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FAIR VALUE MEASUREMENT
 9 Months Ended
Sep. 30, 2013
FAIR VALUE MEASUREMENT  
FAIR VALUE MEASUREMENT

21.   FAIR VALUE MEASUREMENT

        ASC 820-10 (formerly SFAS 157) Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Among other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

        Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative positions and includes the impact of Citigroup's own credit risk on derivatives and other liabilities measured at fair value.

Fair Value Hierarchy

        ASC 820-10 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair value hierarchy:

  • •
    Level 1: Quoted prices for identical instruments in active markets.

    •
    Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

    •
    Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

        This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets.

        The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.

Determination of Fair Value

        For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election or whether they are required to be carried at fair value.

        When available, the Company generally uses quoted market prices to determine fair value and classifies such items as Level 1. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified as Level 2.

        If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified as Level 3 even though there may be some significant inputs that are readily observable.

        The Company may also apply a price-based methodology, which utilizes, where available, quoted prices or other market information obtained from recent trading activity in positions with the same or similar characteristics to the position being valued. The market activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations may be classified as Level 2. When less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of a similar security is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate the valuation, the "price" inputs are considered unobservable and the fair value measurements are classified as Level 3.

        Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors and brokers' valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.

        The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models and any significant assumptions.

Market valuation adjustments

        Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair value hierarchy to ensure that the fair value reflects the liquidity or illiquidity of the market. The liquidity reserve may utilize the bid-offer spread for an instrument as one of the factors.

        Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter uncollateralized derivatives, where the base valuation uses market parameters based on the relevant base interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant base curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.

        Bilateral or "own" credit-risk adjustments are applied to reflect the Company's own credit risk when valuing derivatives and liabilities measured at fair value. Counterparty and own credit adjustments consider the expected future cash flows between Citi and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.

        Generally, the unit of account for a financial instrument is the individual financial instrument. The Company applies market valuation adjustments that are consistent with the unit of account, which does not include adjustment due to the size of the Company's position, except as follows. ASC 820-10 permits an exception, through an accounting policy election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position when certain criteria are met. Citi has elected to measure certain portfolios of financial instruments, such as derivatives, that meet those criteria on the basis of the net open risk position. The Company applies market valuation adjustments, including adjustments to account for the size of the net open risk position, consistent with market participant assumptions and in accordance with the unit of account.

Valuation Process for Level 3 Fair Value Measurements

        Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and Price Verification Policy and Standards, which is jointly owned by Finance and Risk Management. Finance has implemented the ICG Securities and Banking Pricing and Price Verification Standards and Procedures to facilitate compliance with this policy.

        For fair value measurements of substantially all assets and liabilities held by the Company, individual business units are responsible for valuing the trading account assets and liabilities, and Product Control within Finance performs independent price verification procedures to evaluate those fair value measurements. Product Control is independent of the individual business units and reports into the Global Head of Product Control. It has authority over the valuation of financial assets and liabilities. Fair value measurements of assets and liabilities are determined using various techniques, including, but not limited to, discounted cash flows and internal models, such as option and correlation models.

        Based on the observability of inputs used, Product Control classifies the inventory as Level 1, Level 2 or Level 3 of the fair value hierarchy. When a position involves one or more significant inputs that are not directly observable, additional price verification procedures are applied. These procedures may include reviewing relevant historical data, analyzing profit and loss, valuing each component of a structured trade individually, and benchmarking, among others.

        Reports of inventory that is classified within Level 3 of the fair value hierarchy are distributed to senior management in Finance, Risk and the individual business. This inventory is also discussed in Risk Committees and in monthly meetings with senior trading management. As deemed necessary, reports may go to the Audit Committee of the Board of Directors or to the full Board of Directors. Whenever a valuation adjustment is needed to bring the price of an asset or liability to its exit price, Product Control reports it to management along with other price verification results.

        In addition, the pricing models used in measuring fair value are governed by an independent control framework. Although the models are developed and tested by the individual business units, they are independently validated by the Model Validation Group within Risk Management and reviewed by Finance with respect to their impact on the price verification procedures. The purpose of this independent control framework is to assess model risk arising from models' theoretical soundness, calibration techniques where needed, and the appropriateness of the model for a specific product in a defined market. Valuation adjustments, if any, go through a similar independent review process as the valuation models. To ensure their continued applicability, models are independently reviewed annually. In addition, Risk Management approves and maintains a list of products permitted to be valued under each approved model for a given business.

Securities purchased under agreements to resell and securities sold under agreements to repurchase

        No quoted prices exist for such instruments, so fair value is determined using a discounted cash-flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. Expected cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Generally, when such instruments are held at fair value, they are classified within Level 2 of the fair value hierarchy, as the inputs used in the valuation are readily observable. However, certain long-dated positions are classified within Level 3 of the fair value hierarchy.

Trading account assets and liabilities—trading securities and trading loans

        When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities and exchange-traded equity securities.

        For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing valuation techniques, including discounted cash flows, price-based and internal models, such as Black-Scholes and Monte Carlo simulation. Fair value estimates from these internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. A price-based methodology utilizes, where available, quoted prices or other market information obtained from recent trading activity of assets with similar characteristics to the bond or loan being valued. The yields used in discounted cash flow models are derived from the same price information. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of a similar security or loan is necessary to reflect differences in the terms of the actual security or loan being valued, or prices from independent sources are insufficient to corroborate valuation, a loan or security is generally classified as Level 3. The price input used in a price-based methodology may be zero for a security, such as a subprime CDO, that is not receiving any principal or interest and is currently written down to zero.

        Where the Company's principal market for a portfolio of loans is the securitization market, the Company uses the

securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such as commercial real estate loans, price verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, this loan portfolio is classified as Level 2 of the fair value hierarchy.

Trading account assets and liabilities—derivatives

        Exchange-traded derivatives are generally measured at fair value using quoted market (i.e., exchange) prices and are classified as Level 1 of the fair value hierarchy.

        The majority of derivatives entered into by the Company are executed over the counter and are valued using internal valuation techniques, as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows and internal models, including Black-Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).

        The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, volatilities and correlation. The Company uses overnight indexed swap curves as fair value measurement inputs for the valuation of certain collateralized interest-rate related derivatives. The instrument is classified as either Level 2 or Level 3 depending upon the observability of the significant inputs to the model.

Subprime-related direct exposures in CDOs

        The valuation of high-grade and mezzanine asset-backed security (ABS) CDO positions utilizes prices based on the underlying assets of each high-grade and mezzanine ABS CDO. The high-grade and mezzanine positions are largely hedged through the ABS and bond short positions. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup uses trader marks to value this portion of the portfolio and will do so as long as it remains largely hedged.

        For most of the lending and structured direct subprime exposures, fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.

Investments

        The investments category includes available-for-sale debt and marketable equity securities, whose fair value is generally determined by utilizing similar procedures described for trading securities above or, in some cases, using consensus pricing as the primary source.

        Also included in investments are nonpublic investments in private equity and real estate entities held by the S&B business. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment, as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company's process for determining the fair value of such securities utilizes commonly accepted valuation techniques, including comparables analysis. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances or other observable transactions. As discussed in Note 12 to the Consolidated Financial Statements, the Company uses net asset value to value certain of these investments.

        Private equity securities are generally classified as Level 3 of the fair value hierarchy.

Short-term borrowings and long-term debt

        Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by utilizing internal models using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy, as all inputs are readily observable.

        The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (where performance is linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above in "Trading account assets and liabilities—derivatives") given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.

Alt-A mortgage securities

        The Company classifies its Alt-A mortgage securities as held-to-maturity, available-for-sale and trading investments. The securities classified as trading and available-for-sale are recorded at fair value with changes in fair value reported in current earnings and AOCI, respectively. For these purposes, Citi defines Alt-A mortgage securities as non-agency residential mortgage-backed securities (RMBS) where (i) the underlying collateral has weighted average FICO scores between 680 and 720 or (ii) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

        Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair values of Alt-A mortgage securities utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Consensus data providers compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to the security being valued.

        The valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, are price-based and yield analysis. The primary market-derived input is yield. Cash flows are based on current collateral performance with prepayment rates and loss projections reflective of current economic conditions of housing price change, unemployment rates, interest rates, borrower attributes and other market indicators.

        Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or subordinated tranches in the capital structure are mostly classified as Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.


Items Measured at Fair Value on a Recurring Basis

        The following tables present for each of the fair value hierarchy levels the Company's assets and liabilities that are measured at fair value on a recurring basis at September 30, 2013 and December 31, 2012. The Company's hedging of positions that have been classified in the Level 3 category is not limited to other financial instruments (hedging instruments) that have been classified as Level 3, but also instruments classified as Level 1 or Level 2 of the fair value hierarchy. The effects of these hedges are presented gross in the following table.

Fair Value Levels

In millions of dollars at September 30, 2013   Level 1(1)   Level 2(1)   Level 3   Gross
inventory		   Netting(2)   Net
balance		  

Assets

                                      

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ —   $ 228,301   $ 3,767   $ 232,068   $ (57,053 ) $ 175,015  

Trading securities

                                      

Trading mortgage-backed securities

                                      

U.S. government-sponsored agency guaranteed

   $ —   $ 25,593   $ 1,240   $ 26,833   $ —   $ 26,833  

Residential

     —     1,291     2,695     3,986     —     3,986  

Commercial

     —     1,735     379     2,114     —     2,114  
                           

Total trading mortgage-backed securities

   $ —   $ 28,619   $ 4,314   $ 32,933   $ —   $ 32,933  
                           

U.S. Treasury and federal agency securities

   $ 16,267   $ 4,718   $ 54   $ 21,039   $ —   $ 21,039  

State and municipal

     —     3,365     255     3,620     —     3,620  

Foreign government

     53,506     25,870     242     79,618     —     79,618  

Corporate

     —     29,623     1,401     31,024     —     31,024  

Equity securities

     50,389     2,652     557     53,598     —     53,598  

Asset-backed securities

     —     1,405     4,068     5,473     —     5,473  

Other debt securities

     —     9,843     2,825     12,668     —     12,668  
                           

Total trading securities

   $ 120,162   $ 106,095   $ 13,716   $ 239,973   $ —   $ 239,973  
                           

Trading account derivatives

                                      

Interest rate contracts

     39     665,957     3,755     669,751              

Foreign exchange contracts

     31     85,317     1,363     86,711              

Equity contracts

     5,940     18,247     1,011     25,198              

Commodity contracts

     750     8,588     701     10,039              

Credit derivatives

     —     41,907     3,135     45,042              
                               

Total trading account derivatives

   $ 6,760   $ 820,016   $ 9,965   $ 836,741              

Gross cash collateral paid(3)

                     $ 5,349              

Netting agreements

                           $ (755,725 )      

Netting of cash collateral received

                             (34,616 )      
                           

Total trading account derivatives

   $ 6,760   $ 820,016   $ 9,965   $ 842,090   $ (790,341 ) $ 51,749  
                           

Investments

                                      

Mortgage-backed securities

                                      

U.S. government-sponsored agency guaranteed

   $ —   $ 43,468   $ 124   $ 43,592   $ —   $ 43,592  

Residential

     —     10,476     —     10,476     —     10,476  

Commercial

     —     414     4     418     —     418  
                           

Total investment mortgage-backed securities

   $ —   $ 54,358   $ 128   $ 54,486   $ —   $ 54,486  
                           

U.S. Treasury and federal agency securities

   $ 62,455   $ 20,141   $ 9   $ 82,605   $ —   $ 82,605  
                           

 

In millions of dollars at September 30, 2013   Level 1(1)   Level 2(1)   Level 3   Gross
inventory		   Netting(2)   Net
balance		  

State and municipal

   $ —   $ 17,271   $ 726   $ 17,997   $ —   $ 17,997  

Foreign government

     36,965     55,991     326     92,282     —     92,282  

Corporate

     5     11,063     472     11,540     —     11,540  

Equity securities

     2,934     594     799     4,327     —     4,327  

Asset-backed securities

     —     14,431     1,843     16,274     —     16,274  

Other debt securities

     —     366     —     366     —     366  

Non-marketable equity securities

     —     333     5,102     5,435     —     5,435  
                           

Total investments

   $ 101,359   $ 174,548   $ 9,405   $ 285,312   $ —   $ 285,312  
                           

Loans(4)

   $ —   $ 865   $ 4,333   $ 5,198   $ —   $ 5,198  

Mortgage servicing rights

     —     —     2,580     2,580     —     2,580  
                           

Nontrading derivatives and other financial assets measured on a recurring basis, gross

   $ —   $ 11,472   $ 270   $ 11,742              

Cash collateral paid

                     $ 326              

Netting of cash collateral received

                           $ (3,384 )      
                           

Nontrading derivatives and other financial assets measured on a recurring basis

   $ —   $ 11,472   $ 270   $ 12,068   $ (3,384 ) $ 8,684  
                           

Total assets

   $ 228,281   $ 1,341,297   $ 44,036   $ 1,619,289   $ (850,778 ) $ 768,511  

Total as a percentage of gross assets(5)

     14.2 %   83.1 %   2.7 %   100.0 %            
                           

Liabilities

                                      

Interest-bearing deposits

     —     779     868     1,647     —     1,647  

Federal funds purchased and securities loaned or sold under agreements to repurchase

     —     175,585     895     176,480     (57,053 )   119,427  

Trading account liabilities

                                      

Securities sold, not yet purchased

     61,123     10,306     476     71,905           71,905  

Trading account derivatives

                                      

Interest rate contracts

     31     653,656     2,420     656,107              

Foreign exchange contracts

     4     86,077     962     87,043              

Equity contracts

     5,654     26,235     2,342     34,231              

Commodity contracts

     680     9,107     1,198     10,985              

Credit derivatives

     —     41,544     3,175     44,719              
                               

Total trading account derivatives

   $ 6,369   $ 816,619   $ 10,097   $ 833,085              

Cash collateral received(6)

                       8,985              

Netting agreements

                           $ (755,725 )      

Netting of cash collateral paid

                             (36,202 )      
                           

Total trading account derivatives

   $ 6,369   $ 816,619   $ 10,097   $ 842,070   $ (791,927 ) $ 50,143  

Short-term borrowings

     —     4,332     163     4,495     —     4,495  

Long-term debt

     —     20,451     6,173     26,624     —     26,624  
                           

Nontrading derivatives and other financial liabilities measured on a recurring basis, gross

   $ —   $ 2,132   $ 17   $ 2,149              

Cash collateral received(7)

                     $ 276              

Total nontrading derivatives and other financial liabilities measured on a recurring basis

     —     2,132     17     2,425           2,425  
                           

Total liabilities

   $ 67,492   $ 1,030,204   $ 18,689   $ 1,125,646   $ (848,980 ) $ 276,666  

Total as a percentage of gross liabilities(5)

     6.0 %   92.3 %   1.7 %   100.0 %            
                           
(1)
For the three and nine months ended September 30, 2013, the Company transferred assets of approximately $47 million and $1.0 billion, respectively, from Level 1 to Level 2. During the three and nine months ended September 30, 2013, the Company transferred assets of approximately $33 million and $49.1 billion, respectively, from Level 2 to Level 1. Almost all of the transfers during the nine months ended September 2013 were related to U.S. Treasury securities held across the Company's major investment portfolios where Citi obtained additional information from its external pricing sources to meet the criteria for Level 1 classification. During the three and nine months ended September 30, 2013, the Company transferred liabilities of $2 million and $27 million, respectively, from Level 1 to Level 2, and $5 million and $60 million, respectively from Level 2 to Level 1.

(2)
Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.

(3)
This is the net amount of the $41,551 million of gross cash collateral paid, of which $36,202 million was used to offset derivative liabilities.

(4)
There is no allowance for loan losses recorded for loans reported at fair value.

(5)
Percentage is calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding collateral paid/received on derivatives.

(6)
This is the net amount of the $43,601 million of gross cash collateral received, of which $34,616 million was used to offset derivative assets.

(7)
This is the net amount of the $3,660 million of gross cash collateral received, of which $3,384 million was used to offset derivative assets.

Fair Value Levels  
In millions of dollars at December 31, 2012   Level 1(1)   Level 2(1)   Level 3   Gross
inventory		   Netting(2)   Net
balance		  

Assets

                                      

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ —   $ 198,278   $ 5,043   $ 203,321   $ (42,732 ) $ 160,589  

Trading securities

                                      

Trading mortgage-backed securities

                                      

U.S. government-sponsored agency guaranteed

     —     29,835     1,325     31,160     —     31,160  

Residential

     —     1,663     1,805     3,468     —     3,468  

Commercial

     —     1,322     1,119     2,441     —     2,441  
                           

Total trading mortgage-backed securities

   $ —   $ 32,820   $ 4,249   $ 37,069   $ —   $ 37,069  
                           

U.S. Treasury and federal agency securities

   $ 15,416   $ 4,940   $ —   $ 20,356   $ —   $ 20,356  

State and municipal

     —     3,611     195     3,806     —     3,806  

Foreign government

     57,831     31,097     311     89,239     —     89,239  

Corporate

     —     33,194     2,030     35,224     —     35,224  

Equity securities

     54,640     2,094     264     56,998     —     56,998  

Asset-backed securities

     —     899     4,453     5,352     —     5,352  

Other debt securities

     —     15,944     2,321     18,265     —     18,265  
                           

Total trading securities

   $ 127,887   $ 124,599   $ 13,823   $ 266,309   $ —   $ 266,309  
                           

Trading account derivatives

                                      

Interest rate contracts

   $ 2   $ 897,635   $ 1,710   $ 899,347              

Foreign exchange contracts

     18     75,358     902     76,278              

Equity contracts

     2,359     14,109     1,741     18,209              

Commodity contracts

     410     9,752     695     10,857              

Credit derivatives

     —     49,858     4,166     54,024              
                               

Total trading account derivatives

   $ 2,789   $ 1,046,712   $ 9,214   $ 1,058,715              

Gross cash collateral paid(3)

                       5,597              

Netting agreements

                           $ (970,782 )      

Netting of cash collateral received

                             (38,910 )      
                           

Total trading account derivatives

   $ 2,789   $ 1,046,712   $ 9,214   $ 1,064,312   $ (1,009,692 ) $ 54,620  
                           

Investments

                                      

Mortgage-backed securities

                                      

U.S. government-sponsored agency guaranteed

   $ 46   $ 45,841   $ 1,458   $ 47,345   $ —   $ 47,345  

Residential

     —     7,472     205     7,677     —     7,677  

Commercial

     —     449     —     449     —     449  
                           

Total investment mortgage-backed securities

   $ 46   $ 53,762   $ 1,663   $ 55,471   $ —   $ 55,471  
                           

U.S. Treasury and federal agency securities

   $ 13,204   $ 78,625   $ 12   $ 91,841   $ —   $ 91,841  
                           

 

In millions of dollars at December 31, 2012   Level 1(1)   Level 2(1)   Level 3   Gross
inventory		   Netting(2)   Net
balance		  

State and municipal

   $ —   $ 17,483   $ 849   $ 18,332   $ —   $ 18,332  

Foreign government

     36,048     57,616     383     94,047     —     94,047  

Corporate

     —     9,289     385     9,674     —     9,674  

Equity securities

     4,037     132     773     4,942     —     4,942  

Asset-backed securities

     —     11,910     2,220     14,130     —     14,130  

Other debt securities

     —     —     258     258     —     258  

Non-marketable equity securities

     —     404     5,364     5,768     —     5,768  
                           

Total investments

   $ 53,335   $ 229,221   $ 11,907   $ 294,463   $ —   $ 294,463  
                           

Loans(3)

   $ —   $ 356   $ 4,931   $ 5,287   $ —   $ 5,287  

Mortgage servicing rights

     —     —     1,942     1,942     —     1,942  
                           

Nontrading derivatives and other financial assets measured on a recurring basis, gross

   $ —   $ 15,293   $ 2,452   $ 17,745              

Cash collateral paid

                       214              

Netting of cash collateral received

                           $ (4,660 )      
                           

Nontrading derivatives and other financial assets measured on a recurring basis

   $ —   $ 15,293   $ 2,452   $ 17,959   $ (4,660 ) $ 13,299  
                           

Total assets

   $ 184,011   $ 1,614,459   $ 49,312   $ 1,853,593   $ (1,057,084 ) $ 796,509  

Total as a percentage of gross assets(5)

     9.9 %   87.4 %   2.7 %   100.0 %            
                           

Liabilities

                                      

Interest-bearing deposits

   $ —   $ 661   $ 786   $ 1,447   $ —   $ 1,447  

Federal funds purchased and securities loaned or sold under agreements to repurchase

     —     158,580     841     159,421     (42,732 )   116,689  

Trading account liabilities

                                      

Securities sold, not yet purchased

     55,145     8,288     365     63,798           63,798  

Trading account derivatives

                                      

Interest rate contracts

   $ 1   $ 890,362   $ 1,529   $ 891,892              

Foreign exchange contracts

     10     81,137     902     82,049              

Equity contracts

     2,664     25,986     3,189     31,839              

Commodity contracts

     317     10,348     1,466     12,131              

Credit derivatives

     —     47,746     4,508     52,254              
                               

Total trading account derivatives

   $ 2,992   $ 1,055,579   $ 11,594   $ 1,070,165              

Cash collateral received(6)

                       7,923              

Netting agreements

                           $ (970,782 )      

Netting of cash collateral paid

                             (55,555 )      
                           

Total trading account derivatives

   $ 2,992   $ 1,055,579   $ 11,594   $ 1,078,088   $ (1,026,337 ) $ 51,751  

Short-term borrowings

     —     706     112     818     —     818  

Long-term debt

     —     23,038     6,726     29,764     —     29,764  
                           

Nontrading derivatives and other financial liabilities measured on a recurring basis, gross

   $ —   $ 2,228   $ 24   $ 2,252              

Cash collateral received(7)

                     $ 658              

Nontrading derivatives and other financial liabilities measured on a recurring basis

   $ —   $ 2,228   $ 24   $ 2,910   $ —   $ 2,910  
                           

Total liabilities

   $ 58,137   $ 1,249,080   $ 20,448   $ 1,336,246   $ (1,069,069 ) $ 267,177  

Total as a percentage of gross liabilities(5)

     4.4 %   94.1 %   1.5 %   100.0 %            
(1)
For both the three months and nine months ended September 30, 2012, the Company transferred assets of $0.3 billion and $1.3 billion, respectively, from Level 1 to Level 2, primarily related to foreign government bonds which were traded with less frequency. During the three months and nine months ended September 30, 2012, the Company transferred assets of $0.5 billion and $1.0 billion, respectively, from Level 2 to Level 1 related primarily to foreign government bonds, which were traded with sufficient frequency to constitute a liquid market. During the three months and nine months ended September 30, 2012, the Company transferred liabilities of $5 million and $24 million, respectively, from Level 1 to Level 2, and $99 million and $134 million, respectively, from Level 2 to Level 1.

(2)
Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreement and cash collateral offsetting.

(3)
This is the net amount of the $61,152 million of gross cash collateral paid, of which $55,555 million was used to offset derivative liabilities.

(4)
There is no allowance for loan losses recorded for loans reported at fair value.

(5)
Percentage is calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding collateral paid/received on derivatives.

(6)
This is the net amount of the $46,833 million of gross cash collateral received, of which $38,910 million was used to offset derivative assets.

(7)
This is the net amount of the $5,318 million of gross cash collateral received, of which $4,660 million was used to offset derivative liabilities.

Changes in Level 3 Fair Value Category

        The following tables present the changes in the Level 3 fair value category for the three and nine months ended September 30, 2013 and 2012. As discussed above, the Company classifies financial instruments as Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. The gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

        The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables.

Level 3 Fair Value Rollforward

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2013		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		  

Assets

                                                                    

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 4,177   $ 70   $ —   $ 29   $ (534 ) $ 25   $ —   $ —   $ —   $ 3,767   $ (5 )

Trading securities

                                                                    

Trading mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 1,704   $ 43   $ —   $ 295   $ (453 ) $ 160   $ 6   $ (320 ) $ (195 ) $ 1,240   $ 4  

Residential

     2,938     99     —     61     (132 )   1,049     —     (1,320 )   —     2,695     16  

Commercial

     326     24     —     109     (54 )   58     —     (84 )   —     379     (48 )
                                               

Total trading mortgage-backed securities

   $ 4,968   $ 166   $ —   $ 465   $ (639 ) $ 1,267   $ 6   $ (1,724 ) $ (195 ) $ 4,314   $ (28 )
                                               

U.S. Treasury and federal agency securities

   $ —   $ —   $ —   $ 54   $ —   $ —   $ —   $ —   $ —   $ 54   $ 2  

State and municipal

     241     9     —     2     —     11     —     (8 )   —     255     4  

Foreign government

     240     (3 )   —     7     —     83     —     (85 )   —     242     1  

Corporate

     1,688     62     —     129     (240 )   408     —     (642 )   (4 )   1,401     44  

Equity securities

     190     (38 )   —     132     (25 )   331     —     (33 )   —     557     72  

Asset-backed securities

     4,259     99     —     14     (88 )   748     —     (964 )   —     4,068     100  

Other debt securities

     2,276     59     —     2     (84 )   721     —     (98 )   (51 )   2,825     12  
                                               

Total trading securities

   $ 13,862   $ 354   $ —   $ 805   $ (1,076 ) $ 3,569   $ 6   $ (3,554 ) $ (250 ) $ 13,716   $ 207  
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2013		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		  

Trading derivatives, net(4)

                                                                    

Interest rate contracts

     1,083     232     —     (47 )   (121 )   65     —     (33 )   156     1,335     530  

Foreign exchange contracts

     367     39     —     (1 )   (9 )   6     —     (1 )   —     401     (15 )

Equity contracts

     (1,092 )   (224 )   —     (13 )   (46 )   60     —     (69 )   53     (1,331 )   (814 )

Commodity contracts

     (218 )   (223 )   —     (12 )   32     —     —     —     (76 )   (497 )   (332 )

Credit derivatives

     (41 )   (108 )   —     24     (6 )   7     —     —     84     (40 )   (475 )
                                               

Total trading derivatives, net(4)

   $ 99   $ (284 ) $ —   $ (49 ) $ (150 ) $ 138   $ —   $ (103 ) $ 217   $ (132 ) $ (1,106 )
                                               

Investments

                                                                    

Mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 420   $ —   $ (12 ) $ 80   $ (371 ) $ 44   $ —   $ (37 ) $ —   $ 124   $ 9  

Residential

     —     —     —     —     —     —     —     —     —     —     —  

Commercial

     3     —     —     1     —     —     —     —     —     4     —  
                                               

Total investment mortgage-backed securities

   $ 423   $ —   $ (12 ) $ 81   $ (371 ) $ 44   $ —   $ (37 ) $ —   $ 128   $ 9  
                                               

U.S. Treasury and federal agency securities

   $ 9   $ —   $ —   $ —   $ —   $ —   $ —   $ —   $ —   $ 9   $ —  

State and municipal

     684     —     6     5     —     54     —     (23 )   —     726     2  

Foreign government

     367     —     3     63     (55 )   105     —     (140 )   (17 )   326     (28 )

Corporate

     404     —     17     42     —     85     —     (75 )   (1 )   472     8  

Equity securities

     779     —     34     —     (1 )   —     —     (13 )   —     799     33  

Asset-backed securities

     1,758     —     14     —     —     180     —     (14 )   (95 )   1,843     29  

Other debt securities

     51     —     —     —     —     —     —     (51 )   —     —     —  

Non-marketable equity securities

     5,363     —     111     —     —     68     —     —     (440 )   5,102     100  
                                               

Total investments

   $ 9,838   $ —   $ 173   $ 191   $ (427 ) $ 536   $ —   $ (353 ) $ (553 ) $ 9,405   $ 153  
                                               


 

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2013		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		  

Loans

   $ 4,321   $ —   $ (19 ) $ —   $ —   $ —   $ 631   $ —   $ (600 ) $ 4,333   $ (33 )

Mortgage servicing rights

   $ 2,524   $ —   $ (6 ) $ —   $ —   $ —   $ 166   $ —   $ (104 ) $ 2,580   $ (10 )

Other financial assets measured on a recurring basis

   $ 245   $ —   $ 45   $ —   $ —   $ —   $ 107   $ (31 ) $ (96 ) $ 270   $ 41  
                                               

Liabilities

                                                                    

Interest-bearing deposits

   $ 831   $ —   $ (19 ) $ —   $ —   $ —   $ 23   $ —   $ (5 ) $ 868   $ (8 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

     1,007     14     —     15     —     —     —     —     (113 )   895     6  

Trading account liabilities

                                                                    

Securities sold, not yet purchased

     450     40     —     30     (10 )   —     —     182     (136 )   476     —  

Short-term borrowings

     335     (1 )   —     2     —     —     25     —     (200 )   163     (42 )

Long-term debt

     6,811     (309 )   44     375     (1,016 )   —     54     —     (316 )   6,173     (349 )

Other financial liabilities measured on a recurring basis

     95     —     (23 )   —     —     —     10     —     (111 )   17     (23 )
                                               
(1)
Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income (loss), unless other-than-temporarily impaired, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)
Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income.

(3)
Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2013.

(4)
Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

 
    
   Net realized/unrealized
gains (losses) incl. in		   Transfers    
    
    
    
    
    
  
In millions of dollars   Dec. 31,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		   Unrealized
gains (losses)
still held(3)		  

Assets

                                                                    

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 5,043   $ (93 ) $ —   $ 627   $ (1,852 ) $ 42   $ —   $ —   $ —   $ 3,767   $ 476  

Trading securities

                                                                    

Trading mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 1,325   $ 119   $ —   $ 1,032   $ (1,158 ) $ 1,129   $ 61   $ (1,027 ) $ (241 ) $ 1,240     47  

Residential

     1,805     457     —     378     (344 )   2,947     —     (2,541 )   (7 )   2,695     107  

Commercial

     1,119     116     —     264     (238 )   204     —     (1,069 )   (17 )   379     7  
                                               

Total trading mortgage-backed securities

   $ 4,249   $ 692   $ —   $ 1,674   $ (1,740 ) $ 4,280   $ 61   $ (4,637 ) $ (265 ) $ 4,314   $ 161  
                                               

U.S. Treasury and federal agency securities

   $ —   $ —   $ —   $ 54   $ —   $ —   $ —   $ —   $ —   $ 54   $ 2  

State and municipal

     195     28     —     2     —     86     —     (56 )   —     255     2  

Foreign government

     311     (5 )   —     60     (61 )   200     —     (263 )   —     242     1  

Corporate

     2,030     32     —     267     (340 )   1,787     —     (1,461 )   (914 )   1,401     (375 )

Equity securities

     264     (34 )   —     180     (184 )   471     —     (140 )   —     557     347  

Asset-backed securities

     4,453     467     —     100     (143 )   3,780     —     (4,372 )   (217 )   4,068     80  

Other debt securities

     2,321     165     —     510     (1,082 )   2,254     —     (1,094 )   (249 )   2,825     6  
                                               

Total trading securities

   $ 13,823   $ 1,345   $ —   $ 2,847   $ (3,550 ) $ 12,858   $ 61   $ (12,023 ) $ (1,645 ) $ 13,716   $ 224  
                                               

Trading derivatives, net(4)

                                                                    

Interest rate contracts

     181     544     —     702     (13 )   208     —     (115 )   (172 )   1,335   $ 1,430  

Foreign exchange contracts

     —     350     —     29     (6 )   21     —     (9 )   16     401     (183 )

Equity contracts

     (1,448 )   37     —     (37 )   300     176     —     (125 )   (234 )   (1,331 )   (1,652 )

Commodity contracts

     (771 )   188     —     (5 )   37     15     —     (25 )   64     (497 )   108  

Credit derivatives

     (342 )   (254 )   —     134     (184 )   19     —     —     587     (40 )   (444 )
                                               

Total trading derivatives, net(4)

   $ (2,380 ) $ 865   $ —   $ 823   $ 134   $ 439   $ —   $ (274 ) $ 261   $ (132 ) $ (741 )
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		   Transfers    
    
    
    
    
    
  
In millions of dollars   Dec. 31,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		   Unrealized
gains (losses)
still held(3)		  

Investments

                                                                    

Mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 1,458   $ —   $ (10 ) $ 1,977   $ (3,721 ) $ 514   $ —   $ (37 ) $ (57 ) $ 124   $ 9  

Residential

     205     —     23     60     (265 )   117     —     (140 )   —     —     —  

Commercial

     —     —     —     4     (12 )   12     —     —     —     4     —  
                                               

Total investment mortgage-backed securities

   $ 1,663   $ —   $ 13   $ 2,041   $ (3,998 ) $ 643   $ —   $ (177 ) $ (57 ) $ 128   $ 9  
                                               

U.S. Treasury and federal agency securities

   $ 12   $ —   $ —   $ —   $ —   $ —   $ —   $ (3 ) $ —   $ 9     —  

State and municipal

     849     —     4     12     (117 )   261     —     (158 )   (125 )   726     (3 )

Foreign government

     383     —     (1 )   168     (256 )   394     —     (291 )   (71 )   326     (36 )

Corporate

     385     —     14     333     (116 )   101     —     (222 )   (23 )   472     4  

Equity securities

     773     —     31     17     (1 )   1     —     (22 )   —     799     30  

Asset-backed securities

     2,220     —     64     1,192     (1,684 )   1,105     —     (31 )   (1,023 )   1,843     4  

Other debt securities

     258     —     —     —     (205 )   —     —     (53 )   —     —     —  

Non-marketable equity securities

     5,364     —     289     —     —     621     —     (83 )   (1,089 )   5,102     271  
                                               

Total investments

   $ 11,907   $ —   $ 414   $ 3,763   $ (6,377 ) $ 3,126   $ —   $ (1,040 ) $ (2,388 ) $ 9,405   $ 279  
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		   Transfers    
    
    
    
    
    
  
In millions of dollars   Dec. 31,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2013		   Unrealized
gains (losses)
still held(3)		  

Loans

   $ 4,931   $ —   $ (97 ) $ 353   $ —   $ 59   $ 644   $ (6 ) $ (1,551 ) $ 4,333   $ (99 )

Mortgage servicing rights

   $ 1,942   $ —   $ 411   $ —   $ —   $ —   $ 543   $ (1 ) $ (315 ) $ 2,580     181  

Other financial assets measured on a recurring basis

   $ 2,452   $ —   $ 51   $ 1   $ —   $ 216   $ 447   $ (2,041 ) $ (856 ) $ 270     266  
                                               

Liabilities

                                                                    

Interest-bearing deposits

   $ 786   $ —   $ (86 ) $ 22   $ —   $ —   $ 86   $ —   $ (112 ) $ 868     (298 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

     841     74     —     216     (15 )   —     —     40     (113 )   895     35  

Trading account liabilities

                                                                    

Securities sold, not yet purchased

     365     51     —     54     (21 )   —     —     358     (229 )   476     132  

Short-term borrowings

     112     25     —     2     (4 )   —     316     —     (238 )   163     (40 )

Long-term debt

     6,726     62     113     1,740     (2,030 )   —     959     (1 )   (1,046 )   6,173     (1,027 )

Other financial liabilities measured on a recurring basis

     24     —     (208 )   5     (2 )   (3 )   100     —     (315 )   17     (26 )
                                               
(1)
Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income (loss), unless other-than-temporarily impaired, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)
Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income.

(3)
Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2013.

(4)
Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Assets

                                                                    

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 4,414   $ 5   $ —   $ 258   $ —   $ —   $ —   $ —   $ —   $ 4,677   $ —  

Trading securities

                                                                    

Trading mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 895   $ (12 ) $ —   $ 135   $ (199 ) $ 97   $ 17   $ (217 ) $ (32 ) $ 684   $ (21 )

Residential

     1,945     116     —     243     (78 )   84     —     (435 )   (4 )   1,871     18  

Commercial

     416     (1 )   —     163     (29 )   38     —     (63 )   —     524     1  
                                               

Total trading mortgage-backed securities

   $ 3,256   $ 103   $ —   $ 541   $ (306 ) $ 219   $ 17   $ (715 ) $ (36 ) $ 3,079   $ (2 )
                                               

U.S. Treasury and federal agency securities

   $ 13   $ —   $ —   $ —   $ —   $ —   $ —   $ (13 ) $ —   $ —   $ —  
                                               

State and municipal

   $ 223   $ 13   $ —   $ 4   $ —   $ 20   $ —   $ (12 ) $ —   $ 248   $ 5  

Foreign government

     333     1     —     14     (124 )   39     —     (65 )   —     198     3  

Corporate

     2,189     —     —     43     (58 )   392     —     (215 )   —     2,351     1  

Equity securities

     217     13     —     30     (4 )   52     —     (21 )   (44 )   243     (7 )

Asset-backed securities

     4,835     212     —     24     (43 )   2,030     —     (1,933 )   (3 )   5,122     162  

Other debt securities

     2,266     (7 )   —     324     (143 )   781     —     (749 )   (58 )   2,414     2  
                                               

Total trading securities

   $ 13,332   $ 335   $ —   $ 980   $ (678 ) $ 3,533   $ 17   $ (3,723 ) $ (141 ) $ 13,655   $ 164  
                                               

Trading derivatives, net(4)

                                                                    

Interest rate contracts

     619     (188 )   —     172     (275 )   23     —     (19 )   (454 )   (122 )   194  

Foreign exchange contracts

     (517 )   50     —     (70 )   (17 )   2     —     (6 )   (32 )   (590 )   (85 )

Equity contracts

     (1,587 )   —     —     (84 )   20     101     —     (163 )   84     (1,629 )   (328 )

Commodity contracts

     (902 )   (12 )   —     (15 )   —     25     —     (2 )   (8 )   (914 )   216  

Credit derivatives

     298     (775 )   —     45     (70 )   2     —     —     39     (461 )   (80 )
                                               

Total trading derivatives, net(4)

   $ (2,089 ) $ (925 ) $ —   $ 48   $ (342 ) $ 153   $ —   $ (190 ) $ (371 ) $ (3,716 ) $ (83 )
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Investments

                                                                    

Mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 1,399   $ —   $ 10   $ 472   $ (1,257 ) $ 580   $ —   $ —   $ —   $ 1,204   $ 55  

Residential

     11     —     3     203     —     37     —     (11 )   —     243     —  

Commercial

     5     —     —     —     (5 )   —     —     —     —     —     —  
                                               

Total investment mortgage-backed securities

   $ 1,415   $ —   $ 13   $ 675   $ (1,262 ) $ 617   $ —   $ (11 ) $ —   $ 1,447   $ 55  
                                               

U.S. Treasury and federal agency securities

   $ —   $ —   $ —   $ 75   $ —   $ 12   $ —   $ —   $ —   $ 87   $ —  

State and municipal

     480     —     (4 )   —     —     118     —     (3 )   —     591     6  

Foreign government

     329     —     (3 )   68     (80 )   127     —     (26 )   (34 )   381     1  

Corporate

     421     —     (6 )   23     (2 )   7     —     (66 )   (40 )   337     (4 )

Equity securities

     1,180     —     52     —     —     —     —     (54 )   (120 )   1,058     28  

Asset-backed securities

     2,771     —     (170 )   402     (11 )   755     —     (27 )   (368 )   3,352     (170 )

Other debt securities

     55     —     (53 )   —     —     52     —     —     —     54     —  

Non-marketable equity securities

     6,278     —     232     —     —     76     —     (1,734 )   (68 )   4,784     34  
                                               

Total investments

   $ 12,929   $ —   $ 61   $ 1,243   $ (1,355 ) $ 1,764   $ —   $ (1,921 ) $ (630 ) $ 12,091   $ (50 )
                                               


 

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Jun. 30,
2012		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Loans

   $ 4,737   $ —   $ 79   $ 87   $ —   $ 142   $ 415   $ (144 ) $ (252 ) $ 5,064   $ 15  

Mortgage servicing rights

   $ 2,117   $ —   $ (169 ) $ —   $ —   $ —   $ 101   $ —   $ (129 ) $ 1,920   $ (169 )

Other financial assets measured on a recurring basis

   $ 2,375   $ —   $ 207   $ 13   $ —   $ 1   $ 635   $ (4 ) $ (562 ) $ 2,665   $ 207  
                                               

Liabilities

                                                                    

Interest-bearing deposits

   $ 698   $ —   $ (85 ) $ —   $ (36 ) $ —   $ 71   $ —   $ (57 ) $ 761   $ —  

Federal funds purchased and securities loaned or sold under agreements to repurchase

     1,045     (24 )   —     —     (14 )   —     —     (215 )   1     841     4  

Trading account liabilities

                                                                    

Securities sold, not yet purchased

     148     16     —     13     (12 )   —     —     24     (32 )   125     9  

Short-term borrowings

     367     (20 )   —     43     —     —     66     —     (397 )   99     (10 )

Long-term debt

     5,952     (135 )   8     363     (216 )   —     648     —     (408 )   6,466     (245 )

Other financial liabilities measured on a recurring basis

     2     —     (3 )   —     —     —     1     (1 )   (2 )   3     (3 )
                                               
(1)
Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income (loss) unless other-than-temporarily impaired, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)
Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income. See Note 12 to the Consolidated Financial Statements for a discussion of other-than-temporary impairment.

(3)
Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2012.

(4)
Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Dec. 31,
2011		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Assets

                                                                    

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 4,701   $ 70   $ —   $ 283   $ (377 ) $ —   $ —   $ —   $ —   $ 4,677   $ —  

Trading securities

                                                                    

Trading mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 861   $ 21   $ —   $ 673   $ (544 ) $ 352   $ 62   $ (631 ) $ (110 ) $ 684   $ (27 )

Residential

     1,509     196     —     703     (378 )   1,401     —     (1,553 )   (7 )   1,871     13  

Commercial

     618     (71 )   —     254     (217 )   353     —     (413 )   —     524     12  
                                               

Total trading mortgage-backed securities

   $ 2,988   $ 146   $ —   $ 1,630   $ (1,139 ) $ 2,106   $ 62   $ (2,597 ) $ (117 ) $ 3,079   $ (2 )
                                               

U.S. Treasury and federal agency securities

   $ 3   $ —   $ —   $ —   $ —   $ 13   $ —   $ (16 ) $ —   $ —   $ —  
                                               

State and municipal

   $ 252   $ 30   $ —   $ 4   $ (7 ) $ 48   $ —   $ (79 ) $ —   $ 248   $ 3  

Foreign government

     521     5     —     26     (864 )   881     —     (371 )   —     198     2  

Corporate

     3,240     9     —     391     (449 )   2,148     —     (1,614 )   (1,374 )   2,351     (40 )

Equity securities

     244     (58 )   —     49     (17 )   256     —     (163 )   (68 )   243     (27 )

Asset-backed securities

     5,801     434     —     189     (104 )   5,690     —     (6,226 )   (662 )   5,122     126  

Other debt securities

     2,743     15     —     964     (1,566 )   2,143     —     (1,630 )   (255 )   2,414     —  
                                               

Total trading securities

   $ 15,792   $ 581   $ —   $ 3,253   $ (4,146 ) $ 13,285   $ 62   $ (12,696 ) $ (2,476 ) $ 13,655   $ 62  
                                               

Trading derivatives, net(4)

                                                                    

Interest rate contracts

     726     (46 )   —     295     (394 )   239     —     (158 )   (784 )   (122 )   (169 )

Foreign exchange contracts

     (562 )   130     —     (152 )   29     190     —     (203 )   (22 )   (590 )   (14 )

Equity contracts

     (1,737 )   199     —     (120 )   387     304     —     (498 )   (164 )   (1,629 )   (581 )

Commodity contracts

     (934 )   (51 )   —     (20 )   45     98     —     (80 )   28     (914 )   (55 )

Credit derivatives

     1,728     (2,227 )   —     (85 )   (129 )   116     —     (10 )   146     (461 )   (926 )
                                               

Total trading derivatives, net(4)

   $ (779 ) $ (1,995 ) $ —   $ (82 ) $ (62 ) $ 947   $ —   $ (949 ) $ (796 ) $ (3,716 ) $ (1,745 )
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Dec. 31,
2011		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Investments

                                                                    

Mortgage-backed securities

                                                                    

U.S. government-sponsored agency guaranteed

   $ 679   $ —   $ 6   $ 472   $ (2,778 ) $ 2,825   $ —   $ —   $ —   $ 1,204   $ 55  

Residential

     8     —     3     203     (6 )   46     —     (11 )   —     243     —  

Commercial

     —     —     —     —     (11 )   11     —     —     —     —     —  
                                               

Total investment mortgage-backed securities

   $ 687   $ —   $ 9   $ 675   $ (2,795 ) $ 2,882   $ —   $ (11 ) $ —   $ 1,447   $ 55  
                                               

U.S. Treasury and federal agency securities

   $ 75   $ —   $ —   $ 75   $ (75 ) $ 12   $ —   $ —   $ —   $ 87   $ —  

State and municipal

     667     —     9     —     (151 )   276     —     (210 )   —     591     (3 )

Foreign government

     447     —     13     148     (236 )   328     —     (216 )   (103 )   381     3  

Corporate

     989     —     (11 )   68     (698 )   136     —     (102 )   (45 )   337     5  

Equity securities

     1,453     —     101     —     —     —     —     (228 )   (268 )   1,058     16  

Asset-backed securities

     4,041     —     (160 )   402     (54 )   767     —     (77 )   (1,567 )   3,352     1  

Other debt securities

     120     —     (53 )   —     —     52     —     (64 )   (1 )   54     —  

Non-marketable equity securities

     8,318     —     411     —     —     343     —     (3,204 )   (1,084 )   4,784     139  
                                               

Total investments

   $ 16,797   $ —   $ 319   $ 1,368   $ (4,009 ) $ 4,796   $ —   $ (4,112 ) $ (3,068 ) $ 12,091   $ 216  
                                               

 
    
   Net realized/unrealized
gains (losses) incl. in		    
    
    
    
    
    
    
    
  
 
    
   Transfers    
    
    
    
    
    
  
 
    
    
    
    
    
    
   Unrealized
gains
(losses)
still held(3)		  
In millions of dollars   Dec. 31,
2011		   Principal
transactions		   Other(1)(2)   into
Level 3		   out of
Level 3		   Purchases   Issuances   Sales   Settlements   Sep. 30,
2012		  

Loans

   $ 4,682   $ —   $ 17   $ 1,004   $ (25 ) $ 249   $ 930   $ (239 ) $ (1,554 ) $ 5,064   $ 65  

Mortgage servicing rights

   $ 2,569   $ —   $ (462 ) $ —   $ —   $ 2   $ 322   $ (5 ) $ (506 ) $ 1,920   $ (464 )

Other financial assets measured on a recurring basis

   $ 2,245   $ —   $ 305   $ 21   $ (31 ) $ 3   $ 1,264   $ (46 ) $ (1,096 ) $ 2,665   $ 235  
                                               

Liabilities

                                                                    

Interest-bearing deposits

   $ 431   $ —   $ (105 ) $ 213   $ (36 ) $ —   $ 251   $ —   $ (203 ) $ 761   $ (142 )

Federal funds purchased and securities loaned or sold under agreements to repurchase

     1,061     (89 )   —     —     (14 )   —     —     (211 )   (84 )   841     36  

Trading account liabilities

                                                                    

Securities sold, not yet purchased

     412     (44 )   —     18     (43 )   —     —     164     (470 )   125     (40 )

Short-term borrowings

     499     (76 )   —     46     (11 )   —     261     —     (772 )   99     (26 )

Long-term debt

     6,904     6     89     712     (1,122 )   —     1,823     —     (1,756 )   6,466     (534 )

Other financial liabilities measured on a recurring basis

     3     —     (5 )   —     —     (2 )   2     (1 )   (4 )   3     (2 )
                                               
(1)
Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income (loss) unless other-than-temporarily impaired, while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)
Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income. See Note 12 to the Consolidated Financial Statements for a discussion of other-than-temporary impairment.

(3)
Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at September 30, 2012.

(4)
Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

Level 3 Fair Value Rollforward

        The following were the significant Level 3 transfers from June 30, 2013 to September 30, 2013:

  • •
    Transfers of Long-term debt of $1.0 billion from Level 3 to Level 2 related mainly to structured debt, related to certain underlying market inputs becoming more observable as well as unobservable inputs used in the valuation becoming not significant.

        The following were the significant Level 3 transfers from December 31, 2012 to September 30, 2013:

  • •
    Transfers of Federal funds sold and securities borrowed or purchased under agreements to resell of $1.9 billion from Level 3 to Level 2 related to shortening of the remaining tenor of certain reverse repos. There is more transparency and observability for repo curves used in the valuation of structured reverse repos with tenors up to five years; thus, structured reverse repos maturing within five years are generally classified as Level 2.

    •
    Transfers of U.S. government-sponsored agency guaranteed mortgage-backed securities in Investments of $2.0 billion from Level 2 to Level 3, and of $3.7 billion from Level 3 to Level 2, due to changes in the level of price observability for the specific securities. Similarly, there were transfers of U.S. government-sponsored agency guaranteed mortgage-backed securities in Trading securities of $1.0 billion from Level 2 to Level 3, and of $1.2 billion from Level 3 to Level 2.

    •
    Transfers of asset-backed securities in Investments of $1.2 billion from Level 2 to Level 3, and of $1.7 billion from Level 3 to Level 2. These transfers were related to collateralized loan obligations, reflecting changes in the level of price observability.

    •
    Transfers of Long-term debt of $1.7 billion from Level 2 to Level 3, and of $2.0 billion from Level 3 to Level 2, related mainly to structured debt reflecting changes in the significance of unobservable inputs as well as certain underlying market inputs becoming less or more observable.

        The following were the significant Level 3 transfers for the period June 30, 2012 to September 30, 2012:

  • •
    Approximately $1.3 billion of U.S. government-sponsored agency guaranteed mortgage backed securities in Investments were newly issued at June 30, 2012, and therefore had limited trading activity and were previously classified as Level 3. As trading activity in these securities increased and pricing became observable, these positions were transferred to Level 2.

        The following were the significant Level 3 transfers for the period December 31, 2011 to September 30, 2012:

  • •
    Transfers of $2.8 billion of U.S. government-sponsored agency guaranteed mortgage backed securities in Investments from Level 3 to Level 2, including newly issued securities previously classified as Level 3. As trading activity in these securities increased and pricing became observable, these positions were transferred to Level 2.

    •
    Transfers of other debt trading securities from Level 2 to Level 3 of $1.0 billion, the majority of which consisted of trading loans for which there was a reduced number of contributors to external pricing services. Transfers of other debt trading securities out of Level 3 of $1.6 billion were primarily driven by amounts reclassified to Level 3 positions within Loans to conform with the balance sheet presentation. The reclassification is also reflected as transfers into Level 3 within loans in the rollforward table above.

    •
    Transfers of Long-term debt of $1.1 billion from Level 3 to Level 2 related mainly to structured debt for which the underlyings became more observable.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements

        The Company's Level 3 inventory consists of both cash securities and derivatives of varying complexities. The valuation methodologies applied to measure the fair value of these positions include discounted cash flow analyses, internal models and comparative analysis. A position is classified within Level 3 of the fair value hierarchy when at least one input is unobservable and is considered significant to its valuation. The specific reason an input is deemed unobservable varies. For example, at least one significant input to the pricing model is not observable in the market, at least one significant input has been adjusted to make it more representative of the position being valued, or the price quote available does not reflect sufficient trading activities.

        The following tables present the valuation techniques covering the majority of Level 3 inventory and the most significant unobservable inputs used in Level 3 fair value measurements as of September 30, 2013 and December 31, 2012. Differences between this table and amounts presented in the Level 3 Fair Value Rollforward table represent individually immaterial items that have been measured using a variety of valuation techniques other than those listed.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements

As of September 30, 2013
  Fair Value(1)
(in millions)		   Methodology   Input   Low(2)(3)   High(2)(3)   Weighted
Average(4)		  

Assets

                                  

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 3,491   Cash flow   Interest rate     1.14 %   2.17 %   1.87 %

             Yield     1.60 %   4.50 %   2.10 %

Trading and investment securities

   $ 2,906   Price-based   Price   $ 0.10   $ 149.16   $ 75.75  

Mortgage-backed securities

     1,231   Yield analysis   Yield     0.01 %   23.17 %   6.37 %

State and municipal, foreign government, corporate and other debt securities

   $ 4,393   Price-based   Price   $ 0.00   $ 116.75   $ 79.10  

     1,109   Cash flow   Credit spread     25 bps     600 bps     256 bps  

Equity securities

   $ 814   Cash flow   Weighted-average life (WAL)     0.01 years     3.53 years     1.37 years  

 

     534   Price-based   Yield     4.00 %   5.00 %   4.50 %

 

             Price(5)   $ 0.00   $ 100.00   $ 72.79  

Asset-backed securities

   $ 4,337   Price-based   Price   $ 0.00   $ 133.32   $ 69.17  

     1,271   Model-based   Credit spread     298 bps     298 bps     298 bps  

Non-marketable equity

   $ 2,739   Price-based   Fund NAV   $ 612   $ 511,647,716   $ 170,404,146  

 

     1,726   Comparables analysis   EBITDA Multiples     4.30 x   18.30 x   9.56 x

 

     510   Cash flow   Discount to price     0.00 %   75.00 %   2.87 %

 

             Price-to-book ratio     0.80 x   2.50 x   1.54 x

 

             PE ratio     9.90 x   16.90 x   12.55 x

 

             Cost of capital     9.50 %   15.98 %   10.96 %
                           

Derivatives—Gross(6)

                                  

Interest rate contracts (gross)

   $ 6,014   Model-based   Interest rate (IR) volatility     11.00 %   90.00 %   20.79 %

Foreign exchange contracts (gross)

   $ 2,228   Model-based   Foreign exchange (FX) volatility     4.00 %   21.00 %   12.59 %

             IR-IR correlation     39.51 %   61.76 %   40.30 %

             IR-FX correlation     40.00 %   60.00 %   48.51 %

Equity contracts (gross)(7)

   $ 3,182   Model-based   Equity volatility     4.96 %   72.72 %   27.95 %

 

             Equity forward     85.98 %   155.88 %   101.54 %

 

             Equity-equity correlation     (81.30 )%   99.40 %   27.00 %

 

             Equity-FX correlation     (67.50 )%   45.00 %   (7.10 )%

 

             Price   $ 0.00   $ 141.71   $ 80.03  

Commodity contracts (gross)

   $ 1,888   Model-based   Commodity volatility     5.00 %   124.00 %   16.00 %

             Commodity correlation     (75.00 )%   91.00 %   30.00 %

             Forward price     30.00 %   186.00 %   108.00 %

Credit derivatives (gross)

   $ 4,658   Model-based   Recovery rate     20.00 %   65.00 %   39.76 %

 

     1,645   Price-based   Price   $ 0.00   $ 116.75   $ 36.16  

 

             Credit correlation     5.00 %   95.00 %   45.19 %

 

             Credit spread     0 bps     1,496 bps     276 bps  

Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross)(6)

   $ 122   Model-based   Redemption rate     19.19 %   99.50 %   77.54 %

     83   Price-based   EBITDA multiples     6.80 x   13.80 x   12.03 x

     81   Comparables analysis   PE ratio     8.90 x   8.90 x   8.90 x

             Price-to-book ratio     0.70 x   1.10 x   1.02 x

             Price   $ 0.01   $ 100.00   $ 100.00  

Loans

   $ 1,904   Price-based   Price   $ 0.13   $ 104.76   $ 90.09  

 

     1,134   Cash flow   Credit spread     4 bps     400 bps     104 bps  

 

     769   Model-based   Yield     1.60 %   4.50 %   2.10 %

 

     526   Yield analysis                        
                           

Mortgage servicing rights

   $ 2,488   Cash flow   Yield     2.96 %   12.00 %   8.61 %

             WAL     2.27 years     9.39 years     5.95 years  

        

Liabilities

                                  

Interest-bearing deposits

   $ 868   Model-based   Equity volatility     4.96 %   46.92 %   28.57 %

 

             Equity-IR correlation     15.00 %   19.00 %   18.33 %

 

             Mean reversion     1.00 %   20.00 %   10.50 %

 

             Forward price     30.00 %   186.00 %   108.00 %

 

             Commodity correlation     (75.00 )%   91.00 %   30.00 %

 

             Commodity volatility     5.00 %   124.00 %   16.00 %

Federal funds purchased and securities loaned or sold under agreements to repurchase

   $ 695   Model-based   Interest rate     0.43 %   3.37 %   2.45 %

     200   Cash flow                        

Trading account liabilities

                                  

Securities sold, not yet purchased

   $ 450   Price-based   Credit spread     81 bps     245 bps     231 bps  

             Price   $ 0.00   $ 107.64   $ 77.84  

Short-term borrowings and long-term debt

   $ 5,154   Model-based   Price   $ 0.13   $ 112.41   $ 87.06  

 

     711   Price-based   IR-IR correlation     (51.00 )%   (51.00 )%   (51.00 )%

 

             IR volatility     11.00 %   90.00 %   21.00 %

 

             Interest rate     0.05 %   16.00 %   1.74 %

 

             Equity volatility     10.28 %   76.79 %   21.38 %

 

             Equity forward     87.80 %   106.30 %   99.91 %

 

             Equity-FX correlation     (67.50 )%   45.00 %   (7.10 )%

 

             Equity-equity correlation     (81.30 )%   99.40 %   27.00 %
(1)
The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities.

(2)
Some inputs are shown as zero due to rounding.

(3)
When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to one large position only.

(4)
Where provided, weighted averages are calculated based on the fair value of the instrument.

(5)
For equity securities, the price input is expressed on an absolute basis, not as a percentage of the notional amount.

(6)
Both trading and nontrading account derivatives—assets and liabilities—are presented on a gross absolute value basis.

(7)
Includes hybrid products.

As of December 31, 2012
  Fair Value(1)
(in millions)		   Methodology   Input   Low(2)(3)   High(2)(3)  

Assets

                            

Federal funds sold and securities borrowed or purchased under agreements to resell

   $ 4,786   Cash flow   Interest rate     1.09 %   1.50 %

Trading and investment securities

                            

Mortgage-backed securities

   $ 4,402   Price-based   Price   $ 0.00   $ 135.00  

     1,148   Yield analysis   Yield     0.00 %   25.84 %

             Prepayment period     2.16 years     7.84 years  

State and municipal, foreign

   $ 4,416   Price-based   Price   $ 0.00   $ 159.63  

government, corporate and other

     1,231   Cash flow   Yield     0.00 %   30.00 %

debt securities

     787   Yield analysis   Credit spread     35 bps     300 bps  

Equity securities

   $ 792   Cash flow   Yield     9.00 %   10.00 %

     147   Price-based   Prepayment period     3 years     3 years  

             Price   $ 0.00   $ 750.00  

Asset-backed securities

   $ 4,253   Price-based   Price   $ 0.00   $ 136.63  

 

     1,775   Internal model   Yield     0.00 %   27.00 %

 

     561   Cash flow   Credit correlation     15.00 %   90.00 %

 

             Weighted average life (WAL)     0.34 years     16.07 years  

Non-marketable equity

   $ 2,768   Price-based   Fund NAV   $ 1.00   $ 456,773,838  

     1,803   Comparables analysis   EBITDA multiples     4.70 x   14.39 x

             Price-to-book ratio     0.77 x   1.50 x

     709   Cash flow   Discount to price     0.00 %   75.00 %

Derivatives—Gross(4)

                            

 

                            

Interest rate contracts (gross)

   $ 3,202   Internal model   Interest rate (IR)-IR     (98.00 )%   90.00 %

             correlation              

             Credit spread     0 bps     550.27 bps  

             IR volatility     0.09 %   100.00 %

             Interest rate     0 %   15.00 %

Foreign exchange contracts (gross)

   $ 1,542   Internal model   Foreign exchange (FX) volatility     3.20 %   67.35 %

 

             IR-FX correlation     40.00 %   60.00 %

 

             Credit spread     0 bps     376 bps  

Equity contracts (gross)(5)

   $ 4,669   Internal model   Equity volatility     1.00 %   185.20 %

             Equity forward     74.94 %   132.70 %

             Equity-equity correlation     1.00 %   99.90 %

Commodity contracts (gross)

   $ 2,160   Internal model   Forward price     37.45 %   181.50 %

 

             Commodity correlation     (77.00 )%   95.00 %

 

             Commodity volatility     5.00 %   148.00 %

Credit derivatives (gross)

   $ 4,777   Internal model   Price   $ 0.00   $ 121.16  

     3,886   Price-based   Recovery rate     6.50 %   78.00 %

             Credit correlation     5.00 %   99.00 %

             Credit spread     0 bps     2,236 bps  

             Upfront points     3.62     100.00  

Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross)(4)

   $ 2,000   External model   Price   $ 100.00   $ 100.00  

 

     461   Internal model   Redemption rate     30.79 %   99.50 %
                       

Loans

   $ 2,447   Price-based   Price   $ 0.00   $ 103.32  

     1,423   Yield analysis   Credit spread     55 bps     600.19 bps  

     888   Internal model                  

Mortgage servicing rights

   $ 1,858   Cash flow   Yield     0.00 %   53.19 %

 

             Prepayment period     2.16 years     7.84 years  

Liabilities

                            

Interest-bearing deposits

   $ 785   Internal model   Equity volatility     11.13 %   86.10 %

 

             Forward price     67.80 %   182.00 %

 

             Commodity correlation     (76.00 )%   95.00 %

 

             Commodity volatility     5.00 %   148.00 %

Federal funds purchased and securities loaned or sold under agreements to repurchase

   $ 841   Internal model   Interest rate     0.33 %   4.91 %

Trading account liabilities

                            

Securities sold, not yet purchased            

   $ 265   Internal model   Price   $ 0.00   $ 166.47  

     75   Price-based                  

Short-term borrowings and long-term debt

   $ 5,067   Internal model   Price   $ 0.00   $ 121.16  

 

     1,112   Price-based   Equity volatility     12.40 %   185.20 %

 

     649   Yield analysis   Equity forward     75.40 %   132.70 %

 

             Equity-equity correlation     1.00 %   99.90 %

 

             Equity-FX correlation     (80.50 )%   50.40 %
(1)
The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities.

(2)
Some inputs are shown as zero due to rounding.

(3)
When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to one large position only.

(4)
Both trading and nontrading account derivatives—assets and liabilities—are presented on a gross absolute value basis.

(5)
Includes hybrid products.

Sensitivity to Unobservable Inputs and Interrelationships between Unobservable Inputs

        The impact of key unobservable inputs on the Level 3 fair value measurements may not be independent of one another. In addition, the amount and direction of the impact on a fair value measurement for a given change in an unobservable input depends on the nature of the instrument as well as whether the Company holds the instrument as an asset or a liability. For certain instruments, the pricing hedging and risk management are sensitive to the correlation between various inputs rather than on the analysis and aggregation of the individual inputs.

        The following section describes the sensitivities and interrelationships of the most significant unobservable inputs used by the Company in Level 3 fair value measurements.

Correlation

        Correlation is a measure of the co-movement between two or more variables. A variety of correlation-related assumptions are required for a wide range of instruments, including equity and credit baskets, foreign-exchange options, CDOs backed by loans or bonds, mortgages, subprime mortgages and many other instruments. For almost all of these instruments, correlations are not observable in the market and must be estimated using historical information. Estimating correlation can be especially difficult where it may vary over time. Extracting correlation information from market data requires significant assumptions regarding the informational efficiency of the market (for example, swaption markets). Changes in correlation levels can have a major impact, favorable or unfavorable, on the value of an instrument, depending on its nature. A change in the default correlation of the fair value of the underlying bonds comprising a CDO structure would affect the fair value of the senior tranche. For example, an increase in the default correlation of the underlying bonds would reduce the fair value of the senior tranche, because highly correlated instruments produce larger losses in the event of default and a part of these losses would become attributable to the senior tranche. That same change in default correlation would have a different impact on junior tranches of the same structure.

Volatility

        Volatility represents the speed and severity of market price changes and is a key factor in pricing options. Typically, instruments can become more expensive if volatility increases. For example, as an index becomes more volatile, the cost to Citi of maintaining a given level of exposure increases because more frequent rebalancing of the portfolio is required. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities for certain combinations of tenor and strike are not observable. The general relationship between changes in the value of a portfolio to changes in volatility also depends on changes in interest rates and the level of the underlying index. Generally, long option positions (assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses. Some instruments are more sensitive to changes in volatility than others. For example, an at-the-money option would experience a larger percentage change in its fair value than a deep-in-the-money option. In addition, the fair value of an option with more than one underlying security (for example, an option on a basket of bonds) depends on the volatility of the individual underlying securities as well as their correlations.

Yield

        Adjusted yield is generally used to discount the projected future principal and interest cash flows on instruments, such as asset-backed securities. Adjusted yield is impacted by changes in the interest rate environment and relevant credit spreads.

        In some circumstances, the yield of an instrument is not observable in the market and must be estimated from historical data or from yields of similar securities. This estimated yield may need to be adjusted to capture the characteristics of the security being valued. In other situations, the estimated yield may not represent sufficient market liquidity and must be adjusted as well. Whenever the amount of the adjustment is significant to the value of the security, the fair value measurement is classified as Level 3.

Prepayment

        Voluntary unscheduled payments (prepayments) change the future cash flows for the investor and thereby change the fair value of the security. The effect of prepayments is more pronounced for residential mortgage-backed securities. An increase in prepayments—in speed or magnitude—generally creates losses for the holder of these securities. Prepayment is generally negatively correlated with delinquency and interest rate. A combination of low prepayment and high delinquencies amplify each input's negative impact on mortgage securities' valuation. As prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or negatively, depending upon the nature of the security and the direction of the change in the weighted average life.

Recovery

        Recovery is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market input for recovery, but indications of recovery levels are available from pricing services. The assumed recovery of a security may differ from its actual recovery that will be observable in the future. The recovery rate impacts the valuation of credit securities. Generally, an increase in the recovery rate assumption increases the fair value of the security. An increase in loss severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and, as a result, decreases the fair value of the security.

Credit Spread

        Credit spread is a component of the security representing its credit quality. Credit spread reflects the market perception of changes in prepayment, delinquency and recovery rates, therefore capturing the impact of other variables on the fair value. Changes in credit spread affect the fair value of securities differently depending on the characteristics and maturity profile of the security. For example, credit spread is a more significant driver of the fair value measurement of a high yield bond as compared to an investment grade bond. Generally, the credit spread for an investment grade bond is

also more observable and less volatile than its high yield counterpart.

Qualitative Discussion of the Ranges of Significant Unobservable Inputs

        The following section describes the ranges of the most significant unobservable inputs used by the Company in Level 3 fair value measurements. The level of aggregation and the diversity of instruments held by the Company lead to a wide range of unobservable inputs that may not be evenly distributed across the Level 3 inventory.

Correlation

        There are many different types of correlation inputs, including credit correlation, cross-asset correlation (such as equity-interest rate correlation), and same-asset correlation (such as interest rate-interest rate correlation). Correlation inputs are generally used to value hybrid and exotic instruments. Generally, same-asset correlation inputs have a narrower range than cross-asset correlation inputs. However, due to the complex and unique nature of these instruments, the ranges for correlation inputs can vary widely across portfolios.

Volatility

        Similar to correlation, asset-specific volatility inputs vary widely by asset type. For example, ranges for foreign exchange volatility are generally lower and narrower than equity volatility. Equity volatilities are wider due to the nature of the equities market and the terms of certain exotic instruments. For most instruments, the interest rate volatility input is on the lower end of the range; however, for certain structured or exotic instruments (such as market-linked deposits or exotic interest rate derivatives), the range is much wider.

Yield

        Ranges for the yield inputs vary significantly depending upon the type of security. For example, securities that typically have lower yields, such as municipal bonds, will fall on the lower end of the range, while more illiquid securities or securities with lower credit quality, such as certain residual tranche asset-backed securities, will have much higher yield inputs.

Credit Spread

        Credit spread is relevant primarily for fixed income and credit instruments; however, the ranges for the credit spread input can vary across instruments. For example, certain fixed income instruments, such as certificates of deposit, typically have lower credit spreads, whereas certain derivative instruments with high-risk counterparties are typically subject to higher credit spreads when they are uncollateralized or have a longer tenor. Other instruments, such as credit default swaps, also have credit spreads that vary with the attributes of the underlying obligor. Stronger companies have tighter credit spreads, and weaker companies have wider credit spreads.

Price

        The price input is a significant unobservable input for certain fixed income instruments. For these instruments, the price input is expressed as a percentage of the notional amount, with a price of $100 meaning that the instrument is valued at par. For most of these instruments, the price varies between zero to $100, or slightly above $100. Relatively illiquid assets that have experienced significant losses since issuance, such as certain asset-backed securities, are at the lower end of the range, whereas most investment grade corporate bonds will fall in the middle to the higher end of the range. For certain structured debt instruments with embedded derivatives, the price input may be above $100 to reflect the embedded features of the instrument (for example, a step-up coupon or a conversion option).

        The price input is also a significant unobservable input for certain equity securities; however, the range of price inputs varies depending on the nature of the position, the number of shares outstanding and other factors.

Items Measured at Fair Value on a Nonrecurring Basis

        Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These include assets measured at cost that have been written down to fair value during the periods as a result of an impairment. In addition, these assets include loans held-for-sale and other real estate owned that are measured at the lower of cost or market.

        The following table presents the carrying amounts of all assets that were still held as of September 30, 2013 and December 31, 2012, and for which a nonrecurring fair value measurement was recorded during the six and twelve months then ended, respectively:

In millions of dollars   Fair value   Level 2   Level 3  

September 30, 2013

                    

Loans held-for-sale

   $ 3,239   $ 1,968   $ 1,271  

Other real estate owned

     162     37     125  

Loans(1)

     4,543     3,963     580  
               

Total assets at fair value on a nonrecurring basis

   $ 7,944   $ 5,968   $ 1,976  
               
(1)
Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate secured loans.

In millions of dollars   Fair value   Level 2   Level 3  

December 31, 2012

                    

Loans held-for-sale

   $ 2,647   $ 1,159   $ 1,488  

Other real estate owned

     201     22     179  

Loans(1)

     5,732     5,160     572  

Other assets(2)

     4,725     4,725     —  
               

Total assets at fair value on a nonrecurring basis

   $ 13,305   $ 11,066   $ 2,239  
               
(1)
Represents impaired loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate secured loans.

(2)
Represents Citi's then-remaining 35% investment in the Morgan Stanley Smith Barney joint venture whose carrying amount was the agreed purchase price. See Note 12 to the Consolidated Financial Statements.

        The fair value of loans-held-for-sale is determined where possible using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques.

        Where the fair value of the related collateral is based on an unadjusted appraised value, the loan is generally classified as Level 2. Where significant adjustments are made to the appraised value, the loan is classified as Level 3. Additionally, for corporate loans, appraisals of the collateral are often based on sales of similar assets; however, because the prices of similar assets require significant adjustments to reflect the unique features of the underlying collateral, these fair value measurements are generally classified as Level 3.

Valuation Techniques and Inputs for Level 3 Nonrecurring Fair Value Measurements

        The following tables present the valuation techniques covering the majority of Level 3 nonrecurring fair value measurements and the most significant unobservable inputs used in those measurements as of September 30, 2013 and December 31, 2012:

As of September 30, 2013   Fair Value(1)
(in millions)		   Methodology   Input   Low   High   Weighted
average(2)		  

Loans held-for-sale

   $ 1,160   Price-based   Price   $ 60.00   $ 104.95   $ 95.84  

Other real estate owned

  
$
121		  

Price-based

  

Discount to price

    
24.00
%		  
59.00
%		  
33.43
%

 

             Price   $ 0.01   $ 111.50   $ 100.03  

 

             Appraised value   $ 0.00   $ 2,801,660   $ 1,324,975  

Loans(3)

   $ 354   Price-based   Appraised value   $ 6,500,000   $ 195,314,528   $ 117,837,538  

     132   Model-based   Discount to price     24.00 %   34.00 %   32.69 %

     74   Recovery analysis   Recovery rate     45.00 %   65.00 %   53.80 %
(1)
The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities.

(2)
Weighted averages are calculated based on the fair value of the instrument.

(3)
Represents loans held for investment whose carrying amounts are based on the fair value of the underlying collateral.

As of December 31, 2012   Fair Value(1)
(in millions)		   Methodology   Input   Low   High  

Loans held-for-sale

   $ 747   Price-based   Price   $ 63.42   $ 100.00  

     485   External model   Credit spread     40 bps     40 bps  

     174   Recovery analysis                  

Other real estate owned

     165   Price-based   Discount to price     11.00 %   50.00 %

 

             Price(2)   $ 39,774   $ 15,457,452  

Loans(3)

     351   Price-based   Discount to price     25.00 %   34.00 %

     111   Internal model   Price(2)   $ 6,272,242   $ 86,200,000  

             Discount rate     6.00 %   16.49 %
(1)
The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or liabilities.

(2)
Prices are based on appraised values.

(3)
Represents loans held for investment whose carrying amounts are based on the fair value of the underlying collateral.

Nonrecurring Fair Value Changes

        The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at September 30, 2013 and 2012:

 
   Three months ended
September 30,		  
In millions of dollars   2013   2012  

Loans held-for-sale

   $ (44 ) $ (12 )

Other real estate owned

     (1 )   (7 )

Loans(1)

     (186 )   (957 )

Other assets(2)

     —     (3,340 )
           

Total nonrecurring fair value gains (losses)

   $ (231 ) $ (4,316 )
           
(1)
Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate loans.

(2)
The three months ended September 30, 2012 includes the recognition of a $3,340 million impairment charge related to the carrying value of Citi's then-remaining 35% interest in the Morgan Stanley Smith Barney joint venture (MSSB). See note 12 to the Consolidated Financial Statements.


 
   Nine months ended
September 30,		  
In millions of dollars   2013   2012  

Loans held-for-sale

   $ (44 ) $ (11 )

Other real estate owned

     (6 )   (22 )

Loans(1)

     (444 )   (1,461 )

Other assets(2)

     —     (3,340 )
           

Total nonrecurring fair value gains (losses)

   $ (494 ) $ (4,834 )
           
(1)
Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate loans.

(2)
The nine months ended September 30, 2012 includes the recognition of a $3,340 million impairment charge related to the carrying value of Citi's then-remaining 35% interest in MSSB. See note 12 to the Consolidated Financial Statements.

Estimated Fair Value of Financial Instruments Not Carried at Fair Value

        The table below presents the carrying value and fair value of Citigroup's financial instruments which are not carried at fair value. The table below therefore excludes items measured at fair value on a recurring basis presented in the tables above.

        The disclosure also excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. Also, as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity, and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values, which are integral to a full assessment of Citigroup's financial position and the value of its net assets.

        The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for liabilities, such as long-term debt not carried at fair value. For loans not accounted for at fair value, cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. Expected credit losses are either embedded in the estimated future cash flows or incorporated as an adjustment to the discount rate used. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

 
   September 30, 2013    
    
    
  
 
   Estimated fair value  
 
   Carrying
value		   Estimated
fair value		  
In billions of dollars   Level 1   Level 2   Level 3  

Assets

                                

Investments

   $ 18.2   $ 18.7   $ 5.3   $ 12.5   $ 0.9  

Federal funds sold and securities borrowed or purchased under agreements to resell

     98.7     98.7     —     88.1     10.6  

Loans(1)(2)

     629.0     618.5     —     4.7     613.8  

Other financial assets(2)(3)

     260.9     260.9     10.7     196.8     53.4  
                       

Liabilities

                                

Deposits

   $ 953.8   $ 952.4   $ —   $ 775.1   $ 177.3  

Federal funds purchased and securities loaned or sold under agreements to repurchase

     97.0     97.0     —     92.1     4.9  

Long-term debt(4)

     195.0     201.5     —     176.3     25.2  

Other financial liabilities(5)

     141.5     141.5     —     23.7     117.8  
                       


 

 
   December 31, 2012    
    
    
  
 
   Estimated fair value  
 
   Carrying
value		   Estimated
fair value		  
In billions of dollars   Level 1   Level 2   Level 3  

Assets

                                

Investments

   $ 17.9   $ 18.4   $ 3.0   $ 14.3   $ 1.1  

Federal funds sold and securities borrowed or purchased under agreements to resell

     100.7     100.7     —     94.8     5.9  

Loans(1)(2)

     621.9     612.2     —     4.2     608.0  

Other financial assets(2)(3)

     192.8     192.8     11.4     128.3     53.1  
                       

Liabilities

                                

Deposits

   $ 929.1   $ 927.4   $ —   $ 748.7   $ 178.7  

Federal funds purchased and securities loaned or sold under agreements to repurchase

     94.5     94.5     —     94.4     0.1  

Long-term debt(4)

     209.7     215.3     —     177.0     38.3  

Other financial liabilities(5)

     139.0     139.0     —     31.1     107.9  
                       
(1)
The carrying value of loans is net of the Allowance for loan losses of $20.6 billion for September 30, 2013 and $25.5 billion for December 31, 2012. In addition, the carrying values exclude $2.8 billion and $2.8 billion of lease finance receivables at September 30, 2013 and December 31, 2012, respectively.

(2)
Includes items measured at fair value on a nonrecurring basis.

(3)
Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable and other financial instruments included in Other assets on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

(4)
The carrying value includes long-term debt balances carried at fair value under fair value hedge accounting.

(5)
Includes brokerage payables, separate and variable accounts, short-term borrowings (carried at cost) and other financial instruments included in Other liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

        Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality and market perceptions of value, and as existing assets and liabilities run off and new transactions are entered into. The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $10.5 billion and by $9.7 billion at September 30, 2013 and December 31, 2012, respectively. At September 30, 2013, the carrying values, net of allowances, exceeded the estimated fair values by $7.6 billion and $2.9 billion for Consumer loans and Corporate loans, respectively.

        The estimated fair values of the Company's corporate unfunded lending commitments at September 30, 2013 and December 31, 2012 were liabilities of $5.2 billion and $4.9 billion, respectively, which are substantially classified as Level 3. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancelable by providing notice to the borrower.