Derivative Financial Instruments And Hedging Activities

9 Months Ended

Sep. 30, 2013

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivative Financial Instruments And Hedging Activities

Derivative Financial Instruments

Derivative swap and cap agreements consist of the following (in millions):

	September 30, 2013
	Notional		Fair Value(a)
Assets
Interest rate swaps	$	2,786	$	8
Interest rate caps	1,631		5
Foreign exchange swaps(b)	1,500		1
Total assets(c)	5,917		14
Liabilities
Interest rate swaps	4,012		16
Interest rate caps	1,442		6
Foreign exchange swaps(b)	2,034		19
Total liabilities(d)	$	7,488	$	41

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(a) See Note 9 - "Fair Values of Assets and Liabilities" for further discussion of fair value disclosure related to the derivatives.

(b) The foreign exchange swaps relate to (i) intercompany loans denominated in foreign currencies (notional balances on the intercompany loans of €610 million , £432 million and 182kr million have been translated to USD) and (ii) a cross-currency swap for a securitization in the International Segment.

(c) Included in other assets on the condensed consolidated balance sheets.

(d) Included in other liabilities on the condensed consolidated balance sheets.

At December 31, 2012, we had derivative assets and liabilities with notional amounts of $775 million, which had an insignificant fair value.

Generally, we purchase interest rate cap agreements to limit floating rate exposures on our revolving secured debt. We utilize interest rate swap agreements to convert floating rate exposures on our revolving debt, or on securities issued in securitization transactions to fixed rates, thereby hedging the variability in interest expense paid.

In connection with the closing of the acquisition of the international operations from Ally Financial, we provided loans denominated in foreign currencies (euro, British pound and Swedish krona) to acquired entities for the equivalent of $1.5 billion. We purchase foreign exchange swaps to hedge against any valuation change in the loans due to changes in foreign exchange rates.

The following table summarizes the location and amount of gains and losses on derivative instruments reported in our condensed consolidated statement of income and comprehensive income (in millions):

	Three Months Ended			Nine Months Ended
	September 30, 2013
Gain recognized in interest expense
Interest rate contracts	$	5		$	2
Loss recognized in operating expenses
Foreign exchange swaps(a)	$	(99	)	$	(111	)

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(a) These losses are substantially offset by translation gains (included in operating expenses) related to the foreign currency-denominated loans described above.

The gain/loss amounts recognized in interest expense for the three and nine months ended September 30, 2012 were insignificant.

Under the terms of our derivative financial instruments, we are required to pledge certain funds to be held in restricted cash accounts as collateral for the outstanding derivative transactions. As of September 30, 2013 and December 31, 2012, these restricted cash accounts totaled $48 million and $4 million, and are included in other assets on the condensed consolidated balance sheets.