Series 41 shares)
On December 16, 2014, we issued 12 million Series 41 shares with a par value of $25.00 per share, for gross proceeds of $300 million. For the initial
five-year period to the earliest redemption date of January 31, 2020, the Series 41 shares paid quarterly cash dividends, as declared, at a rate of
3.75%. The dividend was reset to 3.909%, payable quarterly as and when declared by the Board, effective for the five-year period commencing
January 31, 2020. On January 31, 2025, and on January 31 every five years thereafter, the dividend rate will reset to be equal to the then current
five-year Government of Canada bond yield plus 2.24%.
Holders of the Series 41 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 42 (NVCC) (Series 42 shares), subject to certain conditions, on January 31, 2020. As the conditions for conversion were not
met, no Series 42 shares were issued, and all of the Series 41 shares remain outstanding. Holders of the Series 41 shares will have the right to
convert their shares on a one-for-one basis into Series 42 shares, subject to certain conditions, on January 31, 2025 and on January 31 every five
years thereafter. Holders of the Series 42 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month
Government of Canada Treasury Bill yield plus 2.24%. Holders of the then outstanding Series 42 shares may convert their shares on a one-for-one
basis into Series 41 shares, subject to certain conditions, on January 31, 2030 and on January 31 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 41 shares at
par on January 31, 2025 and on January 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 42 shares at
par on January 31, 2030 and on January 31 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 43 (NVCC) (Series 43 shares)
On March 11, 2015, we issued 12 million Series 43 shares with a par value of $25.00 per share, for gross proceeds of $300 million. For the initial
five-year period to the earliest redemption date of July 31, 2020, the Series 43 shares paid quarterly cash dividends, as declared, at a rate of 3.60%.
The dividend was reset to 3.143%, payable quarterly as and when declared by the Board, effective for the five-year period commencing July 31,
2020. On July 31, 2025, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government
of Canada bond yield plus 2.79%.
Holders of the Series 43 shares had the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 44 (NVCC) (Series 44 shares), subject to certain conditions, on July 31, 2020. As the conditions for conversion were not
met, no Series 44 shares were issued, and all of the Series 43 shares remain outstanding. Holders of the Series 43 shares will have the right to
convert their shares on a one-for-one basis into Series 44 shares, subject to certain conditions, on July 31, 2025 and on July 31 every five years
thereafter. Holders of the Series 44 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month
Government of Canada Treasury Bill yield plus 2.79%. Holders of the then outstanding Series 44 shares may convert their shares on a one-for-one
basis into Series 43 shares, subject to certain conditions, on July 31, 2030 and on July 31 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 43 shares at
par on July 31, 2025 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 44 shares at par on
July 31, 2030 and on July 31 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 45 (NVCC) (Series 45 shares)
On June 2, 2017, we issued 32 million Series 45 shares with a par value of $25.00 per share, for gross proceeds of $800 million. For the initial
five-year period to the earliest redemption date of July 31, 2022, the Series 45 shares pay quarterly cash dividends, as declared, at a rate of 4.40%.
On July 31, 2022, and on July 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of
Canada bond yield plus 3.38%.
Holders of the Series 45 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 46 (NVCC) (Series 46 shares), subject to certain conditions, on July 31, 2022 and on July 31 every five years thereafter.
Holders of the Series 46 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of
Canada Treasury Bill yield plus 3.38%. Holders of the then outstanding Series 46 shares may convert their shares on a one-for-one basis into Series
45 shares, subject to certain conditions, on July 31, 2027 and on July 31 every five years thereafter.
170 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 45 shares at
par on July 31, 2022 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 46 shares at par on
July 31, 2027 and on July 31 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 47 (NVCC) (Series 47 shares)
On January 18, 2018, we issued 18 million Non-cumulative Rate Reset Class A Preferred Shares Series 47 (NVCC) (Series 47 shares) with a par
value of $25.00 per share, for gross proceeds of $450 million. For the initial five-year period to the earliest redemption date of January 31, 2023, the
Series 47 shares pay quarterly cash dividends, as declared, at a rate of 4.50%. On January 31, 2023, and on January 31 every five years thereafter,
the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.45%.
Holders of the Series 47 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 48 (NVCC) (Series 48 shares), subject to certain conditions, on January 31, 2023 and on January 31 every five years
thereafter. Holders of the Series 48 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month
Government of Canada Treasury Bill yield plus 2.45%. Holders of the then outstanding Series 48 shares may convert their shares on a one-for-one
basis into Series 47 shares, subject to certain conditions, on January 31, 2028 and on January 31 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 47 shares at
par on January 31, 2023 and on January 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 48 shares at
par on January 31, 2028 and on January 31 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 49 (NVCC) (Series 49 shares)
On January 22, 2019, we issued 13 million Non-cumulative Rate Reset Class A Preferred Shares Series 49 (NVCC) (Series 49 shares) with a par
value of $25.00 per share, for gross proceeds of $325 million. For the initial five-year period to the earliest redemption date of April 30, 2024, the
Series 49 shares pay quarterly cash dividends, as declared, at a rate of 5.20%. On April 30, 2024, and on April 30 every five years thereafter, the
dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 3.31%.
Holders of the Series 49 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 50 (NVCC) (Series 50 shares), subject to certain conditions, on April 30, 2024 and on April 30 every five years thereafter.
Holders of the Series 50 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of
Canada Treasury Bill yield plus 3.31%. Holders of the then outstanding Series 50 shares may convert their shares on a one-for-one basis into
Series 49 shares, subject to certain conditions, on April 30, 2029 and on April 30 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 49 shares at
par on April 30, 2024 and on April 30 every five years thereafter; we may redeem all or any part of the then outstanding Series 50 shares at par on
April 30, 2029 and on April 30 every five years thereafter.
Non-cumulative Rate Reset Class A Preferred Shares Series 51 (NVCC) (Series 51 shares)
On June 4, 2019, we issued 10 million Non-cumulative Rate Reset Class A Preferred Shares Series 51 (NVCC) (Series 51 shares) with a par value of
$25.00 per share, for gross proceeds of $250 million. For the initial five-year period to the earliest redemption date of July 31, 2024, the Series 51
shares pay quarterly cash dividends, as declared, at a rate of 5.15%. On July 31, 2024, and on July 31 every five years thereafter, the dividend rate
will reset to be equal to the then current five-year Government of Canada bond yield plus 3.62%.
Holders of the Series 51 shares will have the right to convert their shares on a one-for-one basis into Non-cumulative Floating Rate Class A
Preferred Shares Series 52 (NVCC) (Series 52 shares), subject to certain conditions, on July 31, 2024 and on July 31 every five years thereafter.
Holders of the Series 52 shares will be entitled to receive a quarterly floating rate dividend, if declared, equal to the three-month Government of
Canada Treasury Bill yield plus 3.62%. Holders of the then outstanding Series 52 shares may convert their shares on a one-for-one basis into
Series 51 shares, subject to certain conditions, on July 31, 2029 and on July 31 every five years thereafter.
Subject to regulatory approval and certain provisions of the shares, we may redeem all or any part of the then outstanding Series 51 shares at
par on July 31, 2024 and on July 31 every five years thereafter; we may redeem all or any part of the then outstanding Series 52 shares at par on
July 31, 2029 and on July 31 every five years thereafter.
4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated indebtedness) (LRCN Series 1 Notes)
On September 16, 2020, we issued $750 million principal amount of 4.375% Limited Recourse Capital Notes Series 1 (NVCC) (subordinated
indebtedness). The LRCN Series 1 Notes mature on October 28, 2080, and bear interest at a fixed rate of 4.375% per annum (paid semi-annually)
until October 28, 2025. Starting on October 28, 2025, and every five years thereafter until October 28, 2075, the interest rate will be reset to the then
current five-year Government of Canada bond yield plus 4.000% per annum.
Concurrently with the issuance of the LRCN Series 1 Notes, we issued Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares
Series 53 (NVCC) (Series 53 Preferred Shares) which are held in the CIBC LRCN Limited Recourse Trust (Limited Recourse Trust) that is
consolidated by CIBC and as a result the Series 53 Preferred Shares are eliminated in CIBC’s consolidated financial statements. In the event of
non-payment by CIBC of the principal amount of, interest on, or redemption price for, the LRCN Series 1 Notes when due, the sole remedy of each
LRCN Series 1 Note holder is limited to that holder’s proportionate share of the Series 53 Preferred Shares held in the Limited Recourse Trust.
Subject to regulatory approval, we may redeem the LRCN Series 1 Notes, in whole or in part, every five years during the period from
September 28 to and including October 28, commencing in 2025, at par.
The LRCN Series 1 Notes and the Series 53 Preferred Shares carry standard NVCC provisions necessary for them to qualify as Tier 1
regulatory capital under Basel III (see “NVCC conversion mechanics” below). Upon the occurrence of a Trigger Event, each Series 53 Preferred
Share held in the Limited Recourse Trust will automatically and immediately be converted, without the consent of LRCN Series 1 Note holders, into a
variable number of common shares which will be delivered to LRCN Series 1 Note holders in satisfaction of the principal amount of, and accrued
and unpaid interest on, all of the LRCN Series 1 Notes. All claims of LRCN Series 1 Note holders against CIBC under the LRCN Series 1 Notes will
be extinguished upon receipt of such common shares.
4.000% Limited Recourse Capital Notes Series 2 (NVCC) (subordinated indebtedness) (LRCN Series 2 Notes)
On September 14, 2021, we issued $750 million principal amount of 4.000% Limited Recourse Capital Notes Series 2 (NVCC) (subordinated
indebtedness). The LRCN Series 2 Notes mature on January 28, 2082, and bear interest at a fixed rate of 4.000% per annum (paid semi-annually)
until January 28, 2027. Starting on January 28, 2027, and every five years thereafter until January 28, 2077, the interest rate will be reset to the then
current five-year Government of Canada bond yield plus 3.102% per annum.
CIBC 2021 ANNUAL REPORT 171
Consolidated financial statements
Concurrently with the issuance of the LRCN Series 2 Notes, we issued Non-Cumulative 5-Year Fixed Rate Reset Class A Preferred Shares
Series 54 (NVCC) (the Series 54 Preferred Shares) which are held in the Limited Recourse Trust that is consolidated by CIBC and as a result the
Series 54 Preferred Shares are eliminated in CIBC’s consolidated financial statements. In the event of non-payment by CIBC of the principal amount
of, interest on, or redemption price for, the LRCN Series 2 Notes when due, the sole remedy of each LRCN Series 2 Note holder is limited to that
holder’s proportionate share of the Series 54 Preferred Shares held in the Limited Recourse Trust.
Subject to regulatory approval, we may redeem the LRCN Series 2 Notes, in whole or in part, every five years during the period from
December 28 to and including January 28, commencing on December 28, 2026, at par.
The LRCN Series 2 Notes and the Series 54 Preferred Shares carry standard NVCC provisions necessary for them to qualify as Tier 1
regulatory capital under Basel III (see “NVCC conversion mechanics” below). Upon the occurrence of a Trigger Event, each Series 54 Preferred
Share held in the Limited Recourse Trust will automatically and immediately be converted, without the consent of LRCN Series 2 Note holders, into a
variable number of common shares which will be delivered to LRCN Series 2 Note holders in satisfaction of the principal amount of, and accrued
and unpaid interest on, all of the LRCN Series 2 Notes. All claims of LRCN Series 2 Note holders against CIBC under the LRCN Series 2 Notes will
be extinguished upon receipt of such common shares.
Limited Recourse Capital Notes (the Notes)
The Notes are compound instruments with both equity and liability features as payments of interest and principal in cash are made at our discretion,
as the sole recourse of each Note holder in the event of non-payment will be limited to that holder’s proportionate share of the non-cumulative Rate
Reset Class A Preferred Shares Series 53 and 54 held in the Limited Recourse Trust. The liability component of the Notes has a nominal value and,
as a result, the full proceeds received upon the issuance of the Notes have been presented as equity on the consolidated balance sheet and any
interest payments paid thereon are accounted for as equity distributions.
NVCC conversion mechanics
Each series of Class A preferred shares discussed above are subject to an NVCC provision, necessary for the shares to qualify as regulatory capital
under Basel III. As such, the shares are automatically converted into common shares upon the occurrence of a “Trigger Event”. As described in the
Capital Adequacy Guidelines, a Trigger Event occurs when OSFI determines the bank is or is about to become non-viable and, if after conversion of
all contingent instruments and consideration of any other relevant factors or circumstances, it is reasonably likely that its viability will be restored or
maintained; or if the bank has accepted or agreed to accept a capital injection or equivalent support from a federal or provincial government,
without which OSFI would have determined the bank to be non-viable. Each such share is convertible into a number of common shares, determined
by dividing the par value of $25.00 ($1,000 in the case of the Series 53 and 54 Preferred Shares) plus declared and unpaid dividends (except for
the Series 53 and 54 Preferred Shares while held in the Limited Recourse Trust) by the average common share price (as defined in the relevant
prospectus supplement) subject to a minimum price of $5.00 per share (subject to adjustment in certain events as defined in the relevant
prospectus supplement). We have recorded the Series 39, Series 41, Series 43, Series 45, Series 47, Series 49, and Series 51 shares as equity.
Terms of Class A Preferred Shares
Outstanding as at October 31, 2021
Series 39
Series 41
Series 43
Series 45
Series 47
Series 49
Series 51
Quarterly
dividends per share (1)
Earliest specified
redemption date
Cash redemption
price per share
$ 0.232063
July 31, 2024
$ 0.244313
January 31, 2025
$ 0.196438
$ 0.275000
July 31, 2025
July 31, 2022
$ 0.281250
January 31 2023
$ 0.325000
$ 0.321875
April 30, 2024
July 31, 2024
$ 25.00
$ 25.00
$ 25.00
$ 25.00
$ 25.00
$ 25.00
$ 25.00
(1) Quarterly dividends may be adjusted depending on the timing of issuance or redemption.
Restrictions on the payment of dividends
Under Section 79 of the Bank Act (Canada), a bank, including CIBC, is prohibited from declaring or paying any dividends on its preferred or
common shares if there are reasonable grounds for believing that the bank is, or the payment would cause it to be, in contravention of any capital
adequacy or liquidity regulation or any direction to the bank made by OSFI.
As noted above, OSFI imposed measures on federally regulated financial institutions to cease dividend increases in March 2020. The
temporary measures were lifted effective November 4, 2021.
In addition, our ability to pay common share dividends is also restricted by the terms of the outstanding preferred shares. These terms provide
that we may not pay dividends on our common shares at any time without the approval of holders of the outstanding preferred shares, unless all
dividends to preferred shareholders that are then payable have been declared and paid or set apart for payment. Our Series 53 and 54 Preferred
Shares further limit the payment of dividends on the outstanding Class A Preferred Shares Series 39 to 51 in certain limited circumstances.
We had agreed that if CIBC Capital Trust failed to pay any interest payments on its $300 million of CIBC Tier 1 Notes – Series B, due
June 30, 2108, we would not declare dividends of any kind on any of our preferred or common shares for a specified period of time. These Notes
were redeemed on November 1, 2021. For additional details, see Note 17.
Currently, these limitations do not restrict the payment of dividends on our preferred or common shares.
Capital
Objectives, policy and procedures
Our overall capital management objective is to employ a strong and efficient capital base. We manage capital in accordance with a capital policy
approved by the Board, which includes specific guidelines that relate to capital strength, capital mix, dividends and return of capital, and the
unconsolidated capital adequacy of regulated entities. Capital is monitored continuously for compliance.
Each year, a Capital Plan and three-year outlook are established as a part of the financial plan, and they encompass all material elements of
capital: forecasts of sources and uses of capital including earnings, dividends, business growth, and corporate initiatives, as well as maturities,
redemptions, and issuances of capital instruments. The Capital Plan is stress-tested to ensure that it is sufficiently robust under severe but plausible
stress scenarios. The level of capital and capital ratios are monitored throughout the year including a comparison to the Capital Plan. There were no
significant changes made to the objectives, policy, guidelines and procedures during the year.
172 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Regulatory capital requirements under Basel III
Our regulatory capital requirements are determined in accordance with guidelines issued by OSFI, which are based on the capital standards
developed by the Basel Committee on Banking Supervision (BCBS).
CIBC has been designated by OSFI as a domestic systemically important bank (D-SIB) in Canada, and is subject to a Common Equity Tier 1
(CET1) surcharge equal to 1.0% of RWA. OSFI also expects D-SIBs to hold a Domestic Stability Buffer (DSB) of 2.5% effective October 31, 2021,
reflecting an increase from 1.0% since March 2020. The 2.5% reflects the highest DSB requirement under OSFI capital requirements. This results in
current targets, including all buffer requirements, for CET1, Tier 1 and Total capital ratios of 10.5%, 12.0%, and 14.0%, respectively. These targets
may be higher for certain institutions at OSFI’s discretion.
Regulatory capital and ratios
Regulatory capital under Basel III consists of CET1, Tier 1 and Tier 2 capital.
CET1 capital includes common shares, retained earnings, AOCI (excluding AOCI relating to cash flow hedges and changes to FVO liabilities
attributable to changes in own credit risk), and qualifying instruments issued by a consolidated banking subsidiary to third parties, less regulatory
adjustments for items such as goodwill and other intangible assets (net of related deferred tax liabilities), certain deferred tax assets, net assets
related to defined benefit pension plans as reported on our consolidated balance sheet (net of related deferred tax liabilities), and certain
investments. Additional Tier 1 (AT1) capital primarily includes NVCC preferred shares, Limited Recourse Capital Notes, qualifying instruments issued
by a consolidated subsidiary to third parties, and non-qualifying innovative Tier 1 notes subject to phase-out rules for capital instruments. Tier 2
capital includes NVCC subordinated indebtedness, non-qualifying subordinated indebtedness subject to phase-out rules for capital instruments,
eligible collective allowance under the standardized approach, and qualifying instruments issued by a consolidated subsidiary to third parties.
Our capital ratios and leverage ratio are presented in the table below:
$ millions, as at October 31
CET1 capital (1)
Tier 1 capital
Total capital
Total RWA
CET1 ratio
Tier 1 capital ratio
Total capital ratio
Leverage ratio exposure
Leverage ratio
A
$
2021
33,751
38,344
44,202
$
2020
30,876
34,775
40,969
272,814
254,871
12.4 %
14.1 %
16.2 %
12.1 %
13.6 %
16.1 %
B
A/B
$ 823,343
$ 741,760
4.7 %
4.7 %
(1) Beginning in the second quarter of 2020, includes the impact of the ECL transitional arrangement announced by OSFI on March 27, 2020. The transitional arrangement
results in a portion of ECL allowances that would otherwise be included in Tier 2 capital qualifying for inclusion in CET1 capital. The amount is subject to certain
adjustments and limitations until 2022.
During the years ended October 31, 2021 and 2020, we have complied with OSFI’s regulatory capital requirements.
Note 17 Capital Trust securities
CIBC Capital Trust is a trust wholly owned by CIBC and established under the laws of the Province of Ontario. As at October 31, 2021, CIBC Capital
Trust had $300 million outstanding of CIBC Tier 1 Notes – Series B, due June 30, 2108 (the Notes), redeemable on or after June 30, 2014 at the
Canada Yield Price; redeemable at par on June 30, 2039. The Notes were issued on March 13, 2009. CIBC Capital Trust is not consolidated by
CIBC and the senior deposit notes issued by CIBC to CIBC Capital Trust are reported as Deposits – Business and government on the consolidated
balance sheet.
The Notes were structured to achieve Tier 1 regulatory capital treatment and, as such, had features of equity capital, including the deferral of
cash interest under certain circumstances (Deferral Events). In the case of a Deferral Event, holders of the Notes will be required to invest interest
paid on the Notes in our perpetual preferred shares. Should CIBC Capital Trust fail to pay the semi-annual interest payments on the Notes in full, we
will not declare dividends of any kind on any of our preferred or common shares for a specified period of time.
Subject to the approval of OSFI, CIBC Capital Trust may, in whole or in part, on the redemption dates specified, and on any date thereafter,
redeem the CIBC Tier 1 Notes – Series B without the consent of the holders. Also, subject to the approval of OSFI, CIBC Capital Trust may redeem
all, but not part of, the CIBC Tier 1 Notes – Series B prior to the earliest redemption date specified without the consent of the holders, upon the
occurrence of certain specified tax or regulatory events.
Under the OSFI Capital Adequacy Requirements (CAR) Guideline, any Tier 1 Notes – Series B outstanding as of November 1, 2021 would not
be recognized as regulatory capital. With OSFI’s prior approval, on November 1, 2021, CIBC Capital Trust redeemed all $300 million of its 10.25%
Tier 1 Notes – Series B at 100% of their principal amount together with accrued and unpaid interest up to but excluding the redemption date. As a
result of the redemption of the Tier 1 Notes – Series B by CIBC Capital Trust, CIBC also redeemed the corresponding senior deposit notes issued by
CIBC to CIBC Capital Trust on November 1, 2021.
CIBC 2021 ANNUAL REPORT 173
Consolidated financial statements
Note 18
Share-based payments
We provide the following share-based compensation to certain employees and directors in the form of cash-settled or equity-settled awards.
Restricted share award plan
Under the RSA plan, share unit equivalents (RSA units) are granted to certain key employees on an annual basis or during the year as special
grants. RSA grants are made in the form of cash-settled awards which generally vest and settle in cash either at the end of three years or one-third
annually beginning one year after the date of the grant. Dividend equivalents on RSA units are paid in cash or in the form of additional RSA units to
the employees at the end of the vesting period or settlement date.
Grant date fair value of each cash-settled RSA unit granted is calculated based on the average closing price per common share on the
Toronto Stock Exchange (TSX) for the 10 trading days prior to a date specified in the grant terms. Upon vesting, each RSA unit is settled in cash
based on the average closing price per common share on the TSX for the 10 trading days prior to the vesting date.
During the year, 2,899,365 RSAs were granted at a weighted-average price of $111.34 (2020: 2,864,000 granted at a weighted-average price
of $113.62; 2019: 2,666,888 granted at a weighted-average price of $113.01) and the number of RSAs outstanding as at October 31, 2021 was
8,521,839 (2020: 8,391,532; 2019: 8,343,235). Compensation expense in respect of RSAs, before the impact of hedging for changes in share price,
totalled $692 million in 2021 (2020: $275 million; 2019: $319 million). As at October 31, 2021, liabilities in respect of RSAs, which are included in
Other liabilities, were $1,136 million (2020: $775 million).
Performance share unit plan
Under the PSU plan, awards are granted to certain key employees on an annual basis in December. PSU grants are made in the form of cash-
settled awards which vest and settle in cash at the end of three years. Dividend equivalents on PSUs are provided in the form of additional PSUs.
The grant date fair value of each cash-settled PSU is calculated based on the average closing price per common share on the TSX for the
10 trading days prior to a date specified in the grant terms. The final number of PSUs that vest will range from 75% to 125% of the initial number
awarded based on CIBC’s performance relative to the other major Canadian banks. Upon vesting, each PSU is settled in cash based on the
average closing price per common share on the TSX for the 10 trading days prior to the vesting date.
During the year, 876,295 PSUs were granted at a weighted-average price of $110.16 (2020: 835,785 granted at a weighted-average price of
$115.30; 2019: 952,273 granted at a weighted-average price of $113.48). As at October 31, 2021, the number of PSUs outstanding, before the
impact of CIBC’s relative performance, was 2,911,800 (2020: 2,967,248; 2019: 3,033,980). Compensation expense in respect of PSUs, before the
impact of hedging for changes in share price, totalled $241 million in 2021 (2020: $90 million; 2019: $106 million). As at October 31, 2021, liabilities
in respect of PSUs, which are included in Other liabilities, were $413 million (2020: $286 million).
Exchangeable shares
As part of our acquisition of Wellington Financial in the first quarter of 2018, equity-settled awards in the form of exchangeable shares, which vest
over a period of up to five years and have specific service and non-market performance vesting conditions, were issued to selected employees.
Employees receive dividend equivalents in the form of additional common shares upon vesting. Compensation expense in respect of the
exchangeable shares is based on the grant date fair value, adjusted for the impact of best estimates on the satisfaction of the service requirements
and non-market performance conditions. At the acquisition, each exchangeable share was granted at $123.99, and the number of exchangeable
shares outstanding that have not vested as at October 31, 2021 was 153,015 (2020: 278,711; 2019: 386,010). Compensation expense in respect of
exchangeable shares totalled $12 million in 2021 (2020: $9 million; 2019: $8 million).
Deferred share unit plan/deferred compensation plan
Under the DSU plan and DCP plan, certain employees can elect to receive DSUs in exchange for cash compensation that they would otherwise be
entitled to. In addition, certain key employees are granted DSUs during the year as special grants. DSUs are generally fully vested upon grant or
vest in accordance with the vesting schedule defined in the grant agreement and settle in cash on a date within the period specified in the plan
terms. Employees receive dividend equivalents in the form of additional DSUs.
Grant date fair value of each cash settled DSU that is not granted under the DCP is calculated based on the average closing price per
common share on the TSX for the 10 trading days prior to a date specified in the grant terms. These DSUs are settled in cash based on the average
closing price per common share on the TSX for the 10 trading days prior to the payout date and after the employee’s termination of employment.
The grant date fair value for DCP grants is based on the closing stock price on the New York Stock Exchange (NYSE) on the last day of the calendar
quarter. Upon distribution, each DSU is settled in cash based on the average closing price per common share on the NYSE for the 10 trading days
prior to the date of the distribution.
During the year, 182,174 DSUs were granted at a weighted-average price of $110.62 (2020: 183,941 granted at a weighted-average price of
$106.22; 2019: 173,089 granted at a weighted-average price of $110.53) and the number of DSUs outstanding as at October 31, 2021 was 893,018
(2020: 791,571; 2019: 617,281). Compensation expense in respect of DSUs, before the impact of hedging for changes in share price, totalled
$70 million in 2021 (2020: $8 million; 2019: $17 million). As at October 31, 2021, liabilities in respect of DSUs, which are included in Other liabilities,
were $146 million (2020: $90 million).
Directors’ plans
Each director who is not an officer or employee of CIBC may elect to receive 1) the annual equity retainer as either DSUs or common shares, under
the Director DSU/Common Share Election Plan and 2) all or a portion of their remuneration in the form of cash, common shares or DSU’s under the
Non-Officer Director Share Plan.
The value of DSUs credited to a director is payable when he or she is no longer a director or employee of CIBC or of an affiliate of CIBC, and
for directors subject to section 409A of the U.S. Internal Revenue Code of 1986, as amended, the director is not providing any services to CIBC or
any member of its controlled group as an independent contractor. In addition, under the Director DSU/Common Share Election Plan, the value of
DSUs is payable only if the director is not related to, or affiliated with, CIBC as defined in the Income Tax Act (Canada).
Other non-interest expense in respect of the DSU components, before the impact of hedging for changes in share price of these plans, totalled
$14 million in 2021 (2020: nil; 2019: $3 million). As at October 31, 2021, liabilities in respect of DSUs, which are included in Other liabilities, were
$37 million (2020: $23 million).
174 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Stock option plans
Under the ESOP, stock options are periodically granted to certain key employees. Options provide the employee with the right to purchase common
shares from CIBC at a fixed price not less than the closing price of the shares on the trading day immediately preceding the grant date. In general,
the options vest by the end of the fourth year and expire 10 years from the grant date.
The following tables summarize the activities of the stock options and provide additional details related to stock options outstanding and vested.
As at or for the year ended October 31
Outstanding at beginning of year
Granted
Exercised (2)
Forfeited
Cancelled/expired
Outstanding at end of year
Exercisable at end of year
Available for grant
Reserved for future issue
Number
of stock
options
5,680,111
1,057,208
(1,525,394)
(63,998)
–
5,147,927
2021
Weighted-
average
exercise
price (1)
$ 100.39
110.79
87.83
111.85
–
$ 106.67
2020
Weighted-
average
exercise
price
$
96.93
109.87
68.10
70.66
–
Number
of stock
options
5,176,962
818,290
(314,469)
(672)
–
Number
of stock
options
4,713,163
894,324
(393,055)
(35,714)
(1,756)
5,680,111
$ 100.39
5,176,962
2019
Weighted-
average
exercise
price
$ 91.05
111.50
58.60
110.42
45.63
$ 96.93
2,067,561
$
98.96
2,783,694
$
88.63
2,290,139
$ 80.27
8,323,016
13,470,943
9,316,226
14,996,337
10,133,844
15,310,806
(1) For foreign currency-denominated options granted and exercised during the year, the weighted-average exercise prices are translated using exchange rates as at the
grant date and settlement date, respectively. The weighted-average exercise price of outstanding balances as at October 31, 2021 reflects the conversion of foreign
currency-denominated options at the year-end exchange rate.
(2) The weighted-average share price at the date of exercise was $128.51 (2020: $97.72; 2019: $106.94).
As at October 31, 2021
Stock options outstanding
Stock options vested
Range of exercise prices
$11.00 – $55.00
$55.01 – $65.00
$65.01 – $75.00
$75.01 – $85.00
$85.01 – $95.00
$95.01 – $105.00
$105.01 – $115.00
$115.01 – $125.00
Number
outstanding
98,164
99,889
39,090
104,408
156,437
526,392
3,438,358
685,189
5,147,927
Weighted-
average
contractual life
remaining
1.15
3.81
0.12
1.08
2.04
3.70
7.51
6.09
6.38
Weighted-
average
exercise
price
$ 30.59
56.54
71.51
80.10
90.52
99.34
110.71
120.02
$ 106.67
Number
outstanding
98,164
99,889
39,090
104,408
156,437
526,392
724,534
318,647
2,067,561
Weighted-
average
exercise
price
$ 30.59
56.54
71.51
80.10
90.52
99.34
110.56
120.02
$ 98.96
The fair value of options granted during the year was measured at the grant date using the Black-Scholes option pricing model. Model assumptions
are based on observable market data for the risk-free interest rate and dividend yield, contractual terms for the exercise price, and historical
experience for expected life. Volatility assumptions are best estimates of market implied volatility matching the exercise price and expected life of
the options.
The following weighted-average assumptions were used as inputs into the Black-Scholes option pricing model to determine the fair value of options
on the date of grant:
For the year ended October 31
Weighted-average assumptions
Risk-free interest rate
Expected dividend yield
Expected share price volatility
Expected life
Share price/exercise price
2021
2020
2019
0.96 %
6.50 %
20.25 %
2.00 %
6.80 %
15.30 %
2.63 %
5.87 %
18.36 %
6 years
$ 110.79
6 years
$ 109.87
6 years
$ 111.50
For 2021, the weighted-average grant date fair value of options was $6.73 (2020: $3.90; 2019: $8.22).
Compensation expense in respect of stock options totalled $7 million in 2021 (2020: $5 million; 2019: $7 million).
Employee share purchase plan
Under our Canadian ESPP, qualifying employees can choose each year to have any portion of their eligible earnings withheld to purchase common
shares. We match 50% of the employee contribution amount, up to a maximum contribution of 3% of eligible earnings, subject to a ceiling of
$2,250 annually. CIBC contributions vest after employees have two years of continuous participation in the plan, and all subsequent contributions
vest immediately. Similar programs exist in other regions globally, where each year qualifying employees can choose to have a portion of their
eligible earnings withheld to purchase common shares and receive a matching employer contribution subject to each plan’s provisions. Employee
contributions to our ESPP are used to purchase common shares from Treasury. CIBC FirstCaribbean operates an ESPP locally, in which
contributions are used by the plan trustee to purchase CIBC FirstCaribbean common shares in the open market.
Our contributions are expensed as incurred and totalled $53 million in 2021 (2020: $50 million; 2019: $48 million).
CIBC 2021 ANNUAL REPORT 175
Consolidated financial statements
Note 19
Post-employment benefits
We sponsor pension and other post-employment benefit plans for eligible employees in a number of jurisdictions including Canada, the U.S., the
U.K., and the Caribbean. Our pension plans include registered funded defined benefit pension plans, supplemental arrangements that provide
pension benefits in excess of statutory limits, and defined contribution plans. We also provide certain health-care, life insurance, and other benefits
to eligible employees and retired members. Plan assets and defined benefit obligations related to our defined benefit plans are measured for
accounting purposes as at October 31 each year.
Plan characteristics, funding and risks
Pension plans
Pension plans include CIBC’s Canadian, U.S., U.K., and Caribbean pension plans. CIBC’s Canadian pension plans represent approximately 92% of
our consolidated defined benefit obligation. All of our Canadian pension plans are defined benefit plans, the most significant of which is our
principal Canadian pension plan (the CIBC Pension Plan), which encompasses approximately 66,000 active, deferred, and retired members.
The CIBC Pension Plan provides members with monthly pension income at retirement based on a prescribed plan formula which is based on a
combination of maximum yearly pensionable earnings, average earnings at retirement and length of service recognized in the plan. There is a
two-year waiting period for members to join the CIBC Pension Plan.
The CIBC Pension Plan is funded through a separate trust. Actuarial funding valuations are prepared by the Plan’s external actuary at least
once every three years or more frequently as required by Canadian pension legislation to determine CIBC’s minimum funding requirements as well
as maximum permitted contributions. Any deficits determined in the funding valuations must generally be funded over a period not exceeding fifteen
years. CIBC’s pension funding policy is to make at least the minimum annual required contributions required by regulations. Any contributions in
excess of the minimum requirements are discretionary.
The CIBC Pension Plan is registered with OSFI and the Canada Revenue Agency (CRA) and is subject to the acts and regulations that govern
federally regulated pension plans.
Other post-employment plans
Other post-employment plans include CIBC’s Canadian, U.S. and Caribbean post-retirement health-care benefit plans (referred to for disclosure
purposes as other post-employment plans). CIBC’s Canadian other post-employment plan (the Canadian post-employment plan) represents more
than 93% of our consolidated other post-employment defined benefit obligation.
The Canadian post-employment plan provides medical, dental and life insurance benefits to retirees that meet specified eligibility
requirements, including specified age and service period eligibility requirements. CIBC reimburses 100% of the cost of benefits for eligible
employees that retired prior to January 1, 2009, whereas the contribution level for medical and dental benefits for eligible employees that retire
subsequent to this date has been fixed at a specified level. The plan is funded on a pay-as-you-go basis.
Benefit changes
There were no material changes to the terms of our Canadian defined benefit pension plans in 2021 or 2020. Certain plan amendments were made
to our other pension and other post-employment plans in 2020, which resulted in a negative past service cost.
Risks
CIBC’s defined benefit plans expose the group to actuarial risks (such as longevity risk), currency risk, interest rate risk, market (investment) risk
and health-care cost inflation risks.
The CIBC pension plan operates a currency overlay strategy, which may use forwards or similar instruments, to manage and mitigate its
currency risk.
Interest rate risk is managed as part of the CIBC pension plan’s liability-driven investment strategy through a combination of physical bonds,
overlays funded in the repo market, and/or derivatives.
Market (investment) risk is mitigated through a multi-asset portfolio construction process that diversifies across a variety of market risk drivers.
The use of derivatives within the CIBC pension plan is governed by its derivatives policy that was approved by the Pension Benefits
Management Committee (PBMC) and permits the use of derivatives to manage risk at the discretion of the Pension Investment Committee (PIC). In
addition to the management of interest rate risk, risk reduction and mitigation strategies may include hedging of currency, credit spread and/or
equity risks. The derivatives policy also permits the use of derivatives to enhance plan returns.
Plan governance
All of CIBC’s pension arrangements are governed by local pension committees, senior management or a board of trustees. However, all significant
plan changes require approval from the Management Resources and Compensation Committee (MRCC). For the Canadian pension plans, the
MRCC is responsible for setting the strategy for the pension plans, reviewing material risks, performance including funded status, and approving
material design or governance changes.
While specific investment policies are determined at a plan level to reflect the unique characteristics of each plan, common investment policies
for all plans include the optimization of the risk-return relationship using a portfolio of multiple asset classes diversified by market segment,
economic sector, and issuer. The objectives are to secure the benefits promised by our funded plans, to maximize long-term investment returns
while not compromising the benefit security of the respective plans, manage the level of funding contributions in conjunction with the stability of the
funded status, and implement all policies in a cost effective manner. Investments in quoted debt and equity (held either directly or indirectly through
investment funds) represent the most significant asset allocations.
The use of derivatives is limited to the purposes and instruments described in the derivatives policy of the CIBC Pension Plan. These include
the use of synthetic debt or equity instruments, currency hedging, risk reduction and enhancement of returns.
Investments in specific asset classes are further diversified across funds, managers, strategies, sectors and geographies, depending on the
specific characteristics of each asset class.
The exposure to any one of these asset classes will be determined by our assessment of the needs of the plan assets and economic and
financial market conditions. Factors evaluated before adopting the asset mix include demographics, cash-flow payout requirements, liquidity
requirements, actuarial assumptions, expected benefit increases, and plan funding requirements.
176 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Management of the assets of the various Canadian plans has been delegated primarily to the PIC, which is a committee that is composed of
CIBC management. The PIC is responsible for the appointment and termination of individual investment managers (which includes CIBC Asset
Management Inc., a wholly owned subsidiary of CIBC), who each have investment discretion within established target asset mix ranges as set by
the PBMC. Should a fund’s actual asset mix fall outside specified ranges, the assets are re-balanced as required to be within the target asset mix
ranges. On a periodic basis, an Asset-Liability Matching study is performed in which the consequences of the strategic investment policies are
analyzed.
Management of the actuarial valuations of the various Canadian plans is primarily the responsibility of the PBMC. The PBMC is responsible for
approving the actuarial assumptions for the valuations of the plans, and for recommending the level of annual funding for the Canadian plans to
CIBC senior management.
Local committees with similar mandates manage our non-Canadian plans and annually report back to the MRCC on all material governance
activities.
Amounts recognized on the consolidated balance sheet
The following tables present the financial position of our defined benefit pension and other post-employment plans for Canada, the U.S., the U.K.,
and our Caribbean subsidiaries. Other minor plans operated by some of our subsidiaries are not material and are not included in these disclosures.
$ millions, as at or for the year ended October 31
Defined benefit obligation
Balance at beginning of year
Current service cost
Past service cost (1)
Interest cost on defined benefit obligation
Employee contributions
Benefits paid
Special termination benefits
Foreign exchange rate changes
Net actuarial (gains) losses on defined benefit obligation
Balance at end of year
Plan assets
Fair value at beginning of year
Interest income on plan assets (2)
Net actuarial gains (losses) on plan assets (2)
Employer contributions
Employee contributions
Benefits paid
Plan administration costs
Foreign exchange rate changes
Fair value at end of year
Net defined benefit asset (liability)
Valuation allowance (3)
Pension plans
Other post-employment plans
2021
2020
2021
2020
$ 9,139
280
(1)
267
5
(386)
–
(49)
(691)
$ 8,564
$ 9,341
282
479
249
5
(386)
(8)
(58)
$ 9,904
1,340
(17)
$ 8,722
277
(20)
268
5
(369)
10
8
238
$ 9,139
$ 8,853
277
349
227
5
(369)
(7)
6
$ 9,341
202
(17)
185
$ 609
7
9
17
–
(26)
–
(3)
(64)
$ 549
$
–
–
–
26
–
(26)
–
–
$ 671
14
(77)
20
–
(26)
–
1
6
$ 609
$
–
–
–
26
–
(26)
–
–
$
–
$
–
(549)
–
(609)
–
$ (549)
$ (609)
Net defined benefit asset (liability), net of valuation allowance
$ 1,323
$
(1) Prior year amounts include amounts related to the restructuring charge, and gains related to plan amendments recognized in 2020. See Note 23 for additional details on
the restructuring charge.
(2) The actual return on plan assets for the year was $761 million (2020: $626 million).
(3) The valuation allowance reflects the effect of asset ceiling on plans with a net defined benefit asset.
The net defined benefit asset (liability), net of valuation allowance, included in Other assets and Other liabilities is as follows:
$ millions, as at October 31
Other assets
Other liabilities (1)
Pension plans
Other post-employment plans
2021
$ 1,372
(49)
$ 1,323
2020
$ 247
(62)
$ 185
2021
–
(549)
(549)
$
$
2020
–
(609)
(609)
$
$
(1) Excludes $4 million (2020: $5 million) of other liabilities for other post-employment plans of immaterial subsidiaries.
The defined benefit obligation and plan assets by region are as follows:
$ millions, as at October 31
Defined benefit obligation
Canada
U.S., U.K., and the Caribbean
Defined benefit obligation at the end of year
Plan assets
Canada
U.S., U.K., and the Caribbean
Plan assets at the end of year
Pension plans
Other post-employment plans
2021
2020
2021
2020
$ 7,846
718
$ 8,564
$ 8,996
908
$ 9,904
$ 8,384
755
$ 9,139
$ 8,469
872
$ 9,341
$ 512
37
$ 549
$
$
–
–
–
$ 568
41
$ 609
$
$
–
–
–
CIBC 2021 ANNUAL REPORT 177
Consolidated financial statements
Amounts recognized in the consolidated statement of income
The net defined benefit expense for our defined benefit plans in Canada, the U.S., the U.K., and the Caribbean is as follows:
$ millions, for the year ended October 31
Current service cost (1)
Past service cost (2)
Interest cost on defined benefit obligation
Interest income on plan assets
Special termination benefits (2)
Plan administration costs
Loss on settlements
Net defined benefit plan expense recognized in net income
Pension plans
Other post-employment plans
2021
$ 280
(1)
267
(282)
–
8
–
$ 272
2020
$ 277
(20)
268
(277)
10
7
–
$ 265
2019
$ 218
1
303
(323)
–
6
1
$ 206
2021
2020
2019
$
$
7
9
17
–
–
–
–
33
$
$
14
(77)
20
–
–
–
–
11
–
24
–
–
–
–
$
(43)
$ 35
(1) The 2021, 2020 and 2019 current service costs were calculated using separate discount rates of 2.99%, 3.14%, and 4.14%, respectively, to reflect the longer duration of
future benefits payments associated with the additional year of service to be earned by the plan’s active participants.
(2) Prior year amount includes amounts related to the restructuring charge, and gains related to plan amendments recognized in 2020. See Note 23 for additional details on
the restructuring charge.
Amounts recognized in the consolidated statement of comprehensive income
The net remeasurement gains (losses) recognized in OCI for our defined benefit plans in Canada, the U.S., the U.K., and the Caribbean is as follows:
Pension plans
Other post-employment plans
$ millions, for the year ended October 31
2021
2020
2019
2021
2020
2019
Actuarial gains (losses) on defined benefit obligation arising from
changes in:
Demographic assumptions
Financial assumptions
Experience
Net actuarial gains (losses) on plan assets
Changes in asset ceiling excluding interest income
$
(1)
798
(106)
479
–
$ 148
(327)
(59)
349
(1)
$
–
(1,133)
(45)
965
(5)
Net remeasurement gains (losses) recognized in OCI (1)
$ 1,170
$ 110
$
(218)
$
$
16
42
6
–
–
64
$ 13 $
(26)
7
–
–
–
(78)
1
–
–
$
(6)
$
(77)
(1) Excludes net remeasurement gains/losses recognized in OCI in respect of immaterial subsidiaries not included in the disclosures totalling $6 million net losses (2020:
$5 million of net losses; 2019: $2 million of net losses).
Canadian defined benefit plans
As the Canadian defined benefit pension and other post-employment benefit plans represent approximately 92% of our consolidated defined benefit
obligation, they are the subject and focus of the disclosures in the balance of this note.
Disaggregation and maturity profile of defined benefit obligation
The breakdown of the defined benefit obligation for our Canadian plans between active, deferred and retired members is as follows:
$ millions, as at October 31
Active members
Deferred members
Retired members
Total
Pension plans Other post-employment plans
2021
$ 4,014
569
3,263
$ 7,846
2020
$ 4,362
626
3,396
$ 8,384
$
2021
99
–
413
$ 512
2020
$ 129
–
439
$ 568
The weighted-average duration of the defined benefit obligation for our Canadian plans is as follows:
As at October 31
Weighted-average duration, in years
Pension plans Other post-employment plans
2021
14.2
2020
14.8
2021
11.7
2020
12.6
178 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Plan assets
The major categories of our defined benefit pension plan assets for our Canadian plans are as follows:
$ millions, as at October 31
Asset category (1)
Canadian equity securities (2)
Debt securities (3)
Government bonds
Corporate bonds
Investment funds (4)
Canadian equity funds
U.S. equity funds
International equity funds (5)
Global equity funds (5)
Emerging markets equity funds
Fixed income funds
Other (2)
Alternative investments (6)
Cash and cash equivalents and other
Obligations related to securities sold under repurchase agreements
2021
2020
$
753
8 %
$
540
6 %
4,917
755
5,672
40
560
39
1,171
296
110
2,216
1,740
257
(1,642)
355
55
8
63
1
6
1
13
3
1
25
20
2
(18)
4
5,001
1,195
6,196
30
423
32
961
229
117
1,792
1,281
241
(1,581)
(59)
59
14
73
–
5
–
12
3
1
21
16
3
(19)
–
$ 8,996
100 %
$ 8,469
100 %
(1) Asset categories are based upon risk classification including synthetic exposure through derivatives. The fair value of derivatives as at October 31, 2021 was a net
derivative asset of $30 million (2020: net derivative liability of $41 million).
(2) Pension benefit plan assets include CIBC issued securities and deposits of nil (2020: $7 million), representing nil of Canadian plan assets (2020: 0.1%). All of the equity
securities held as at October 31, 2021 and 2020 have daily quoted prices in active markets except hedge funds, infrastructure, and private equity.
(3) All debt securities held as at October 31, 2021 and 2020 are investment grade, of which $134 million (2020: $244 million) have daily quoted prices in active markets.
(4) $40 million (2020: $31 million) of the investment funds are directly held as at October 31, 2021 and have daily quoted prices in active markets.
(5) Global equity funds include North American and international investments, whereas International equity funds do not include North American investments.
(6) Comprised of private equity, infrastructure, private debt and real estate funds.
Principal actuarial assumptions
The weighted-average principal assumptions used to determine the defined benefit obligation for our Canadian plans are as follows:
As at October 31
Discount rate
Rate of compensation increase (1)
Pension plans Other post-employment plans
2021
2020
2021
2020
3.5 %
2.1 %
2.8 %
2.0 %
3.4 %
2.1 %
2.7 %
2.0 %
(1) Rates of compensation increase for 2021 and 2020 reflect the use of a salary growth rate assumption table that is based on the age and tenure of the employees. The table
yields a weighted-average salary growth rate of approximately 2.1% per annum (2020: 2.0%).
Assumptions regarding future mortality have been based on published statistics and mortality tables. The current longevities underlying the values
of the defined benefit obligation of our Canadian plans are as follows (in years):
As at October 31
Longevity at age 65 for current retired members
Males
Females
Longevity at age 65 for current members aged 45
Males
Females
2021
2020
23.4
24.5
24.4
25.4
23.4
24.5
24.3
25.4
The assumed health-care cost trend rates of the Canadian other post-employment plan providing medical, dental, and life insurance benefits are as
follows:
For the year ended October 31
Health-care cost trend rates assumed for next year
Rate to which the cost trend rate is assumed to decline
Year that the rate reaches the ultimate trend rate
2021
4.9 %
4.0 %
2040
2020
5.2 %
4.0 %
2040
CIBC 2021 ANNUAL REPORT 179
Consolidated financial statements
Sensitivity analysis
Reasonably possible changes to one of the principal actuarial assumptions, holding other assumptions constant, would have affected the defined
benefit obligation of our Canadian plans as follows:
Estimated increase (decrease) in defined benefit obligation
Pension plans Other post-employment plans
$ millions, as at October 31
Discount rate (100 basis point change)
Decrease in assumption
Increase in assumption
Rate of compensation increase (100 basis point change)
Decrease in assumption
Increase in assumption
Health-care cost trend rates (100 basis point change)
Decrease in assumption
Increase in assumption
Future mortality
1 year shorter life expectancy
1 year longer life expectancy
n/a Not applicable.
2021
$
1,256
(1,028)
(267)
309
n/a
n/a
(192)
189
2021
$
69
(57)
–
–
(22)
25
(13)
14
The sensitivity analyses presented above are indicative only, and should be considered with caution as they have been calculated in isolation
without changing other assumptions. In practice, changes in one assumption may result in changes in another, which may magnify or counteract
the disclosed sensitivities.
Future cash flows
Cash contributions
The most recently completed actuarial valuation of the CIBC Pension Plan for funding purposes was as at October 31, 2020. The next actuarial
valuation of this plan for funding purposes will be effective as of October 31, 2021.
The minimum contributions for 2022 are anticipated to be $233 million for the Canadian defined benefit pension plans and $28 million for the
Canadian other post-employment benefit plans. These estimates are subject to change since contributions are affected by various factors, such as
market performance, regulatory requirements, and management’s ability to change funding policy.
Expected future benefit payments
The expected future benefit payments for our Canadian plans for the next 10 years are as follows:
$ millions, for the year ended October 31
Defined benefit pension plans
Other post-employment plans
2022
2023
2024
2025
2026
2027–2031
Total
$ 346
28
$ 354
28
$ 362
29
$ 371
29
$ 380
30
$ 2,039
156
$ 3,852
300
$ 374
$ 382
$ 391
$ 400
$ 410
$ 2,195
$ 4,152
Defined contributions and other plans
We also maintain defined contribution plans for certain employees and make contributions to government pension plans. The expense recognized
in the consolidated statement of income for these benefit plans is as follows:
$ millions, for the year ended October 31
Defined contribution pension plans
Government pension plans (1)
(1) Includes Canada Pension Plan, Quebec Pension Plan, and U.S. Federal Insurance Contributions Act.
2021
2020
2019
$
40
143
$
33
137
$
29
121
$ 183
$ 170
$ 150
180 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 20
Income taxes
Total income taxes
$ millions, for the year ended October 31
Consolidated statement of income
Provision for (reversal of) current income taxes
Adjustments for prior years
Current income tax expense
Provision for (reversal of) deferred income taxes
Adjustments for prior years
Effect of changes in tax rates and laws
Origination and reversal of temporary differences
OCI
Total comprehensive income
Components of income tax
$ millions, for the year ended October 31
Current income taxes
Federal
Provincial
Foreign
Deferred income taxes
Federal
Provincial
Foreign
2021
2020
2019
$
(22)
1,939
1,917
$
(40)
1,366
1,326
$
(125)
1,365
1,240
19
1
(61)
(41)
1,876
297
37
4
(269)
(228)
1,098
130
107
34
(33)
108
1,348
22
$ 2,173
$ 1,228
$ 1,370
$
2021
918
629
398
1,945
137
90
1
228
$
2020
613
420
390
1,423
(67)
(44)
(84)
(195)
$
2019
634
428
226
1,288
30
20
32
82
$ 2,173
$ 1,228
$ 1,370
The combined Canadian federal and provincial income tax rate varies each year according to changes in the statutory rates imposed by each of
these jurisdictions, and according to changes in the proportion of our business carried out in each province. We are also subject to Canadian
taxation on income of foreign branches.
Earnings of foreign subsidiaries would generally only be subject to Canadian tax when distributed to Canada. Additional Canadian taxes that
would be payable if all foreign subsidiaries’ retained earnings were distributed to the Canadian parent as dividends are estimated to be nil.
The effective rates of income tax in the consolidated statement of income are different from the combined Canadian federal and provincial
income tax rates as set out in the following table:
Reconciliation of income taxes
$ millions, for the year ended October 31
2021
2020
2019
Combined Canadian federal and provincial income tax rate applied to
income before income taxes
Income taxes adjusted for the effect of:
Earnings of foreign subsidiaries
Tax-exempt income
Changes in income tax rate on deferred tax balances
Impact of equity-accounted income
Other (1)
$ 2,188
26.3 %
$ 1,291
26.4 %
$ 1,718
26.5 %
(136)
(150)
1
(13)
(14)
(1.6)
(1.8)
–
(0.2)
(0.2)
(66)
(134)
4
(18)
21
(1.3)
(2.7)
0.1
(0.4)
0.4
(214)
(131)
34
(23)
(36)
(3.3)
(2.0)
0.5
(0.4)
(0.5)
Income taxes in the consolidated statement of income
$ 1,876
22.5 %
$ 1,098
22.5 %
$ 1,348
20.8 %
(1) Prior period amounts include the Enron settlement recognized in the first quarter of 2019.
CIBC 2021 ANNUAL REPORT 181
Consolidated financial statements
Deferred income taxes
Sources of and movement in deferred tax assets and liabilities
Deferred tax assets
$ millions, for the year ended October 31
2021 Balance at beginning of year
Recognized in net income
Recognized in OCI
Other (2)
Allowance
for credit
losses
Property
and
equipment
$
314
(80)
–
(12)
$
39
3
–
(2)
Pension and
employee
benefits Provisions
$
$
554
59
(296)
(10)
53
51
–
(1)
Financial
instrument
revaluation
Tax loss
carry-
forwards (1) Other
Total
assets
$
$
1
(7)
43
(13)
19
(3)
–
(11)
$ 236 $ 1,216
7
(253)
(54)
(16)
–
(5)
Balance at end of year
$
222
$
40
$
307
$ 103
$
24
$
5
$ 215 $
916
2020 Balance at beginning of year before accounting
policy changes
Impact of adopting IFRS 16 at November 1, 2019
Balance at beginning of year after accounting
policy changes
Recognized in net income
Recognized in OCI
Other (2)
Balance at end of year
2019 Balance at beginning of year before accounting
policy changes
Impact of adopting IFRS 15 at November 1, 2018
Balance at beginning of year after accounting
policy changes
Recognized in net income
Recognized in OCI
Other (2)
Balance at end of year
Deferred tax liabilities
$ millions, for the year ended October 31
2021 Balance at beginning of year
Recognized in net income
Recognized in OCI
Other (2)
Balance at end of year
2020 Balance at beginning of year before accounting
policy changes
Impact of adopting IFRS 16 at November 1, 2019 (3)
Balance at beginning of year after accounting
policy changes
Recognized in net income
Recognized in OCI
Other (2)
Balance at end of year
2019 Balance at beginning of year before accounting
policy changes
Impact of adopting IFRS 15 at November 1, 2018
Balance at beginning of year after accounting
policy changes
Recognized in net income
Recognized in OCI
Other (2)
Balance at end of year
Net deferred tax assets as at October 31, 2021
Net deferred tax assets as at October 31, 2020
Net deferred tax assets as at October 31, 2019
$
$
$
170
–
170
143
–
1
314
298
–
298
(124)
–
(4)
$
47
–
$
567
–
$
47
(23)
–
15
567
4
(18)
1
$
39
$
554
$
$
12
–
12
14
–
21
47
$
$
437
–
437
46
83
1
567
$
$
20
–
20
33
–
–
53
16
–
16
3
–
1
20
$
$
$
1
–
1
–
–
–
1
$
24
–
$ 157 $
(12)
986
(12)
24
(1)
–
(4)
145
114
–
(23)
974
270
(18)
(10)
$
19
$ 236 $ 1,216
$
66
–
38
–
66
(32)
(50)
17
38
(14)
–
–
$ 127 $
3
130
20
–
7
994
3
997
(87)
33
43
986
$
170
$
$
1
$
24
$ 157 $
Intangible
assets
$
(305)
(26)
–
4
Property
and
equipment
Pension and
employee
benefits
$
(112)
27
–
3
$
(15)
1
(15)
5
Financial
instrument
revaluation
$
(63)
28
(1)
17
Goodwill
$
(86)
(2)
–
–
Other
Total
liabilities
$
(18) $
6
–
–
(599)
34
(16)
29
$
(327)
$
(82)
$
(24)
$
(88)
$
(19)
$
(12) $
(552)
$
(315)
–
$
(68)
(39)
$
(315)
13
–
(3)
(107)
(6)
–
1
(9)
–
(9)
(5)
(2)
1
$
(84)
–
$
(25)
–
$
(6) $
–
(507)
(39)
(84)
(2)
–
–
(25)
(24)
(13)
(1)
(6)
(18)
–
6
(546)
(42)
(15)
4
$
(305)
$
(112)
$
(15)
$
(86)
$
(63)
$
(18) $
(599)
$
(287)
–
$
(287)
(16)
–
(12)
$
(315)
$
(47)
–
(47)
(12)
–
(9)
(68)
$
(11)
–
$
(85)
–
$
(12)
–
$
6
(5)
$
(436)
(5)
(11)
(1)
(6)
9
(85)
(1)
–
2
(12)
(4)
–
(9)
1
13
(1)
(19)
(441)
(21)
(7)
(38)
$
(9)
$
(84)
$
(25)
$
(6) $
(507)
$
$
$
364
617
479
(1) The deferred tax effect of tax loss carryforwards includes $5 million (2020: $19 million; 2019: $22 million) that relate to operating losses (of which $2 million relate to
Canada, and $3 million relate to the Caribbean) that expire in various years commencing in 2022, and nil (2020: nil, 2019: $2 million) that relate to U.S. capital losses.
(2) Includes foreign currency translation adjustments.
(3) Transition impact from the adoption of IFRS 16 at November 1, 2019 is reported net for lease liability and right-of-use assets.
Deferred tax assets and liabilities are assessed by entity for presentation in our consolidated balance sheet. As a result, the net deferred tax assets
of $364 million (2020: $617 million) are presented in the consolidated balance sheet as deferred tax assets of $402 million (2020: $650 million) and
deferred tax liabilities of $38 million (2020: $33 million).
182 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Unrecognized tax losses
The amount of unused operating tax losses for which deferred tax assets have not been recognized was $1,611 million as at October 31, 2021
(2020: $1,855 million), of which $674 million (2020: $669 million) relates to the U.S. region and $937 million (2020: $1,186 million) relates to the
Caribbean region. These unused operating tax losses expire within 10 years.
The amount of unused capital tax losses for which deferred tax assets have not been recognized was $519 million as at October 31, 2021
(2020: $611 million). These unused capital tax losses relate to Canada.
Enron
In prior years, the Canada Revenue Agency (CRA) issued reassessments disallowing the deduction of Enron settlement payments and related legal
expenses (the Enron expenses). In January 2019, CIBC entered into a settlement agreement (the Agreement) with the CRA that provides certainty
with respect to the portion of the Enron expenses deductible in Canada. The Agreement resulted in the recognition of a net $38 million tax recovery
in the first quarter of 2019. This recovery was determined after taking into account taxable refund interest in Canada and also the portion of the
Enron expenses that are expected to be deductible in the United States (the U.S. deduction). The U.S. deduction has not been agreed to by the
Internal Revenue Service. It is possible that adjustments may be required to the amount of tax benefits recognized in the U.S.
Dividend received deduction
The CRA has reassessed CIBC approximately $1,420 million of additional income tax by denying the tax deductibility of certain 2011 to 2016
Canadian corporate dividends on the basis that they were part of a “dividend rental arrangement”. The dividends that were subject to the
reassessments are similar to those prospectively addressed by the rules in the 2015 and 2018 Canadian federal budgets. In August 2021, CIBC
filed a Notice of Appeal with the Tax Court of Canada and the matter is now in litigation. It is possible that subsequent years may be reassessed for
similar activities. CIBC is confident that its tax filing positions were appropriate and intends to defend itself vigorously. Accordingly, no amounts
have been accrued in the consolidated financial statements.
Foreign exchange capital loss reassessment
In November 2021, the Tax Court of Canada ruled against CIBC on its 2007 foreign exchange capital loss reassessment (Decision). CIBC disagrees
with the Decision and filed its Appeal in November 2021. CIBC remains confident that its tax filing position was appropriate. Accordingly, no
amounts have been accrued in the consolidated financial statements. The exposure of additional tax and interest related to this and similar matters
is approximately $300 million in addition to the potential inability to utilize approximately $500 million in unrecognized capital tax loss carryforwards.
Note 21
Earnings per share
$ millions, except per share amounts, for the year ended October 31
Basic EPS
Net income attributable to equity shareholders
Less: preferred share dividends and distributions on other equity instruments
Net income attributable to common shareholders
Weighted-average common shares outstanding (thousands)
Basic EPS
Diluted EPS
Net income attributable to common shareholders
Weighted-average common shares outstanding (thousands)
Add: stock options potentially exercisable (1) (thousands)
Add: restricted shares and equity-settled consideration (thousands)
Weighted-average diluted common shares outstanding (thousands)
$
$
$
2021
6,429
158
6,271
448,953
13.97
6,271
448,953
1,061
169
450,183
$
$
$
2020
3,790
122
3,668
445,435
8.23
3,668
445,435
378
208
446,021
$
$
$
2019
5,096
111
4,985
444,324
11.22
4,985
444,324
702
431
445,457
Diluted EPS
$
13.93
$
8.22
$
11.19
(1) Excludes average options outstanding of nil with a weighted-average exercise price of nil (2020: 3,748,652 with a weighted-average exercise price of $111.53; 2019:
2,319,723 with a weighted-average exercise price of $114.29), to the extent that the options’ exercise prices were less than the average market price of CIBC’s common
shares.
CIBC 2021 ANNUAL REPORT 183
Consolidated financial statements
Note 22 Commitments, guarantees and pledged assets
Commitments
Credit-related arrangements
Credit-related arrangements are generally off-balance sheet instruments and are typically entered into to meet the financing needs of clients. In
addition, there are certain exposures for which we could be obligated to extend credit that are not recorded on the consolidated balance sheet. Our
policy of requiring collateral or other security to support credit-related arrangements and the types of security held is generally the same as for
loans. The contract amounts presented below for credit-related arrangements represent the maximum amount of additional credit that we could be
obligated to extend. The contract amounts also represent the additional credit risk amounts should the contracts be fully drawn, the counterparties
default and any collateral held proves to be of no value. As many of these arrangements will expire or terminate without being drawn upon, the
contract amounts are not necessarily indicative of future cash requirements or actual risk of loss.
$ millions, as at October 31
Securities lending (1)
Unutilized credit commitments (2)
Backstop liquidity facilities
Standby and performance letters of credit
Documentary and commercial letters of credit
Other commitments to extend credit
2021
2020
Contract amounts
$
50,578
301,343
12,174
15,775
194
978
$
39,186
268,089
12,907
14,565
196
2,149
$ 381,042
$ 337,092
(1) Excludes securities lending of $2.5 billion (2020: $1.8 billion) for cash because it is reported on the consolidated balance sheet.
(2) Includes $141.5 billion (2020: $131.3 billion) of personal, home equity and credit card lines, which are unconditionally cancellable at our discretion.
In addition, the client securities lending of the joint ventures which CIBC has with The Bank of New York Mellon totalled $81.7 billion (2020: $78.1 billion)
of which $8.6 billion (2020: $8.0 billion) are transactions between CIBC and the joint ventures.
CIBC has provided indemnities to customers of the joint ventures in respect of securities lending transactions with third parties amounting to
$68.0 billion (2020: $64.3 billion).
For further information on the joint ventures, see Note 26.
Securities lending
Securities lending represents our credit exposure when we lend our own or our clients’ securities to a borrower and the borrower defaults on the
redelivery obligation. The borrower must fully collateralize the security lent at all times.
Unutilized credit commitments
Unutilized credit commitments are the undrawn portion of lending facilities that we have approved to meet the requirements of clients. These lines
may include various conditions that must be satisfied prior to drawdown and include facilities extended in connection with contingent acquisition
financing. The credit risk associated with these lines arises from the possibility that a commitment will be drawn down as a loan at some point in the
future, prior to the expiry of the commitment. The amount of collateral obtained, if deemed necessary, is based on our credit evaluation of the
borrower and may include a charge over the present and future assets of the borrower.
Backstop liquidity facilities
We provide irrevocable backstop liquidity facilities primarily to ABCP conduits. We are the financial services agent for some of these conduits, while
other conduits are administered by third parties. The liquidity facilities for our sponsored ABCP programs, Safe Trust, Sure Trust, Sound Trust and Stable
Trust, require us to provide funding to fund non-defaulted assets, subject to the satisfaction of certain limited conditions with respect to the conduits.
Standby and performance letters of credit
These represent an irrevocable obligation to make payments to third parties in the event that clients are unable to meet their contractual financial or
performance obligations. The credit risk associated with these instruments is essentially the same as that involved in extending irrevocable loan
commitments to clients. The amount of collateral obtained, if deemed necessary, is based on our credit evaluation of the borrower and may include
a charge over present and future assets of the borrower.
Documentary and commercial letters of credit
Documentary and commercial letters of credit are short-term instruments issued on behalf of a client, authorizing a third-party, such as an exporter,
to draw drafts on CIBC up to a specified amount, subject to specific terms and conditions. We are at risk for any drafts drawn that are not ultimately
settled by the client; however, the amounts drawn are collateralized by the related goods.
Other commitments to extend credit
These represent other commitments to extend credit, and primarily include forward-dated securities financing trades in the form of securities
purchased under resale agreements with various counterparties that are executed on or before the end of our reporting period and that settle
shortly after period end, usually within five business days.
Other commitments
As an investor in merchant banking activities, we enter into commitments to fund external private equity funds. In connection with these activities, we
had commitments to invest up to $337 million (2020: $212 million).
In addition, we act as underwriter for certain new issuances under which we alone or together with a syndicate of financial institutions purchase
these new issuances for resale to investors. As at October 31, 2021, the related underwriting commitments were $268 million (2020: $94 million).
184 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Guarantees and other indemnification agreements
Guarantees
A guarantee is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor
failed to make payment when due in accordance with the original or modified terms of a debt instrument. Guarantees include standby and
performance letters of credit as discussed above, and credit derivatives protection sold, as discussed in Note 13.
Other indemnification agreements
In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counterparty to such
arrangement from any losses relating to a breach of representations and warranties, a failure to perform certain covenants, or for claims or losses
arising from certain external events as outlined within the particular contract. This may include, for example, losses arising from changes in tax
legislation, litigation, or claims relating to past performance. In addition, we indemnify each of our directors and officers to the extent permitted by
law, against any and all claims or losses (including any amounts paid in settlement of any such claims) incurred as a result of their service to CIBC.
In most indemnities, maximum loss clauses are generally not provided for, and as a result, no defined limit of the maximum potential liability exists.
Amounts are accrued when we have a present legal or constructive obligation as a result of a past event, when it is both probable that an outflow of
economic benefits will be required to resolve the matter, and when a reliable estimate can be made of the amount of the obligation. We believe that
the likelihood of the conditions arising to trigger obligations under these contract arrangements is remote. Historically, any payments made in
respect of these contracts have not been significant. Amounts related to these indemnifications, representations, and warranties reflected within the
consolidated financial statements as at October 31, 2021 and 2020 are not significant.
Pledged assets
In the normal course of business, on- and off-balance sheet assets are pledged as collateral for various activities. The following table summarizes
asset pledging amounts and the activities to which they relate:
$ millions, as at October 31
Assets pledged in relation to:
Securities lending
Obligations related to securities sold under repurchase agreements
Obligations related to securities sold short
Securitizations
Covered bonds
Derivatives
Foreign governments and central banks (1)
Clearing systems, payment systems, and depositories (2)
Other
(1) Includes assets pledged to maintain access to central bank facilities in foreign jurisdictions.
(2) Includes assets pledged in order to participate in clearing and payment systems and depositories.
Note 23 Contingent liabilities and provisions
$
2021
2020
50,895 $
73,687
22,790
18,824
25,416
16,266
252
649
374
41,042
69,528
15,963
20,818
21,073
14,410
133
605
400
$ 209,153 $ 183,972
In the ordinary course of its business, CIBC is a party to a number of legal proceedings, including regulatory investigations, in which claims for
substantial monetary damages are asserted against CIBC and its subsidiaries. Legal provisions are established if, in the opinion of management, it
is both probable that an outflow of economic benefits will be required to resolve the matter, and a reliable estimate can be made of the amount of
the obligation. If the reliable estimate of probable loss involves a range of potential outcomes within which a specific amount appears to be a better
estimate, that amount is accrued. If no specific amount within the range of potential outcomes appears to be a better estimate than any other
amount, the mid-point in the range is accrued. In some instances, however, it is not possible either to determine whether an obligation is probable or
to reliably estimate the amount of loss, in which case no accrual can be made.
While there is inherent difficulty in predicting the outcome of legal proceedings, based on current knowledge and in consultation with legal
counsel, we do not expect the outcome of these matters, individually or in aggregate, to have a material adverse effect on our consolidated financial
statements. However, the outcome of these matters, individually or in aggregate, may be material to our operating results for a particular reporting
period. We regularly assess the adequacy of CIBC’s litigation accruals and make the necessary adjustments to incorporate new information as it
becomes available.
CIBC considers losses to be reasonably possible when they are neither probable nor remote. It is reasonably possible that CIBC may incur
losses in addition to the amounts recorded when the loss accrued is the mid-point of a range of reasonably possible losses, or the potential loss
pertains to a matter in which an unfavourable outcome is reasonably possible but not probable.
CIBC believes the estimate of the aggregate range of reasonably possible losses, in excess of the amounts accrued, for its significant legal
proceedings, where it is possible to make such an estimate, is from nil to approximately $1.1 billion as at October 31, 2021. This estimated
aggregate range of reasonably possible losses is based upon currently available information for those significant proceedings in which CIBC is
involved, taking into account CIBC’s best estimate of such losses for those cases for which an estimate can be made. CIBC’s estimate involves
significant judgment, given the varying stages of the proceedings and the existence of multiple defendants in many of such proceedings whose
share of the liability has yet to be determined. The range does not include potential punitive damages and interest. The matters underlying the
estimated range as at October 31, 2021 consist of the significant legal matters disclosed below. The matters underlying the estimated range will
change from time to time, and actual losses may vary significantly from the current estimate. For certain matters, CIBC does not believe that an
estimate can currently be made as many of them are in preliminary stages and certain matters have no specific amount claimed. Consequently,
these matters are not included in the range.
The following is a description of CIBC’s significant legal proceedings, which we intend to vigorously defend.
CIBC 2021 ANNUAL REPORT 185
Consolidated financial statements
Green v. Canadian Imperial Bank of Commerce, et al.
In July 2008, a shareholder plaintiff commenced this proposed class action in the Ontario Superior Court of Justice against CIBC and several former
and current CIBC officers and directors. It alleges that CIBC and the individual officers and directors violated the Ontario Securities Act through
material misrepresentations and non-disclosures relating to CIBC’s exposure to the U.S. sub-prime mortgage market. The plaintiffs instituted this
action on behalf of all CIBC shareholders in Canada who purchased shares between May 31, 2007 and February 28, 2008. The action seeks
damages of $5 billion. In July 2012, the plaintiffs’ motions for leave to file the statement of claim and for class certification were dismissed by the
Ontario Superior Court of Justice. In February 2014, the Ontario Court of Appeal released its decision overturning the lower court and allowing the
matter to proceed as a certified class action. In August 2014, CIBC and the individual defendants were granted leave to appeal to the Supreme
Court of Canada. The defendants’ appeal to the Supreme Court of Canada was heard in February 2015. In December 2015, the Supreme Court of
Canada upheld the Ontario Court of Appeal’s decision allowing the matter to proceed as a certified class action. The trial, which was scheduled to
start in October 2021, has been adjourned. A settlement agreement has been reached, subject to court approval. Pursuant to the proposed
settlement, CIBC will pay the plaintiffs $125 million.
Fresco v. Canadian Imperial Bank of Commerce
Gaudet v. Canadian Imperial Bank of Commerce
In June 2007, two proposed class actions were filed against CIBC in the Ontario Superior Court of Justice (Fresco) and in the Quebec Superior
Court (Gaudet). Each makes identical claims for unpaid overtime for full-time, part-time, and retail frontline non-management employees. The
Ontario action seeks $500 million in damages plus $100 million in punitive damages for all employees in Canada, while the Quebec action is limited
to employees in Quebec and has been stayed pending the outcome of the Ontario action. In June 2009, in the Ontario action, the motion judge
denied certification of the matter as a class action. In September 2010, the Ontario Divisional Court upheld the motion judge’s denial of the plaintiff’s
certification motion and the award of costs to CIBC by a two-to-one majority. In January 2011, the Ontario Court of Appeal granted the plaintiff leave
to appeal the decision denying certification. In June 2012, the Ontario Court of Appeal overturned the lower court and granted certification of the
matter as a class action. The Supreme Court of Canada released its decision in March 2013 denying CIBC leave to appeal certification of the matter
as a class action, and denying the plaintiff’s cross appeal on aggregate damages. The motions for summary judgment were heard in December
2019. In March 2020, the court found CIBC liable for unpaid overtime. CIBC has appealed the liability decision. A decision on remedies was
released in August 2020 and the court certified aggregate damages as a common issue and directed that the availability and quantum, if any, of
aggregate damages be determined at a later date. The plaintiffs’ claim for punitive damages was dismissed. In October 2020, the court released its
decision on limitation periods finding that limitation periods cannot be determined on a class wide basis. CIBC has appealed the decisions on
remedies and limitation periods. The appeal was heard in September 2021. The court reserved its decision.
Credit card class actions – Interchange fees litigation:
Bancroft-Snell v. Visa Canada Corporation, et al.
9085-4886 Quebec Inc. v. Visa Canada Corporation, et al.
Watson v. Bank of America Corporation, et al.
Fuze Salon v. BofA Canada Bank, et al.
1023926 Alberta Ltd. v. Bank of America Corporation, et al.
The Crown & Hand Pub Ltd. v. Bank of America Corporation, et al.
Hello Baby Equipment Inc. v. BofA Canada Bank, et al.
Since 2011, seven proposed class actions have been commenced against VISA Canada Corporation (Visa), MasterCard International Incorporated
(MasterCard), CIBC and numerous other financial institutions. The actions, brought on behalf of all merchants who accepted payment by Visa or
MasterCard from March 23, 2001 to the present, allege two “separate, but interrelated” conspiracies: one in respect of Visa and one in respect of
MasterCard. The claims allege that Visa and MasterCard conspired with their issuing banks to set default interchange rate and merchant discount
fees and that certain rules (Honour All Cards and No Surcharge) have the effect of increasing the merchant discount fees. The claims allege civil
conspiracy, violation of the Competition Act, interference with economic interests and unjust enrichment. The claims seek unspecified general and
punitive damages. The motion for class certification in Watson was granted in March 2014. The appeal of the decision granting class certification
was heard in December 2014. In August 2015, the British Columbia Court of Appeal allowed the appeals in part, resulting in certain causes of action
being struck and others being reinstated. The matter remains certified as a class action. The trial in Watson which was scheduled to commence in
October 2020 has been adjourned. The motion for class certification in 9085-4886 Quebec Inc. (formerly Bakopanos) was heard in November 2017.
In February 2018, the Court certified 9085-4886 Quebec Inc. as a class action. In May 2019, the plaintiffs’ appeal of the certification decision in
9085-4886 Quebec Inc. was heard and in July 2019, the Quebec Court of Appeal allowed the plaintiffs’ appeal. Five of the seven actions have been
settled subject to court approval. The motions for court approval of the settlement are scheduled for December 2021. The remaining two actions will
be stayed. CIBC will contribute towards a proposed settlement.
Mortgage prepayment class actions:
Jordan v. CIBC Mortgages Inc.
Lamarre v. CIBC Mortgages Inc.
Sherry v. CIBC Mortgages Inc.
Haroch v. Toronto Dominion Bank, et al.
In 2011, three proposed class actions were filed in the Superior Courts of Ontario (Jordan), Quebec (Lamarre) and British Columbia (Sherry) against
CIBC Mortgages Inc. The representative plaintiffs allege that since 2005, CIBC Mortgages Inc. wrongfully charged or overcharged mortgage
prepayment penalties and that the calculation clauses in the mortgage contract that provide for discretion in applying the prepayment penalties are
void and unenforceable at law. The motion for class certification in Sherry was granted in June 2014 conditional on the plaintiffs framing a workable
class definition. In July 2014, CIBC filed a Notice of Appeal. CIBC’s appeal of the certification decision in Sherry was heard in April 2016. In June
2016, the British Columbia Court of Appeal allowed the appeal in Sherry in part, resulting in certain causes of action being struck. Sherry remains
certified as a class action, and continuation of the certification motion on the amended pleading was heard November 2017. In August 2018, the
court certified certain of the plaintiffs’ causes of action in Sherry. The appeal in Sherry was heard in April 2019. In May 2020, the court dismissed
CIBC’s appeal. The certification motion in Jordan was heard in August 2018. In February 2019, the court certified Jordan as a class action. CIBC’s
motion for leave to appeal the certification decision in Jordan was denied in June 2019.
In May 2018, a new proposed class action, Haroch, was filed in the Superior Court of Quebec against CIBC, CIBC Mortgages Inc. and several
other financial institutions. The action is brought on behalf of Quebec residents who during the class period allegedly paid a mortgage prepayment
charge in excess of three months’ interest. The plaintiffs allege that the defendants created complex prepayment formulas that are contrary to the
186 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Quebec Civil Code, the Quebec Consumer Protection Act and the Interest Act and seek damages back to 2015. Haroch and Lamarre have been
consolidated. The motion for class certification in Haroch was heard in June 2019 and in July 2019, the court certified the matter as a class action
against CIBC and CIBC Mortgages Inc. CIBC and CIBC Mortgages Inc. sought leave to appeal the certification decision. The Jordan and Sherry
actions have been settled subject to court approval, for which hearings are scheduled for February 2022. The appeal of the certification decision in
Haroch did not proceed as the matter has been settled against CIBC, subject to court approval.
Cerberus Capital Management L.P. v. CIBC
In November 2015, Securitized Asset Funding 2011-2, LTD., a special purpose investment vehicle affiliated with Cerberus Capital Management L.P.
(collectively, Cerberus), commenced a New York State Court action against CIBC seeking unspecified damages of “at least hundreds of millions of
dollars”. The action relates to two transactions in 2008 and 2011 in which CIBC issued a limited recourse note and certificate to Cerberus which
significantly reduced CIBC’s exposure to the U.S. residential real estate market. The complaint alleges that CIBC breached its contracts with
Cerberus by failing to appropriately calculate and pay with respect to two of the payment streams due under the 2008 note and 2011 certificate. In
January 2016, CIBC served its answer denying Cerberus’ allegations and asserting counterclaims. Pre-trial discovery was completed and the
parties filed a Note of Issue and Certificate of Readiness for Trial in August 2021. In September 2021, CIBC filed a motion for summary judgment,
which is scheduled to be heard in December 2021. A non-jury trial is scheduled to commence in March 2022.
Valeant class actions:
Catucci v. Valeant Pharmaceuticals International Inc., et al.
Potter v. Valeant Pharmaceuticals International Inc., et al.
In March 2016, a proposed class action was filed in the Quebec Superior Court on behalf of purchasers of shares in Valeant Pharmaceuticals
International Inc. against the issuer, its directors and officers, its auditors and the underwriting syndicates for six public offerings from 2013 to 2015.
CIBC World Markets Corp. was part of the underwriting syndicate for three of the offerings (underwriting 1.5% of a US$1.6 billion offering in June 2013,
1.5% of a US$900 million offering in December 2013 and 0.625% of an offering comprising US$5.25 billion and €1.5 billion in March 2015). The
proposed class action alleges various misrepresentations on the part of Valeant and the other defendants, including representations made in the
prospectus of the public offerings, relating to Valeant’s relationships with various “specialty pharmacies” who were allegedly acting improperly in the
distribution of Valeant’s products resulting in Valeant’s operational results, revenues, and share price during the relevant period being artificially inflated.
In July 2016, a similar proposed class action (Potter v. Valeant Pharmaceuticals International Inc., et al.) was commenced in New Jersey Federal Court.
The motion for class certification in Catucci and motion to dismiss in Potter were heard in April 2017. In September 2017, the court certified
Catucci as a class action. The defendants sought leave to appeal the certification decision, which was dismissed in December 2017. In Potter, the
court dismissed the action against the underwriters, without prejudice to the plaintiff to re-plead its allegations. In November 2020, the Catucci class
action was settled. The underwriters did not contribute to the settlement. This matter is now closed.
Pilon v. Amex Bank of Canada, et al.
In January 2018, a proposed class action was commenced in Quebec against CIBC and several other financial institutions. The action alleges that
the defendants breached the Quebec Consumer Protection Act and the Bank Act when they unilaterally increased the credit limit on the plaintiffs’
credit cards. The claim seeks the return of all over limit fees charged to Quebec customers beginning in January 2015 as well as punitive damages
of $500 per class member. The motion for class certification was heard in April 2019. In August 2019, the court dismissed the certification motion.
The plaintiff’s appeal of the decision denying certification was heard in February 2021. In March 2021, the court dismissed the plaintiff’s appeal. In
May 2021, the plaintiff filed a motion seeking leave to appeal to the Supreme Court of Canada.
Simplii privacy class actions:
Bannister v. CIBC (formerly John Doe v. CIBC)
Steinman v. CIBC
In June 2018, two proposed class actions were filed in the Ontario Superior Court against CIBC on behalf of Simplii Financial clients who allege their
personal information was disclosed as a result of a security incident in May 2018. The actions allege that Simplii Financial failed to protect its clients’
personal information. The Bannister proposed class action seeks aggregated damages of approximately $550 million, while the Steinman proposed
class action, which has been stayed, sought damages per class member plus punitive damages of $20 million. The motion for certification in
Bannister, which was scheduled for December 2019, was adjourned. In April 2021, the court approved the settlement in the Bannister and Steinman
actions. Pursuant to the settlement, CIBC agreed to pay $2 million to settle these actions. This matter is now closed.
Order Execution Only class actions:
Pozgaj v. CIBC and CIBC Trust
Frayce v. BMO Investorline Inc., et al
Michaud v. BBS Securities Inc. et al
In September 2018, a proposed class action (Pozgaj) was filed in the Ontario Superior Court against CIBC and CIBC Trust. It alleges that the
defendants should not have paid mutual fund trailing commissions to order-execution-only-dealers. The action is brought on behalf of all persons
who held units of CIBC mutual funds through order-execution-only-dealers and seeks $200 million in damages.
In 2020, two proposed class action were filed in the Ontario Superior Court (Frayce) and the Supreme Court of British Columbia (Michaud)
against CIBC Investor Services Inc. and several other dealers. The proposed actions allege that the defendants should not have received and
accepted trailing commissions for service and advice on mutual funds purchased through their respective order-execution-only-dealers. The
proposed actions are brought on behalf of all persons who purchased units of mutual funds through an order-execution-only-dealer owned by one
or more of the defendants and seeks unspecified compensatory and punitive damages. The motion for class certification in Frayce is scheduled for
February 2022, and the Michaud action has been stayed.
CIBC 2021 ANNUAL REPORT 187
Consolidated financial statements
York County on Behalf of the County of York Retirement Fund v. Rambo, et al.
In February 2019, a class action complaint was filed in the Northern District of California against the directors, certain officers and the underwriters
of several senior note offerings of the Pacific Gas and Electric Company (PG&E) that took place between March 2016 and April 2018, the total
issuance amount for the series of offerings being approximately US$4 billion. CIBC World Markets Corp. was part of the underwriting syndicate for
an offering, whereby CIBC World Markets Corp. underwrote 6% of a US$650 million December 2016 issuance of senior notes. The offering involved
the issuance of two tranches of notes: US$400 million of 30-year senior notes maturing in December 2046 and US$250 million of one-year floating
rate notes that matured and were repaid in November 2017. The complaint alleges that the disclosure documentation associated with the note
offerings contained misrepresentations and/or omissions of material facts, including with respect to PG&E’s failure to comply with various safety
regulations, vegetation management programs and requirements, as well as understating the extent to which its equipment has allegedly caused
multiple fires in California, including before the wildfires that occurred in California in 2017 and 2018. In October 2019, the defendants filed a motion
to dismiss.
Pope v. CIBC and CIBC Trust
In August 2020, a proposed class action was filed in the Supreme Court of British Columbia against CIBC and CIBC Trust. The action alleges that
the defendants misrepresented their investment strategy and charged unitholders excess fees in relation to the CIBC Canadian Equity Fund and
certain CIBC portfolio funds. The action is brought on behalf of all persons who hold or held units of these funds from January 2005 to present and
seeks unspecified compensatory and punitive damages. In December 2020, CIBC Asset Management Inc. was added as a defendant. The motion
for class certification was heard in August 2021 and taken under reserve.
Salko v. CIBC Investor Services Inc. et al
In March 2021, a proposed class action was commenced in Quebec against CIBC Investor Services Inc. and several other financial institutions. The
plaintiff subsequently added CIBC World Markets Inc. and additional financial institutions as defendants. The action seeks the reimbursement of
currency conversion fees alleged to have been unlawfully charged to class members and concealed by the defendants, as well as exemplary and
punitive damages. The plaintiff seeks reimbursement of fees charged to clients since March 15, 2018, as well as punitive damages in the amount of
5% of the total sum of fees charged to class members, plus interest. The motion for class certification is scheduled for April 2022.
The Registered Retirement Savings Plan (RRSP) of J.T.G v. Her Majesty The Queen
CIBC Trust Corporation is the trustee of a self-directed RRSP that has been the subject of proceedings in the Tax Court of Canada. The proceedings
arise from appeals of tax assessments made by the Minister of National Revenue against the RRSP for the 2004 to 2009 taxation years under Parts I
and XI.1 of the Income Tax Act (Canada). At the time they were made in March 2013, the Part I assessment amounted to approximately $139 million
and the Part XI.1 reassessment totalled approximately $144 million, in each case including all taxes, penalties and interest. In April 2021, the Tax
Court of Canada released a decision allowing the appeal in part of the assessment under Part I and dismissing the appeal of the reassessment
under Part XI.1. The RRSP by its trustee CIBC Trust has appealed this decision to the Federal Court of Appeal. To the extent there is a shortfall in the
RRSP’s ability to satisfy any of the Part XI.1 reassessment that may be upheld by the courts, CIBC Trust may be liable to pay a portion of that
reassessment.
Legal provisions
The following table presents changes in our legal provisions:
$ millions, for the year ended October 31
Balance at beginning of year
Additional new provisions recognized
Less:
Amounts incurred and charged against existing provisions
Unused amounts reversed and other adjustments
Balance at end of year
2021
$ 151
169
(13)
(6)
$
2020
67
92
(5)
(3)
$
301
$ 151
Restructuring
During the first quarter of 2020, we recognized a restructuring charge of $339 million in Corporate and Other associated with ongoing efforts to
transform our cost structure and simplify our bank. The charge consisted primarily of employee severance and related costs and was recorded in
Non-interest expenses – Employee compensation and benefits.
The following table presents changes in the restructuring provision:
$ millions, for the year ended October 31
Balance at beginning of year
Additional new provisions recognized
Less:
Amounts incurred and charged against existing provisions
Unused amounts reversed
Balance at end of year
2021
$ 222
14
2020
26
370
$
(112)
(25)
(152)
(22)
$
99
$ 222
The amount of $99 million recognized represents our best estimate as at October 31, 2021 of the amount required to settle the obligation, including
obligations related to ongoing payments as a result of the restructuring.
188 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 24 Concentration of credit risk
Concentration of credit exposure may arise with a group of counterparties that have similar economic characteristics or are located in the same
geographic region. The ability of such counterparties to meet contractual obligations would be similarly affected by changing economic, political or
other conditions.
The amounts of credit exposure associated with our on- and off-balance sheet financial instruments are summarized in the following table:
Credit exposure by country of ultimate risk
$ millions, as at October 31
2021
Canada
U.S.
Other
countries
Total
Canada
U.S.
Other
countries
2020
Total
On-balance sheet
Major assets (1)(2)(3)
Off-balance sheet
Credit-related arrangements
Financial institutions
Governments
Retail
Corporate
$ 537,932 $ 181,813 $ 77,384 $ 797,129 $ 512,542 $ 151,337 $ 70,945 $ 734,824
$
59,636 $ 18,315 $ 16,458 $
10
11,229
700
154,341
33,233
77,939
8
383
8,790
94,409 $
11,247
155,424
119,962
48,236 $ 13,482 $ 12,737 $
10
554
30,839
9,860
142,351
70,130
7
434
8,452
74,455
9,877
143,339
109,421
$ 303,145 $ 52,258 $ 25,639 $ 381,042 $ 270,577 $ 44,885 $ 21,630 $ 337,092
(1) Major assets consist of cash and deposits with banks, loans and acceptances net of allowance for credit losses, securities, securities borrowed or purchased under resale
agreements, and derivative instruments.
(2) Includes Canadian currency of $522.8 billion (2020: $497.3 billion) and foreign currencies of $274.3 billion (2020: $237.5 billion).
(3) No industry or foreign jurisdiction accounted for more than 10% of loans and acceptances net of allowance for credit losses, with the exception of the U.S., which
accounted for 13% as at October 31, 2021 (2020: 13%).
See Note 13 for derivative instruments by country and counterparty type of ultimate risk. In addition, see Note 22 for details on the client securities
lending of the joint ventures which CIBC has with The Bank of New York Mellon.
Also see shaded sections in “MD&A – Management of risk” for a detailed discussion on our credit risk.
CIBC 2021 ANNUAL REPORT 189
Consolidated financial statements
Note 25 Related-party transactions
In the ordinary course of business, we provide banking services and enter into transactions with related parties on terms similar to those offered to
unrelated parties. Related parties include key management personnel(1), their close family members, and entities that they or their close family
members control or jointly control. Related parties also include associates and joint ventures accounted for under the equity method, and post-
employment benefit plans for CIBC employees. Loans to these related parties are made in the ordinary course of business and on substantially the
same terms as for comparable transactions with unrelated parties. As CIBC’s subsidiaries are consolidated, transactions with these entities have
been eliminated and are not reported as related-party transactions. We offer a subsidy on annual fees and preferential interest rates on credit card
balances to senior officers, which is the same offer extended to all employees of CIBC.
Key management personnel and their affiliates
As at October 31, 2021, loans to key management personnel(1) and their close family members and to entities that they or their close family
members control or jointly control totalled $17 million (2020: $139 million), letters of credit and guarantees were nil (2020: $2 million), and undrawn
credit commitments totalled $11 million (2020: $65 million).
These outstanding balances are generally unsecured and we have no provision for credit losses on impaired loans relating to these amounts
for the years ended October 31, 2021 and 2020.
(1) Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of CIBC directly or
indirectly and comprise the members of the Board (referred to as directors), Executive Committee and certain named officers per the Bank Act (Canada) (collectively
referred to as senior officers). Board members who are also Executive Committee members are included as senior officers.
Compensation of key management personnel
$ millions, for the year ended October 31
Short-term benefits (1)
Post-employment benefits
Share-based benefits (2)
Termination benefits
Total compensation
2021
Senior
officers
$
$
18
3
30
–
51
2020
Senior
officers
$
$
18
3
30
4
55
Directors
$
$
3
–
1
–
4
Directors
$
$
3
–
1
–
4
(1) Comprises salaries, statutory and non-statutory benefits related to senior officers and fees related to directors recognized during the year. Also includes annual incentive
plan payments related to senior officers on a cash basis.
(2) Comprises grant-date fair values of awards granted in the year.
Refer to the following Notes for additional details on related-party transactions:
Share-based payment plans
See Note 18 for details of these plans offered to directors and senior officers.
Post-employment benefit plans
See Note 19 for related-party transactions between CIBC and the post-employment benefit plans.
Equity-accounted associates and joint ventures
See Note 26 for details of our investments in equity-accounted associates and joint ventures.
190 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 26
Investments in equity-accounted associates and joint ventures
Joint ventures
CIBC is a 50/50 joint venture partner with The Bank of New York Mellon in two joint ventures: CIBC Mellon Trust Company and CIBC Mellon Global
Securities Services Company (collectively referred to as CIBC Mellon), which provide trust and asset servicing, both in Canada. As at October 31,
2021, the carrying value of our investments in the joint ventures was $592 million (2020: $587 million), which was included in Corporate and Other.
As at October 31, 2021, loans to the joint ventures totalled $5 million (2020: nil) and undrawn credit commitments totalled $122 million
(2020: $164 million).
CIBC, The Bank of New York Mellon, and CIBC Mellon have, jointly and severally, provided indemnities to customers of the joint ventures in
respect of securities lending transactions. See Note 22 for additional details.
There was no unrecognized share of losses of any joint ventures, either for the year or cumulatively. In 2021 and 2020, none of our joint
ventures experienced any significant restrictions to transfer funds in the form of cash dividends or distributions, or repayment of loans or advances.
The following table provides the summarized aggregate financial information related to our proportionate interest in the equity-accounted joint
ventures:
$ millions, for the year ended October 31
Net income
OCI
Total comprehensive income
2021
$
51
(44)
$
7
2020
67
43
$
$ 110
2019
88
45
$
$ 133
Associates
As at October 31, 2021, the total carrying value of our investments in associates was $66 million (2020: $71 million). These investments comprise:
listed associates with a carrying value of nil (2020: $10 million) and a fair value of nil (2020: $10 million); and unlisted associates with a carrying
value of $66 million (2020: $61 million) and a fair value of $89 million (2020: $83 million). Of the total carrying value of our investments in associates,
$9 million (2020: $10 million) was included in Canadian Personal and Business Banking, $37 million (2020: $37 million) in Capital Markets, and
$20 million (2020: $24 million) in Corporate and Other.
As at October 31, 2021, loans to associates totalled $34 million (2020: nil) and undrawn credit commitments totalled $1 million (2020: $79
million). We also had commitments to invest up to nil (2020: nil) in our associates.
There was no unrecognized share of losses of any associate, either for the year or cumulatively. In 2021 and 2020, none of our associates
experienced any significant restrictions to transfer funds in the form of cash dividends or distributions, or repayment of loans or advances.
The following table provides the summarized aggregate financial information related to our proportionate interest in equity-accounted
associates:
$ millions, for the year ended October 31
Net income
OCI
Total comprehensive income
2021
$
$
4
1
5
2020
$
$
12
1
13
2019
$
$
4
(1)
3
CIBC 2021 ANNUAL REPORT 191
Consolidated financial statements
Note 27
Significant subsidiaries
The following is a list of significant subsidiaries in which CIBC, either directly or indirectly, owns 100% of the voting shares, except where noted.
$ millions, as at October 31, 2021
Subsidiary name (1)
Canada and U.S.
CIBC Asset Management Inc.
CIBC BA Limited
CIBC Bancorp USA Inc.
Canadian Imperial Holdings Inc.
CIBC Inc.
CIBC World Markets Corp.
CIBC Bank USA
CIBC Private Wealth Group, LLC
CIBC Delaware Trust Company
CIBC National Trust Company
CIBC Private Wealth Advisors, Inc.
CIBC Investor Services Inc.
CIBC Life Insurance Company Limited
CIBC Mortgages Inc.
CIBC Securities Inc.
CIBC Trust Corporation
CIBC World Markets Inc.
CIBC Wood Gundy Financial Services Inc.
CIBC Wood Gundy Financial Services (Quebec) Inc.
INTRIA Items Inc.
International
CIBC Australia Ltd
CIBC Capital Markets (Europe) S.A.
CIBC Cayman Holdings Limited
CIBC Cayman Bank Limited
CIBC Cayman Capital Limited
CIBC Cayman Reinsurance Limited
CIBC Investments (Cayman) Limited
FirstCaribbean International Bank Limited (91.7%)
FirstCaribbean International Bank and Trust Company (Cayman) Limited (91.7%)
CIBC Fund Administration Services (Asia) Limited (91.7%)
FirstCaribbean International Bank (Bahamas) Limited (87.3%)
Sentry Insurance Brokers Ltd. (87.3%)
FirstCaribbean International Bank (Barbados) Limited (91.7%)
FirstCaribbean International Finance Corporation (Leeward & Windward) Limited (91.7%)
FirstCaribbean International Securities Limited (91.7%)
FirstCaribbean International Bank (Cayman) Limited (91.7%)
FirstCaribbean International Finance Corporation (Netherlands Antilles) N.V. (91.7%)
FirstCaribbean International Bank (Curacao) N.V. (91.7%)
FirstCaribbean International Bank (Jamaica) Limited (91.7%)
FirstCaribbean International Bank (Trinidad and Tobago) Limited (91.7%)
FirstCaribbean International Trust Company (Bahamas) Limited (91.7%)
FirstCaribbean International Wealth Management Bank (Barbados) Limited (91.7%)
Address of head
or principal office
Book value of
shares owned
by CIBC (2)
Toronto, Ontario, Canada
$ 444
Toronto, Ontario, Canada
Chicago, Illinois, U.S.
New York, New York, U.S.
New York, New York, U.S.
New York, New York, U.S.
Chicago, Illinois, U.S.
Atlanta, Georgia, U.S.
Wilmington, Delaware, U.S.
Atlanta, Georgia, U.S.
Chicago, Illinois, U.S.
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Toronto, Ontario, Canada
Montreal, Quebec, Canada
– (3)
9,331
25
23
230
2
591
306
Mississauga, Ontario, Canada
100
19
550
1,742
2,820
Sydney, New South Wales, Australia
Luxembourg
George Town, Grand Cayman, Cayman Islands
George Town, Grand Cayman, Cayman Islands
George Town, Grand Cayman, Cayman Islands
George Town, Grand Cayman, Cayman Islands
George Town, Grand Cayman, Cayman Islands
Warrens, St. Michael, Barbados
George Town, Grand Cayman, Cayman Islands
Hong Kong, China
Nassau, The Bahamas
Nassau, The Bahamas
Warrens, St. Michael, Barbados
Castries, St. Lucia
Kingston, Jamaica
George Town, Grand Cayman, Cayman Islands
Curacao, Netherlands Antilles
Curacao, Netherlands Antilles
Kingston, Jamaica
Maraval, Port of Spain, Trinidad & Tobago
Nassau, The Bahamas
Warrens, St. Michael, Barbados
CIBC World Markets (Japan) Inc.
Tokyo, Japan
48
(1) Each subsidiary is incorporated or organized under the laws of the state or country in which the principal office is situated, except for Canadian Imperial Holdings Inc.,
CIBC Inc., CIBC Capital Corporation, CIBC World Markets Corp., CIBC Private Wealth Group, LLC, CIBC Private Wealth Advisors, Inc., and CIBC Bancorp USA Inc., which
were incorporated or organized under the laws of the State of Delaware, U.S.; CIBC National Trust Company, which was organized under the laws of the U.S.; and CIBC
World Markets (Japan) Inc., which was incorporated in Barbados.
(2) The book value of shares of subsidiaries is shown at cost and may include non-voting common and preferred shares. These amounts are eliminated upon consolidation.
(3) The book value of shares owned by CIBC is less than $1 million.
In addition to the above, we consolidate certain SEs where we have control over the SE. See Note 7 for additional details.
192 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 28
Financial instruments – disclosures
Certain disclosures required by IFRS 7 are provided in the shaded sections of the “MD&A – Management of risk”, as permitted by IFRS. The
following table provides a cross referencing of those disclosures in the MD&A.
Description
For each type of risk arising from financial instruments, an entity shall disclose: the exposure to risks and how they
arise; objectives, policies and processes used for managing the risks; methods used to measure the risk; and
description of collateral.
Credit risk: gross exposure to credit risk, credit quality and concentration of exposures.
Market risk: trading portfolios – Value-at-Risk (VaR); stressed VaR, incremental risk charge, non-trading portfolios –
interest rate risk, foreign exchange risk and equity risk.
Liquidity risk: liquid assets, maturity of financial assets and liabilities, and credit commitments.
Section
Risk overview
Credit risk
Market risk
Liquidity risk
Operational risk
Reputation and legal risks
Conduct risk
Regulatory compliance risk
Credit risk
Market risk
Liquidity risk
We have provided quantitative disclosures related to credit risk consistent with Basel guidelines in the “Credit risk” section of the MD&A. The table
below sets out the categories of the on-balance sheet exposures that are subject to the credit risk framework as set out in the Capital Adequacy
Requirements (CAR) Guideline issued by OSFI under the different Basel approaches based on the carrying value of those exposures in our
consolidated financial statements. The credit risk framework includes CCR exposures arising from OTC derivatives, repo-style transactions and
trades cleared through CCPs, as well as securitization exposures. Items not subject to the credit risk framework include exposures that are subject
to the market risk framework, amounts that are not subject to capital requirements or are subject to deduction from capital, and amounts relating to
CIBC’s insurance subsidiaries, which are excluded from the scope of regulatory consolidation.
$ millions, as at October 31
AIRB
approach
Standardized
approach
Other
credit risk (1)
Total
subject to
credit risk
Not
subject to
credit risk
Total
consolidated
balance sheet
2021
Cash and deposits with banks
Securities
Cash collateral on securities borrowed
Securities purchased under resale agreements
Loans
Allowance for credit losses
Derivative instruments
Customers’ liability under acceptances
Other assets
$
40,418
93,476
12,362
67,572
408,087
(2,190)
35,865
10,671
21,889
$ 14,764
11,686
6
–
43,463
(659)
47
287
292
$
1,793
–
–
–
1,494
–
–
–
7,988
$
56,975
105,162
12,368
67,572
453,044
(2,849)
35,912
10,958
30,169
$
22
56,239
–
–
1,726
–
–
–
10,385
$
56,997
161,401
12,368
67,572
454,770
(2,849)
35,912
10,958
40,554
Total credit exposures
$ 688,150
$ 69,886
$ 11,275
$ 769,311
$ 68,372
$ 837,683
2020
Total credit exposures
$ 634,193
$ 65,911
$ 10,699
$ 710,803
$ 58,748
$ 769,551
(1) Includes credit risk exposures arising from other assets that are subject to the credit risk framework but are not included in the standardized or AIRB frameworks, including
other balance sheet assets which are risk-weighted at 100%, significant investments in the capital of non-financial institutions, and amounts below the thresholds for capital
deduction that are risk-weighted at 250%.
CIBC 2021 ANNUAL REPORT 193
Consolidated financial statements
Note 29 Offsetting financial assets and liabilities
The following table identifies the amounts that have been offset on the consolidated balance sheet in accordance with the requirements of IAS 32
“Financial Instruments: Presentation”, and also those amounts that are subject to enforceable netting agreements but do not qualify for offsetting on
the consolidated balance sheet either because we do not have a currently enforceable legal right to set-off the recognized amounts, or because we
do not intend to settle on a net basis or to realize the asset and settle the liability simultaneously.
$ millions, as at October 31
2021 Financial assets
Derivatives
Cash collateral on securities
Securities purchased under resale
borrowed
agreements
Financial liabilities
Derivatives
Cash collateral on securities lent
Obligations related to securities
sold under repurchase
agreements
2020 Financial assets
Derivatives
Cash collateral on securities
Securities purchased under resale
borrowed
agreements
Amounts subject to enforceable netting agreements
Gross
amounts of
recognized
financial
assets
Gross
amounts
offset on the
consolidated
balance sheet (1)
Related amounts not set-off on
the consolidated balance sheet
Net
amounts
Financial
instruments (2)
Collateral
received (3)
Net
amounts
Amounts not
subject to
enforceable
netting
agreements (4)
Net amounts
presented on
the consolidated
balance sheet
$ 53,285
$ (22,668) $ 30,617
$ (16,585) $
(6,375) $ 7,657
$ 5,295
$ 35,912
12,368
–
12,368
–
(12,121)
247
–
12,368
71,777
$ 137,430
(4,205)
67,572
$ (26,873) $ 110,557
–
1,149
$ (16,585) $ (84,919) $ 9,053
(66,423)
–
$ 5,295
67,572
$ 115,852
$ 49,607
2,463
$ (22,668) $ 26,939
2,463
–
$ (16,585) $
–
(6,617) $ 3,737
132
(2,331)
$ 5,162
–
$ 32,101
2,463
76,085
$ 128,155
(4,205)
71,880
$ (26,873) $ 101,282
–
1,313
$ (16,585) $ (79,515) $ 5,182
(70,567)
–
$ 5,162
71,880
$ 106,444
$ 59,024
$ (29,989) $ 29,035
$ (19,347) $
(5,170) $ 4,518
$ 3,695
$ 32,730
8,547
–
8,547
–
(8,267)
280
–
8,547
68,335
$ 135,906
(2,740)
65,595
$ (32,729) $ 103,177
–
417
$ (19,347) $ (78,615) $ 5,215
(65,178)
–
$ 3,695
65,595
$ 106,872
Financial liabilities
Derivatives
Cash collateral on securities lent
Obligations related to securities
sold under repurchase
agreements
$ 56,461
1,824
$ (29,989) $ 26,472
1,824
–
$ (19,347) $
–
(5,883) $ 1,242
105
(1,719)
$ 4,036
–
$ 30,508
1,824
74,393
$ 132,678
(2,740)
71,653
$ (32,729) $ 99,949
–
285
$ (19,347) $ (78,970) $ 1,632
(71,368)
–
$ 4,036
71,653
$ 103,985
(1) Comprises amounts related to financial instruments which qualify for offsetting. Derivatives cleared through the CME are considered to be settled-to-market and not
collateralized-to-market. Derivatives which are settled-to-market are settled on a daily basis, resulting in derecognition, rather than offsetting, of the related amounts. As a
result, settled-to-market amounts are not considered to be subject to enforceable netting arrangements. In the absence of this, an amount of $309 million as at October 31,
2021 (2020: $964 million) relating to derivatives cleared through CME would otherwise have been considered to be offset on the consolidated balance sheet.
(2) Comprises amounts subject to set-off under enforceable netting agreements, such as ISDA agreements, derivative exchange or clearing counterparty agreements, global
master repurchase agreements, and global master securities lending agreements. Under such arrangements, all outstanding transactions governed by the relevant
agreement can be offset if an event of default or other predetermined event occurs.
(3) Collateral received and pledged amounts are reflected at fair value, but have been limited to the net balance sheet exposure so as not to include any over-collateralization.
(4) Includes exchange-traded derivatives and derivatives which are settled-to-market.
The offsetting and collateral arrangements discussed above and other credit risk mitigation strategies used by CIBC are further explained in the
“Credit risk” section of the MD&A. Certain amounts of securities received as collateral are restricted from being sold or re-pledged.
Note 30
Interest income and expense
The table below provides the consolidated interest income and expense by accounting categories.
$ millions, for the year ended October 31
2021 Measured at amortized cost (1)(2)
Debt securities measured at FVOCI (1)
Other (3)
Total
2020 Measured at amortized cost (1)(2)
Debt securities measured at FVOCI (1)
Other (3)
Total
2019 Measured at amortized cost (1)
Debt securities measured at FVOCI (1)
Other (3)
Total
Interest
income
$ 12,816
349
1,576
$ 14,741
$ 15,055
685
1,782
$ 17,522
$ 17,871
960
1,866
$ 20,697
Interest
expense
2,830
n/a
452
3,282
6,062
n/a
416
6,478
$
$
$
$
$
9,824
n/a
322
$ 10,146
(1) Interest income for financial instruments that are measured at amortized cost and debt securities that are measured at FVOCI is calculated using the effective interest rate
method.
(2) Effective November 1, 2019, includes interest income on sublease-related assets and interest expense on lease liabilities under IFRS 16.
(3) Includes interest income and expense and dividend income for financial instruments that are mandatorily measured and designated at FVTPL and equity securities
designated at FVOCI.
n/a Not applicable.
194 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
Note 31
Segmented and geographic information
CIBC has four SBUs – Canadian Personal and Business Banking, Canadian Commercial Banking and Wealth Management, U.S. Commercial
Banking and Wealth Management, and Capital Markets. These SBUs are supported by Corporate and Other.
Canadian Personal and Business Banking provides personal and business clients across Canada with financial advice, services and solutions
through banking centres, digital, and mobile channels to help make their ambitions a reality.
Canadian Commercial Banking and Wealth Management provides high-touch, relationship-oriented banking and wealth management services
to middle-market companies, entrepreneurs, high-net-worth individuals and families across Canada, as well as asset management services to
institutional investors.
U.S. Commercial Banking and Wealth Management provides commercial banking and private wealth services across the U.S., as well as
personal and small business banking services in four U.S. Midwestern markets and focuses on middle-market and mid-corporate companies and
high-net-worth individuals and families.
Capital Markets provides integrated global markets products and services, investment banking advisory and execution, corporate banking
solutions and top-ranked research to our clients around the world. It includes Direct Financial Services which focuses on expanding CIBC’s digitally-
enabled capabilities to provide a cohesive set of direct banking, direct investing and innovative multi-currency payment solutions for CIBC’s clients.
Corporate and Other includes the following functional groups – Technology, Infrastructure and Innovation, Risk Management, People, Culture
and Brand, Finance and Enterprise Strategy, as well as other support groups. The expenses of these functional and support groups are generally
allocated to the business lines within the SBUs. The majority of the functional and support costs of CIBC Bank USA are recognized directly in the
U.S. Commercial Banking and Wealth Management SBU. Corporate and Other also includes the results of CIBC FirstCaribbean and other strategic
investments, as well as other income statement and balance sheet items not directly attributable to the business lines.
Business unit allocations
Revenue, expenses, and other balance sheet resources related to certain activities are generally allocated to the lines of business within the SBUs.
Treasury activities impact the financial results of the SBUs. Each line of business within our SBUs is charged or credited with a market-based
cost of funds on assets and liabilities, respectively, which impacts the revenue performance of the SBUs. This market-based cost of funds takes into
account the cost of maintaining sufficient regulatory capital to support business requirements, including the cost of preferred shares. Once the
interest and liquidity risks inherent in our client-driven assets and liabilities are transfer priced into Treasury, they are managed within CIBC’s risk
framework and limits. Consistent with the changes discussed in the “Changes made to our business segments” section, the residual financial results
associated with Treasury activities are reported in Corporate and Other. Capital is attributed to the SBUs based on the estimated amount of
regulatory capital required to support their businesses, which is intended to consistently measure and align the costs with the underlying benefits
and risks associated with SBU activities. Earnings on unattributed capital remain in Corporate and Other.
We review our transfer pricing methodologies on an ongoing basis to ensure they reflect changing market environments and industry practices.
We use a Product Owner/Customer Segment/Distributor Channel allocation management model to measure and report the results of
operations of various lines of business within our SBUs. The model uses certain estimates and methodologies to process internal transfers between
the impacted lines of business for sales, renewals and trailer commissions as well as certain attributable costs. Periodically, the sales, renewals and
trailer commission rates paid to customer segments for certain products/services are revised and applied prospectively.
The non-interest expenses of the functional and support groups are generally allocated to the business lines within the SBUs based on
appropriate criteria and methodologies. The basis of allocation is reviewed periodically to reflect changes in support to business lines. Other costs
not directly attributable to business lines remain in Corporate and Other.
We recognize provision for credit losses on both impaired (stage 3) and performing (stages 1 and 2) loans in the respective SBUs.
Changes made to our business segments
2021
The following changes were made in the first quarter of 2021:
Simplii Financial and CIBC Investor’s Edge, previously reported in Canadian Personal and Business Banking, are now part of the newly-
created Direct Financial Services line of business in Capital Markets, along with certain other direct payment services that were previously in
Capital Markets. This change was made to align with the mandates of the relevant SBUs.
The financial results associated with U.S. treasury activities in U.S. Commercial Banking and Wealth Management are now included within
Treasury in Corporate and Other. In addition, the transfer pricing methodology between U.S. Commercial Banking and Wealth Management
and Treasury in Corporate and Other has been enhanced. Both changes align the treatment of U.S. Commercial Banking and Wealth
Management with our other SBUs, and allow for better management of interest rate and liquidity risks.
These changes impacted the results of our SBUs. Prior period amounts were revised accordingly. There was no impact on consolidated net income
resulting from these changes.
CIBC 2021 ANNUAL REPORT 195
Consolidated financial statements
Results by reporting segments and geographic areas
$ millions, for the year ended October 31
Canadian
Personal
and Business
Banking
Canadian
Commercial
Banking
and Wealth
Management
U.S.
Commercial
Banking
and Wealth
Management
Capital
Markets
Corporate
and Other
CIBC
Total
Canada (1)
U.S. (1) Caribbean (1)
Other
countries (1)
2021 Net interest income (2)
$
Non-interest income (3)(4)
Total revenue
Provision for (reversal of)
credit losses
Amortization and impairment (5)
Other non-interest expenses
Income (loss) before income taxes
Income taxes (2)
5,954
2,196
8,150
350
213
4,201
3,386
892
$ 1,291
3,379
$ 1,449 $
745
2,701 $
1,819
4,670
2,194
4,520
(39)
27
2,416
2,266
601
(75)
109
1,012
1,148
222
(100)
11
2,106
2,503
646
417
481
22
657
783
(981)
(485)
20,015
15,389
158
1,017
10,518
8,322
1,876
320
812
8,423
5,834
1,320
64 $ 11,459 $
8,556
9,159 $
6,230
1,470
1,365
2,835
(165)
128
1,382
1,490
381
$
$
672
622
1,294
21
60
504
709
101
158
339
497
(18)
17
209
289
74
215
Net income (loss)
$
2,494
$ 1,665
$
926 $
1,857 $
(496) $
6,446 $
4,514 $
1,109
$
608
$
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
$
–
2,494
$
–
1,665
$
– $
– $
17 $
17 $
– $
926
1,857
(513)
6,429
4,514
–
1,109
$
$
17
591
–
215
Average assets (6)(7)
$ 272,645
$ 70,070
$ 46,733 $ 255,063 $ 165,110 $ 809,621 $ 624,791 $ 130,302
$ 36,777
$ 17,751
2020 (8) Net interest income (2)
$
Non-interest income (3)(4)
Total revenue
Provision for (reversal of)
credit losses
Amortization and impairment (5)
Other non-interest expenses
Income (loss) before income taxes
Income taxes (2)
5,849
2,073
7,922
1,189
230
4,078
2,425
640
$ 1,248
2,873
$ 1,422 $
621
2,354 $
1,699
171 $ 11,044 $
431
7,697
8,449 $
5,243
4,121
2,043
4,053
602
18,741
13,692
303
30
2,149
1,639
437
487
126
1,000
430
55
311
10
1,919
1,813
505
199
915
905
(1,417)
(539)
2,489
1,311
10,051
4,890
1,098
1,648
805
7,991
3,248
700
Net income (loss)
$
1,785
$ 1,202
$
375 $
1,308 $
(878) $
3,792 $
2,548 $
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
$
–
1,785
$
–
1,202
$
– $
– $
2 $
2 $
– $
375
1,308
(880)
3,790
2,548
1,583
1,167
2,750
623
174
1,336
617
165
452
–
452
$
$
890
616
1,506
199
312
530
465
89
$
376
$
$
$
2
374
122
671
793
19
20
194
560
144
416
–
416
Average assets (6)(7)
$ 252,955
$ 65,839
$ 48,201 $ 230,163 $ 138,334 $ 735,492 $ 554,787 $ 122,721
$ 33,012
$ 24,972
2019 (8) Net interest income (2)
$
Non-interest income (3)(4)
Total revenue
Provision for (reversal of)
credit losses
Amortization and impairment (5)
Other non-interest expenses
Income (loss) before income taxes
Income taxes (2)
5,944
2,296
8,240
889
96
4,363
2,892
766
$ 1,205
2,822
$ 1,327 $
584
1,681 $
1,794
394 $ 10,551 $
564
8,060
7,890 $
6,008
4,027
1,911
3,475
958
18,611
13,898
163
8
2,098
1,758
471
73
109
1,005
724
76
160
4
1,798
1,513
396
1
621
754
(418)
(361)
1,286
838
10,018
6,469
1,348
1,111
508
7,985
4,294
1,008
Net income (loss)
$
2,126
$ 1,287
$
648 $
1,117 $
(57) $
5,121 $
3,286 $
Net income (loss) attributable to:
Non-controlling interests
Equity shareholders
$
–
2,126
$
–
1,287
$
– $
– $
648
1,117
25 $
(82)
25 $
– $
5,096
3,286
1,405
1,099
2,504
173
139
1,290
902
139
763
–
763
$
$
820
643
1,463
1
181
556
725
155
$
570
$
$
$
25
545
436
310
746
1
10
187
548
46
502
–
502
Average assets (6)(7)
$ 249,545
$ 62,552
$ 41,190 $ 194,115 $ 92,314 $ 639,716 $ 501,066 $ 99,152
$ 27,086
$ 12,412
(1) Net income and average assets are allocated based on the geographic location where they are recorded.
(2) U.S. Commercial Banking and Wealth Management and Capital Markets net interest income and income taxes include taxable equivalent basis (TEB) adjustments of nil
and $204 million, respectively (2020: nil and $183 million, respectively; 2019: $2 million and $177 million, respectively) with an equivalent offset in Corporate and Other.
(3) The fee and commission income within non-interest income consists primarily of underwriting and advisory fees, deposit and payment fees, credit fees, card fees,
investment management and custodial fees, mutual fund fees and commissions on securities transactions. Underwriting and advisory fees are earned primarily in Capital
Markets with the remainder earned in Canadian Commercial Banking and Wealth Management. Deposit and payment fees are earned primarily in Canadian Personal and
Business Banking, with the remainder earned mainly in Canadian Commercial Banking and Wealth Management and Corporate and Other. Credit fees are earned primarily
in Canadian Commercial Banking and Wealth Management, Capital Markets, and U.S. Commercial Banking and Wealth Management. Card fees are earned primarily in
Canadian Personal and Business Banking, with the remainder earned mainly in Corporate and Other. Investment management and custodial fees are earned primarily in
Canadian Commercial Banking and Wealth Management and U.S. Commercial Banking and Wealth Management, with the remainder earned mainly in Corporate and
Other. Mutual fund fees are earned primarily in Canadian Commercial Banking and Wealth Management and U.S. Commercial Banking and Wealth Management.
Commissions on securities transactions are earned primarily in Capital Markets and Canadian Commercial Banking and Wealth Management.
(4) Includes intersegment revenue, which represents internal sales commissions and revenue allocations under the Product Owner/Customer Segment/Distributor Channel
allocation management model.
(5) Comprises amortization and impairment of buildings, right-of-use assets, furniture, equipment, leasehold improvements, software and other intangible assets, and goodwill.
(6) Assets are disclosed on an average basis as this measure is most relevant to a financial institution and is the measure reviewed by management.
(7) Average balances are calculated as a weighted average of daily closing balances.
(8) Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.
196 CIBC 2021 ANNUAL REPORT
Consolidated financial statements
The following table provides a breakdown of revenue from our reporting segments:
$ millions, for the year ended October 31
Canadian Personal and Business Banking
Canadian Commercial Banking and Wealth Management
Commercial banking
Wealth management
U.S. Commercial Banking and Wealth Management (2)
Commercial banking
Wealth management (3)
Capital Markets (2)
Global markets
Corporate and investment banking
Direct financial services
Corporate and Other (2)
International banking
Other
2021
2020 (1)
2019 (1)
$ 8,150
$ 7,922
$ 8,240
$ 1,827
2,843
$ 4,670
$ 1,444
750
$ 2,194
$ 2,076
1,616
828
$ 4,520
$ 1,663
2,458
$ 4,121
$ 1,421
622
$ 2,043
$ 1,999
1,344
710
$ 4,053
$
$
687
(206)
481
$
$
734
(132)
602
$ 1,633
2,394
$ 4,027
$ 1,300
611
$ 1,911
$ 1,583
1,231
661
$ 3,475
$
$
798
160
958
(1) Certain prior period information has been revised. See the “Changes made to our business segments” section for additional details.
(2) U.S. Commercial Banking and Wealth Management and Capital Markets revenue includes a TEB adjustment of nil and $204 million, respectively (2020: nil and $183 million,
respectively; 2019: $2 million and $177 million, respectively) with an equivalent offset in Corporate and Other.
(3) Includes revenue related to the U.S. Paycheck Protection Program.
Note 32
Future accounting policy changes
IFRS 17 “Insurance Contracts” (IFRS 17)
IFRS 17 “Insurance Contracts” (IFRS 17), issued in May 2017, replaces IFRS 4 “Insurance Contracts”. On June 25, 2020, the IASB issued
amendments to IFRS 17 partly aimed at helping companies implement the standard. IFRS 17, incorporating the amendments, is effective for annual
reporting periods beginning on or after January 1, 2023, which for us will be November 1, 2023. IFRS 17 provides comprehensive guidance on the
recognition, measurement, presentation and disclosure of insurance contracts we issue and reinsurance contracts we hold.
We continue to prepare for the implementation of IFRS 17, which is overseen by an Executive Steering Committee. Significant progress has
been made in evaluating the required changes to our accounting and actuarial policies resulting from the adoption of IFRS 17. We plan to
implement the required technology solution to support the new requirements in the upcoming year.
CIBC 2021 ANNUAL REPORT 197
Quarterly review
Condensed consolidated statement of income
Unaudited, $ millions, for the three months ended
Oct. 31
Jul. 31
Apr. 30
2021
Jan. 31
Oct. 31
Jul. 31
Apr. 30
2020
Jan. 31
Net interest income
Non-interest income
$ 2,980
2,084
$ 2,893
2,163
$ 2,747
2,185
$ 2,839
2,124
$ 2,792
1,808
$ 2,729
1,979
$ 2,762
1,816
$ 2,761
2,094
5,064
78
3,135
1,851
411
5,056
(99)
2,918
2,237
507
4,932
32
2,756
2,144
493
4,963
147
2,726
2,090
465
4,600
291
2,891
1,418
402
4,708
525
2,702
1,481
309
$ 1,440
$ 1,730
$ 1,651
$ 1,625
$ 1,016
$ 1,172
$
4,578
1,412
2,704
462
70
392
4,855
261
3,065
1,529
317
$ 1,212
$
4
$
5
$
4
$
4
$
1
$
2
$
(8)
$
7
Net income attributable to equity shareholders
$ 1,436
$ 1,725
$ 1,647
$ 1,621
$ 1,015
$ 1,170
$
47
1,389
30
1,695
51
1,596
30
1,591
30
985
31
1,139
Condensed consolidated balance sheet
Unaudited, $ millions, as at
Oct. 31
Jul. 31
Apr. 30
2021
Jan. 31
Oct. 31
Jul. 31
Apr. 30
30
370
400
31
1,174
$ 1,205
2020
Jan. 31
20,731
129,349
$
56,997 $
50,296 $
47,197 $
63,293 $
62,518 $
68,422 $
55,471 $
161,401
157,478
155,122
150,493
149,046
144,344
133,806
79,940
76,206
74,679
75,953
74,142
62,060
71,706
63,904
251,526
53,031
150,213
(2,849)
35,912
10,958
40,554
245,045
52,101
144,130
(2,926)
34,360
10,817
38,560
234,747
53,004
136,567
(3,200)
35,313
11,002
38,447
226,594
52,680
134,863
(3,484)
34,165
10,322
38,029
221,165
53,611
135,546
(3,540)
32,730
9,606
34,727
216,469
53,150
138,496
(3,347)
43,476
9,689
35,786
213,254
53,541
147,855
(3,064)
40,319
8,993
37,255
209,792
55,565
129,539
(1,948)
25,251
9,505
30,430
$ 837,683 $ 806,067 $ 782,878 $ 782,908 $ 769,551 $ 768,545 $ 759,136 $ 672,118
$ 213,932 $ 210,683 $ 207,028 $ 206,090 $ 202,152 $ 197,409 $ 194,080 $ 182,773
264,775
11,928
38,423
25,380
9,568
311,426
17,011
40,151
30,508
9,649
311,628
16,405
40,693
42,875
9,802
290,800
17,497
41,411
41,188
9,051
310,445
18,666
38,726
32,158
10,380
313,201
17,140
39,194
34,121
11,071
332,974
18,708
40,604
29,291
10,879
344,388
20,246
42,592
32,101
10,961
97,133
24,961
5,539
45,830
90,059
22,931
5,653
44,285
89,594
23,196
5,653
42,680
97,743
22,078
4,693
41,929
89,440
22,167
5,712
41,335
82,765
21,047
5,822
40,099
96,288
23,750
4,818
40,253
76,188
19,158
4,695
39,230
$ 837,683 $ 806,067 $ 782,878 $ 782,908 $ 769,551 $ 768,545 $ 759,136 $ 672,118
Total revenue
Provision for (reversal of) credit losses
Non-interest expenses
Income before income taxes
Income taxes
Net income
Net income (loss) attributable to non-
controlling interests
Preferred shareholders and other equity
instrument holders
Common shareholders
Assets
Cash and deposits with banks
Securities
Securities borrowed or purchased under
resale agreements
Loans
Residential mortgages
Personal and credit card
Business and government
Allowance for credit losses
Derivative instruments
Customers’ liability under acceptances
Other assets
Liabilities and equity
Deposits
Personal
Business and government
Bank
Secured borrowings
Derivative instruments
Acceptances
Obligations related to securities lent or sold
short or under repurchase agreements
Other liabilities
Subordinated indebtedness
Equity
198 CIBC 2021 ANNUAL REPORT
Select financial measures
Unaudited, as at or for the three months ended
Oct. 31
Jul. 31
Apr. 30
2021
Jan. 31
Oct. 31
Jul. 31
Apr. 30
2020
Jan. 31
Return on common shareholders’ equity
Return on average assets (1)
Average common shareholders’
equity ($ millions) (1)
Average assets ($ millions) (1)
Average assets to average common
equity (1)
Capital and leverage
CET1 ratio
Tier 1 capital ratio
Total capital ratio
Leverage ratio
Net interest margin
Operating leverage
Efficiency ratio
13.4 %
0.68 %
17.1 %
0.85 %
17.1 %
0.85 %
17.0 %
0.81 %
10.7 %
0.52 %
12.1 %
0.62 %
4.0 %
0.22 %
13.1 %
0.71 %
40,984 $
$
$ 835,931
39,263 $
35,671
$ 806,768 $ 795,373 $ 799,948 $ 778,933 $ 757,589 $ 725,701 $ 679,531
37,386 $
37,360 $
36,762 $
37,067 $
38,189 $
20.4
20.5
20.8
21.6
21.2
20.3
19.4
19.0
12.4 %
14.1 %
16.2 %
4.7 %
1.41 %
1.7 %
61.9 %
12.3 %
13.7 %
16.0 %
4.6 %
1.42 %
(0.6)%
57.7 %
12.4 %
13.9 %
16.2 %
4.7 %
1.42 %
5.8 %
55.9 %
12.3 %
13.8 %
15.8 %
4.7 %
1.41 %
13.3 %
54.9 %
12.1 %
13.6 %
16.1 %
4.7 %
1.43 %
(5.5)%
62.9 %
11.8 %
13.0 %
15.4 %
4.6 %
1.43 %
(1.7)%
57.4 %
11.3 %
12.5 %
14.5 %
4.5 %
1.55 %
(3.7)%
59.1 %
11.3 %
12.5 %
14.5 %
4.3 %
1.62 %
(4.7)%
63.1 %
(1) Average balances are calculated as a weighted average of daily closing balances.
Common share information
Unaudited, as at or for the three months ended
Oct. 31
Jul. 31
Apr. 30
2021
Jan. 31
Oct. 31
Jul. 31
Apr. 30
2020
Jan. 31
Weighted-average basic shares
outstanding (thousands)
Per share
– basic earnings
– diluted earnings
– dividends
– book value (1)
Closing share price (2)
Dividend payout ratio
450,469
449,590
448,455
447,281
446,321
445,416
444,739
445,248
$
3.08
3.07
1.46
91.66
150.17
$
3.77
3.76
1.46
90.06
145.07
$
3.56
3.55
1.46
86.70
127.78
$
3.56
3.55
1.46
85.24
108.98
$ 2.21
2.20
1.46
84.05
99.38
$ 2.56
2.55
1.46
83.17
92.73
47.3 %
38.7 %
41.0 %
41.1 %
66.2 %
57.1 %
$ 0.83
0.83
1.46
83.67
82.48
176.0 %
$
2.64
2.63
1.44
81.38
107.92
54.6 %
(1) Common shareholders’ equity divided by the number of common shares issued and outstanding at end of period.
(2) The high and low price during the period, and closing price on the last trading day of the period, on the TSX.
CIBC 2021 ANNUAL REPORT 199
Ten-year statistical review
Condensed consolidated statement of income
Unaudited, $ millions, for the year ended
October 31
Net interest income
Non-interest income
Total revenue
Provision for credit losses
Non-interest expenses
Income before income taxes
Income taxes
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$ 11,459 $ 11,044 $ 10,551 $ 10,065 $ 8,977 $ 8,366 $ 7,915 $ 7,459 $ 7,453 $ 7,326
5,159
5,941
6,669
7,769
5,252
5,904
7,303
8,556
8,060
7,697
20,015
158
11,535
8,322
1,876
18,741
2,489
11,362
4,890
1,098
18,611
1,286
10,856
6,469
1,348
17,834
870
10,258
6,706
1,422
16,280
829
9,571
5,880
1,162
15,035
1,051
8,971
5,013
718
13,856
771
8,861
4,224
634
13,363
937
8,512
3,914
699
12,705
1,121
7,608
3,976
626
12,485
1,291
7,202
3,992
689
Net income
$
6,446 $
3,792 $
5,121 $
5,284 $ 4,718 $ 4,295
$ 3,590 $ 3,215 $ 3,350 $ 3,303
Net income (loss) attributable to
non-controlling interests
$
17 $
2 $
25 $
17
$
19
$
20
$
14
$
(3) $
(2) $
9
Preferred shareholders and other
equity instrument holders
Common shareholders
Net income attributable
to equity shareholders
158
6,271
122
3,668
111
4,985
89
5,178
52
4,647
38
4,237
45
3,531
87
3,131
99
3,253
158
3,136
$
6,429 $
3,790 $
5,096 $
5,267 $ 4,699 $ 4,275 $ 3,576 $ 3,218 $ 3,352 $ 3,294
Condensed consolidated balance sheet
Unaudited, $ millions, as at October 31
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Assets
Cash and deposits with banks
Securities
Securities borrowed or purchased
$ 56,997
161,401
$ 62,518 $ 17,359 $ 17,691 $ 14,152 $ 14,165 $ 18,637 $ 13,547 $
93,419
121,310
101,664
149,046
59,542
87,423
74,982
6,379 $
71,984
4,727
65,334
under resale agreements
79,940
74,142
59,775
48,938
45,418
33,810
33,334
36,796
28,728
28,474
Loans
Residential mortgages
Personal and credit card
Business and government
Allowance for credit losses
Derivative instruments
Customers’ liability under
acceptances
Other assets
Liabilities and equity
Deposits
Personal
Business and government
Bank
Secured borrowings
Derivative instruments
Acceptances
Obligations related to securities
lent or sold short or under
repurchase agreements
Capital Trust securities (1)
Other liabilities
Subordinated indebtedness
Non-controlling interests
Shareholders’ equity
251,526
53,031
150,213
(2,849)
35,912
221,165
53,611
135,546
(3,540)
32,730
208,652
56,406
125,798
(1,915)
23,895
207,749
55,731
109,555
(1,639)
21,431
207,271
53,315
97,766
(1,618)
24,342
187,298
50,373
71,437
(1,691)
27,762
169,258
48,321
65,276
(1,670)
26,342
157,526
47,087
56,075
(1,660)
20,680
150,938
49,213
48,207
(1,698)
19,947
150,056
50,476
43,624
(1,860)
27,039
10,958
40,554
9,606
34,727
9,167
31,157
10,265
25,714
8,824
22,375
12,364
18,416
9,796
19,033
9,212
16,098
9,720
14,588
10,436
14,813
$ 837,683 $ 769,551 $ 651,604 $ 597,099
$ 565,264 $ 501,357 $ 463,309 $ 414,903 $ 398,006 $ 393,119
$ 213,932 $ 202,152 $ 178,091 $ 163,879 $ 159,327 $ 148,081 $ 137,378 $ 130,085 $ 125,034 $ 118,153
125,055
4,723
52,413
27,091
10,481
134,736
5,592
49,802
19,724
9,721
225,622
13,789
40,968
23,271
8,828
178,850
10,785
39,644
29,057
9,796
240,149
14,380
42,607
20,973
10,296
190,240
17,842
39,484
28,807
12,395
148,793
7,732
38,783
21,841
9,212
344,388
20,246
42,592
32,101
10,961
257,502
11,224
38,895
25,113
9,188
311,426
17,011
40,151
30,508
9,649
97,133
n/a
24,961
5,539
182
45,648
89,440
n/a
22,167
5,712
181
41,154
69,258
n/a
19,069
4,684
186
38,394
47,353
n/a
18,266
4,080
173
34,943
43,708
n/a
15,305
3,209
202
31,035
24,550
n/a
12,919
3,366
201
23,472
20,149
n/a
12,223
3,874
193
21,360
23,764
n/a
10,932
4,978
164
18,619
20,313
n/a
10,862
4,228
175
17,819
21,259
1,678
11,076
4,823
170
16,197
$ 837,683 $ 769,551 $ 651,604 $ 597,099 $ 565,264 $ 501,357 $ 463,309 $ 414,903 $ 398,006 $ 393,119
(1) Commencing November 1, 2012, CIBC Capital Trust was deconsolidated.
n/a Not applicable.
200 CIBC 2021 ANNUAL REPORT
Select financial measures
Unaudited, as at or for the year
ended October 31
Return on equity
Return on average assets (1)
Average common shareholders’
equity ($ millions) (1)
Average assets ($ millions) (1)
Average assets to average
common equity (1)
Capital and leverage – Basel III
CET1 ratio
Tier 1 capital ratio
Total capital ratio
Leverage ratio
Basel II
Tier 1 capital ratio
Total capital ratio
Net interest margin
Operating leverage
Efficiency ratio
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
16.1 %
0.80 %
10.0 %
0.52 %
14.5 %
0.80 %
16.6 %
0.88 %
18.3 %
0.87 %
19.9 %
0.84 %
18.7 %
0.79 %
18.3 %
0.78 %
21.4 %
0.83 %
22.2 %
0.83 %
$ 38,881
$ 809,621
$ 36,792
$ 735,492
$ 34,467
$ 639,716
$ 31,184
$ 598,441
$ 25,393
$ 542,365
$ 21,275
$ 509,140
$ 18,857
$ 455,324
$ 17,067
$ 411,481
$ 15,167
$ 403,546
$ 14,116
$ 397,155
20.8
20.0
18.6
19.2
21.4
23.9
24.1
24.1
26.6
28.1
12.4 %
14.1 %
16.2 %
4.7 %
n/a
n/a
1.42 %
5.3 %
57.6 %
12.1 %
13.6 %
16.1 %
4.7 %
n/a
n/a
1.50 %
(4.0)%
60.6 %
11.6 %
12.9 %
15.0 %
4.3 %
n/a
n/a
1.65 %
(1.5)%
58.3 %
11.4 %
12.9 %
14.9 %
4.3 %
n/a
n/a
1.68 %
2.4 %
57.5 %
10.6 %
12.1 %
13.8 %
4.0 %
n/a
n/a
1.66 %
1.6 %
58.8 %
11.3 %
12.8 %
14.8 %
4.0 %
n/a
n/a
1.64 %
7.3 %
59.7 %
10.8 %
12.5 %
15.0 %
3.9 %
n/a
n/a
1.74 %
(0.4)%
63.9 %
10.3 %
12.2 %
15.5 %
n/a
n/a
n/a
1.81 %
(6.7)%
63.7 %
9.4 %
11.6 %
14.6 %
n/a
n/a
n/a
1.85 %
(3.9)%
59.9 %
n/a
n/a
n/a
n/a
13.8 %
17.3 %
1.84 %
4.2 %
57.7 %
(1) Average balances are calculated as a weighted average of daily closing balances.
n/a Not applicable.
Condensed consolidated statement of changes in equity
Unaudited, $ millions, for the year
ended October 31
Balance at beginning of year
Adjustment for change in
accounting policy
Premium on purchase of
common shares
Premium on redemption of
preferred shares
Changes in share capital
Preferred and other equity
instruments
Common
Changes in contributed surplus
Changes in OCI
Net income
Dividends and distributions
Preferred and other equity
instruments
Common
Non-controlling interests
Other
Balance at end of year
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$ 41,335
$ 38,580
$ 35,116
$ 31,237
$ 23,673
$ 21,553
$ 18,783
$ 17,994
$ 16,367
$ 16,091
–
–
–
750
443
(7)
(339)
6,429
(158)
(2,622)
1
(2)
148 (1)
6 (2)
(91) (3)
(166)
(79)
(313)
–
–
–
750
317
(8)
647
3,790
(122)
(2,592)
(5)
(4)
575
348
(11)
122
5,096
(111)
(2,488)
13
(7)
453
695
(1)
317
5,267
(89)
(2,356)
(25)
22
–
–
–
797
4,522
65
(338)
4,699
(52)
(2,121)
1
(9)
–
(209)
–
–
213
(4)
(248)
4,275
(38)
(1,879)
8
2
–
(9)
–
(31)
31
1
933
3,576
(45)
(1,708)
29
(7)
– (4)
7 (5)
(180)
(250)
(422)
(118)
–
–
(30)
(675)
29
(7)
145
3,218
(87)
(1,567)
(11)
(6)
–
(16)
(3)
325
3,352
(99)
(1,523)
5
1
(1,050)
393
(8)
(435)
3,294
(128)
(1,470)
8
–
$ 45,830
$ 41,335
$ 38,580
$ 35,116
$ 31,237
$ 23,673
$ 21,553
$ 18,783
$ 17,994
$ 16,367
(1) Represents the impact of adoption of IFRS 16 “Leases”.
(2) Represents the impact of adoption of IFRS 15 “Revenue from Contracts with Customers”.
(3) Represents the impact of adoption of IFRS 9 “Financial Instruments”.
(4) Represents the impact of adoption of IFRS 10 “Consolidated Financial Statements”.
(5) Represents the impact of adoption of amendments to IAS 19 “Employee Benefits”.
CIBC 2021 ANNUAL REPORT 201
Common share information
Unaudited, as at or for the
year ended October 31
Weighted-average
number basic shares
outstanding
(thousands)
Per share
– basic earnings
– diluted earnings
– dividends
– book value (2)
Closing share price (3)
Dividend payout ratio
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
448,953
445,435
444,324
443,082 (1) 412,636
395,389
397,213
397,620
400,880
403,685
$
13.97 $
13.93
5.84
91.66
150.17
41.8 %
8.23 $
8.22
5.82
84.05
99.38
70.7 %
11.22 $
11.19
5.60
79.87
112.31
11.69 $
11.65
5.32
73.83
113.68
11.26 $
11.24
5.08
66.55
113.56
10.72 $
10.70
4.75
56.59
100.50
8.89 $
8.87
4.30
51.25
100.28
7.87 $
7.86
3.94
44.30
102.89
49.9 %
45.5 %
45.6 %
44.3 %
48.4 %
50.0 %
8.11 $
8.11
3.80
40.36
88.70
46.8 %
7.77
7.76
3.64
35.83
78.56
46.9 %
(1) Excludes 2,010,890 common shares which were issued and outstanding but which had not been acquired by a third-party as at October 31, 2017. These shares were
issued as a component of our acquisition of The PrivateBank.
(2) Common shareholders’ equity divided by the number of common shares issued and outstanding at end of year.
(3) The high and low price during the year, and closing price on the last trading day of the year, on the TSX.
Preferred shares and other equity instruments(1)
Unaudited, for the year
ended October 31
Preferred shares
Class A
Series 18
Series 19
Series 23
Series 26
Series 27
Series 28
Series 29
Series 30
Series 31
Series 32
Series 33
Series 35
Series 37
Series 39
Series 41
Series 43
Series 45
Series 47
Series 49
Series 51
Other equity instruments
Limited Recourse
Capital Notes (2)
Series 1
Series 2
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9283
0.9773
0.7858
1.1000
1.1250
1.3000
1.2875
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9283
0.9673
0.8714
1.1000
1.1250
1.3000
1.2875
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9633
0.9375
0.9000
1.1000
1.1250
0.9990
0.5256
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9750
0.9375
0.9000
1.1000
0.8769
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9750
0.9375
0.9000
0.4551
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
0.9750
0.9375
0.9000
–
–
–
–
$
–
–
–
–
0.3500
–
0.6750
–
–
–
–
–
–
0.9750
0.8203
0.5764
–
–
–
–
$
–
–
–
1.4375
1.4000
–
1.3500
–
–
–
1.0031
0.8125
1.2188
0.3793
–
–
–
–
–
–
$
–
–
–
1.4375
1.4000
–
1.3500
–
–
–
1.3375
1.6250
1.6250
–
–
–
–
–
–
–
$ 1.3694
–
–
1.4375
1.4000
–
1.3500
–
0.2938
0.5625
1.3375
1.6250
1.6250
–
–
–
–
–
–
–
4.375%
4.000%
4.375%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
–%
(1) The dividends and distributions are adjusted for the number of days during the year that the share and other equity instruments are outstanding at the time of issuance and
redemption.
(2) Represents the annual interest rate percentage applicable to the LRCNs issued as at October 31 for each respective year.
202 CIBC 2021 ANNUAL REPORT
Shareholder information
Fiscal Year
November 1st to October 31st
Key Dates
Reporting dates 2022
First quarter results – Friday, February 25, 2022
Second quarter results – Thursday, May 26, 2022
Third quarter results – Thursday, August 25, 2022
Fourth quarter results – Thursday, December 1, 2022
Annual Meeting of Shareholders 2022
CIBC’s Annual Meeting of Shareholders will be held on April 7, 2022. For more details, please visit our Annual Meeting webpage at
https://www.cibc.com/en/about-cibc/investor-relations/annual-meeting.html.
Common shares of CIBC (CM) are listed on the Toronto Stock Exchange and the New York Stock Exchange. Preferred
shares are listed on the Toronto Stock Exchange.
Dividends
Quarterly dividends were paid on CIBC common and preferred shares in 2021:
Common shares
Record date
Sep 28/21
Jun 28/21
Mar 29/21
Dec 29/20
Preferred shares
Stock
Series 39
Payment date
Dividends per share
Oct 28/21
Jul 28/21
Apr 28/21
Jan 28/21
$1.46
$1.46
$1.46
$1.46
Number of common shares
on record date
450,483,543
449,702,743
448,685,825
447,366,726
Series 41
Series 43
Series 45
Series 47
Series 49
Series 51
Ticker symbol
Quarterly dividend $0.232063
CM.PR.O
CM.PR.P
$0.244313
CM.PR.Q
$0.196438
CM.PR.R
$0.275000
CM.PR.S
$0.281250
CM.PR.T
$0.325000
CM.PR.Y
$0.321875
2022 dividend payment dates
(Subject to approval by the CIBC Board of Directors)
Record dates
December 29, 2021
March 28, 2022
June 28, 2022
September 28, 2022
Payment dates
January 28, 2022
April 28, 2022
July 28, 2022
October 28, 2022
Eligible dividends
CIBC designates any and all dividends paid or deemed for Canadian federal, provincial or territorial income tax purposes to be paid on or after
January 1, 2006 to be “eligible dividends”, unless otherwise indicated in respect of dividends paid subsequent to this notification, and hereby
notifies all recipients of such dividends of this designation.
Regulatory capital
Information on CIBC’s regulatory capital instruments and regulatory capital position may be found at https://www.cibc.com/en/about-cibc/investor-
relations/regulatory-capital-instruments.html.
Credit ratings
Credit rating information can be found on page 77 in this Annual Report.
Shareholder investment plan
All Canadian and U.S. resident registered holders of CIBC common shares and designated Class A preferred shares may participate in one or more
of the following options and pay no brokerage commissions or service charges:
Dividend reinvestment option – Canadian residents may have dividends reinvested in additional CIBC common shares.
Share purchase option – Canadian residents may purchase up to $50,000 of additional CIBC common shares during the fiscal year.
Stock dividend option – U.S. residents may elect to receive stock dividends on CIBC common shares.
Further information is available through TSX Trust Company (Canada) (formerly AST Trust Company) and on the CIBC website at www.cibc.com.
Transfer agent and registrar
For information relating to shareholdings, shareholder investment plan, dividends, direct dividend deposit, dividend reinvestment accounts and lost
certificates, or to eliminate duplicate mailings of shareholder material, please contact:
CIBC 2021 ANNUAL REPORT 203
TSX Trust Company (Canada), P.O. Box 700, Postal Station B, Montreal, QC, H3B 3K3
416 682-3860 or 1 800 258-0499 (Canada and the U.S. only), Fax 1 888 249-6189, Email: inquiries@astfinancial.com,
Website: www.astfinancial.com/ca.
Common and preferred shares are transferable in Canada at the offices of our agent, TSX Trust Company (Canada), in Toronto, Montreal, Calgary
and Vancouver.
In the U.S., common shares are transferable at:
Computershare Inc., By Mail: P.O. Box 505000 Louisville, KY 40233; By Overnight Delivery: 462 S. 4th St. Suite 1600, Louisville, KY 40202, 1 800
589-9836, Website: www.computershare.com/investor.
Registered shareholders can opt to have their shares recorded electronically in the Direct Registration System (DRS). Please contact our transfer
agent for details.
How to reach us:
CIBC Head Office
81 Bay Street, CIBC Square,
Toronto, Ontario,
Canada M5J 0E7
SWIFT code: CIBCCATT
Website: www.cibc.com
Investor Relations
Email: Mailbox.InvestorRelations@cibc.com
Corporate Secretary
Email: corporate.secretary@cibc.com
Office of the CIBC Ombudsman
Toll-free across Canada: 1 800 308-6859
Toronto: 416 861-3313
Email: ombudsman@cibc.com
CIBC Telephone Banking
Toll-free across Canada: 1 800 465-2422
Communications and Public Affairs
Email: Mailbox.Communications@cibc.com
Client Care
Toll-free across Canada: 1 800 465-2255
Email: client.care@cibc.com
Where to find more information
CIBC Annual Report 2021
Additional print copies of the Annual Report will be available in March 2022 and may be obtained by emailing Mailbox.InvestorRelations@cibc.com.
The Annual Report is also available online at www.cibc.com/ca/investor-relations/annual-reports.html.
Des exemplaires supplémentaires du Rapport annuel seront disponibles en mars 2022 et peuvent être commandés par courriel à
relationsinvestisseurs@cibc.com. Le Rapport annuel est aussi disponible à l’adresse www.cibc.com/ca/investor-relations/annual-reports-fr.html.
CIBC Sustainability Report and Public Accountability Statement 2021
This report reviews our economic, environmental, social and governance activities over the past year and will be available in March 2022 at
https://www.cibc.com/en/about-cibc/corporate-responsibility.html.
Management Proxy Circular 2022
The Management Proxy Circular contains information for shareholders about CIBC’s annual meeting, including information relating to the election of
CIBC’s directors, appointment of auditors and shareholder proposals, as well as other matters. The 2022 Proxy Circular will be available in March
2022 at www.cibc.com.
Corporate Governance
CIBC’s Statement of Corporate Governance Practices describes the governance framework that guides the Board and management in fulfilling their
obligations to CIBC and our shareholders. This statement and other information on Corporate Governance at CIBC, including our CIBC Code of
Conduct for all employees and Directors, can be found on our corporate website at www.cibc.com/ca/inside-cibc/governance/governance-
practices.html.
Regulatory Filings
In Canada with the Canadian Securities Administrators at www.sedar.com.
In the U.S. with the U.S. Securities and Exchange Commission at www.sec.gov/edgar.shtml.
Incorporation
Canadian Imperial Bank of Commerce (CIBC) is a diversified financial institution governed by the Bank Act (Canada). CIBC was formed through the
amalgamation of The Canadian Bank of Commerce and Imperial Bank of Canada in 1961.
The Canadian Bank of Commerce was originally incorporated as Bank of Canada by special act of the legislature of the Province of Canada in
1858. Subsequently, the name was changed to The Canadian Bank of Commerce and it opened for business under that name in 1867. Imperial
Bank of Canada was incorporated in 1875 by special act of the Parliament of Canada and commenced operations in that year.
Trademarks
Trademarks used in this Annual Report which are owned by Canadian Imperial Bank of Commerce, or its subsidiaries in Canada and/or other
countries include, “CIBC Agility”, “CIBC Bank USA Smart Account”, the CIBC logo, “CIBC eDeposit”, “CIBC FirstCaribbean International Bank”,
“CIBC ForeignCash Online”, “CIBC Global Money Transfer”, “CIBC GoalPlanner”, “CIBC Investor’s Edge”, “CIBC Miracle Day”, “CIBC Mobile
Banking”, “CIBC Pace It”, “CIBC Personal Portfolio Services”, “CIBC Private Wealth Management”, “CIBC Smart”, “CIBC SmartBanking”, “CIBC
Team Next”, “Simplii Financial” and “Wood Gundy”. All other trademarks mentioned in this annual report which are not owned by Canadian Imperial
Bank of Commerce or its subsidiaries, are the property of their respective owners.
204 CIBC 2021 ANNUAL REPORT
Board of Directors:
Katharine B. Stevenson
Chair of the Board
CIBC
Corporate Director
Toronto, Ontario, Canada
Joined in 2011
Patrick D. Daniel
(CGC, MRCC)
Corporate Director
Calgary, Alberta, Canada
Joined in 2009
Charles J. G. Brindamour
(RMC)
Chief Executive Officer
Intact Financial Corporation
Toronto, Ontario, Canada
Joined in 2020
Luc Desjardins
(AC)
President and Chief Executive Officer
Superior Plus Corp.
Toronto, Ontario, Canada
Joined in 2009
Nanci E. Caldwell
(MRCC)
Corporate Director
Woodside, California, U.S.A.
Joined in 2015
Michelle L. Collins
(AC)
President
Cambium LLC
Chicago, Illinois, U.S.A.
Joined in 2017
Victor G. Dodig
President and Chief Executive Officer
CIBC
Toronto, Ontario, Canada
Joined in 2014
Kevin J. Kelly
(MRCC – Chair)
Corporate Director
Toronto, Ontario, Canada
Joined in 2013
Christine E. Larsen
(RMC)
Corporate Director
Montclair, New Jersey, U.S.A.
Joined in 2016
Jane L. Peverett
(AC, CGC – Chair)
Corporate Director
West Vancouver, British Columbia,
Canada
Joined in 2009
Nicholas D. Le Pan
(AC – Chair)
Corporate Director
Ottawa, Ontario, Canada
Joined in 2008
Martine Turcotte
(CGC, MRCC)
Corporate Director
Verdun, Québec, Canada
Joined in 2014
AC – Audit Committee
CGC – Corporate Governance Committee
MRCC – Management Resources and Compensation Committee
RMC – Risk Management Committee
Mary Lou Maher
(RMC)
Corporate Director
Toronto, Ontario, Canada
Joined in 2021
Barry L. Zubrow
(CGC, RMC – Chair)
Chief Executive Officer
ITB LLC
West Palm Beach, Florida, U.S.A.
Joined in 2015
CIBC 2021 ANNUAL REPORT 205
www.cibc.com