Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

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 following table. 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 following table.



	September 30, 2019				December 31, 2018
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives accounted for as fair value hedges⁽¹⁾
OTC-cleared⁽²⁾	$	—	$	—	$	6	$	—
Bilateral OTC⁽²⁾	—		198		—		117
Interest rate contracts	—		198		6		117
Derivatives accounted for as cash flow hedges⁽¹⁾
Foreign exchange contracts - bilateral OTC⁽²⁾	30		—		11		32
Interest rate contracts - bilateral OTC⁽²⁾	—		24		—		13
Total derivatives accounted for as hedges	30		222		17		162
Trading derivatives not accounted for as hedges⁽³⁾
Exchange-traded⁽²⁾	174		14		2		45
OTC-cleared⁽²⁾	40		10		50		14
Bilateral OTC⁽²⁾	12,675		14,206		9,866		10,780
Interest rate contracts	12,889		14,230		9,918		10,839
Exchange-traded⁽²⁾	—		14		—		15
OTC-cleared ⁽²⁾	52		—		—		—
Bilateral OTC⁽²⁾	15,835		15,361		15,897		15,684
Foreign exchange contracts	15,887		15,375		15,897		15,699
Equity contracts - bilateral OTC⁽²⁾	2,960		2,930		2,034		2,061
Exchange-traded⁽²⁾	124		174		16		274
Bilateral OTC⁽²⁾	1,210		1,237		829		626
Precious metals contracts	1,334		1,411		845		900
OTC-cleared⁽²⁾	—		—		125		107
Bilateral OTC⁽²⁾	1,252		1,234		825		831
Credit contracts	1,252		1,234		950		938
Other non-qualifying derivatives not accounted for as hedges⁽¹⁾
Interest rate contracts - bilateral OTC⁽²⁾	231		51		133		216
Foreign exchange contracts - bilateral OTC⁽²⁾	6		1		13		2
Equity contracts - bilateral OTC⁽²⁾	1,029		158		512		805
Credit contracts - bilateral OTC⁽²⁾	—		26		6		9
Other contracts - bilateral OTC⁽²⁾⁽⁴⁾	5		38		5		40
Total derivatives	35,623		35,676		30,330		31,671
Less: Gross amounts of receivable / payable subject to enforceable master netting agreements⁽⁵⁾⁽⁷⁾	28,521		28,521		25,172		25,172
Less: Gross amounts of cash collateral received / posted subject to enforceable master netting agreements⁽⁶⁾⁽⁷⁾	4,042		4,933		2,020		3,675
Net amounts of derivative assets / liabilities presented in the balance sheet	3,060		2,222		3,138		2,824
Less: Gross amounts of financial instrument collateral received / posted subject to enforceable master netting agreements but not offset in the consolidated balance sheet	885		955		832		568
Net amounts of derivative assets / liabilities	$	2,175	$	1,267	$	2,306	$	2,256


⁽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. In addition, OTC-cleared interest rate and, beginning in the third quarter of 2019, credit derivatives with certain central clearing counterparties are settled daily.


⁽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 the carrying amount of hedged items in fair value hedges recognized in the consolidated balance sheet at September 30, 2019, along with the cumulative amount of fair value hedging adjustments included in the carrying amount of those hedged items:



	Carrying Amount of Hedged Items⁽¹⁾		Cumulative Amount of Fair Value Hedging Adjustments Increasing (Decreasing) the Carrying Amount of Hedged Items
	Carrying Amount of Hedged Items⁽¹⁾		Active		Discontinued			Total
	(in millions)
At September 30, 2019
Securities available-for-sale ("AFS")	$	11,618	$	986	$	292		$	1,278
Long-term debt	12,032		353		(42		)	311


⁽¹⁾	The carrying amount of securities AFS represents the amortized cost basis.

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



	Gain (Loss) on Derivatives⁽¹⁾						Gain (Loss) on Hedged Items⁽¹⁾						Net Ineffective Gain (Loss) Recognized⁽¹⁾
	Net Interest Income			Other Income (Loss)			Net Interest Income			Other Income (Loss)			Other Income (Loss)
	(in millions)
Three Months Ended September 30, 2019
Interest rate contracts / Securities AFS	$	(327	)	$	—		$	415		$	—		$	—
Interest rate contracts / Long-term debt	51			—			(173		)	—			—
Total	$	(276	)	$	—		$	242		$	—		$	—

Three Months Ended September 30, 2018
Interest rate contracts / Securities AFS	$	(9	)	$	147		$	92		$	(142	)	$	5
Interest rate contracts / Long-term debt	(18		)	5			(53		)	(5		)	—
Total	$	(27	)	$	152		$	39		$	(147	)	$	5

Nine Months Ended September 30, 2019
Interest rate contracts / Securities AFS	$	(988	)	$	—		$	1,253		$	—		$	—
Interest rate contracts / Long-term debt	288			—			(662		)	—			—
Total	$	(700	)	$	—		$	591		$	—		$	—

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


⁽¹⁾	As a result of adopting new accounting guidance discussed in Note 21, "New Accounting Pronouncements," beginning January 1, 2019, we report gains and losses on the derivatives and the hedged items in fair value hedges in net interest income. Prior to January 1, 2019, fair value hedge ineffectiveness was separately measured and reported in other income (loss).

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 discontinued cash flow hedges) and their locations on the consolidated statement of income (loss):



	Gain (Loss) Recognized in AOCI on Derivatives⁽¹⁾						Location of Gain (Loss) Reclassified from AOCI into Income⁽¹⁾	Gain (Loss) Reclassified From AOCI into Income⁽¹⁾
	2019			2018				2019			2018
	(in millions)
Three Months Ended September 30,
Foreign exchange contracts	$	1		$	2		Net interest income	$	—		$	—
Interest rate contracts	(22		)	21			Net interest income	(8		)	(6		)
Total	$	(21	)	$	23			$	(8	)	$	(6	)

Nine Months Ended September 30,
Foreign exchange contracts	$	2		$	(4	)	Net interest income	$	—		$	—
Interest rate contracts	(17		)	33			Net interest income	(27		)	(15		)
Total	$	(15	)	$	29			$	(27	)	$	(15	)

⁽¹⁾

As a result of adopting new accounting guidance discussed in Note 21, "New Accounting Pronouncements," beginning January 1, 2019, gains and losses on the derivatives in cash flow hedges are initially reported in AOCI and then reclassified into earnings in the same accounting period in which the designated forecasted transaction or hedged item affects earnings. Prior to January 1, 2019, cash flow hedge ineffectiveness was separately measured and reported immediately in other income (loss). Cash flow hedge ineffectiveness was immaterial during the three and nine months ended September 30, 2018.

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 (loss):



	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,
		2019			2018		2019			2018
		(in millions)
Interest rate contracts	Trading revenue	$	(77	)	$	65	$	(192	)	$	394
Foreign exchange contracts	Trading revenue	(7		)	105		232			33
Equity contracts	Trading revenue	11			11		(139		)	10
Precious metals contracts	Trading revenue	36			44		89			259
Credit contracts	Trading revenue	(179		)	10		(446		)	6
Total		$	(216	)	$	235	$	(456	)	$	702

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 (loss):



	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,
		2019			2018			2019			2018
		(in millions)
Interest rate contracts	Gain (loss) on instruments designated at fair value and related derivatives	$	131		$	(68	)	$	467		$	(284	)
Interest rate contracts	Other income (loss)	1			—			(1		)	—
Foreign exchange contracts	Gain (loss) on instruments designated at fair value and related derivatives	(4		)	(1		)	(4		)	(11		)
Equity contracts	Gain (loss) on instruments designated at fair value and related derivatives	68			276			1,306			104
Credit contracts	Other income (loss)	(3		)	(9		)	(17		)	1
Other contracts⁽¹⁾	Other income (loss)	(4		)	(5		)	(13		)	(19		)
Total		$	189		$	193		$	1,738		$	(209	)


⁽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	$	38	$	61

Notional Value of Derivative Contracts

The following table summarizes the notional values of derivative contracts:



	September 30, 2019		December 31, 2018
	(in millions)
Interest rate:
Futures and forwards	$	729,684	$	787,049
Swaps	2,855,855		3,203,048
Options written	94,535		106,009
Options purchased	103,195		107,561
	3,783,269		4,203,667
Foreign exchange:
Swaps, futures and forwards	1,417,913		1,052,088
Options written	50,475		30,567
Options purchased	51,493		31,069
Spot	58,519		31,084
	1,578,400		1,144,808
Commodities, equities and precious metals:
Swaps, futures and forwards	47,115		41,328
Options written	38,436		28,595
Options purchased	49,306		40,236
	134,857		110,159
Credit derivatives	119,521		97,298
Other contracts⁽¹⁾	956		736
Total	$	5,617,003	$	5,556,668


⁽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.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4B
-URI http://asc.fasb.org/extlink&oid=109980867&loc=SL5624163-113959

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1B
-URI http://asc.fasb.org/extlink&oid=109980867&loc=SL5580258-113959

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=109980867&loc=d3e41620-113959

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=109980867&loc=SL5579245-113959

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=109980867&loc=d3e41638-113959

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109980867&loc=d3e41678-113959

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=109980867&loc=d3e41641-113959

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 4C
-URI http://asc.fasb.org/extlink&oid=109980867&loc=SL5624171-113959

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(n)(2))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=109980867&loc=SL5579240-113959

+ Details