We primarily use derivative financial instruments to manage interest rate risk and currency exchange rate risk and to assist customers with their risk management objectives, which may include currency exchange rate risks and interest rate risks. Also, in connection with negotiating credit facilities and certain other services, we often obtain equity warrant assets, giving us the right to acquire stock in private, venture-backed companies in the technology and life science/healthcare industries.

Interest rate risk is our primary market risk and can result from timing and volume differences in the repricing of our interest rate sensitive assets and liabilities and changes in market interest rates. To manage interest rate risk on our interest rate sensitive assets, we have entered into interest rate swap contracts to hedge against future changes in interest rates.

To manage interest rate risk on our AFS securities portfolio, we enter into pay-fixed, receive-floating interest rate swap contracts to hedge against exposure to changes in the fair value of the securities resulting from changes in interest rates. We designate these interest rate swap contracts as fair value hedges that qualify for hedge accounting under ASC 815, Derivatives and Hedging ("ASC 815"). In 2021, we elected to account for a portion of the fair value hedges using the last-of-layer method as outlined in ASC 815. All hedges using the last-of-layer method were terminated in 2022. We record the interest rate swaps in the line items "accrued interest receivable and other assets" and "other liabilities" on our consolidated balance sheet. For qualifying fair value hedges, both the changes in the fair value of the derivative and the portion of the fair value adjustments associated with the last-of-layer attributable to the hedged risk are recognized into earnings as they occur. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item in the line item "investment securities" as part of interest income, a component of consolidated net income.

We assess hedge effectiveness under ASC 815 on a quarterly basis to ensure all hedges remain highly effective and hedge accounting under ASC 815 can be applied. In conjunction with the assessment of effectiveness, we assess the hedged item to ensure it is expected to be outstanding at the hedged item’s assumed maturity date and the last-of-layer method of accounting under ASC 815 can be applied. If the hedging relationship no longer exists or no longer qualifies as a hedge per ASC 815, any remaining fair value basis adjustments are allocated to the individual assets in the portfolio and amortized into earnings over a period consistent with the amortization of other discounts and premiums associated with the respective assets. As allowed under ASC 815, we apply the "shortcut" method of accounting to a portion of our fair value hedges which assumes there is perfect effectiveness.

The following table summarizes the amortized cost basis of hedged assets that are designated and qualify as fair value hedges and the cumulative amount of fair value hedging adjustments included in the carrying value that have been recorded on our consolidated balance sheets as of December 31, 2022, and December 31, 2021:


			Cumulative Amount of Fair Value Hedging Adjustment Included in the Amortized Cost Basis of the Hedged Assets
(Dollars in millions)	Amortized Cost Basis of the Hedged Assets		Active		Terminated
December 31, 2022
AFS securities	$	563	$	(2)	$	(290)
December 31, 2021
AFS securities (1)	$	15,260	$	(131)	$	6

(1)These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. At December 31, 2021, the amortized cost basis of the closed portfolios used in these hedging relationships was $11.2 billion, the amounts of the designated hedged items was $6.7 billion and the cumulative basis adjustments associated with these hedging relationships was $83 million.

To manage interest rate risk on our variable-interest rate loan portfolio, we enter into interest rate swap contracts to hedge against future changes in interest rates by using hedging instruments to lock in future cash inflows that would otherwise be impacted by movements in the market interest rates. We designate these interest rate swap contracts as cash flow hedges that qualify for hedge accounting under ASC 815 and record them in the line items "accrued interest receivable and other assets" and "other liabilities" on our consolidated balance sheet. For qualifying cash flow hedges, changes in the fair value of the derivative are recorded in AOCI and recognized in earnings as the hedged item affects earnings. Derivative amounts affecting earnings are recognized consistent with the classification of the hedged item in the line item "loans" as part of interest income, a component of consolidated net income.

We assess hedge effectiveness under ASC 815 on a quarterly basis to ensure all hedges remain highly effective and hedge accounting under ASC 815 can be applied. If the hedging relationship no longer exists or no longer qualifies as a hedge per ASC 815, any amounts remaining as gain or loss in AOCI are reclassified into earnings in the line item "loans" as part of interest income, a component of consolidated net income. As of March 31, 2020, all derivatives previously classified as hedges with notional balances totaling $5.0 billion and a net asset fair value of $228 million were terminated. As of December 31, 2022, the total unrealized gains on terminated cash flow hedges remaining in AOCI is $60 million, or $43 million net of tax. The unrealized gains will be reclassified into interest income as the underlying forecasted transactions impact earnings through the original maturity of the hedged forecasted transactions. The total remaining term over which the unrealized gains will be reclassified into earnings is approximately two years

We enter into foreign exchange forward contracts to economically reduce our foreign exchange exposure risk associated with the net difference between foreign currency denominated assets and liabilities. Gains or losses from changes in currency rates on foreign currency denominated instruments are recorded in the line item “other” as part of noninterest income, a component of consolidated net income. We may experience ineffectiveness in the economic hedging relationship, because the instruments are revalued based upon changes in the currency’s spot rate on the principal value, while the forwards are revalued on a discounted cash flow basis. We record forward agreements in gain positions in the line item "accrued interest receivable and other assets" and loss positions in the line item "other liabilities" on our consolidated balance sheet, while net changes in fair value are recorded in the line item “other” as part of noninterest income, a component of consolidated net income.

We enter into net investment hedges to hedge against the foreign currency risk of a net investment in foreign operations. Certain foreign exchange contracts are designated as net investment hedges to minimize our exposure to variability in the foreign currency translation of net investments in non-U.S. subsidiaries. For qualifying net investment hedges under ASC 815, changes in the spot rate of the net investment hedges of foreign operations are recorded in OCI in the line item "foreign currency translation (losses) gains, net of hedges." We assess hedge effectiveness under ASC 815 at least quarterly to ensure all hedges remain effective and hedge accounting can be applied. Net investment hedge pretax losses of $18 million were recognized in AOCI related to foreign exchange contracts for the year ending December 31, 2022.

We issue loans to clients with conversion features allowing SVBFG to convert the contingent conversion rights to stock in private or public companies. All of our contingent conversion rights qualify as derivatives and are reported at fair value as a component of "accrued interest receivable and other assets" on our consolidated balance sheet. Any changes in fair value after the grant date are recognized as net gains or losses in the line item "other" in noninterest income, a component of consolidated net income.

We enter into total return swaps related to certain of our equity funds, which manages the risk of exposure from the volatility of equity investments in the funds. We do not designate any total return swaps as derivative instruments that qualify for hedge accounting. Gains or losses from changes in fair value are recognized as net gains or losses in the line item "other" in noninterest income, a component of consolidated net income.

We are exposed to credit risk if counterparties to our derivative contracts do not perform as expected. We mitigate counterparty credit risk through credit approvals, limits, monitoring procedures and by obtaining collateral, as appropriate. With respect to measuring counterparty credit risk for derivative instruments, we measure the fair value of a group of financial assets and financial liabilities on a net risk basis by counterparty portfolio.


	December 31, 2022						December 31, 2021
	Notional or Contractual Amount		Fair Value				Notional or Contractual Amount		Fair Value
(Dollars in millions)			Derivative Assets (1)		Derivative Liabilities (1)				Derivative Assets (1)		Derivative Liabilities (1)
Derivatives designated as hedging instruments:
Interest rate risks:
Interest rate swaps (2)	$	550	$	—	$	—	$	10,700	$	18	$	—

Currency exchange risks:
Foreign exchange contracts	778		17		—		—		—		—
Foreign exchange contracts	616		—		56		—		—		—
Total derivatives designated as hedging instruments			17		56				18		—
Derivatives not designated as hedging instruments:
Currency exchange risks:
Foreign exchange contracts	1,763		42		—		701		16		—
Foreign exchange contracts	2,184		—		29		62		—		2
Other derivative instruments:
Equity warrant assets	375		383		—		322		277		—
Contingent conversion rights	92		12		—		—		—		—
Client foreign exchange contracts	10,145		262		—		8,245		146		—
Client foreign exchange contracts	9,960		—		257		7,764		—		126
Total return swaps	119		40		—		—		—		—
Client foreign currency options	866		19		—		688		9		—
Client foreign currency options	866		—		19		688		—		9
Client interest rate derivatives (2)	2,391		128		—		2,178		99		—
Client interest rate derivatives (2)	2,709		—		195		2,315		—		101
Total derivatives not designated as hedging instruments			886		500				547		238
Total gross derivatives			903		556				565		238
Less: netting adjustment (3)			(351)		(223)				(137)		(120)
Total derivatives			$	552	$	333			$	428	$	118

(2)The amount reported reflects reductions of approximately $74 million and $112 million of derivative assets at December 31, 2022, and 2021, respectively, reflecting variation margin treated as settlement of the related derivative fair values for legal and accounting purposes as required by central clearing houses.

(3)For some counterparties, the collateral amounts of financial instruments may exceed the derivative receivables and derivative payables balances. Where this is the case, the total amount reported is limited to the net derivative receivables and net derivative payables balances with that counterparty. There was approximately $31 million of cash collateral in excess of net derivative receivables and $1 million of cash collateral in excess of net derivative payables balances not included in the netting adjustment at December 31, 2022, and December 31, 2021, respectively.


		Year ended December 31,
(Dollars in millions)	Statement of income location	2022		2021		2020
Derivatives designated as hedging instruments:
Interest rate risks:
Amounts reclassified from AOCI into income	Interest income - loans	$	56	$	63	$	50
Change in fair value of interest rate swaps hedging investment securities	Interest income - investment securities taxable	387		138		—
Change in fair value of hedged investment securities	Interest income - investment securities taxable	(387)		(139)		—
Net gains associated with interest rate risk derivatives		$	56	$	62	$	50
Derivatives not designated as hedging instruments:
Currency exchange risks:
(Losses) gains on revaluations of internal foreign currency instruments, net	Other noninterest income	$	(42)	$	(43)	$	39
Gains (losses) on internal foreign exchange forward contracts, net	Other noninterest income	32		43		(40)
Net losses associated with internal currency risk		$	(10)	$	—	$	(1)
Other derivative instruments:
Gains on revaluations of client foreign currency instruments, net	Other noninterest income	$	23	$	17	$	3
Losses on client foreign exchange forward contracts, net	Other noninterest income	(10)		(17)		(3)
Net gains associated with client currency risk		$	13	$	—	$	—
Gains on total return swaps	Other noninterest income	$	40	$	—	$	—
Net gains on equity warrant assets	Gains on equity warrant assets, net	$	148	$	560	$	237
Net gains on other derivatives	Other noninterest income	$	5	$	2	$	28

Certain of our derivative and other financial instruments are subject to enforceable master netting arrangements with our counterparties. These agreements provide for the net settlement of multiple contracts with a single counterparty through a single payment, in a single currency, in the event of default on or termination of any one contract.


(Dollars in millions)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position (1)				Net Amounts of Assets Presented in the Statement of Financial Position (1)		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
			Financial Instruments		Cash Collateral Received
December 31, 2022:
Derivatives	$	382	$	(144)	$	(207)	$	31	$	—	$	31
Reverse repurchase, securities borrowing and similar arrangements	722		—		—		722		(722)		—
Total	$	1,104	$	(144)	$	(207)	$	753	$	(722)	$	31
December 31, 2021:
Derivatives	$	165	$	(87)	$	(50)	$	28	$	—	$	28
Reverse repurchase, securities borrowing and similar arrangements	607		—		—		607		(607)		—
Total	$	772	$	(87)	$	(50)	$	635	$	(607)	$	28

(1)During the third quarter of 2022, we changed our accounting policy to report the fair values of our derivative assets and liabilities subject to ISDA master netting arrangements on a net basis where a right of setoff exists. The net derivative fair values have been further adjusted for cash collateral received/pledged. The change in accounting policy was applied retrospectively, and prior periods have been revised to conform with current period presentation.


(Dollars in millions)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position (1)				Net Amounts of Liabilities Presented in the Statement of Financial Position (1)		Gross Amounts Not Offset in the Statement of Financial Position		Net Amount
			Financial Instruments		Cash Collateral Pledged
December 31, 2022:
Derivatives	$	234	$	(144)	$	(79)	$	11	$	—	$	11
Repurchase, securities lending and similar arrangements	525		—		—		525		—		525
Total	$	759	$	(144)	$	(79)	$	536	$	—	$	536
December 31, 2021:
Derivatives	$	148	$	(87)	$	(33)	$	28	$	—	$	28
Repurchase, securities lending and similar arrangements	61		—		—		61		—		61
Total	$	209	$	(87)	$	(33)	$	89	$	—	$	89