Fair Value Option (Tables)

9 Months Ended

Sep. 30, 2021

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 three and nine months ended September 30, 2021 and 2020, 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.


	Three months ended September 30,
	2021							2020
(in millions)	Principal transactions		All other income			Total changes in fair value recorded (e)		Principal transactions			All other income			Total changes in fair value recorded (e)
Federal funds sold and securities purchased under resale agreements	$	(19)	$	—		$	(19)	$	(148)		$	—		$	(148)
Securities borrowed	(22)		—			(22)		5			—			5
Trading assets:
Debt and equity instruments, excluding loans	(2,255)		—			(2,255)		1,780		(f)	—			1,780
Loans reported as trading assets:
Changes in instrument-specific credit risk	66		—			66		216			—			216
Other changes in fair value	1		—			1		—			—			—
Loans:
Changes in instrument-specific credit risk	119		(7)		(c)	112		112			(13)		(c)	99
Other changes in fair value	25		609		(c)	634		93			928		(c)	1,021
Other assets	(22)		—			(22)		(28)			(7)		(d)	(35)
Deposits(a)	38		—			38		(147)			—			(147)
Federal funds purchased and securities loaned or sold under repurchase agreements	11		—			11		58			—			58
Short-term borrowings(a)	388		—			388		(54)			—			(54)
Trading liabilities	(1)		—			(1)		1			—			1

Other liabilities	(1)		—			(1)		(8)			—			(8)
Long-term debt(a)(b)	643		11		(c)(d)	654		(530)			(4)		(c)	(534)


	Nine months ended September 30,
	2021							2020
(in millions)	Principal transactions		All other income			Total changes in fair value recorded (e)		Principal transactions			All other income			Total changes in fair value recorded (e)
Federal funds sold and securities purchased under resale agreements	$	(33)	$	—		$	(33)	$	96		$	—		$	96
Securities borrowed	(119)		—			(119)		173			—			173
Trading assets:
Debt and equity instruments, excluding loans	(1,188)		(1)		(c)	(1,189)		1,083		(f)	(1)		(c)	1,082
Loans reported as trading assets:
Changes in instrument-specific credit risk	342		—			342		(39)			—			(39)
Other changes in fair value	(7)		—			(7)		1			—			1
Loans:
Changes in instrument-specific credit risk	540		(9)		(c)	531		143			2		(c)	145
Other changes in fair value	(82)		1,733		(c)	1,651		357			2,423		(c)	2,780
Other assets	6		(23)		(d)	(17)		74			1		(d)	75
Deposits(a)	(53)		—			(53)		(612)			—			(612)
Federal funds purchased and securities loaned or sold under repurchase agreements	42		—			42		(20)			—			(20)
Short-term borrowings(a)	(223)		—			(223)		1,035			—			1,035
Trading liabilities	(2)		—			(2)		1			—			1

Other liabilities	1		—			1		(54)			—			(54)
Long-term debt(a)(b)	(262)		6		(c)(d)	(256)		70			(1)		(c)	69

(a)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, while realized gains/(losses) are recorded in principal transactions revenue. Realized gains/(losses) due to instrument-specific credit risk recorded in principal transactions revenue were $(6) million and $1 million for the three months ended September 30, 2021 and 2020, respectively and $(8) million and $20 million for the nine months ended September 30, 2021 and 2020, respectively.

(b)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.

(c)Reported in mortgage fees and related income.

(d)Reported in other income.

(e)Changes in fair value exclude contractual interest, which is included in interest income and interest expense for all instruments other than certain hybrid financial instruments recorded in CIB. Refer to Note 6 for further information regarding interest income and interest expense.

(f)Prior-period amounts have been revised to conform with the current presentation.

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 September 30, 2021, and December 31, 2020, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.


	September 30, 2021							December 31, 2020
(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	$	3,591		$	642	$	(2,949)	$	3,386		$	555	$	(2,831)
Loans	1,193			1,055		(138)		1,867			1,507		(360)
Subtotal	4,784			1,697		(3,087)		5,253			2,062		(3,191)
90 or more days past due and government guaranteed

Loans(a)	301			289		(12)		328			317		(11)

All other performing loans(b)
Loans reported as trading assets	7,950			6,699		(1,251)		7,917			6,439		(1,478)
Loans	58,949			59,284		335		42,022			42,650		628
Subtotal	66,899			65,983		(916)		49,939			49,089		(850)
Total loans	$	71,984		$	67,969	$	(4,015)	$	55,520		$	51,468	$	(4,052)
Long-term debt
Principal-protected debt	$	37,445	(d)	$	35,244	$	(2,201)	$	40,560	(d)	$	40,526	$	(34)
Nonprincipal-protected debt(c)	NA			41,255		NA		NA			36,291		NA
Total long-term debt	NA			$	76,499	NA		NA			$	76,817	NA
Long-term beneficial interests
Nonprincipal-protected debt(c)	NA			$	99	NA		NA			$	41	NA
Total long-term beneficial interests	NA			$	99	NA		NA			$	41	NA

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

(b)There were no performing loans that were ninety days or more past due as of September 30, 2021, and December 31, 2020, respectively.

(c)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.

(d)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.


	September 30, 2021									December 31, 2020
(in millions)	Long-term debt		Short-term borrowings		Deposits			Total		Long-term debt		Short-term borrowings		Deposits			Total
Risk exposure
Interest rate	$	35,571	$	13	$	5,700		$	41,284	$	38,129	$	65	$	5,057		$	43,251
Credit	6,843		1,438		—			8,281		6,409		1,022		—			7,431
Foreign exchange	3,648		244		221			4,113		3,613		92		—			3,705
Equity	28,496		6,258		5,565			40,319		26,943		5,021		6,893			38,857
Commodity	321		—		6		(a)	327		250		13		232		(a)	495
Total structured notes	$	74,879	$	7,953	$	11,492		$	94,324	$	75,344	$	6,213	$	12,182		$	93,739

(a)Excludes deposits linked to precious metals for which the fair value option has not been elected of $676 million and $739 million for the periods ended September 30, 2021 and December 31, 2020, respectively.