Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2011

Fair Value Measurements (Tables) [Abstract]

Fair values of the funds and the unfunded commitments for funds

June 30, 2011			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Passive funds (a)	$	16	$	5
Co-managed funds (b)		17		9
Total	$	33	$	14

(a)

We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to seven years.

(b)

We are a manager or co-manager of these funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. In addition, we receive management fees. We can sell or transfer our interest in any of these funds with the written consent of a majority of the fund’s investors. In one instance, the other co-manager of the fund must consent to the sale or transfer of our interest in the fund. The funds will mature over a period of three to six years.

Fair values of indirect funds and unfunded commitments for indirect funds

June 30, 2011			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Private equity funds (a)	$	463	$	143
Hedge funds (b)		7		—
Total	$	470	$	143

(a)

Consists of buyout, venture capital and fund of funds. These investments can never be redeemed with the investee funds. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to ten years.

(b)

Consists of funds invested in long and short positions of “stressed and distressed” fixed income-oriented securities with the goal of producing attractive risk-adjusted returns. The investments can be redeemed quarterly with 45 days’ notice. However, the fund’s general partners may impose quarterly redemption limits that may delay receipt of requested redemptions.

Fair value of assets and liabilities on recurring basis

June 30, 2011
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short-term investments:
Securities purchased under resale agreements		—	$	414		—	$	414
Trading account assets:
U.S. Treasury, agencies and corporations		—		403		—		403
States and political subdivisions		—		78		—		78
Collateralized mortgage obligations		—		79		—		79
Other mortgage-backed securities				61	$	1		62
Other securities	$	94		49		—		143
Total trading account securities		94		670		1		765
Commercial loans		—		4		—		4
Total trading account assets		94		674		1		769
Securities available for sale:
U.S. Treasury, agencies and corporations		—		9		—		9
States and political subdivisions		—		129		—		129
Collateralized mortgage obligations		—		17,609		—		17,609
Other mortgage-backed securities		—		917		—		917
Other securities		9		7		—		16
Total securities available for sale		9		18,671		—		18,680
Other investments:
Principal investments:
Direct		—		—		270		270
Indirect		—		—		470		470
Total principal investments		—		—		740		740
Equity and mezzanine investments:
Direct		—		—		14		14
Indirect		—		—		33		33
Total equity and mezzanine investments		—		—		47		47
Total other investments		—		—		787		787
Derivative assets:
Interest rate		—		1,527		81		1,608
Foreign exchange		83		95		—		178
Energy and commodity		—		295		—		295
Credit		—		26		8		34
Equity		—		4		—		4
Derivative assets		83		1,947		89		2,119
Netting adjustments(a)		—		—		—		(1,219	)
Total derivative assets		83		1,947		89		900
Accrued income and other assets		7		21		—		28
Total assets on a recurring basis at fair value	$	193	$	21,727	$	877	$	21,578
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	369		—	$	369
Bank notes and other short-term borrowings:
Short positions	$	1		449		—		450
Derivative liabilities:
Interest rate		—		1,181		—		1,181
Foreign exchange		78		241		—		319
Energy and commodity		—		303		—		303
Credit		—		31		—		31
Equity		—		4		—		4
Derivative liabilities		78		1,760		—		1,838
Netting adjustments(a)		—		—		—		(847	)
Total derivative liabilities		78		1,760		—		991
Accrued expense and other liabilities		—		36		—		36
Total liabilities on a recurring basis at fair value	$	79	$	2,614		—	$	1,846

(a) 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 related to the offsetting of certain derivative contracts on the balance sheet. The net basis takes into account the impact of bilateral collateral and 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 collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2010
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Short term investments:
Securities purchased under resale agreements		—	$	373		—	$	373
Trading account assets:
U.S. Treasury, agencies and corporations		—		501		—		501
States and political subdivisions		—		66		—		66
Collateralized mortgage obligations		—		34		—		34
Other mortgage-backed securities		—		137	$	1		138
Other securities	$	145		69		21		235
Total trading account securities		145		807		22		974
Commercial loans		—		11		—		11
Total trading account assets		145		818		22		985
Securities available for sale:
U.S. Treasury, agencies and corporations		—		8		—		8
States and political subdivisions		—		172		—		172
Collateralized mortgage obligations		—		20,665		—		20,665
Other mortgage-backed securities		—		1,069		—		1,069
Other securities		13		6		—		19
Total securities available for sale		13		21,920		—		21,933
Other investments:
Principal investments:
Direct		—		—		372		372
Indirect		—		—		526		526
Total principal investments		—		—		898		898
Equity and mezzanine investments:
Direct		—		—		20		20
Indirect		—		—		30		30
Total equity and mezzanine investments		—		—		50		50
Total other investments		—		—		948		948
Derivative assets:
Interest rate		—		1,691		75		1,766
Foreign exchange		92		88		—		180
Energy and commodity		—		317		1		318
Credit		—		27		12		39
Equity		—		1		—		1
Derivative assets		92		2,124		88		2,304
Netting adjustments (a)		—		—		—		(1,298	)
Total derivative assets		92		2,124		88		1,006
Accrued income and other assets		1		76		—		77
Total assets on a recurring basis at fair value	$	251	$	25,311	$	1,058	$	25,322
LIABILITIES MEASURED ON A RECURRING BASIS
Federal funds purchased and securities sold under repurchase agreements:
Securities sold under repurchase agreements		—	$	572		—	$	572
Bank notes and other short-term borrowings:
Short positions		—		395		—		395
Derivative liabilities:
Interest rate		—		1,335		—		1,335
Foreign exchange	$	82		323		—		405
Energy and commodity		—		335		—		335
Credit		—		30	$	1		31
Equity		—		1		—		1
Derivative liabilities		82		2,024		1		2,107
Netting adjustments (a)		—		—		—		(965	)
Total derivative liabilities		82		2,024		1		1,142
Accrued expense and other liabilities		—		66		—		66
Total liabilities on a recurring basis at fair value	$	82	$	3,057	$	1	$	2,175

(a) 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 related to the offsetting of certain derivative contracts on the balance sheet. The net basis takes into account the impact of bilateral collateral and 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 collateral. Total derivative assets and liabilities include these netting adjustments.

Changes in Level 3 Fair Value Measurements

	Trading Account Assets												Other Investments																			Derivative Instruments										(a)
	Other																				Equity and								Accrued
	Mortgage-												Principal Investments								Mezzanine Investments								Income
	Backed				Other				Commercial																				and Other			Interest				Energy and
in millions	Securities				Securities				Loans				Direct				Indirect				Direct				Indirect				Assets			Rate				Commodity				Credit
Balance at December 31, 2010	$	1			$	21				—			$	372			$	526			$	20			$	30				—		$	75			$	1			$	11
Gains (losses) included in earnings		—		(b)		3		(b)		—		(b)		2		(c)		43		(c)		13		(c)		—		(c)		—	(c)		14		(b)		(1	)	(b)		(10	)	(b)
Purchases		—				—				—				30				46				—				9				—			11				—				—
Sales		—				—				—				(9	)			(36	)			—				—				—			(20	)			—				—
Issuances		—				—				—				—				—				—				—				—			—				—				—
Settlements		—				(24	)			—				—				—				(19	)			(3	)			—			—				—				7
Transfers into Level 3		—				—				—				—				—				—				—				—			10				—				—
Transfers out of Level 3		—				—				—				(125	)	(d)		(109	)	(d)		—				(3	)			—			(9	)			—				—
Balance at June 30, 2011	$	1				—				—			$	270			$	470			$	14			$	33				—		$	81				—			$	8
Unrealized gains (losses) included in earnings		—		(b)		3		(b)		—		(b)	$	8		(c)	$	28		(c)	$	32		(c)	$	(3	)	(c)		—	(c)		—		(b)		—		(b)		—		(b)
Balance at March 31, 2011	$	1			$	—			$	—			$	395			$	548			$	25			$	27			$	—		$	81			$	—			$	4
Gains (losses) included in earnings		—		(b)		3		(b)		—		(b)		—		(c)		10		(c)		8		(c)		1		(c)		—	(c)		10		(b)		—		(b)		(9	)	(b)
Purchases		—				—				—				2				32				—				7				—			11				—				6
Sales		—				—				—				(2	)			(11	)			—				—				—			(18	)			—				—
Issuances		—				—				—				—				—				—				—				—			—				—				—
Settlements		—				(3	)			—				—				—				(19	)			(2	)			—			—				—				7
Transfers into Level 3		—				—				—				—				—				—				—				—			3				—				—
Transfers out of Level 3		—				—				—				(125	)	(d)		(109	)	(d)		—				—				—			(6	)			—				—
Balance at June 30, 2011	$	1				—				—			$	270			$	470			$	14			$	33				—		$	81				—			$	8
Unrealized gains (losses) included in earnings		—		(b)		3		(b)		—		(b)	$	6		(c)	$	4		(c)	$	22		(c)	$	1		(c)		—	(c)		—		(b)		—		(b)		—		(b)
Balance at December 31, 2009	$	29			$	423			$	19			$	538			$	497			$	26			$	31				—		$	99				—			$	9
Gains (losses) included in earnings		3		(b)		—		(b)		(1	)	(b)		18		(c)		36		(c)		5		(c)		(4	)	(c)		—	(c)		—		(b)		—		(b)		1		(b)
Purchases, sales, issuances and settlements		(29	)			(399	)			(9	)			(129	)			(3	)			(13	)			4			$	3			(4	)			—				—
Net transfers into (out of) Level 3		1				—				—				(8	)			—				6				—				—			(8	)			—				—
Balance at June 30, 2010	$	4			$	24			$	9			$	419			$	530			$	24			$	31			$	3		$	87				—			$	10
Unrealized gains (losses) included in earnings	$	2		(b)		—		(b)	$	(1	)	(b)	$	2		(c)	$	32		(c)	$	41		(c)	$	(4	)	(c)		—	(c)		—		(b)		—		(b)		—		(b)
Balance at March 31, 2010	$	29			$	199			$	11			$	534			$	518			$	32			$	33			$	3		$	80				—			$	10
Gains (losses) included in earnings		3		(b)		—		(b)		(1	)	(b)		3		(c)		13		(c)		3		(c)		(2	)	(c)		—	(c)		9		(b)		—		(b)		—		(b)
Purchases, sales, issuances and settlements		(29	)			(175	)			(1	)			(118	)			(1	)			(11	)			—				—			(1	)			—				—
Net transfers into (out of) Level 3		1				—				—				—				—				—				—				—			(1	)			—				—
Balance at June 30, 2010	$	4			$	24			$	9			$	419			$	530			$	24			$	31			$	3		$	87				—			$	10
Unrealized gains (losses) included in earnings	$	2		(b)		—		(b)		—		(b)	$	(14	)	(c)	$	13		(c)	$	34		(c)	$	(2	)	(c)		—	(c)		—		(b)	$	—		(b)		—		(b)

(a)	Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.
(b)	Realized and unrealized gains and losses on trading account assets and derivative instruments are reported in “investment banking and capital markets income (loss)” on the income statement.
(c)	Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investments” on the income statement. Realized and unrealized gains and losses on private equity and mezzanine investments are reported in “investment banking and capital markets income (loss)” on the income statement. Realized and unrealized gains and losses on investments included in accrued income and other assets are reported in “other income” on the income statement.
(d)	Transfers out of Level 3 for principal investments represent investments that were deconsolidated during the second quarter of 2011 when employees who managed our various principal investments left Key and formed two independent entities that will serve as investment managers of these investments.

Assets Measured at Fair Value on a Nonrecurring Basis

	June 30, 2011								December 31, 2010
in millions	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	131	$	131		—		—	$	219	$	219
Loans held for sale (a)		—		—		25		25		—		—		15		15
Operating lease assets		—		—		—		—		—		—		—		—
Goodwill and other intangible assets		—		—		—		—		—		—		—		—
Accrued income and other assets		—	$	19		13		32		—	$	39		23		62
Other investments		—		—		1		1		—		—		—		—
Total assets on a nonrecurring basis at fair value		—	$	19	$	170	$	189		—	$	39	$	257	$	296

Fair Value Disclosures of Financial Instruments

		June 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
in millions	Amount		Value		Amount		Value
ASSETS
Cash and short-term investments (a)	$	5,416	$	5,416	$	1,622	$	1,622
Trading account assets (e)		769		769		985		985
Securities available for sale (e)		18,680		18,680		21,933		21,933
Held-to-maturity securities (b)		19		19		17		17
Other investments (e)		1,195		1,195		1,358		1,358
Loans, net of allowance (c)		46,610		45,759		48,503		46,140
Loans held for sale (e)		381		381		467		467
Mortgage servicing assets (d)		180		247		196		284
Derivative assets (e)		900		900		1,006		1,006
LIABILITIES
Deposits with no stated maturity (a)	$	47,568	$	47,568	$	45,598	$	45,598
Time deposits (d)		12,842		13,253		15,012		15,502
Short-term borrowings (a)		2,179		2,179		3,196		3,196
Long-term debt (d)		10,997		11,321		10,592		10,611
Derivative liabilities (e)		991		991		1,142		1,142

Valuation Methods and Assumptions

(a)	Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.
(b)	Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.
(c)	The fair value of the loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.
(d)	Fair values of servicing assets, time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.
(e)	Information pertaining to our methodology for measuring the fair values of derivative assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this note.