Eligible Dividends Designation
For the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation, BMO designates all dividends paid or deemed to be paid on both its common and preferred shares as "eligible dividends", unless indicated otherwise.
Transactions with Related Parties
In the ordinary course of business, we provide banking services to our key management personnel, joint ventures and associates on the same terms that we offer to our customers for those services.
The Bank's policies and procedures for related party transactions did not materially change from October 31, 2012, as described in Note 27 to the audited consolidated financial statements on pages 168 and 169 of BMO's 2012 Annual Report.
Off-Balance Sheet Arrangements
BMO enters into a number of off-balance sheet arrangements in the normal course of operations. The most significant of these are Credit Instruments, Special Purpose Entities (SPEs), and Guarantees, which are described on pages 64, 65, 66 and 70 of BMO's 2012 Annual Report as well as in Notes 5 and 7 to the unaudited interim consolidated financial statements. We consolidate all of our SPEs, except for certain Canadian customer securitization and structured finance vehicles. See the Select Financial Instruments section for comments on any significant changes to these arrangements during the quarter ended July 31, 2013.
Accounting Policies and Critical Accounting Estimates
Significant accounting policies are described in the notes to our audited consolidated financial statements for the year ended October 31, 2012, together with a discussion of certain accounting estimates that are considered particularly important as they require management to make significant judgments, some of which relate to matters that are inherently uncertain. Readers are encouraged to review that discussion.
Future Changes in Accounting Policies
BMO monitors the potential changes proposed by the International Accounting Standards Board (IASB) and analyses the effect that changes in the standards may have on BMO's financial reporting and accounting policies. New standards and amendments to existing standards, which are effective for the Bank in the future, can be found in Note 1 to the audited consolidated financial statements on pages 126 and 127 of BMO's 2012 Annual Report.
U.S. Regulatory Developments
We continue to monitor and prepare for U.S. regulatory developments including financial reforms under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) and highlight recent developments in this section. For a more comprehensive discussion, see the U.S. Regulatory Developments section on page 69 of BMO's 2012 annual MD&A.
Under the Dodd-Frank Act, swaps are now subject to a comprehensive regulatory regime. Certain swaps are currently required to be centrally cleared and will soon be required to be traded on an exchange. As a registered swap dealer in the United States, BMO is now subject to swap reporting and business conduct requirements. Capital and margin requirements relating to swaps are currently being reviewed by U.S. and international regulators.
In December 2012, the Federal Reserve Board (FRB) issued for comment a proposed rulemaking that would establish enhanced prudential standards and early remediation requirements for certain foreign banks with U.S. operations, including BMO. The proposal would establish new requirements for organizational structure, risk management, capital, liquidity, stress testing, and early remediation covering all U.S. operations of foreign banks. The proposed requirements applicable to BMO Financial Corp. (BFC) are similar to those that already apply to BFC and its subsidiaries as domestic U.S. banks and bank holding companies. The proposed rule would also affect BMO's U.S. branches. The FRB has indicated the requirements would be effective July 1, 2015.
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