Fair Value Option (Tables)

12 Months Ended

Dec. 31, 2020

Changes in fair value under the fair value option election

The following table presents the changes in fair value included in the Consolidated statements of income for the years ended December 31, 2020, 2019 and 2018, for items for which the fair value option was elected. The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table.


	2020							2019							2018
December 31, (in millions)	Principal transactions		All other income			Total changes in fair value recorded(f)		Principal transactions		All other income			Total changes in fair value recorded(f)		Principal transactions		All other income			Total changes in fair value recorded(f)
Federal funds sold and securities purchased under resale agreements	$	12	$	—		$	12	$	(36)	$	—		$	(36)	$	(35)	$	—		$	(35)
Securities borrowed	143		—			143		133		—			133		22		—			22
Trading assets:
Debt and equity instruments, excluding loans	1,546		(1)		(d)	1,545		2,482		(1)		(d)	2,481		(1,680)		1		(d)	(1,679)
Loans reported as trading assets:
Changes in instrument-specific credit risk(a)	135		—			135		248		—			248		15		—			15
Other changes in fair value(a)	(19)		—			(19)		(1)		—			(1)		28		—			28
Loans:
Changes in instrument-specific credit risk(a)	190		7		(d)	197		475		2		(d)	477		385		1		(d)	386
Other changes in fair value(a)	470		3,239		(d)	3,709		267		1,224		(d)	1,491		138		185		(d)	323
Other assets(a)	103		(65)		(e)	38		8		6		(e)	14		11		(45)		(e)	(34)
Deposits(b)	(726)		—			(726)		(1,730)		—			(1,730)		181		—			181
Federal funds purchased and securities loaned or sold under repurchase agreements	(6)		—			(6)		(8)		—			(8)		11		—			11
Short-term borrowings(b)	294		—			294		(693)		—			(693)		862		—			862
Trading liabilities	2		—			2		6		—			6		1		—			1

Other liabilities	(94)		—			(94)		(16)		—			(16)		—		—			—
Long-term debt(b)(c)	(2,120)		(1)		(d)	(2,121)		(6,173)		1		(d)	(6,172)		2,695		—			2,695

(a)In the third quarter of 2020, the Firm reclassified certain fair value option elected lending-related positions from trading assets to loans and other assets. Prior-period amounts have been revised to conform with the current presentation.

(b)Unrealized gains/(losses) due to instrument-specific credit risk (DVA) for liabilities for which the fair value option has been elected are recorded in OCI and subsequently recorded in principal transactions revenue when realized. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were $20 million for the year ended December 31,2020 and were not material for the years ended December 31, 2019 and 2018.

(c)Long-term debt measured at fair value predominantly relates to structured notes. Although the risk associated with the structured notes is actively managed, the gains/(losses) reported in this table do not include the income statement impact of the risk management instruments used to manage such risk.

(d)Reported in mortgage fees and related income.

(e)Reported in other income.

(f)Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than hybrid financial instruments. Refer to Note 7 for further information regarding interest income and interest expense.

Difference between aggregate fair value and aggregate remaining contractual principal balance outstanding

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of December 31, 2020 and 2019, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.


	2020							2019
December 31, (in millions)	Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding		Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding
Loans
Nonaccrual loans
Loans reported as trading assets(a)	$	3,386		$	555	$	(2,831)	$	2,563		$	234	$	(2,329)
Loans(a)	1,867			1,507		(360)		964			696		(268)
Subtotal	5,253			2,062		(3,191)		3,527			930		(2,597)
90 or more days past due and government guaranteed(b)
Loans reported as trading assets	—			—		—		—			—		—
Loans	328			317		(11)		138			129		(9)
Subtotal	328			317		(11)		138			129		(9)
All other performing loans(c)
Loans reported as trading assets(a)	7,917			6,439		(1,478)		8,288			6,779		(1,509)
Loans(a)	42,022			42,650		628		43,955			44,130		175
Subtotal	49,939			49,089		(850)		52,243			50,909		(1,334)
Total loans	$	55,520		$	51,468	$	(4,052)	$	55,908		$	51,968	$	(3,940)
Long-term debt
Principal-protected debt	$	40,560	(e)	$	40,526	$	(34)	$	40,124	(e)	$	39,246	$	(878)
Nonprincipal-protected debt(d)	NA			36,291		NA		NA			36,499		NA
Total long-term debt	NA			$	76,817	NA		NA			$	75,745	NA
Long-term beneficial interests
Nonprincipal-protected debt(d)	NA			$	41	NA		NA			$	36	NA
Total long-term beneficial interests	NA			$	41	NA		NA			$	36	NA

(b)These balances are excluded from nonaccrual loans as the loans are insured and/or guaranteed by U.S. government agencies.

(c)There were no performing loans that were ninety days or more past due as of December 31, 2020 and 2019.

(d)Remaining contractual principal is not applicable to nonprincipal-protected structured notes and long-term beneficial interests. Unlike principal-protected structured notes and long-term beneficial interests, for which the Firm is obligated to return a stated amount of principal at maturity, nonprincipal-protected structured notes and long-term beneficial interests do not obligate the Firm to return a stated amount of principal at maturity, but for structured notes to return an amount based on the performance of an underlying variable or derivative feature embedded in the note. However, investors are exposed to the credit risk of the Firm as issuer for both nonprincipal-protected and principal-protected notes.

(e)Where the Firm issues principal-protected zero-coupon or discount notes, the balance reflects the contractual principal payment at maturity or, if applicable, the contractual principal payment at the Firm’s next call date.

Fair value option, structured notes by balance sheet classification and primary embedded derivative risk

The following table presents the fair value of structured notes, by balance sheet classification and the primary risk type.


	December 31, 2020								December 31, 2019
(in millions)	Long-term debt		Short-term borrowings		Deposits		Total		Long-term debt		Short-term borrowings		Deposits		Total
Risk exposure
Interest rate	$	38,129	$	65	$	5,057	$	43,251	$	35,470	$	34	$	16,692	$	52,196
Credit	6,409		1,022		—		7,431		5,715		875		—		6,590
Foreign exchange	3,613		92		—		3,705		3,862		48		5		3,915
Equity	26,943		5,021		6,893		38,857		29,294		4,852		8,177		42,323
Commodity	250		13		232		495		472		32		1,454		1,958
Total structured notes	$	75,344	$	6,213	$	12,182	$	93,739	$	74,813	$	5,841	$	26,328	$	106,982