The Province employs various risk management strategies and operates
within strict risk exposure limits to ensure exposure to risk is
managed in a prudent and cost-effective manner. A variety of
strategies are used, including the use of derivative financial
instruments (“derivatives”). Risk exposures are monitored daily and
audited annually. The cost-effectiveness of borrowing and debt
management programs are measured daily, while the effectiveness of
the money market program is measured monthly against pre-established
The Province's consolidated derivative portfolio as at March 31,
2013 had a notional value of $199.0 billion, which consisted of
$117.0 billion in interest rate swaps, $61.9 billion in
cross-currency swaps, $19.3 billion in forward foreign exchange
contracts and $0.8 billion in swaptions.
The table below details the limits and strategies employed to ensure
that market, credit and liquidity risks are managed in a sound and
Risk Management Limits and Strategies (Excludes OEFC
|Foreign Exchange Risk
||As per the Market Risk Policy, currency exposure on debt
principal cannot exceed 5 per cent of debt.
||Interim net foreign exchange exposure was 0.8 per cent of
debt as at March 31, 2013. Foreign exchange exposure has
remained within approved limits during the fiscal year.
|Interest Rate Resetting Risk
||This measure limits interest rate resetting risk arising
from net floating rate exposure and fixed-rate debt maturing
within a 12-month period, to no more than 35 per cent of debt.
||The interim percentage of interest rate resetting exposure
(net of liquid reserves) was 8.9 per cent of debt as at March
31, 2013. Net interest rate resetting exposure has remained
within approved limits during the fiscal year.
|Debt Maturities and Refinancing Risk
||Term selection for new borrowing will be aimed for a smooth
maturity schedule to diversify the interest resetting risk of
refinancing debt maturities.
||Debt maturities are estimated at $23.7 billion for 2013–14.
||Ontario only enters into transactions with highly rated
||As at March 31, 2013, almost 98 per cent of Ontario’s credit
exposure was to counterparties that are rated "AA minus" or
||Liquidity risk is controlled through the management of
liquid reserve levels and short-term borrowing programs.
||The average level of daily liquid reserves from January 1,
2013 to March 31, 2013 was $23.005 billion, net of collaterals.
The Province’s Treasury Bill and U.S. Commercial Paper programs
have authorized limits of $30.5 billion and $8.5 billion,