FAIR VALUE (Tables)

3 Months Ended

Dec. 31, 2020

Assets and Liabilities Measured at Fair Value on a Recurring and Nonrecurring Basis

The following tables present assets and liabilities measured at fair value on a recurring basis. Netting adjustments represent the impact of counterparty and collateral netting on our derivative balances included on our Condensed Consolidated Statements of Financial Condition. See Note 6 for additional information.


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of December 31, 2020
Assets at fair value on a recurring basis:
Assets segregated pursuant to regulations	$	2,749	$	—	$	—	$	—	$	2,749
Trading assets
Municipal and provincial obligations	—		32		—		—		32
Corporate obligations	11		31		—		—		42
Government and agency obligations	16		91		—		—		107
Agency MBS and agency CMOs	—		146		—		—		146

Total debt securities	27		300		—		—		327
Equity securities	14		5		—		—		19
Brokered certificates of deposit	—		37		—		—		37
Other	—		—		3		—		3
Total trading assets	41		342		3		—		386
Available-for-sale securities (1)	16		7,984		—		—		8,000
Derivative assets
Interest rate - matched book	—		273		—		—		273
Interest rate - other	34		189		—		(128)		95

Total derivative assets	34		462		—		(128)		368
Other investments - private equity - not measured at net asset value (“NAV”)	—		—		52		—		52
All other investments:
Government and agency obligations (2)	603		—		—		—		603
Other	100		1		22		—		123
Total all other investments	703		1		22		—		726
Subtotal	3,543		8,789		77		(128)		12,281
Other investments - private equity - measured at NAV									85
Total assets at fair value on a recurring basis	$	3,543	$	8,789	$	77	$	(128)	$	12,366

Liabilities at fair value on a recurring basis:
Trading liabilities
Municipal and provincial obligations	$	1	$	—	$	—	$	—	$	1
Corporate obligations	1		3		—		—		4
Government and agency obligations	61		—		—		—		61

Total debt securities	63		3		—		—		66
Equity securities	79		7		—		—		86

Total trading liabilities	142		10		—		—		152
Derivative liabilities
Interest rate - matched book	—		273		—		—		273
Interest rate - other	37		124		—		(138)		23
Foreign exchange	—		11		—		—		11
Other	—		2		1		—		3
Total derivative liabilities	37		410		1		(138)		310
Total liabilities at fair value on a recurring basis	$	179	$	420	$	1	$	(138)	$	462

(1) Substantially all of our available-for-sale securities consist of agency MBS and agency CMOs. See Note 5 for further information.

(2) These assets are comprised of U.S. Treasuries purchased to meet future customer reserve requirements or to meet certain deposit requirements with clearing organizations.


$ in millions	Level 1		Level 2		Level 3		Netting adjustments		Balance as of September 30, 2020
Assets at fair value on a recurring basis:

Trading assets
Municipal and provincial obligations	$	5	$	120	$	—	$	—	$	125
Corporate obligations	11		45		—		—		56
Government and agency obligations	13		131		—		—		144
Agency MBS and agency CMOs	—		130		—		—		130
Non-agency CMOs and asset-backed securities (“ABS”)	—		13		—		—		13
Total debt securities	29		439		—		—		468
Equity securities	11		5		—		—		16
Brokered certificates of deposit	—		17		—		—		17
Other	—		—		12		—		12
Total trading assets	40		461		12		—		513
Available-for-sale securities (1)	16		7,634		—		—		7,650
Derivative assets
Interest rate - matched book	—		333		—		—		333
Interest rate - other	16		224		—		(135)		105

Total derivative assets	16		557		—		(135)		438
Other investments - private equity - not measured at NAV	—		—		37		—		37
All other investments:
Government and agency obligations (2)	103		—		—		—		103
Other	92		1		22		—		115
Total all other investments	195		1		22		—		218
Subtotal	267		8,653		71		(135)		8,856
Other investments - private equity - measured at NAV									79
Total assets at fair value on a recurring basis	$	267	$	8,653	$	71	$	(135)	$	8,935

Liabilities at fair value on a recurring basis:
Trading liabilities
Municipal and provincial obligations	$	1	$	—	$	—	$	—	$	1
Corporate obligations	—		5		—		—		5
Government and agency obligations	136		—		—		—		136
Non-agency CMOs and ABS	—		2		—		—		2
Total debt securities	137		7		—		—		144
Equity securities	96		—		—		—		96

Total trading liabilities	233		7		—		—		240
Derivative liabilities
Interest rate - matched book	—		333		—		—		333
Interest rate - other	16		145		—		(112)		49
Foreign exchange	—		5		—		—		5
Other	—		1		5		—		6
Total derivative liabilities	16		484		5		(112)		393
Total liabilities at fair value on a recurring basis	$	249	$	491	$	5	$	(112)	$	633

(1) Substantially all of our available-for-sale securities consist of agency MBS and agency CMOs. See Note 5 for further information.

(2) These assets are comprised of U.S. Treasuries purchased to meet certain deposit requirements with clearing organizations.

Level 3 Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis, Roll Forward Table of Change in Balances

The following tables present the changes in fair value for Level 3 assets and liabilities measured at fair value on a recurring basis. The realized and unrealized gains and losses in the tables may include changes in fair value that were attributable to both observable and unobservable inputs. In the following tables, gains/(losses) on trading instruments are reported in “Principal transactions” and gains/(losses) on other investments are reported in “Other” revenues.


Three months ended December 31, 2020 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Derivative liabilities
$ in millions	Other		Private equity investments		All other		Other
Fair value beginning of period	$	12	$	37	$	22	$	(5)
Total gains/(losses) included in earnings	2		15		—		4
Purchases and contributions	6		—		—		—
Sales and distributions	(17)		—		—		—
Transfers:
Into Level 3	—		—		—		—
Out of Level 3	—		—		—		—
Fair value end of period	$	3	$	52	$	22	$	(1)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	3	$	15	$	—	$	3


Three months ended December 31, 2019 Level 3 instruments at fair value
	Financial assets						Financial liabilities
	Trading assets		Other investments				Trading liabilities
$ in millions	Other		Private equity investments		All other		Other
Fair value beginning of period	$	3	$	63	$	24	$	(1)
Total gains/(losses) included in earnings	(1)		—		—		—
Purchases and contributions	31		—		—		1
Sales and distributions	(14)		(1)		—		(1)
Transfers:
Into Level 3	—		—		—		—
Out of Level 3	—		—		—		—
Fair value end of period	$	19	$	62	$	24	$	(1)
Unrealized gains/(losses) for the period included in earnings for instruments held at the end of the reporting period	$	—	$	—	$	—	$	—

Significant Assumptions Used in Valuation of Level 3 Financial Instruments

The following table presents the valuation techniques and significant unobservable inputs used in the valuation of certain of our private equity investments classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument. Certain investments are valued initially at transaction price and updated as other investment-specific events take place which indicate that a change in the carrying values of these investments is appropriate. Other investment-specific events include such events as our periodic review, significant transactions occur or new developments become known.

Recurring measurements

$ in millions

Fair value at December 31, 2020

Valuation technique(s)

Unobservable input

Range
(weighted-average)

Other investments - private equity investments (not measured at NAV)

Discounted cash flow, transaction price or other investment-specific events

Discount rate

25%

Terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiple

9.0x

Terminal year

2021 - 2042 (2022)

Fair value at September 30, 2020

Other investments - private equity investments (not measured at NAV)

Discounted cash flow, transaction price or other investment-specific events

Discount rate

25%

Terminal EBITDA multiple

9.0x

Terminal year

2021 - 2042 (2023)

Net asset value of recorded value and unfunded commitments

The following table presents the recorded value and unfunded commitments related to our private equity investments portfolio.


$ in millions	Recorded value		Unfunded commitment
December 31, 2020
Private equity investments measured at NAV	$	85	$	9
Private equity investments not measured at NAV	52
Total private equity investments	$	137

September 30, 2020
Private equity investments measured at NAV	$	79	$	9
Private equity investments not measured at NAV	37
Total private equity investments	$	116

Fair Value Measurements, Nonrecurring

The following table presents assets measured at fair value on a nonrecurring basis along with the valuation techniques and significant unobservable inputs used in the valuation of the assets classified as level 3. These inputs represent those that a market participant would take into account when pricing these instruments. Weighted averages are calculated by weighting each input by the relative fair value of the related financial instrument.


$ in millions	Level 2		Level 3		Total fair value		Valuation technique(s)	Unobservable input	Range (weighted-average)
December 31, 2020
Bank loans:
Residential mortgage loans	$	4	$	12	$	16	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.6 yrs.)
Corporate loans	$	—	$	14	$	14	Collateral or discounted cash flow (1)	Not meaningful (1)	Not meaningful (1)
Loans held for sale	$	104	$	—	$	104	N/A	N/A	N/A


September 30, 2020
Bank loans:
Residential mortgage loans	$	4	$	13	$	17	Collateral or discounted cash flow (1)	Prepayment rate	7 yrs. - 12 yrs. (10.6 yrs.)
Corporate loans	$	—	$	15	$	15	Collateral or discounted cash flow (1)	Not meaningful (1)	Not meaningful (1)
Loans held for sale	$	38	$	—	$	38	N/A	N/A	N/A
Other assets: other real estate owned	$	1	$	—	$	1	N/A	N/A	N/A

(1) The valuation techniques used to estimate the fair values are based on collateral value less selling costs for the collateral-dependent loans and discounted cash flows for loans that are not collateral-dependent.

Carrying Amounts and Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following table presents the estimated fair value and fair value hierarchy of financial assets and liabilities that are not recorded at fair value in accordance with GAAP on the Condensed Consolidated Statements of Financial Condition at December 31, 2020 and September 30, 2020. This table excludes financial instruments that are carried at amounts which approximate fair value. Refer to Note 3 of our 2020 Form 10-K for a discussion of the fair value hierarchy classifications of our financial instruments that are not recorded at fair value.


$ in millions	Level 2		Level 3		Total estimated fair value		Carrying amount
December 31, 2020
Financial assets:
Bank loans, net	$	105	$	21,737	$	21,842	$	21,823
Financial liabilities:
Bank deposits - certificates of deposit	$	—	$	946	$	946	$	912
Senior notes payable	$	2,572	$	—	$	2,572	$	2,045

September 30, 2020
Financial assets:
Bank loans, net	$	72	$	21,119	$	21,191	$	21,125
Financial liabilities:
Bank deposits - certificates of deposit	$	—	$	1,056	$	1,056	$	1,017
Senior notes payable	$	2,504	$	—	$	2,504	$	2,045

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details