Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional and Fair Values of Derivative Instruments

The following table summarizes the notional and fair values of our derivative instruments as of December 31, 2017 and 2016, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further segregated by type of contract within those two categories. The total derivative assets and liabilities are presented on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged.

Table 10.1: Derivative Assets and Liabilities at Fair Value



	December 31, 2017								December 31, 2016
	Notional or Contractual Amount		Derivative⁽¹⁾⁽⁴⁾						Notional or Contractual Amount		Derivative⁽¹⁾
(Dollars in millions)	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
Derivatives designated as accounting hedges:
Interest rate contracts:
Fair value hedges	$	56,604	$	102		$	164		$	40,480	$	295		$	569
Cash flow hedges	77,300		30			125			50,400		151			287
Total interest rate contracts	133,904		132			289			90,880		446			856
Foreign exchange contracts:
Cash flow hedges	6,086		19			75			5,620		108			9
Net investment hedges	3,036		1			164			2,396		163			0
Total foreign exchange contracts	9,122		20			239			8,016		271			9
Total derivatives designated as accounting hedges	143,026		152			528			98,896		717			865
Derivatives not designated as accounting hedges:
Interest rate contracts covering:
MSRs⁽²⁾	1,033		7			1			1,696		17			21
Customer accommodation	48,520		848			727			39,474		670			530
Other interest rate exposures⁽²⁾	2,824		33			7			1,105		33			8
Total interest rate contracts	52,377		888			735			42,275		720			559
Other contracts	1,209		0			5			1,767		57			14
Total derivatives not designated as accounting hedges	53,586		888			740			44,042		777			573
Total derivatives	$	196,612	$	1,040		$	1,268		$	142,938	$	1,494		$	1,438
Less: netting adjustment⁽³⁾			(275		)	(662		)			(539		)	(336		)
Total derivative assets/liabilities			$	765		$	606				$	955		$	1,102

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⁽¹⁾	Derivative assets and liabilities presented above exclude valuation adjustments related to non-performance risk. As of December 31, 2017 and 2016, the cumulative CVA balances were $2 million and $6 million, respectively, and the cumulative DVA balances were less than $1 million as of both December 31, 2017 and 2016.


⁽²⁾	MSR contracts include interest rate swaps and to-be-announced contracts. Other interest rate exposures include mortgage-related derivatives.


⁽³⁾	Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty. See Table 10.2 for additional information.


⁽⁴⁾	Reflects an increase of derivative assets of $38 million and a reduction of derivative liabilities of $724 million on our consolidated balance sheets as of December 31, 2017 as a result of adoption of the CME variation margin rule change in

Offsetting Assets

The following table presents as of December 31, 2017 and 2016 the gross and net fair values of our derivative assets and liabilities and repurchase agreements, as well as the related offsetting amounts permitted under U.S. GAAP. The table also includes cash and non-cash collateral received or pledged associated with such arrangements. The collateral amounts shown are limited to the extent of the related net derivative fair values or outstanding balances, thus instances of over-collateralization are not shown.

Table 10.2: Offsetting of Financial Assets and Financial Liabilities



	Gross Amounts		Gross Amounts Offset in the Balance Sheet						Net Amounts as Recognized		Securities Collateral Held Under Master Netting Agreements
(Dollars in millions)	Gross Amounts		Financial Instruments			Cash Collateral Received			Net Amounts as Recognized		Securities Collateral Held Under Master Netting Agreements			Net Exposure
As of December 31, 2017
Derivative assets⁽¹⁾⁽²⁾	$	1,040	$	(202	)	$	(73	)	$	765	$	0		$	765
As of December 31, 2016
Derivative assets⁽²⁾	1,494		(152		)	(387		)	955		(11		)	944

Offsetting Liabilities



	Gross Amounts		Gross Amounts Offset in the Balance Sheet						Net Amounts as Recognized		Securities Collateral Pledged Under Master Netting Agreements
(Dollars in millions)	Gross Amounts		Financial Instruments			Cash Collateral Pledged			Net Amounts as Recognized					Net Exposure
As of December 31, 2017
Derivative liabilities⁽¹⁾⁽²⁾	$	1,268	$	(202	)	$	(460	)	$	606	$	0		$	606
Repurchase agreements⁽³⁾	576		0			0			576		(576		)	0
As of December 31, 2016
Derivative liabilities⁽²⁾	1,438		(152		)	(184		)	1,102		0			1,102
Repurchase agreements	992		0			0			992		(992		)	0

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⁽¹⁾	Reflects an increase of derivative assets of $38 million and a reduction of derivative liabilities of $724 million on our consolidated balance sheets as of December 31, 2017 as a result of adoption of the CME variation margin rule change in the second quarter of 2017.

⁽²⁾

We received cash collateral from derivative counterparties totaling $91 million and $448 million as of December 31, 2017 and 2016, respectively. We also received securities from derivative counterparties with a fair value of $1 million and $16 million as of December 31, 2017 and 2016, respectively, which we have the ability to re-pledge. We posted $966 million and $1.5 billion of cash collateral as of December 31, 2017 and 2016, respectively.


⁽³⁾	Represents customer repurchase agreements that mature the next business day. As of December 31, 2017, we pledged collateral with a fair value of $588 million under these customer repurchase agreements, which were primarily agency RMBS securities.

Fair Value Hedging and Free-Standing Derivatives

Derivative Instruments, Gain (Loss) [Line Items]

Derivative Instruments, Gain (Loss)

related to derivatives designated as fair value hedges and free-standing derivatives for the years ended December 31, 2017, 2016 and 2015. These gains or losses are included as a component of other non-interest income in our consolidated statements of income. Accrued interest income or expense on fair value hedges is recorded in net interest income or expense in our consolidated statements of income and is excluded from this table.

Table 10.3: Gains and Losses on Fair Value Hedges and Free-Standing Derivatives



	Year Ended December 31,
(Dollars in millions)	2017			2016			2015
Derivatives designated as fair value hedges:
Fair value interest rate contracts:
Gains (losses) recognized in earnings on derivatives	$	(212	)	$	(613	)	$	(66	)
Gains (losses) recognized in earnings on hedged items	216			603			75
Net fair value hedge ineffectiveness gains (losses)	4			(10		)	9
Derivatives not designated as accounting hedges:
Interest rate contracts covering:
MSRs	3			(1		)	3
Customer accommodation	38			37			21
Other interest rate exposures	58			68			44
Total interest rate contracts	99			104			68
Other contracts	0			(9		)	(2		)
Total gains on derivatives not designated as accounting hedges	99			95			66
Net derivative gains recognized in earnings	$	103		$	85		$	75

Cash Flow Hedging and Net Investment Hedging

Derivative Instruments, Gain (Loss) [Line Items]

Derivative Instruments, Gain (Loss)

The following table shows the net gains (losses) related to derivatives designated as cash flow hedges and net investment hedges for the years ended December 31, 2017, 2016 and 2015.

Table 10.4: Gains and Losses on Derivatives Designated as Cash Flow Hedges and Net Investment Hedges



	Year Ended December 31,
(Dollars in millions)	2017			2016			2015
Gains (losses) recorded in AOCI:
Cash flow hedges:
Interest rate contracts	$	(113	)	$	(6	)	$	301
Foreign exchange contracts	18			3			(17		)
Subtotal	(95		)	(3		)	284
Net investment hedges:
Foreign exchange contracts	(143		)	280			83
Net derivatives gains (losses) recognized in AOCI	$	(238	)	$	277		$	367
Gains (losses) recorded in earnings:
Cash flow hedges:
Gains (losses) reclassified from AOCI into earnings:
Interest rate contracts⁽¹⁾	$	91		$	192		$	190
Foreign exchange contracts⁽²⁾	17			3			(16		)
Subtotal	108			195			174
Gains (losses) recognized in earnings due to ineffectiveness:
Interest rate contracts⁽²⁾	2			(4		)	2
Net derivative gains (losses) recognized in earnings	$	110		$	191		$	176

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⁽¹⁾	Amounts reclassified are recorded in our consolidated statements of income in interest income or interest expense.


⁽²⁾	Amounts are recorded in our consolidated statements of income in other non-interest income or other interest income.