Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting as well as collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet, as well as cash and securities collateral posted and received under enforceable master netting agreements that do not meet the criteria for netting. Derivative assets and liabilities which are not subject to an enforceable master netting agreement, or are subject to a netting agreement where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, have not been netted in the table below. Where we have received or posted collateral under netting agreements where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, the related collateral also has not been netted in the table below.



	September 30, 2018				December 31, 2017
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives accounted for as fair value hedges⁽¹⁾
OTC-cleared⁽²⁾	$	—	$	—	$	84	$	390
Bilateral OTC⁽²⁾	—		73		—		134
Interest rate contracts	—		73		84		524
Derivatives accounted for as cash flow hedges⁽¹⁾
Foreign exchange contracts - bilateral OTC⁽²⁾	37		—		10		—
OTC-cleared⁽²⁾	—		—		4		86
Bilateral OTC⁽²⁾	4		7		—		22
Interest rate contracts	4		7		4		108
Total derivatives accounted for as hedges	41		80		98		632
Trading derivatives not accounted for as hedges⁽³⁾
Exchange-traded⁽²⁾	3		145		6		59
OTC-cleared⁽²⁾	61		17		11,905		10,526
Bilateral OTC⁽²⁾	9,586		10,098		11,549		12,997
Interest rate contracts	9,650		10,260		23,460		23,582
Exchange-traded⁽²⁾	—		21		4		—
OTC-cleared ⁽²⁾	—		6		—		—
Bilateral OTC⁽²⁾	15,433		14,563		15,746		14,666
Foreign exchange contracts	15,433		14,590		15,750		14,666
Equity contracts - bilateral OTC⁽²⁾	3,124		3,091		2,820		2,806
Exchange-traded⁽²⁾	64		51		52		108
Bilateral OTC⁽²⁾	774		800		502		613
Precious metals contracts	838		851		554		721
OTC-cleared⁽²⁾	230		242		67		75
Bilateral OTC⁽²⁾	709		663		589		485
Credit contracts	939		905		656		560
Other non-qualifying derivatives not accounted for as hedges⁽¹⁾
OTC-cleared⁽²⁾	—		—		519		60
Bilateral OTC⁽²⁾	111		308		170		164
Interest rate contracts	111		308		689		224
Foreign exchange contracts - bilateral OTC⁽²⁾	5		5		—		—
Equity contracts - bilateral OTC⁽²⁾	1,122		286		1,264		145
Precious metals contracts - bilateral OTC⁽²⁾	—		—		—		1
Credit contracts - bilateral OTC⁽²⁾	10		11		—		24
Other contracts - bilateral OTC⁽²⁾⁽⁴⁾	6		51		6		52
Total derivatives	31,279		30,438		45,297		43,413
Less: Gross amounts of receivable / payable subject to enforceable master netting agreements⁽⁵⁾⁽⁷⁾	24,613		24,613		36,394		36,394
Less: Gross amounts of cash collateral received / posted subject to enforceable master netting agreements⁽⁶⁾⁽⁷⁾	3,433		3,517		4,480		3,823
Net amounts of derivative assets / liabilities presented in the balance sheet	3,233		2,308		4,423		3,196
Less: Gross amounts of financial instrument collateral received / posted subject to enforceable master netting agreements but not offset in the consolidated balance sheet	722		462		742		370
Net amounts of derivative assets / liabilities	$	2,511	$	1,846	$	3,681	$	2,826


⁽¹⁾	Derivative assets / liabilities related to cash flow hedges, fair value hedges and derivative instruments held for purposes other than for trading are recorded in other assets / interest, taxes and other liabilities on the consolidated balance sheet.

⁽²⁾

Over-the-counter ("OTC") derivatives include derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements. OTC-cleared derivatives are executed bilaterally in the OTC market but then novated to a central clearing counterparty, whereby the central clearing counterparty becomes the counterparty to each of the original counterparties. Exchange traded derivatives are executed directly on an organized exchange. Credit risk is minimized for OTC-cleared derivatives and exchange traded derivatives through daily margining requirements. During the first quarter of 2018, a central clearing counterparty amended its rules for OTC-cleared interest rate derivatives to legally re-characterize daily variation margin payments to be settlement payments as opposed to cash collateral posted. The impact of reflecting the rule change for this central clearing counterparty as of December 31, 2017 would have been a reduction in gross derivative assets and liabilities of approximately $11.5 billion and $10.3 billion, respectively, with corresponding decreases in the related counterparty and cash collateral netting.


⁽³⁾	Trading related derivative assets / liabilities are recorded in trading assets / trading liabilities on the consolidated balance sheet.


⁽⁴⁾	Consists of swap agreements entered into in conjunction with the sales of Visa Inc. ("Visa") Class B common shares ("Class B Shares").


⁽⁵⁾	Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements.


⁽⁶⁾	Represents the netting of cash collateral posted and received by counterparty under enforceable netting agreements.


⁽⁷⁾	Netting is performed at a counterparty level in cases where enforceable master netting agreements are in place, regardless of the type of derivative instrument. Therefore, we have not allocated netting to the different types of derivative instruments shown in the table above.

Schedule of Gains and Losses on Fair Value Hedging Instruments

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments in fair value hedges and the hedged items in fair value hedges and their locations on the consolidated statement of income:



	Gain (Loss) on Derivative						Gain (Loss) on Hedged Items						Net Ineffective Gain (Loss) Recognized
	Net Interest Income			Other Income (Loss)			Net Interest Income			Other Income (Loss)			Other Income (Loss)
	(in millions)
Three Months Ended September 30, 2018
Interest rate contracts / AFS Securities	$	(9	)	$	147		$	92		$	(142	)	$	5
Interest rate contracts / long-term debt	(18		)	5			(53		)	(5		)	—
Total	$	(27	)	$	152		$	39		$	(147	)	$	5

Three Months Ended September 30, 2017
Interest rate contracts / AFS Securities	$	(28	)	$	2		$	88		$	(2	)	$	—
Interest rate contracts / long-term debt	2			(5		)	(63		)	3			(2		)
Total	$	(26	)	$	(3	)	$	25		$	1		$	(2	)

Nine Months Ended September 30, 2018
Interest rate contracts / AFS Securities	$	(42	)	$	634		$	268		$	(616	)	$	18
Interest rate contracts / long-term debt	(38		)	(62		)	(163		)	60			(2		)
Total	$	(80	)	$	572		$	105		$	(556	)	$	16

Nine Months Ended September 30, 2017
Interest rate contracts / AFS Securities	$	(95	)	$	(59	)	$	268		$	62		$	3
Interest rate contracts / long-term debt	14			14			(197		)	(13		)	1
Total	$	(81	)	$	(45	)	$	71		$	49		$	4

Schedule of Gains and Losses on Cash Flow Hedging Instruments

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments in cash flow hedges (including amounts recognized in AOCI from all terminated cash flow hedges) and their locations on the consolidated statement of income:



	Gain (Loss) Recognized in AOCI on Derivative (Effective Portion)						Location of Gain (Loss) Reclassified from AOCI into Income (Effective Portion)	Gain (Loss) Reclassed From AOCI into Income (Effective Portion)						Location of Gain (Loss) Recognized in Income on the Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Gain (Loss) Recognized in Income on the Derivative (Ineffective Portion)
	2018			2017				2018			2017				2018			2017
	(in millions)
Three Months Ended September 30,
Foreign exchange contracts	$	2		$	—		Net interest income	$	—		$	—		Other income (loss)	$	—		$	—
Interest rate contracts	$	21		$	(3	)	Net interest income	$	(6	)	$	(5	)	Other income (loss)	$	(1	)	$	—
Total	$	23		$	(3	)		$	(6	)	$	(5	)		$	(1	)	$	—

Nine Months Ended September 30,
Foreign exchange contracts	$	(4	)	$	—		Net interest income	$	—		$	—		Other income (loss)	$	—		$	—
Interest rate contracts	33			(14		)	Net interest income	(15		)	(11		)	Other income (loss)	(1		)	—
Total	$	29		$	(14	)		$	(15	)	$	(11	)		$	(1	)	$	—

Schedule of Gains and Losses on Derivative Instruments Included in Trading Activities

The following table presents information on gains and losses on derivative instruments held for trading purposes and their locations on the consolidated statement of income:



	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended September 30,					Nine Months Ended September 30,
		2018		2017			2018		2017
		(in millions)
Interest rate contracts	Trading revenue	$	65	$	(52	)	$	394	$	(249	)
Foreign exchange contracts	Trading revenue	105		116			33		185
Equity contracts	Trading revenue	11		1			10		—
Precious metals contracts	Trading revenue	44		50			259		161
Credit contracts	Trading revenue	10		(41		)	6		(87		)
Total		$	235	$	74		$	702	$	10

Schedule of Gains and Losses on Derivative Instruments Held for Non-qualifying Hedging Activities

The following table presents information on gains and losses on derivative instruments held for non-qualifying hedging and other activities and their locations on the consolidated statement of income:



	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended September 30,						Nine Months Ended September 30,
		2018			2017			2018			2017
		(in millions)
Interest rate contracts	Gain on instruments designated at fair value and related derivatives	$	(68	)	$	14		$	(284	)	$	89
Foreign exchange contracts	Gain on instruments designated at fair value and related derivatives	(1		)	8			(11		)	11
Equity contracts	Gain on instruments designated at fair value and related derivatives	276			342			104			863
Credit contracts	Other income (loss)	(9		)	(9		)	1			(39		)
Other contracts⁽¹⁾	Other income (loss)	(5		)	(5		)	(19		)	(7		)
Total		$	193		$	350		$	(209	)	$	917


⁽¹⁾	Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.

Credit-Risk Related Contingent Features

The following table presents the amount of additional collateral that we would be required to post (from the current collateral level) related to derivative instruments with credit-risk related contingent features if our long-term ratings were downgraded by one or two notches. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another rating agency will generally not result in additional collateral.



	One-notch downgrade		Two-notch downgrade
	(in millions)
Amount of additional collateral to be posted upon downgrade	$	34	$	53

Notional Value of Derivative Contracts

The following table summarizes the notional values of derivative contracts:



	September 30, 2018		December 31, 2017
	(in millions)
Interest rate:
Futures and forwards	$	783,526	$	735,757
Swaps	3,088,381		2,687,273
Options written	102,741		77,144
Options purchased	118,183		93,042
	4,092,831		3,593,216
Foreign exchange:
Swaps, futures and forwards	1,006,804		924,163
Options written	28,800		25,911
Options purchased	29,183		26,617
Spot	49,821		19,401
	1,114,608		996,092
Commodities, equities and precious metals:
Swaps, futures and forwards	49,408		38,709
Options written	31,982		31,631
Options purchased	43,710		43,202
	125,100		113,542
Credit derivatives	101,098		90,290
Other contracts⁽¹⁾	838		644
Total	$	5,434,475	$	4,793,784


⁽¹⁾	Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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