Investors Group Trust Co. Ltd. Regulatory Disclosures
Investors Group Trust Co. Ltd. – Overview
Investors Group Trust Co. Ltd. (IGTC or the Company) is a trust company continued under the Trust and Loan Companies Act (Canada) incorporated and domiciled in Canada. The Company is a wholly owned subsidiary of Investors Group Inc. and is ultimately controlled by Power Corporation of Canada.
The Company provides trustee services to IGM Financial Inc. affiliated companies. The Company’s assets are primarily invested in insured residential mortgage loans and in highly rated short-term securities. The Company doesn’t offer retail deposit products.
The operations of IGTC are supported through outsourcing agreements with the Company’s parent, Investors Group Inc., and with other affiliated companies under common control. The officers of the Company are employed by affiliated companies and receive no remuneration from IGTC.
Capital Management
The Company’s capital management policy and practices are focused on maintaining a solid capital base and a strong balance sheet. The objective is to maintain a capital position which supports the Company’s business objectives and working capital requirements and ensures all regulatory capital requirements are satisfied.
On an annual basis, a Capital Plan with a three-year horizon is prepared by management and is reviewed and approved by the Board of Directors (Board). The Capital Plan encompasses all the forecasted uses, sources and adequacy of capital. The Company manages its capital on an ongoing basis in accordance with the Capital Management & Dividend Policy which is reviewed and approved by the Board annually.
Regulatory capital requirements and capital ratios are determined in accordance with the Capital Adequacy Requirements Guideline issued by the Office of the Superintendent of Financial Institutions Canada (OSFI).
Regulatory capital includes Common Equity Tier 1 (CET1), Tier 1 and Tier 2 Capital. CET1 Capital is the most permanent form of capital and is comprised of common shareholder’s equity less certain deductions, if applicable. Tier 1 Capital is comprised of CET1 Capital with additional items that consist of capital instruments such as certain preferred shares, net of certain deductions. Tier 2 Capital is primarily comprised of subordinated debentures and the eligible portion of the allowance for expected credit losses, net of certain Tier 2 Capital deductions. Total Capital includes Tier 1 and Tier 2 Capital.
The Company’s CET1 Capital, Tier 1 Capital and Total Capital are comprised solely of common shareholder’s equity.
As at December 31, 2023, the CET1 Capital Ratio, Tier 1 Capital Ratio and Total Capital Ratio are the primary regulatory capital measures.
Regulatory capital ratios are calculated in accordance with OSFI’s Capital Adequacy Requirements Guideline and based on the Small and Medium Sized Deposit Taking Institutions (SMSB) Capital and Liquidity Requirements Guideline. IGTC is segmented as Category III SMSB and its capital ratios are calculated on this basis.
OSFI establishes minimum risk-based capital targets for deposit-taking institutions in Canada. The minimum targets that apply to the Company are a CET1 Capital Ratio of 7%, Tier 1 Capital Ratio of 8.5%, and a Total Capital Ratio of 10.5%.
As at December 31, 2023, the Company’s Capital Ratios were well above both OSFI’s regulatory requirements and the requirements of the Company’s Capital Management & Dividend Policy. The Company’s Regulatory Capital and Capital Ratios at December 31, 2023, are detailed below (see attached pdf for capital chart).
Regulatory Capital and Capital Ratios as at December 31, 2023
In addition to meeting capital requirements specified in the CAR Guideline issued by OSFI, the Company also conducts its own assessment of the adequacy of its capital through an Internal Capital Adequacy Assessment Process (ICAAP). The ICAAP, which is completed on a periodic basis, addresses all material risks faced by the Company as they relate to the adequacy of capital. This includes risks explicitly captured in the minimum regulatory capital requirements as well as material risks not fully captured under the CAR Guideline. The Company utilizes the ICAAP in concert with the Capital Plan and the minimum requirements set out in the CAR Guideline to assess the adequacy of its capital to support current and future activities. The most recent ICAAP was completed in 2022 and was reviewed and approved by the Board.
Management measures its capital position and its compliance with both regulatory requirements and the Company’s Capital Management & Dividend Policy and reports to the Investment and Conduct Review Committee of the Board on a quarterly basis.
A link to OSFI’s website with Financial Data for Trust Companies is provided below:
https://www.osfi-bsif.gc.ca/Eng/wt-ow/Pages/fd-df.aspx
Risk management overview
The Company’s strategy and its business activities are supported by a risk management framework that defines appetite for risk, through which policies and guidelines are established for each major category of risk. Supporting this risk management framework is a governance structure which includes oversight by the Board, the Audit Committee and the Investment Conduct and Review Committee of the Board. The Board reviews and approves all of the Company’s risk management policies on an annual basis. Management reports on a regular basis to the Investment and Conduct Review Committee, the Audit Committee, and the Board on compliance with the Company’s risk management policies. The Company also benefits from the enterprise-wide risk management framework of its parent company.
The Company actively manages its non-financial operational risks and its financial risks including liquidity and funding risk, credit risk, and market risk.
Non-Financial Risks - Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.
The Company manages operational risk through its outsourcing arrangements with the Company’s parent and affiliated companies. Operational risk is managed by the detailed control processes, and through the risk avoidance and risk mitigation strategies employed by the Company and the affiliates which are party to the outsourcing agreements. All related party outsourcing arrangements are reviewed by the Investment and Conduct Review Committee and approved by the Board. The Company’s Outsourcing Policy is reviewed and approved by the Board on an annual basis.
Financial Risks
Liquidity and funding risk
Liquidity and funding risk is the risk of the inability to generate or obtain sufficient cash in a timely and cost-effective manner to meet contractual or anticipated commitments as they become due or arise.
Liquidity management for the Company is based on the Liquidity Management Policy, which is reviewed and approved by the Board on an annual basis. As at December 31, 2023, the Company’s liquidity position was in compliance with the Liquidity Management Policy.
The Company’s liquidity management practices include controls over liquidity management processes, stress testing of various operating scenarios, and oversight of liquidity management by the Investment and Conduct Review Committee of the Board.
As required by the Liquidity Management Policy, a Liquidity Plan with a three-year horizon is prepared by management on an annual basis and is reviewed and approved by the Board. The Liquidity Plan considers regulatory requirements and the effect on liquidity of changes in the Company’s business, operational and financial position. In addition, on an annual basis a Liquidity Contingency Plan is prepared by management for review and approval by the Investment Conduct and Review Committee of the Board. The Liquidity Contingency Plan outlines the Company’s liquidity requirements and funding strategies under different stress scenarios.
The Company also monitors its liquidity position on a monthly basis as required by OSFI’s Liquidity Adequacy Requirements Guideline and in accordance with OSFI’s Small and Medium Sized Banking Institutions Capital and Liquidity Requirements guideline.
In addition to the Company’s current balance of cash and cash equivalents, other potential sources of liquidity include access to a line of credit with a Schedule I Canadian bank through IGM Financial Inc., the parent company of Investors Group Inc. The Company had not utilized this facility as of December 31, 2023.
The Company’s liquidity position and its management of liquidity risk have not changed materially since September 30, 2023.
Credit risk
Credit risk is the potential for financial loss to the Company if a counterparty to a transaction fails to meet its obligations. The Company’s cash and cash equivalents and mortgage loans are subject to credit risk. The Company monitors its credit risk management practices on an ongoing basis to evaluate their effectiveness.
The Company manages credit risk related to cash and cash equivalents and mortgage loans by adhering to its Investment and Interest Rate Risk Management Policy, which is reviewed and approved by the Board on an annual basis. The Investment and Interest Rate Risk Management Policy outlines credit risk parameters and concentration limits. The Company does not utilize derivative financial instruments.
As at December 31, 2023, the Company’s cash and cash equivalents consisted of cash balances on deposit with Canadian chartered banks and cash equivalents comprised of bankers’ acceptances and Government of Canada treasury bills. The Company regularly reviews the credit ratings of its counterparties.
The Company regularly reviews the credit quality of its mortgage loan portfolio and the adequacy of the allowance for expected credit losses. For further information on mortgages please see the Mortgage portfolio details section of this report below.
The Company’s exposure to and management of credit risk have not changed materially since September 30, 2023.
Market risk
Market risk is the potential for loss to the Company from changes in the values of its financial instruments due to changes in foreign exchange rates, interest rates, or equity prices. The Company’s financial instruments are denominated in Canadian dollars and, therefore, are not subject to risks related to foreign exchange rates. The Company has no equity security holdings and does not utilize derivative financial instruments and is therefore not exposed to equity price risk.
Interest rate risk
The Company is exposed to interest rate risk to the extent that its assets mature or re-price at different points in time.
The Company controls interest rate risk by managing its exposure in accordance with its Investment and Interest Rate Risk Management Policy which has limits on the maturity dates of the Company’s assets. As at December 31, 2023, the Company was in compliance with the limits set out in the Investment and Interest Rate Risk Management Policy.
The table below reflects the impact on Net earnings for the next twelve months from an immediate parallel increase or decrease of 100 basis points in the yield curve:
|
December 31, 2023 |
December 31, 2022 |
100 basis points increase |
12 |
15 |
100 basis points decrease (1) |
(12) |
(15) |
(1) Net earnings exposure is calculated by measuring the impact of a decline ininterest rates where the resultant interest rate does not become negative.
The Company’s exposure and approach to managing interest rate risk has not changed materially since September 30, 2023.
Mortgage portfolio details
The Company purchases the residential mortgages used to support its deposit operations from its affiliate, I.G. Investment Management, Ltd.
As at December 31, 2023, mortgages totaled $6.8 million. The mortgage portfolio was 100% insured, 100% residential and geographically diverse.
There were no impaired loans. The collective allowance for expected credit losses was $35 thousand as at December 31, 2023.
As at December 31, 2023, loans with a remaining amortization period of 25 years or less comprised 100% of the mortgage portfolio and loans with an amortization term of between 25 and 30 years comprised 0% of the portfolio.
The geographic distribution of the loans in the Company’s mortgage portfolio was within Investment Policy limits as at December 31, 2023, and was as follows:
Atlantic Canada |
3.8% |
Quebec |
20.9% |
Ontario |
38.5% |
Manitoba/Saskatchewan |
4.9% |
Alberta |
17.9% |
British Columbia |
14.0% |
Territories |
0.0% |
Designated office for support orders and support provisions
In compliance with the Support Orders and Support Provisions (Trust and Loan Companies) Regulations established under the Act, the following location has been designated for the service of all enforcement notices on Investors Group Trust Co. Ltd. across Canada.
Attention: Legal Department
Investors Group Trust Co. Ltd.
447 Portage Avenue
Winnipeg, Manitoba
R3B 3H5