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Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure

Offsetting of Derivative Instruments and Related Collateral Amounts

			At September 30, 2015
			Gross Amounts(1)		Amounts Offset in the Condensed Consolidated Statements of Financial Condition		Net Amounts Presented in the Condensed Consolidated Statements of Financial Condition		Amounts Not Offset in the Condensed Consolidated Statements of Financial Condition(2)				Net Exposure
			Gross Amounts(1)						Financial Instruments Collateral		Other Cash Collateral		Net Exposure
			(dollars in millions)
Derivative assets
	Bilateral OTC	$	379,609	$	(351,265)	$	28,344	$	(9,967)	$	(8)	$	18,369
	Cleared OTC(3)		129,262		(127,987)		1,275		—		—		1,275
	Exchange traded		31,948		(28,273)		3,675		—		—		3,675
	Total derivative assets	$	540,819	$	(507,525)	$	33,294	$	(9,967)	$	(8)	$	23,319
Derivative liabilities
	Bilateral OTC	$	361,467	$	(332,549)	$	28,918	$	(6,967)	$	—	$	21,951
	Cleared OTC(3)		128,153		(127,267)		886		—		(2)		884
	Exchange traded		34,242		(28,273)		5,969		(735)		—		5,234
	Total derivative liabilities	$	523,862	$	(488,089)	$	35,773	$	(7,702)	$	(2)	$	28,069

			At December 31, 2014
			Gross Amounts(4)		Amounts Offset in the Condensed Consolidated Statements of Financial Condition		Net Amounts Presented in the Condensed Consolidated Statements of Financial Condition		Amounts Not Offset in the Condensed Consolidated Statements of Financial Condition(2)				Net Exposure
			Gross Amounts(4)						Financial Instruments Collateral		Other Cash Collateral		Net Exposure
			(dollars in millions)
Derivative assets
	Bilateral OTC	$	427,079	$	(396,582)	$	30,497	$	(9,844)	$	(19)	$	20,634
	Cleared OTC(3)		217,169		(215,576)		1,593		—		—		1,593
	Exchange traded		32,123		(27,819)		4,304		—		—		4,304
	Total derivative assets	$	676,371	$	(639,977)	$	36,394	$	(9,844)	$	(19)	$	26,531
Derivative liabilities
	Bilateral OTC	$	410,003	$	(375,095)	$	34,908	$	(11,192)	$	(179)	$	23,537
	Cleared OTC(3)		211,695		(211,180)		515		—		(6)		509
	Exchange traded		32,608		(27,819)		4,789		(726)		—		4,063
	Total derivative liabilities	$	654,306	$	(614,094)	$	40,212	$	(11,918)	$	(185)	$	28,109

(1) Amounts include $6.2 billion of derivative assets and $6.9 billion of derivative liabilities, which are either not subject to master netting agreements or collateral agreements or are subject to such agreements but the Company has not determined the agreements to be legally enforceable. See also “Fair Value and Notional of Derivative Instruments” herein, for additional disclosure about gross fair values and notionals for derivative instruments by risk type.

(2) Amounts relate to master netting agreements and collateral agreements, which have been determined by the Company to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance.

(3) Amounts include OTC derivatives that are centrally cleared in accordance with certain regulatory requirements.

(4) Amounts include $6.5 billion of derivative assets and $6.9 billion of derivative liabilities, which are either not subject to master netting agreements or collateral agreements or are subject to such agreements but the Company has not determined the agreements to be legally enforceable. See also “Fair Value and Notional of Derivative Instruments” herein, for additional disclosure about gross fair values and notionals for derivative instruments by risk type.

Summary by Counterparty Credit Rating and Remaining Contract Maturity of the Fair Value of OTC Derivatives in a Gain Position

OTC Derivative Products—Trading Assets.

The tables below present a summary by counterparty credit rating and remaining contract maturity of the fair value of OTC derivatives in a gain position at September 30, 2015 and December 31, 2014. Fair value is presented in the final column, net of collateral received (principally cash and U.S. government and agency securities):

			At September 30, 2015(1)
			Years to Maturity								Cross-Maturityand Cash Collateral Netting(3)		Net Exposure Post-cash Collateral		Net Exposure Post-collateral
Credit Rating(2)			Less than 1		1 - 3		3 - 5		Over 5		Cross-Maturityand Cash Collateral Netting(3)		Net Exposure Post-cash Collateral		Net Exposure Post-collateral
			(dollars in millions)
AAA		$	260	$	289	$	895	$	4,174	$	(4,514)	$	1,104	$	924
AA			2,599		2,493		1,848		11,978		(13,432)		5,486		2,887
A			10,807		9,428		5,885		22,520		(38,543)		10,097		6,606
BBB			4,202		4,711		2,414		12,306		(15,682)		7,951		5,654
Non-investment grade			4,502		3,339		1,521		3,755		(8,144)		4,973		3,573
	Total	$	22,370	$	20,260	$	12,563	$	54,733	$	(80,315)	$	29,611	$	19,644

			At December 31, 2014(1)
			Years to Maturity								Cross-Maturity and Cash Collateral Netting(3)		Net Exposure Post-cash Collateral		Net Exposure Post-collateral
Credit Rating(2)			Less than 1		1-3		3-5		Over 5		Cross-Maturity and Cash Collateral Netting(3)		Net Exposure Post-cash Collateral		Net Exposure Post-collateral
			(dollars in millions)
AAA		$	499	$	246	$	1,313	$	4,281	$	(5,009)	$	1,330	$	1,035
AA			2,679		2,811		2,704		14,137		(15,415)		6,916		4,719
A			11,733		10,833		7,585		23,968		(43,644)		10,475		6,520
BBB			5,119		3,753		2,592		13,132		(15,844)		8,752		6,035
Non-investment grade			3,196		3,089		1,541		2,499		(5,727)		4,598		3,918
	Total	$	23,226	$	20,732	$	15,735	$	58,017	$	(85,639)	$	32,071	$	22,227

_____________

(1) Fair values shown represent the Company’s net exposure to counterparties related to the Company’s OTC derivative products. Amounts include centrally cleared OTC derivatives. The tables do not include exchange-traded derivatives and the effect of any related hedges utilized by the Company.

(2) Obligor credit ratings are determined by the Company’s Credit Risk Management Department.

(3) Amounts represent the netting of receivable balances with payable balances for the same counterparty across maturity categories. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. Cash collateral received is netted on a counterparty basis, provided legal right of offset exists.

Fair Value of Derivative Instruments Designated and Not Designated as Accounting Hedges by Type of Derivative Contract on a Gross Basis

				Derivative Assets
				at September 30, 2015
				Fair Value								Notional
				Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total		Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total
				(dollars in millions)
Derivatives designated as accounting
hedges:
	Interest rate contracts		$	3,565	$	1,828	$	—	$	5,393	$	38,389	$	43,193	$	—	$	81,582
	Foreign exchange contracts			210		5		—		215		6,533		438		—		6,971
		Total derivatives designated as
		accounting hedges		3,775		1,833		—		5,608		44,922		43,631		—		88,553

Derivatives not designated as accounting
hedges(2):
	Interest rate contracts			242,212		123,482		436		366,130		4,570,771		6,416,792		1,231,155		12,218,718
	Credit contracts			21,246		3,535		—		24,781		684,536		171,985		—		856,521
	Foreign exchange contracts			70,521		412		102		71,035		1,964,784		13,908		42,417		2,021,109
	Equity contracts			25,261		—		26,399		51,660		356,509		—		294,745		651,254
	Commodity contracts			16,230		—		5,011		21,241		87,566		—		103,188		190,754
	Other			364		—		—		364		7,568		—		—		7,568
		Total derivatives not designated
		as accounting hedges		375,834		127,429		31,948		535,211		7,671,734		6,602,685		1,671,505		15,945,924
Total derivatives			$	379,609	$	129,262	$	31,948	$	540,819	$	7,716,656	$	6,646,316	$	1,671,505	$	16,034,477
Cash collateral netting				(54,391)		(2,480)		—		(56,871)		—		—		—		—
Counterparty netting				(296,874)		(125,507)		(28,273)		(450,654)		—		—		—		—
	Total derivative assets		$	28,344	$	1,275	$	3,675	$	33,294	$	7,716,656	$	6,646,316	$	1,671,505	$	16,034,477

				Derivative Liabilities
				at September 30, 2015
				Fair Value								Notional
				Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total		Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total
				(dollars in millions)
Derivatives designated as accounting
hedges:
	Interest rate contracts		$	61	$	98	$	—	$	159	$	2,000	$	4,519	$	—	$	6,519
	Foreign exchange contracts			37		2		—		39		4,155		153		—		4,308
		Total derivatives designated as										.
		accounting hedges		98		100		—		198		6,155		4,672		—		10,827

Derivatives not designated as accounting
hedges(2):
	Interest rate contracts			224,805		124,372		321		349,498		4,259,745		6,013,571		1,189,701		11,463,017
	Credit contracts			21,224		3,418		—		24,642		617,011		165,496		—		782,507
	Foreign exchange contracts			72,572		263		60		72,895		1,968,292		12,137		9,274		1,989,703
	Equity contracts			28,858		—		28,553		57,411		351,276		—		293,615		644,891
	Commodity contracts			13,859		—		5,308		19,167		79,641		—		89,147		168,788
	Other			51		—		—		51		4,170		—		—		4,170
		Total derivatives not designated
		as accounting hedges		361,369		128,053		34,242		523,664		7,280,135		6,191,204		1,581,737		15,053,076
Total derivatives			$	361,467	$	128,153	$	34,242	$	523,862	$	7,286,290	$	6,195,876	$	1,581,737	$	15,063,903
Cash collateral netting				(35,675)		(1,760)		—		(37,435)		—		—		—		—
Counterparty netting				(296,874)		(125,507)		(28,273)		(450,654)		—		—		—		—
	Total derivative liabilities		$	28,918	$	886	$	5,969	$	35,773	$	7,286,290	$	6,195,876	$	1,581,737	$	15,063,903

				Derivative Assets
				at December 31, 2014
				Fair Value								Notional
				Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total		Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total
				(dollars in millions)
Derivatives designated as accounting
hedges:
	Interest rate contracts		$	3,947	$	1,053	$	—	$	5,000	$	44,324	$	27,692	$	—	$	72,016
	Foreign exchange contracts			498		6		—		504		9,362		261		—		9,623
		Total derivatives designated as
		accounting hedges		4,445		1,059		—		5,504		53,686		27,953		—		81,639

Derivatives not designated as accounting
hedges(3):
	Interest rate contracts			281,214		211,552		407		493,173		4,854,953		9,187,454		1,467,056		15,509,463
	Credit contracts			27,776		4,406		—		32,182		806,441		167,390		—		973,831
	Foreign exchange contracts			72,362		152		83		72,597		1,955,343		11,538		9,663		1,976,544
	Equity contracts			23,208		—		24,916		48,124		299,363		—		271,164		570,527
	Commodity contracts			17,698		—		6,717		24,415		115,792		—		156,440		272,232
	Other			376		—		—		376		5,179		—		—		5,179
		Total derivatives not designated
		as accounting hedges		422,634		216,110		32,123		670,867		8,037,071		9,366,382		1,904,323		19,307,776
Total derivatives			$	427,079	$	217,169	$	32,123	$	676,371	$	8,090,757	$	9,394,335	$	1,904,323	$	19,389,415
Cash collateral netting				(58,541)		(4,654)		—		(63,195)		—		—		—		—
Counterparty netting				(338,041)		(210,922)		(27,819)		(576,782)		—		—		—		—
	Total derivative assets		$	30,497	$	1,593	$	4,304	$	36,394	$	8,090,757	$	9,394,335	$	1,904,323	$	19,389,415

				Derivative Liabilities
				at December 31, 2014
				Fair Value								Notional
				Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total		Bilateral OTC		Cleared OTC(1)		Exchange Traded		Total
				(dollars in millions)
Derivatives designated as accounting
hedges:
	Interest rate contracts		$	125	$	99	$	—	$	224	$	2,024	$	7,588	$	—	$	9,612
	Foreign exchange contracts			5		1		—		6		1,491		121		—		1,612
		Total derivatives designated as
		accounting hedges		130		100		—		230		3,515		7,709		—		11,224

Derivatives not designated as accounting
hedges(3):
	Interest rate contracts			264,579		207,482		293		472,354		4,615,886		9,138,417		1,714,021		15,468,324
	Credit contracts			28,165		3,944		—		32,109		714,181		154,054		—		868,235
	Foreign exchange contracts			72,156		169		21		72,346		1,947,178		11,477		1,761		1,960,416
	Equity contracts			30,061		—		25,511		55,572		339,884		—		302,205		642,089
	Commodity contracts			14,740		—		6,783		21,523		93,019		—		132,136		225,155
	Other			172		—		—		172		5,478		—		—		5,478
		Total derivatives not designated
		as accounting hedges		409,873		211,595		32,608		654,076		7,715,626		9,303,948		2,150,123		19,169,697
Total derivatives			$	410,003	$	211,695	$	32,608	$	654,306	$	7,719,141	$	9,311,657	$	2,150,123	$	19,180,921
Cash collateral netting				(37,054)		(258)		—		(37,312)		—		—		—		—
Counterparty netting				(338,041)		(210,922)		(27,819)		(576,782)		—		—		—		—
	Total derivative liabilities		$	34,908	$	515	$	4,789	$	40,212	$	7,719,141	$	9,311,657	$	2,150,123	$	19,180,921

_____________

(1) Amounts include OTC derivatives that are centrally cleared in accordance with certain regulatory requirements.

(2) Notional amounts include gross notionals related to open long and short futures contracts of $886 billion and $950 billion, respectively. The unsettled fair value on these futures contracts (excluded from the table above) of $432 million and $9 million is included in Customer and other receivables and Customer and other payables, respectively, in the Company’s condensed consolidated statements of financial condition.

(3) Notional amounts include gross notionals related to open long and short futures contracts of $685 billion and $1,122 billion, respectively. The unsettled fair value on these futures contracts (excluded from the table above) of $472 million and $21 million is included in Customer and other receivables and Customer and other payables, respectively, in the Company’s condensed consolidated statements of financial condition.

Summary of Gains or Losses Reported on Derivative Instruments Designated and Not Designated as Accounting Hedges

Derivatives Designated as Fair Value Hedges.

The following table presents gains (losses) reported on interest rate derivative instruments designated and qualifying as accounting hedges and the related hedged item as well as the hedge ineffectiveness included in Interest expense in the Company’s condensed consolidated statements of income:

		Gains (Losses) Recognized in Interest Expense
		Three Months Ended				Nine Months Ended
		September 30,				September 30,
Product Type		2015		2014		2015		2014
		(dollars in millions)
Derivatives	$	1,531	$	(384)	$	390	$	547
Borrowings		(1,334)		757		386		429
Total	$	197	$	373	$	776	$	976

Derivatives Designated as Net Investment Hedges.

The following table presents gains (losses) reported on derivative instruments designated and qualifying as accounting hedges:

			Gains (Losses) Recognized in OCI (effective portion)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
Product Type			2015		2014		2015		2014
			(dollars in millions)
Foreign exchange contracts(1)		$	210	$	438	$	391	$	262
	Total	$	210	$	438	$	391	$	262

____________

(1) Losses of $37 million and $117 million related to the forward points on the hedging instruments were excluded from hedge effectiveness testing and recognized in interest income during the quarter and nine months ended September 30, 2015, respectively. Losses of $46 million and $143 million related to the forward points on the hedging instruments were excluded from hedge effectiveness testing and recognized in interest income during the quarter and nine months ended September 30, 2014, respectively.

Derivatives Not Designated as Accounting Hedges.

The following table summarizes gains (losses) on derivative instruments not designated as accounting hedges:

			Gains (Losses) Recognized in Income(1)
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
Product Type			2015		2014		2015		2014
			(dollars in millions)
Interest rate contracts		$	103	$	(37)	$	579	$	(1,847)
Credit contracts			99		407		(110)		258
Foreign exchange contracts			3,570		191		(1,224)		1,795
Equity contracts			3,678		114		1,658		(2,212)
Commodity contracts			787		60		1,435		531
Other contracts			35		22		(30)		133
	Total derivative instruments	$	8,272	$	757	$	2,308	$	(1,342)

____________

(1) Gains (losses) on derivative contracts not designated as hedges are primarily included in Trading revenues in the Company’s condensed consolidated statements of income. Gains (losses) associated with certain derivative contracts that have physically settled are excluded from the table above. Gains (losses) on these contracts are reflected with the associated cash instruments, which are also included in Trading revenues in the Company’s condensed consolidated statements of income.

Credit Risk-Related Contingencies

		At September 30, 2015
		(dollars in millions)
Net derivative liabilities	$	26,700
Collateral posted		22,247

			At September 30, 2015
			(dollars in millions)
Incremental collateral or termination payments upon potential future ratings downgrade(1):
	One-notch downgrade	$	1,111
	Two-notch downgrade		1,251

________

(1) Amounts include $1,879 million related to bilateral arrangements between the Company and other parties where upon the downgrade of one party, the downgraded party must deliver collateral to the other party. These bilateral downgrade arrangements are a risk management tool used extensively by the Company as credit exposures are reduced if counterparties are downgraded.

Disclosure of Credit Derivatives

		At September 30, 2015
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	458,768	$	1,241	$	439,328	$	(593)
Index and basket credit default swaps		264,416		(148)		231,528		(68)
Tranched index and basket credit default swaps		74,353		(1,394)		170,635		823
Total	$	797,537	$	(301)	$	841,491	$	162

		At December 31, 2014
		Maximum Potential Payout/Notional
		Protection Sold				Protection Purchased
		Notional		Fair Value (Asset)/Liability		Notional		Fair Value (Asset)/Liability
		(dollars in millions)
Single name credit default swaps	$	535,415	$	(2,479)	$	509,872	$	1,641
Index and basket credit default swaps		276,465		(1,777)		229,789		1,563
Tranched index and basket credit default swaps		96,182		(2,355)		194,343		3,334
Total	$	908,062	$	(6,611)	$	934,004	$	6,538

The tables below summarize the credit ratings of the reference obligation and maturities of protection sold through credit default swaps and other credit contracts:

			At September 30, 2015
			Maximum Potential Payout/Notional										Fair Value(Asset)/Liability(1)(2)
			Years to Maturity
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total
			(dollars in millions)
Single name credit default swaps:
	AAA	$	4,247	$	13,475	$	5,252	$	1,587	$	24,561	$	(253)
	AA		9,247		18,450		10,605		2,689		40,991		(433)
	A		18,861		36,875		11,145		1,825		68,706		(803)
	BBB		43,071		92,864		41,808		11,883		189,626		(325)
	Non-investment grade		35,030		66,058		28,914		4,882		134,884		3,055
Total			110,456		227,722		97,724		22,866		458,768		1,241
Index and basket credit default swaps:
	AAA		14,890		41,296		1,663		—		57,849		(1,006)
	A		4,700		4,668		6,271		12		15,651		(197)
	BBB		9,904		27,045		49,952		34,893		121,794		(818)
	Non-investment grade		24,331		82,978		16,048		20,118		143,475		479
Total			53,825		155,987		73,934		55,023		338,769		(1,542)
Total credit default swaps sold		$	164,281	$	383,709	$	171,658	$	77,889	$	797,537	$	(301)
Other credit contracts(3)		$	1	$	806	$	340	$	49	$	1,196	$	(1,042)
Total credit derivatives and other credit
	contracts	$	164,282	$	384,515	$	171,998	$	77,938	$	798,733	$	(1,343)

			At December 31, 2014
			Maximum Potential Payout/Notional										Fair Value(Asset)/Liability(1)(2)
			Years to Maturity
Credit Ratings of the Reference Obligation			Less than 1		1-3		3-5		Over 5		Total
			(dollars in millions)
Single name credit default swaps:
	AAA	$	2,385	$	9,400	$	6,147	$	692	$	18,624	$	(113)
	AA		9,080		23,701		14,769		3,318		50,868		(688)
	A		22,861		52,291		22,083		2,944		100,179		(1,962)
	BBB		48,547		114,384		60,629		13,536		237,096		(1,489)
	Non-investment grade		29,857		66,066		29,011		3,714		128,648		1,773
Total			112,730		265,842		132,639		24,204		535,415		(2,479)
Index and basket credit default swaps:
	AAA		17,625		31,124		7,265		1,883		57,897		(985)
	AA		704		6,512		716		2,864		10,796		(270)
	A		1,283		6,841		10,154		30		18,308		(465)
	BBB		30,265		40,575		60,141		7,730		138,711		(2,904)
	Non-investment grade		25,750		88,105		22,971		10,109		146,935		492
Total			75,627		173,157		101,247		22,616		372,647		(4,132)
Total credit default swaps sold		$	188,357	$	438,999	$	233,886	$	46,820	$	908,062	$	(6,611)
Other credit contracts(3)		$	51	$	539	$	1	$	620	$	1,211	$	(500)
Total credit derivatives and other credit
	contracts	$	188,408	$	439,538	$	233,887	$	47,440	$	909,273	$	(7,111)

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(1) Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.

(2) Fair value amounts of certain credit default swaps where the Company sold protection have an asset carrying value because credit spreads of the underlying reference entity or entities tightened during the term of the contracts.

(3) Other credit contracts include credit-linked notes (“CLNs”), collateralized debt obligations (“CDOs”) and credit default swaps that are considered hybrid instruments. Fair value amounts shown represent the fair value of the hybrid instruments.

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details