XML 100 R39.htm IDEA: XBRL DOCUMENT

Derivatives and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments

The following table summarizes the fair values of our derivative instruments on a gross and net basis as of September 30, 2020, and December 31, 2019. The derivative asset and liability balances are presented on a gross basis, prior to the application of bilateral collateral and master netting agreements, but after the variation margin payments with central clearing organizations have been applied as settlement, as applicable. Total derivative assets and liabilities are adjusted to take into account the impact of legally enforceable master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Securities collateral related to legally enforceable master netting agreements is not offset on the balance sheet. Our derivative instruments are included in “accrued income and other assets” or “accrued expenses and other liabilities” on the balance sheet, as follows:


	September 30, 2020						December 31, 2019
			Fair Value						Fair Value
in millions	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	34,220	$	71	$	6	$	39,208	$	191	$	20


Derivatives not designated as hedging instruments:
Interest rate	75,507		1,756		300		71,209		772		233
Foreign exchange	5,879		74		68		6,572		67		60
Commodity	7,738		462		445		5,324		208		200
Credit	487		3		15		427		1		10
Other (a)	5,572		70		13		3,337		14		10
Total	95,183		2,365		841		86,869		1,062		513
Netting adjustments (b)	—		(490)		(679)		—		(473)		(335)
Net derivatives in the balance sheet	129,403		1,946		168		126,077		780		198
Other collateral (c)	—		(3)		(1)		—		(2)		(42)
Net derivative amounts	$	129,403	$	1,943	$	167	$	126,077	$	778	$	156

(a)Other derivatives include interest rate lock commitments and forward sale commitments related to our residential mortgage banking activities, forward purchase and sales contracts consisting of contractual commitments associated with “to be announced” securities and when-issued securities, and other customized derivative contracts.

(b)Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(c)Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, excess other collateral, if any, is not reflected above.

Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following tables summarize the amounts that were recorded on the balance sheet as of September 30, 2020, and December 31, 2019, related to cumulative basis adjustments for fair value hedges.


	September 30, 2020
in millions	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	8,255	$	492



	December 31, 2019
	Balance sheet line item in which the hedge item is included	Carrying amount of hedged item (a)		Hedge accounting basis adjustment (b)
Interest rate contracts	Long-term debt	$	8,408	$	240

(a)The carrying amount represents the portion of the liability designated as the hedged item.

(b)Basis adjustments related to de-designated hedged items that no longer qualify as fair value hedges reduced the hedge accounting basis adjustment by $8 million and $9 million at September 30, 2020, and December 31, 2019, respectively,

Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location

The following tables summarize the effect of fair value and cash flow hedge accounting on the income statement for the three- and nine-month periods ended September 30, 2020, and September 30, 2019.


	Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
in millions	Interest expense – long-term debt		Interest income – loans		Interest expense - deposits		Other income
Three months ended September 30, 2020
Total amounts presented in the consolidated statement of income	$	(64)	$	927	$	(54)	$	28

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	47		—		—		—
Recognized on derivatives designated as hedging instruments	(7)		—		—		—
Net income (expense) recognized on fair value hedges	$	40	—		—		—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	100	—		—
Net income (expense) recognized on cash flow hedges	$	(1)	$	100	—		—

Three months ended September 30, 2019
Total amounts presented in the consolidated statement of income	$	(114)	$	1,073	$	227	$	27

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	(75)	—		$	—	—
Recognized on derivatives designated as hedging instruments	72		—		—		—
Net income (expense) recognized on fair value hedges	$	(3)	—		$	—	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(1)	$	(8)	—		—

Net income (expense) recognized on cash flow hedges	$	(1)	$	(8)	—		—


	Location and amount of net gains (losses) recognized in income on fair value and cash flow hedging relationships
in millions	Interest expense – long-term debt		Interest income – loans		Interest expense - deposits		Other income
Nine months ended September 30, 2020
Total amounts presented in the consolidated statement of income	$	(225)	$	2,933	$	(319)	$	(27)

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	(252)		—		—		—
Recognized on derivatives designated as hedging instruments	343		—		—		—
Net income (expense) recognized on fair value hedges	$	91	—		—		—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(3)	$	224	—		—
Net income (expense) recognized on cash flow hedges	$	(3)	$	224	—		—

Nine months ended September 30, 2019
Total amounts presented in the consolidated statement of income	$	354	$	3,221	$	652	$	54

Net gains (losses) on fair value hedging relationships
Interest contracts
Recognized on hedged items	$	(320)	—		$	(1)	—
Recognized on derivatives designated as hedging instruments	296		—		—		—
Net income (expense) recognized on fair value hedges	$	(24)	—		$	(1)	—
Net gain (loss) on cash flow hedging relationships
Interest contracts
Realized gains (losses) (pre-tax) reclassified from AOCI into net income	$	(2)	$	(51)	—		—

Net income (expense) recognized on cash flow hedges	$	(2)	$	(51)	—		—

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following tables summarize the pre-tax net gains (losses) on our cash flow and net investment hedges for the three- and nine-month periods ended September 30, 2020, and September 30, 2019, and where they are recorded on the income statement. The table includes net gains (losses) recognized in OCI during the period and net gains (losses) reclassified from OCI into income during the current period.


in millions	Net Gains (Losses) Recognized in OCI		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income
Three months ended September 30, 2020
Cash Flow Hedges
Interest rate	$	5	Interest income — Loans	$	100
Interest rate	—		Interest expense — Long-term debt	(1)
Interest rate	10		Investment banking and debt placement fees	—


Total	$	15		$	99
Three months ended September 30, 2019
Cash Flow Hedges
Interest rate	$	86	Interest income — Loans	$	(8)
Interest rate	(2)		Interest expense — Long-term debt	(1)
Interest rate	(4)		Investment banking and debt placement fees	—
Net Investment Hedges
Foreign exchange contracts	1		Other Income	—
Total	$	81		$	(9)


in millions	Net Gains (Losses) Recognized in OCI		Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income	Net Gains (Losses) Reclassified From OCI Into Income(a)
Nine months ended September 30, 2020
Cash Flow Hedges
Interest rate	$	629	Interest income — Loans	$	224
Interest rate	(6)		Interest expense — Long-term debt	(3)
Interest rate	(10)		Investment banking and debt placement fees	—
Net Investment Hedges
Foreign exchange contracts	—		Other Income	—
Total	$	613		$	221
Nine months ended September 30, 2019
Cash Flow Hedges
Interest rate	$	471	Interest income — Loans	$	(51)
Interest rate	(5)		Interest expense — Long-term debt	(2)
Interest rate	(10)		Investment banking and debt placement fees	—
Net Investment Hedges
Foreign exchange contracts	(3)		Other Income	—
Total	$	453		$	(53)

Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the three- and nine-month periods ended September 30, 2020, and September 30, 2019, and where they are recorded on the income statement.


	Three months ended September 30, 2020							Three months ended September 30, 2019
in millions	Corporate services income		Consumer mortgage income	Other income		Total		Corporate services income		Consumer mortgage income	Other income		Total
NET GAINS (LOSSES)
Interest rate	$	5	—	$	(1)	$	4	$	16	—	(1)		$	15
Foreign exchange	9		—	—		9		11		—	—		11
Commodity	5		—	—		5		2		—	—		2
Credit	4		—	(8)		(4)		(5)		—	$	(8)	(13)
Other	—		28	(8)		20		—		5	(3)		2
Total net gains (losses)	$	23	28	$	(17)	$	34	$	24	5	$	(12)	$	17


	Nine months ended September 30, 2020								Nine months ended September 30, 2019
in millions	Corporate services income		Consumer mortgage income		Other income		Total		Corporate services income		Consumer mortgage income		Other income		Total
NET GAINS (LOSSES)
Interest rate	$	23	$	—	$	(10)	$	13	$	31	—		$	(3)	$	28
Foreign exchange	29		—		—		29		32		—		—		32
Commodity	13		—		—		13		5		—		—		5
Credit	(6)		—		(20)		(26)		(4)		—		(23)		(27)
Other	—		36		17		53		—		$	5	—		5
Total net gains (losses)	$	59	$	36	$	(13)	$	82	$	64	$	5	$	(26)	$	43

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type at the dates indicated. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.


in millions	September 30, 2020		December 31, 2019
Interest rate	$	1,680	$	848
Foreign exchange	28		30
Commodity	212		95
Credit	—		—
Other	70		14
Derivative assets before collateral	1,990		987
Less: Related collateral	44		207
Total derivative assets	$	1,946	$	780

Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at September 30, 2020, and December 31, 2019. The notional amount represents the amount that the seller could

be required to pay. The payment/performance risk shown in the table represents a weighted average of the default

probabilities for all reference entities in the respective portfolios. These default probabilities are implied from

observed credit indices in the credit default swap market, which are mapped to reference entities based on Key’s

internal risk rating.


	September 30, 2020					December 31, 2019
dollars in millions	Notional Amount		Average Term (Years)	Payment / Performance Risk		Notional Amount		Average Term (Years)	Payment / Performance Risk

Other	$	287	13.48	17.15	%	$	134	14.30	14.56	%
Total credit derivatives sold	$	287	—	—		$	134	—	—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of September 30, 2020, and December 31, 2019. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or three ratings as of September 30, 2020, and December 31, 2019, and take into account all collateral already posted. A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of September 30, 2020, and December 31, 2019. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 2 of this report.


	September 30, 2020				December 31, 2019
in millions	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings	A3		A-		A3		A-
One rating downgrade	$	1	$	1	$	1	$	1
Two rating downgrades	1		1		1		1
Three rating downgrades	1		1		1		1

- 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

- 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=121590274&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=121590274&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=121590274&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=121590274&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=121590274&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=121590274&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=121590274&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=121590274&loc=SL5624171-113959

Reference 9: 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=121590274&loc=SL5579240-113959

+ Details