Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2012

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

Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:

	2012								2011
			Fair Value								Fair Value
December 31, in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	19,085	$	579		$	30		$	15,067	$	589		$	27
Foreign exchange		196		—			7			554		—			147
Total		19,281		579			37			15,621		589			174
Derivatives not designated as hedging instruments:
Interest rate		51,633		1,144			1,122			48,537		1,364			1,371
Foreign exchange		5,025		75			68			5,549		151			141
Energy and commodity		1,688		156			150			1,610		253			253
Credit		955		9			10			3,210		37			62
Equity		7		—			—			17		3			3
Total		59,308		1,384			1,350			58,923		1,808			1,830
Netting adjustments (a)		—		(1,270	)		(803	)		—		(1,452	)		(978	)
Total derivatives	$	78,589	$	693		$	584		$	74,544	$	945		$	1,026

(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. 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 cash collateral.

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

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the years ended December 31, 2012, and 2011, and where they are recorded on the income statement.

	Year ended December 31, 2012
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative			Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	(52)		Long-term debt	Other income	$	45	(a	)
Interest rate	Interest expense – Long-term debt		155
Foreign exchange	Other income		5		Long-term debt	Other income		(6)	(a	)
Foreign exchange	Interest expense – Long-term debt		1		Long-term debt	Interest expense – Long-term debt		(1)	(b	)
Total		$	109				$	38
	Year ended December 31, 2011
in millions	Income Statement Location of Net Gains (Losses) on Derivative	Net Gains (Losses) on Derivative			Hedged Item	Income Statement Location of Net Gains (Losses) on Hedged Item	Net Gains (Losses) on Hedged Item
Interest rate	Other income	$	163		Long-term debt	Other income	$	(158)	(a)
Interest rate	Interest expense – Long-term debt		220
Foreign exchange	Other income		(46	)	Long-term debt	Other income		39	(a)
Foreign exchange	Interest expense – Long-term debt		12		Long-term debt	Interest expense – Long-term debt		(16)	(b)
Total		$	349				$	(135)

(a) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b) Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the years ended December 31, 2012 and 2011, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.

	Year ended December 31, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)		Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	105			Interest income – Loans	$	66			Other income		—
Interest rate		(6	)		Interest expense – Long-term debt		(10	)		Other income		—
Interest rate		—			Net gains (losses) from loan sales		—			Other income		—
Net Investment Hedges
Foreign exchange contracts		(14	)		Other Income		—			Other income		—
Total	$	85				$	56					—

	Year ended December 31, 2011
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)		Net Gains (Losses) Recognized in Income (Ineffective Portion)
Interest rate	$	72		Interest income – Loans	$	51			Other income		—
Interest rate		(46	)	Interest expense – Long-term debt		(10	)		Other income		—
Interest rate		—		Net gains (losses) from loan sales		—			Other income		—
Total	$	26			$	41					—

After-Tax Change in AOCI Resulting from Cash Flow Hedges

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:

in millions	December 31, 2011		2012 Hedging Activity		Reclassification of Gains to Net Income		December 31, 2012
AOCI resulting from cash flow and net investment hedges	$	(2)	$	55	$	(35)	$	18

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 years ended December 31, 2012, and 2011, and where they are recorded on the income statement.

in millions	2012			2011
NET GAINS (LOSSES) (a)
Interest rate	$	22		$	19
Foreign exchange		36			42
Energy and commodity		9			4
Credit		(20	)		(45	)
Total net gains (losses)	$	47		$	20

(a) Recorded in “investment banking and capital markets income (loss)” on the income statement.

Largest Exposure to Individual Counterparty

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.

December 31, in millions	2012		2011
Largest gross exposure (derivative asset) to an individual counterparty	$	182	$	194
Collateral posted by this counterparty		66		64
Derivative liability with this counterparty		191		250
Collateral pledged to this counterparty		82		127
Net exposure after netting adjustments and collateral		7		7

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type. 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.

December 31, in millions	2012		2011
Interest rate	$	1,114	$	1,257
Foreign exchange		23		64
Energy and commodity		47		96
Credit		3		12
Equity		—		2
Derivative assets before collateral		1,187		1,431
Less: Related collateral		494		486
Total derivative assets	$	693	$	945

Fair Value of Credit Derivatives Purchased and Sold

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of December 31, 2012, and 2011. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.

December 31, in millions	2012						2011
	Purchased		Sold		Net		Purchased		Sold		Net
Single name credit default swaps	$	3	$	(3)	$	—	$	3	$	(1)	$	2
Traded credit default swap indices		—		—		—		6		(6)		—
Other		—		(1)		(1)		1		(1)		—
Total credit derivatives	$	3	$	(4)	$	(1)	$	10	$	(8)	$	2

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 December 31, 2012, and 2011. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. 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 directly correlated to the probability that we will have to make a payment under the credit derivative contracts.

	2012							2011
December 31, dollars in millions	Notional Amount		Average Term (Years)		Payment / Performance Risk			Notional Amount		Average Term (Years)		Payment / Performance Risk
Single name credit default swaps	$	257		2.19		7.41	%	$	878		2.18		4.98	%
Traded credit default swap indices		29		4.97		0.77			343		3.20		4.58
Other		23		5.35		10.77			18		5.74		10.89
Total credit derivatives sold	$	309		—		—		$	1,239		—		—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of December 31, 2012, and 2011. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two or three ratings as of December 31, 2012, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $3 million would have been required as of December 31, 2012, while additional collateral would not have been required as of December 31, 2011.

December 31, in millions	2012				2011
	Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings		A3		A-		A3		A-
One rating downgrade	$	6	$	6	$	11	$	11
Two rating downgrades		11		11		16		16
Three rating downgrades		11		11		16		16