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Derivative Instruments and Hedging Activities (Tables)
 12 Months Ended
Dec. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of derivative assets and liabilities at fair value The following table summarizes the notional and fair values of our derivative instruments as of December 31, 2018 and 2017, 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 adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets.
Table 10.1: Derivative Assets and Liabilities at Fair Value
 
 
December 31, 2018
 
December 31, 2017
 
 
Notional or
Contractual
Amount
 
Derivative(1)(2)
 
Notional or
Contractual
Amount
 
Derivative(1)
(Dollars in millions)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivatives designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges
 
$
53,413

 
$
64

 
$
28

 
$
56,604

 
$
102

 
$
164

Cash flow hedges
 
81,200

 
83

 
70

 
77,300

 
30

 
125

Total interest rate contracts
 
134,613

 
147

 
98

 
133,904

 
132

 
289

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
5,745

 
184

 
2

 
6,086

 
19

 
75

Net investment hedges
 
2,607

 
178

 
0

 
3,036

 
1

 
164

Total foreign exchange contracts
 
8,352

 
362

 
2

 
9,122

 
20

 
239

Total derivatives designated as accounting hedges
 
142,965

 
509

 
100

 
143,026

 
152

 
528

Derivatives not designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Customer accommodation:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
49,386

 
190

 
256

 
39,429

 
316

 
221

Commodity contracts
 
10,673

 
797

 
786

 
8,111

 
518

 
496

Foreign exchange and other contracts
 
1,418

 
12

 
11

 
980

 
14

 
10

Total customer accommodation
 
61,477

 
999

 
1,053

 
48,520

 
848

 
727

Other interest rate exposures(3)
 
6,427

 
29

 
36

 
3,857

 
40

 
8

Other contracts
 
1,636

 
2

 
12

 
1,209

 
0

 
5

Total derivatives not designated as accounting hedges
 
69,540

 
1,030

 
1,101

 
53,586

 
888

 
740

Total derivatives
 
$
212,505

 
$
1,539

 
$
1,201

 
$
196,612

 
$
1,040

 
$
1,268

Less: netting adjustment(4)
 
(1,079
)
 
(287
)
 
 
 
(275
)
 
(662
)
Total derivative assets/liabilities
 
$
460

 
$
914

 
 
 
$
765

 
$
606

__________
(1) 
Derivative assets and liabilities presented above exclude valuation adjustments related to non-performance risk. As of December 31, 2018 and 2017, the cumulative CVA balances were $3 million and $2 million, respectively, and the cumulative DVA balances were approximately $1 million as of both December 31, 2018 and 2017.
(2) 
Reflects a reduction in derivative assets of $431 million and a reduction in derivative liabilities of $397 million on our consolidated balance sheets as a result of adopting the LCH variation margin rule change in the first quarter of 2018.
(3) 
Other interest rate exposures include commercial mortgage-related derivatives and interest rate swaps.
(4) 
Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty.
Hedged item in fair value hedging relationship The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated cumulative basis adjustments included in those carrying values as of December 31, 2018.
Table 10.2: Hedged Items in Fair Value Hedging Relationships
 
 
December 31, 2018
 
 
Carrying Amount
Assets/(Liabilities)
 
Cumulative Amount of Basis Adjustments Included in the Carrying Amount
(Dollars in millions)
 
 
Total
Assets/(Liabilities)
 
Discontinued-Hedging Relationships
Line item on our consolidated balance sheets in which the hedged item is included:
 
 
 
 
 
 
Investment securities available for sale(1)(2)
 
$
14,067

 
$
(6
)
 
$
(2
)
Interest-bearing deposits
 
(13,101
)
 
247

 
0

Securitized debt obligations
 
(5,887
)
 
168

 
143

Senior and subordinated notes
 
(23,572
)
 
315

 
392

__________
(1) 
These amounts include the amortized cost basis of our investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. As of December 31, 2018, the amortized cost basis of this portfolio was $8.3 billion, the amount of the designated hedged items was $4.0 billion, and the cumulative basis adjustment associated with these hedges was $26 million.
(2) 
Carrying value represents amortized cost.
Offsetting Assets The following table presents as of December 31, 2018 and 2017 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 in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 10.3: 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)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)(2)
 
$
1,539

 
$
(205
)
 
$
(874
)
 
$
460

 
$
0

 
$
460

As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,040

 
(202
)
 
(73
)
 
765

 
0

 
765

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)(2)
 
$
1,201

 
$
(205
)
 
$
(82
)
 
$
914

 
$
0

 
$
914

Repurchase agreements(3)
 
352

 
0

 
0

 
352

 
(352
)
 
0

As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,268

 
(202
)
 
(460
)
 
606

 
0

 
606

Repurchase agreements
 
576

 
0

 
0

 
576

 
(576
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $925 million and $91 million as of December 31, 2018 and 2017, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both December 31, 2018 and 2017, which we have the ability to re-pledge. We posted $633 million and $966 million of cash collateral as of December 31, 2018 and 2017, respectively.
(2) 
Reflects a reduction in derivative assets of $431 million and a reduction in derivative liabilities of $397 million on our consolidated balance sheets as a result of adopting the LCH variation margin rule change in the first quarter of 2018.
(3) 
Represents customer repurchase agreements that mature the next business day. As of December 31, 2018, we pledged collateral with a fair value of $359 million under these customer repurchase agreements, which were primarily agency RMBS securities.
Offsetting Liabilities The following table presents as of December 31, 2018 and 2017 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 in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 10.3: 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)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)(2)
 
$
1,539

 
$
(205
)
 
$
(874
)
 
$
460

 
$
0

 
$
460

As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,040

 
(202
)
 
(73
)
 
765

 
0

 
765

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)(2)
 
$
1,201

 
$
(205
)
 
$
(82
)
 
$
914

 
$
0

 
$
914

Repurchase agreements(3)
 
352

 
0

 
0

 
352

 
(352
)
 
0

As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,268

 
(202
)
 
(460
)
 
606

 
0

 
606

Repurchase agreements
 
576

 
0

 
0

 
576

 
(576
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $925 million and $91 million as of December 31, 2018 and 2017, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both December 31, 2018 and 2017, which we have the ability to re-pledge. We posted $633 million and $966 million of cash collateral as of December 31, 2018 and 2017, respectively.
(2) 
Reflects a reduction in derivative assets of $431 million and a reduction in derivative liabilities of $397 million on our consolidated balance sheets as a result of adopting the LCH variation margin rule change in the first quarter of 2018.
(3) 
Represents customer repurchase agreements that mature the next business day. As of December 31, 2018, we pledged collateral with a fair value of $359 million under these customer repurchase agreements, which were primarily agency RMBS securities.
Effects of fair value and cash flow hedge accounting The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the years ended December 31, 2018, 2017 and 2016. Prior period amounts were not reclassified to conform to the current period presentation.
Table 10.4: Effects of Fair Value and Cash Flow Hedge Accounting
 
 
Year Ended December 31, 2018
 
 
Net Interest Income
 
Non-Interest Income
(Dollars in millions)
 
Investment Securities
 
Loans, Including Loans Held for Sale
 
Other
 
Deposits
 
Securitized Debt Obligations
 
Senior and Subordinated Notes
 
Other
Total amounts presented in our consolidated statements of income
 
$
2,211

 
$
24,728

 
$
237

 
$
(2,598
)
 
$
(496
)
 
$
(1,125
)
 
$
1,002

Fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest recognized on derivatives
 
(23
)
 
0

 
0

 
(76
)
 
(53
)
 
2

 
0

Gains (losses) recognized on derivatives
 
34

 
0

 
0

 
(60
)
 
(61
)
 
(212
)
 
0

Gains (losses) recognized on hedged items(1)
 
(33
)
 
0

 
0

 
52

 
38

 
131

 
0

Net income (expense) recognized on fair value hedges
 
(22
)
 
0

 
0

 
(84
)
 
(76
)
 
(79
)
 
0

Cash flow hedging relationships:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) reclassified from AOCI into net income
 
(9
)
 
(82
)
 
0

 
0

 
0

 
0

 
0

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) reclassified from AOCI into net income(3)
 
0

 
0

 
47

 
0

 
0

 
0

 
(2
)
Net income (expense) recognized on cash flow hedges
 
$
(9
)
 
$
(82
)
 
$
47

 
$
0

 
$
0

 
$
0

 
$
(2
)
__________
(1) 
Includes amortization expense of $75 million for the year ended December 31, 2018 related to basis adjustments on discontinued hedges.
(2) 
See “Note 11—Stockholders’ Equity” for the effects of cash flow and net investment hedges on AOCI and amounts reclassified to net income, net of tax.
(3) 
The amount recognized in non-interest income represents the net impact of $191 million of realized gains on foreign exchange contracts reclassified from AOCI into net income to offset $193 million of foreign currency transaction losses on our foreign currency denominated inter-company borrowings for the year ended December 31, 2018.

 
 
Year Ended December 31,
(Dollars in millions)
 
2017
 
2016
Derivatives designated as fair value hedges:
 
 
 
 
Fair value interest rate contracts:
 
 
 
 
Gains (losses) recognized in net income on derivatives
 
$
(212
)
 
$
(613
)
Gains (losses) recognized in net income on hedged items
 
216

 
603

Net fair value hedge ineffectiveness gains (losses)
 
4

 
(10
)
Derivatives designated as cash flow hedges:
 
 
 
 
Gains (losses) reclassified from AOCI into net income:
 
 
 
 
Interest rate contracts
 
91

 
192

Foreign exchange contracts
 
17

 
3

Subtotal
 
108

 
195

Gains (losses) recognized in net income due to ineffectiveness:
 
 
 
 
Interest rate contracts
 
2

 
(4
)
Net derivative gains (losses) recognized in net income
 
$
110

 
$
191
Gains (losses) on free-standing derivatives The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the years ended December 31, 2018, 2017 and 2016. These gains or losses are recognized in other non-interest income on our consolidated statements of income.Table 10.5: Gains (Losses) on Free-Standing Derivatives
 
 
Year Ended December 31,
(Dollars in millions)
 
2018
 
2017
 
2016
Gains (losses) recognized in other non-interest income:
 
 
 
 
 
 
Customer accommodation:
 
 
 
 
 
 
Interest rate contracts
 
$
25

 
$
20

 
$
24

Commodity contracts
 
16

 
13

 
10

Foreign exchange and other contracts
 
7

 
5

 
3

Total customer accommodation
 
48

 
38

 
37

Other interest rate exposures
 
33

 
61

 
67

Other contracts
 
(21
)
 
0

 
(9
)
Total
 
$
60

 
$
99

 
$
95