Fair Value

Fair Value Measurements

We carry trading account assets, investment securities available for sale and various types of derivative financial instruments at fair value in our consolidated statement of condition on a recurring basis. Changes in the fair values of these financial assets and liabilities are recorded either as components of our consolidated statement of income or as components of OCI within shareholders' equity in our consolidated statement of condition.

We measure fair value for the above-described financial assets and liabilities in accordance with GAAP that governs the measurement of the fair value of financial instruments. Management believes that its valuation techniques and underlying assumptions used to measure fair value conform to the provisions of GAAP. We categorize the financial assets and liabilities that we carry at fair value based on a prescribed three-level valuation hierarchy. The hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to valuation methods using significant unobservable inputs (level 3). If the inputs used to measure a financial asset or liability cross different levels of the hierarchy, categorization is based on the lowest-level input that is most significant to the fair value measurement. Management's assessment of the significance of a particular input to the overall fair value measurement of a financial asset or liability requires judgment, and considers factors specific to that asset or liability. The three valuation levels are described below.

Level 1. Financial assets and liabilities with values based on unadjusted quoted prices for identical assets or liabilities in an active market. Fair value is measured using unadjusted quoted prices in active markets for identical securities. Our level 1 financial assets and liabilities primarily include positions in U.S. government securities and highly liquid U.S. and non-U.S. government fixed-income securities. We carry U.S. government securities in our available-for-sale portfolio in connection with our asset and liability management activities. Our level 1 financial assets also include active exchange-traded equity securities.

Level 2. Financial assets and liabilities with values based on quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. Level 2 inputs include the following:


•	Quoted prices for similar assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in non-active markets;


•	Pricing models whose inputs are observable for substantially the full term of the asset or liability; and


•	Pricing models whose inputs are derived principally from, or corroborated by, observable market information through correlation or other means for substantially the full term of the asset or liability.

Our level 2 financial assets and liabilities primarily include trading account assets and fixed-income investment securities, as well as various types of foreign exchange and interest-rate derivative instruments.

Fair value for our investment securities categorized in level 2 is measured primarily using information obtained from independent third parties. This third-party information is subject to review by management as part of a validation process, which includes obtaining an understanding of the underlying assumptions and the level of market participant information used to support those assumptions. In addition, management compares significant assumptions used by third parties to available market information. Such information may include known trades or, to the extent that trading activity is limited, comparisons to market research information pertaining to credit expectations, execution prices and the timing of cash flows, and where information is available, back-testing.

Derivative instruments categorized in level 2 predominantly represent foreign exchange contracts used in our trading activities, for which fair value is measured using discounted cash flow techniques, with inputs consisting of observable spot and forward points, as well as observable interest rate curves. With respect to derivative instruments, we evaluate the impact on valuation of the credit risk of our counterparties and our own credit risk. We consider factors such as the likelihood of default by us and our counterparties, our current and potential future net exposures and remaining maturities in determining the appropriate measurements of fair value. Valuation adjustments associated with derivative instruments were not material to those instruments for the three and nine months ended September 30, 2012 and 2011.

Level 3. Financial assets and liabilities with values based on prices or valuation techniques that require inputs that are both unobservable in the market and significant to the overall fair value measurement. These inputs reflect management's judgment about the assumptions that a market participant would use in pricing the financial asset or liability, and are based on the best available information, some of which is internally developed. The following provides a more detailed discussion of our financial assets and liabilities that we may categorize in level 3 and the related valuation methodology.

•

Fair value for our investment securities categorized in level 3 is measured using information obtained from third-party sources, typically non-binding broker or dealer quotes, or through the use of internally developed pricing models. Management has evaluated its methodologies used to determine fair value, but has considered the level of observable market information to be insufficient to categorize the securities in level 2.


•	The fair value of foreign exchange contracts carried in other assets and accrued expenses and other liabilities, primarily composed of options, is measured using an option pricing model. Because of a limited number of observable transactions, certain model inputs are not observable, such as implied volatility surface, but are derived from observable market information.


•	The fair value of certain interest-rate caps with long-dated maturities, also carried in other assets and accrued expenses and other liabilities, is measured using a matrix pricing approach. Observable market prices are not available for these derivatives, so extrapolation is necessary to value these instruments, since they have a strike and/or maturity outside of the matrix.

Our level-3 financial assets and liabilities are similar in structure and profile to our level-1 and level-2 financial instruments, but they trade in less liquid markets, and the measurement of their fair value is inherently more difficult. As of September 30, 2012, on a gross basis, we categorized in level 3 approximately 6% and 2% of our financial assets and liabilities, respectively, carried at fair value on a recurring basis. We generally determine the fair value of our level-3 financial assets and liabilities using pricing information from third-party sources, typically non-binding broker and dealer quotes, and, to a lesser extent, using internally developed pricing models. The fair value of investment securities categorized in level 3 that was measured using non-binding quotes and internally developed pricing model inputs composed approximately 95% and 5%, respectively, of the total fair value of the investment securities categorized in level 3 as of September 30, 2012.

The fair value measurement process for our level-3 financial assets and liabilities is overseen by a valuation group within Corporate Finance, independent of the business units that carry the assets and liabilities. This function, which develops and manages the valuation process, reports to State Street's Valuation Committee. The Valuation Committee, composed of senior management from independent business units, Enterprise Risk Management and Corporate Finance, oversees adherence to State Street's valuation policies.

The valuation group performs independent validation of the pricing information obtained from third-party sources in order to evaluate reasonableness and consistency with market experience in similar asset classes. Monthly analyses include a review of price changes relative to overall trends, credit analysis and other relevant procedures (discussed below). In addition, prices for level-3 securities carried in our investment portfolio are tested on a sample basis based on unusual pricing movements.These sample prices are then corroborated through price recalculations, when applicable, using available market information, which is obtained independent of the third-party pricing source. The recalculated prices are compared to market research information pertaining to credit expectations, execution prices and the timing of cash flows, and where information is available, back-testing. If a difference is identified and it is determined that there is a significant impact requiring an adjustment, a recommendation is presented to the Valuation Committee for review and consideration.

Independent validation is also performed on fair value measurements determined using internally developed pricing models. The pricing models are subject to independent validation through our Model Assessment Committee, a corporate risk committee that provides technical recommendations to the Valuation Committee. This validation process incorporates a review of a diverse set of model and trade parameters across a broad range of values in order to evaluate the model's suitability for valuation of a particular financial instrument type, as well as the model's accuracy in reflecting the characteristics of the related financial asset or liability and its significant risks. Inputs and assumptions, including any price valuation adjustments, are developed by the business units and independently reviewed by the valuation group. Model valuations are compared to available market information including appropriate proxy instruments and other benchmarks to highlight abnormalities for further investigation.

Measuring fair value requires the exercise of management judgment. The level of subjectivity and the degree of management judgment required is more significant for financial instruments whose fair value is measured using inputs that are not observable. The areas requiring significant judgment are identified, documented and reported to the Valuation Committee as part of the valuation control framework. We believe that our valuation methods are appropriate; however, the use of different methodologies or assumptions, particularly as they apply to level-3 financial assets and liabilities, could materially affect fair value measurements as of the reporting date.

The following tables present information with respect to our financial assets and liabilities carried at fair value in our consolidated statement of condition on a recurring basis as of the dates indicated. No transfers of financial assets or liabilities between levels 1 and 2 occurred during the nine months ended September 30, 2012 or the year ended December 31, 2011.



	Fair Value Measurements on a Recurring Basis
	as of September 30, 2012
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	20								$	20
Non-U.S. government securities	366									366
Other	72		$	153						225
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations	3		867							870
Mortgage-backed securities	—		31,097		$	906				32,003
Asset-backed securities:
Student loans	—		16,059		478					16,537
Credit cards	—		9,728		238					9,966
Sub-prime	—		1,379		—					1,379
Other	—		666		3,460					4,126
Total asset-backed securities	—		27,832		4,176					32,008
Non-U.S. debt securities:
Mortgage-backed securities	—		10,759		285					11,044
Asset-backed securities	—		5,243		677					5,920
Government securities	—		2,986		—					2,986
Other	—		3,840		194					4,034
Total non-U.S. debt securities	—		22,828		1,156					23,984
State and political subdivisions	—		7,256		48					7,304
Collateralized mortgage obligations	—		4,721		124					4,845
Other U.S. debt securities	—		5,095		9					5,104
U.S. equity securities	—		881		—					881
Non-U.S. equity securities	—		130		—					130
Total investment securities available for sale	3		100,707		6,419					107,129
Other assets:
Derivative instruments:
Foreign exchange contracts	—		6,646		99
Interest-rate contracts	—		186		—
Total derivative instruments	—		6,832		99		$	(3,496	)	3,435
Other	49		2		—		—			51
Total assets carried at fair value	$	510	$	107,694	$	6,518	$	(3,496	)	$	111,226
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts			$	6,351	$	100
Interest-rate contracts			301		—
Other			—		9
Total derivative instruments			6,652		109		$	(2,947	)	$	3,814
Other	$	49	—		—		—			49
Total liabilities carried at fair value	$	49	$	6,652	$	109	$	(2,947	)	$	3,863

⁽¹⁾

Represents counterparty netting against level 2 financial assets and liabilities, where a legally enforceable master netting agreement exists between State Street and the counterparty. Netting also reflects asset and liability reductions of $854 million and $367 million, respectively, for cash collateral received from and deposited with derivative counterparties. This netting cannot be disaggregated by type of derivative instrument.



	Fair Value Measurements on a Recurring Basis
	as of December 31, 2011
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting⁽¹⁾			Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	20								$	20
Non-U.S. government securities	498									498
Other	51		$	138						189
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations	1,727		1,109							2,836
Mortgage-backed securities	—		28,832		$	1,189				30,021
Asset-backed securities:
Student loans	—		15,685		860					16,545
Credit cards	—		10,396		91					10,487
Sub-prime	—		1,404		—					1,404
Other	—		667		2,798					3,465
Total asset-backed securities	—		28,152		3,749					31,901
Non-U.S. debt securities:
Mortgage-backed securities	—		9,418		1,457					10,875
Asset-backed securities	—		2,535		1,768					4,303
Government securities	—		1,671		—					1,671
Other	—		2,754		71					2,825
Total non-U.S. debt securities	—		16,378		3,296					19,674
State and political subdivisions	—		6,997		50					7,047
Collateralized mortgage obligations	—		3,753		227					3,980
Other U.S. debt securities	—		3,613		2					3,615
U.S. equity securities	—		640		—					640
Non-U.S. equity securities	1		117		—					118
Total investment securities available for sale	1,728		89,591		8,513					99,832
Other assets:
Derivatives instruments:
Foreign exchange contracts	—		12,045		168
Interest-rate contracts	—		1,795		10
Other	—		1		—
Total derivative instruments	—		13,841		178		$	(7,653	)	6,366
Other	110		—		—		—			110
Total assets carried at fair value	$	2,407	$	103,570	$	8,691	$	(7,653	)	$	107,015
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts			$	12,191	$	161
Interest-rate contracts			1,970		11
Other			1		9
Total derivative instruments			14,162		181		$	(7,653	)	$	6,690
Other	$	110	—		20		—			130
Total liabilities carried at fair value	$	110	$	14,162	$	201	$	(7,653	)	$	6,820


⁽¹⁾	Represents counterparty netting against level 2 financial assets and liabilities, where a legally enforceable master netting agreement exists between State Street and the counterparty. This netting cannot be disaggregated by type of derivative instrument.

The following tables present activity related to our level-3 financial assets and liabilities during the three and nine months ended September 30, 2012 and 2011, respectively. Transfers into and out of level 3 are reported as of the beginning of the period. During both the three and nine months ended September 30, 2012 and 2011, transfers out of level 3 were substantially related to certain mortgage- and asset-backed securities and non-U.S. debt securities, for which fair value was measured using prices for which observable market information became available.



	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2012
	Fair Value at June 30, 2012		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales			Settlements			Fair Value at September 30, 2012		Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30, 2012
(In millions)								Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	933									$	3								$	(30	)	$	906
Asset-backed securities:
Student loans	484							$	1		5									(12		)	478
Credit cards	274				$	(36	)	1			(1		)							—			238
Other	3,094		$	12	(11		)	10			14			$	608					(267		)	3,460
Total asset-backed securities	3,852		12		(47		)	12			18			608						(279		)	4,176
Non-U.S. debt securities:
Mortgage-backed securities	273		—		(147		)	—			—			156						3			285
Asset-backed securities	1,362		—		(676		)	1			4			—						(14		)	677
Other	1		—		—			—			—			193						—			194
Total non-U.S. debt securities	1,636		—		(823		)	1			4			349						(11		)	1,156
State and political subdivisions	49		—		—			—			(1		)	—						—			48
Collateralized mortgage obligations	301		—		(123		)	168			1			—			$	(45	)	(178		)	124
Other U.S. debt securities	—		9		—			—			—			—			—			—			9
Total investment securities available for sale	6,771		21		(993		)	181			25			957			(45		)	(498		)	6,419
Other assets:
Derivative instruments, foreign exchange contracts	160		—		—			(69		)	—			75			—			(67		)	99		$	(47	)
Total assets carried at fair value	$	6,931	$	21	$	(993	)	$	112		$	25		$	1,032	—	$	(45	)	$	(565	)	$	6,518	$	(47	)



	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2012
	Fair Value at June 30, 2012		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses				Purchases	Issuances		Sales	Settlements			Fair Value at September 30, 2012		Change in Unrealized (Gains) Losses Related to Financial Instruments Held at September 30, 2012
(In millions)	Fair Value at June 30, 2012		Transfers into Level 3	Transfers out of Level 3	Recorded in Revenue			Recorded in Other Comprehensive Income	Purchases	Issuances		Sales	Settlements			Fair Value at September 30, 2012
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	157			$	(58	)			$	76		$	(75	)	$	100	$	(43	)
Other	9				—					—			—			9		—
Total derivative instruments	166				(58		)			76			(75		)	109		(43		)
Total liabilities carried at fair value	$	166	—	—	$	(58	)	—	—	$	76	—	$	(75	)	$	109	$	(43	)



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2012
	Fair Value at December 31, 2011		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales			Settlements			Fair Value at September 30, 2012		Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30, 2012
(in millions)								Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies, mortgage-backed securities	$	1,189	$	50	$	(251	)				$	3								$	(85	)	$	906
Asset-backed securities:
Student loans	860		—		(341		)	$	2		(5		)							(38		)	478
Credit cards	91		21		(36		)	4			(5		)	$	224		$	(61	)	—			238
Other	2,798		12		(11		)	31			39			1,177			(12		)	(574		)	3,460
Total asset-backed securities	3,749		33		(388		)	37			29			1,401			(73		)	(612		)	4,176
Non-U.S. debt securities:
Mortgage-backed securities	1,457		—		(1,642		)	—			3			463			—			4			285
Asset-backed securities	1,768		—		(2,243		)	1			4			1,206			—			(59		)	677
Other	71		—		(372		)	—			(3		)	500			—			(2		)	194
Total Non-U.S. debt securities	3,296		—		(4,257		)	1			4			2,169			—			(57		)	1,156
State and political subdivisions	50		—		—			—			—			—			—			(2		)	48
Collateralized mortgage obligations	227		44		(314		)	369			1			283			(45		)	(441		)	124
Other U.S. debt securities	2		9		—			—			—			—			—			(2		)	9
Total investment securities available for sale	8,513		136		(5,210		)	407			37			3,853			(118		)	(1,199		)	6,419
Other assets:
Derivative instruments:
Foreign exchange contracts	168		—		—			(127		)	—			162			—			(104		)	99		$	(71	)
Interest-rate contracts	10		—		—			(10		)	—			—			—			—			—		—
Total derivative instruments	178		—		—			(137		)	—			162			—			(104		)	99		(71		)
Total assets carried at fair value	$	8,691	$	136	$	(5,210	)	$	270		$	37		$	4,015	—	$	(118	)	$	(1,303	)	$	6,518	$	(71	)



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2012
	Fair Value at December 31, 2011		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses				Purchases	Issuances		Sales	Settlements			Fair Value at September 30, 2012		Change in Unrealized (Gains) Losses Related to Financial Instruments Held at September 30, 2012
(In millions)					Recorded in Revenue			Recorded in Other Comprehensive Income
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	161			$	(131	)			$	162		$	(92	)	$	100	$	(70	)
Interest-rate contracts	11				(11		)			—			—			—		—
Other	9				—					—			—			9		—
Total derivative instruments	181				(142		)			162			(92		)	109		(70		)
Other	20				—					—			(20		)	—		—
Total liabilities carried at fair value	$	201	—	—	$	(142	)	—	—	$	162	—	$	(112	)	$	109	$	(70	)



	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2011
	Fair Value at June 30, 2011		Transfers into Level 3	Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales			Settlements			Fair Value at September 30, 2011		Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30, 2011
(In millions)							Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	17		$	(17	)							$	22								$	22
Mortgage-backed securities	932									$	2		590						$	(25	)	1,499
Asset-backed securities:
Student loans	1,289			$	(379	)	$	(1	)	(6		)	—						46			949
Credit cards	79			(20		)	2			—			250						—			311
Other	2,530			—			5			(34		)	267			$	(37	)	2			2,733
Total asset-backed securities	3,898			(399		)	6			(40		)	517			(37		)	48			3,993
Non-U.S. debt securities:
Mortgage-backed securities	361			(36		)	—			(1		)	608			—			(2		)	930
Asset-backed securities	1,749			(573		)	—			(3		)	286			(3		)	(50		)	1,406
Other	6			—			—			—			—			—			—			6
Total non-U.S. debt securities	2,116			(609		)	—			(4		)	894			(3		)	(52		)	2,342
State and political subdivisions	54			(2		)	—			(1		)	—			—			—			51
Collateralized mortgage obligations	173			(31		)	31			(1		)	216			—			(38		)	350
Other U.S. debt securities	2			—			—			—			—			—			—			2
Total investment securities available for sale	7,192			(1,058		)	37			(44		)	2,239			(40		)	(67		)	8,259
Other assets:
Derivative instruments:
Foreign exchange contracts	201			—			54			—			173						(117		)	311		$	59
Interest-rate contracts	8			—			—			—			4			(1		)	—			11		2
Total derivative instruments	209			—			54			—			177			(1		)	(117		)	322		61
Total assets carried at fair value	$	7,401	—	$	(1,058	)	$	91		$	(44	)	$	2,416	—	$	(41	)	$	(184	)	$	8,581	$	61



	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2011
	Fair Value at June 30, 2011		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses			Purchases			Issuances		Sales			Settlements			Fair Value at September 30, 2011		Change in Unrealized (Gains) Losses Related to Financial Instruments Held at September 30, 2011
(In millions)	Fair Value at June 30, 2011		Transfers into Level 3	Transfers out of Level 3	Recorded in Revenue		Recorded in Other Comprehensive Income	Purchases			Issuances		Sales			Settlements			Fair Value at September 30, 2011
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	203			$	42					$	170				$	(117	)	$	298	$	51
Interest-rate contracts	16				—			$	(1	)	15		$	(16	)	—			14		10
Other	9				—			—			—		—			—			9		—
Total derivative instruments	228				42			(1		)	185		(16		)	(117		)	321		61
Other	11																		11
Total liabilities carried at fair value	$	239	—	—	$	42	—	$	(1	)	$	185	$	(16	)	$	(117	)	$	332	$	61



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2011
	Fair Value at December 31, 2010		Transfers into Level 3		Transfers out of Level 3			Total Realized and Unrealized Gains (Losses)						Purchases		Issuances	Sales			Settlements			Fair Value at September 30, 2011		Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30, 2011
(In millions)								Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
Investment securities available for sale:
U.S. Treasury and federal agencies:
Direct obligations					$	(17	)							$	39								$	22
Mortgage-backed securities	$	673			(404		)				$	3		1,289						$	(62	)	1,499
Asset-backed securities:
Student loans	1,234				(720		)	$	2		(6		)	421						18			949
Credit cards	43				(35		)	3			(2		)	301						1			311
Other	2,000		$	114	(135		)	22			14			837			$	(37	)	(82		)	2,733
Total asset-backed securities	3,277		114		(890		)	27			6			1,559			(37		)	(63		)	3,993
Non-U.S. debt securities:
Mortgage-backed securities	396		—		(739		)	—			—			1,261			—			12			930
Asset-backed securities	740		—		(693		)	1			8			1,538			(3		)	(185		)	1,406
Government securities	1		—		—			—			—			—			—			(1		)	—
Other	8		—		—			—			—			—			—			(2		)	6
Total non-U.S. debt securities	1,145		—		(1,432		)	1			8			2,799			(3		)	(176		)	2,342
State and political subdivisions	50		1		(3		)	—			—			3						—			51
Collateralized mortgage obligations	359		—		(359		)	363			(2		)	381						(392		)	350
Other U.S. debt securities	3		—		—			—			—			—						(1		)	2
Total investment securities available for sale	5,507		115		(3,105		)	391			15			6,070			(40		)	(694		)	8,259
Other assets:
Derivative instruments:
Foreign exchange contracts	254		—		—			(15		)	—			256			—			(184		)	311		$	40
Interest-rate contracts	—		—		—			5			—			10			(4		)	—			11		9
Total derivative instruments	254		—		—			(10		)	—			266			(4		)	(184		)	322		49
Total assets carried at fair value	$	5,761	$	115	$	(3,105	)	$	381		$	15		$	6,336	—	$	(44	)	$	(878	)	$	8,581	$	49



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2011
	Fair Value at December 31, 2010		Transfers into Level 3	Transfers out of Level 3	Total Realized and Unrealized (Gains) Losses				Purchases			Issuances		Sales			Settlements			Fair Value at September 30, 2011		Change in Unrealized (Gains) Losses Related to Financial Instruments Held at September 30, 2011
(In millions)	Fair Value at December 31, 2010		Transfers into Level 3	Transfers out of Level 3	Recorded in Revenue			Recorded in Other Comprehensive Income	Purchases			Issuances		Sales			Settlements			Fair Value at September 30, 2011
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	260			$	(21	)					$	247				$	(188	)	$	298	$	32
Interest-rate contracts	—				10				$	(5	)	29		$	(20	)	—			14		10
Other	9				—				—			—		—			—			9		—
Total derivative instruments	269				(11		)		(5		)	276		(20		)	(188		)	321		42
Other	—				—				—			11		—			—			11
Total liabilities carried at fair value	$	269	—	—	$	(11	)	—	$	(5	)	$	287	$	(20	)	$	(188	)	$	332	$	42

The following table presents total realized and unrealized gains and losses for the periods indicated that were recorded in revenue for our level-3 financial assets and liabilities:



	Three Months Ended September 30,								Nine Months Ended September 30,
(In millions)	Total Realized and Unrealized Gains (Losses) Recorded in Revenue					Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30,			Total Realized and Unrealized Gains (Losses) Recorded in Revenue				Change in Unrealized Gains (Losses) Related to Financial Instruments Held at September 30,
	2012			2011		2012		2011	2012		2011		2012			2011
Fee revenue:
Trading services	$	(11	)	$	12	(4	)		$	5	$	1	$	(1	)	$	7
Total fee revenue	(11		)	12		(4	)		5		1		(1		)	7
Net interest revenue	181			37					407		391		—			—
Total revenue	$	170		$	49	(4	)	—	$	412	$	392	$	(1	)	$	7

The following table presents quantitative information about the valuation techniques and significant unobservable inputs used in the valuation of our level-3 financial assets and liabilities measured at fair value on a recurring basis for which we use internally developed pricing models. The significant unobservable inputs for our level-3 financial assets and liabilities whose fair value is measured using pricing information from non-binding broker or dealer quotes are not included in the table, as the specific inputs applied are not provided by the broker/dealer.



	Quantitative Information about Level-3 Fair Value Measurements
(Dollars in millions)	Fair Value at September 30, 2012		Valuation Technique	Significant Unobservable Input	Weighted-Average
Significant unobservable inputs readily available to State Street:
Assets:
Asset-backed securities, student loans	$	12	Discounted cash flows	Credit spread	6.7%
Asset-backed securities, credit cards	138		Discounted cash flows	Credit spread	3.0%
Asset-backed securities, other	101		Discounted cash flows	Credit spread	2.0%
State and political subdivisions	48		Discounted cash flows	Credit spread	1.9%
Derivative instruments, foreign exchange contracts	99		Option model	Volatility	9.3%
Total	$	398

Liabilities:
Derivative instruments, foreign exchange contracts	$	100	Option model	Volatility	9.3%
Derivative instruments, other	9		Discounted cash flows	Participant redemptions	5.9%
Total	$	109

The following table presents information with respect to the composition of our level-3 financial assets and liabilities by availability of significant unobservable inputs as of September 30, 2012:



	Fair Value at September 30, 2012
(In millions)	Significant Unobservable Inputs Readily Available to State Street ⁽¹⁾		Significant Unobservable Inputs Not Developed by State Street and Not Readily Available ⁽²⁾		Total Assets and Liabilities with Significant Unobservable Inputs
Assets:
Mortgage-backed securities			$	906	$	906
Asset-backed securities, student loans	$	12	466		478
Asset-backed securities, credit cards	138		100		238
Asset-backed securities, other	101		3,359		3,460
Non-U.S. debt securities, mortgage-backed securities	—		285		285
Non-U.S. debt securities, asset-backed securities	—		677		677
Non-U.S. debt securities, other	—		194		194
State and political subdivisions	48		—		48
Collateralized mortgage obligations	—		124		124
Other U.S.debt securities	—		9		9
Derivative instruments, foreign exchange contracts	99		—		99
Total	$	398	$	6,120	$	6,518

Liabilities:
Derivative instruments, foreign exchange contracts	$	100			$	100
Derivative instruments, other	9				9
Total	$	109	—		$	109

⁽¹⁾ Information with respect to these model-priced financial assets and liabilities is provided in the preceding table.

⁽²⁾ Fair value for these financial assets is measured using non-binding broker or dealer quotes.

Internally developed pricing models used to measure the fair value of our recurring level-3 financial assets and liabilities incorporate discounted cash flow and option modeling techniques. Use of these techniques requires the determination of relevant inputs and assumptions, some of which represent significant unobservable inputs as indicated in the preceding table. Accordingly, changes in these unobservable inputs may have a significant impact on fair value.

Certain of these unobservable inputs will (in isolation) have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. Where multiple inputs are used within the valuation technique of an asset or liability, a change in one input in a certain direction may be offset by an opposite change in another input having a potentially muted impact to the overall fair value of that particular instrument. Additionally, a change in one unobservable input may result in a change to another unobservable input (that is, changes in certain inputs are interrelated to one another), which may counteract or magnify the fair value impact.

For recurring level-3 fair value measurements for which significant unobservable inputs are readily available to State Street as of September 30, 2012, the sensitivity of the fair value measurement to changes in significant unobservable inputs, and a description of any interrelationships between those unobservable inputs, is described below; however, we rarely experience a situation in which those unobservable inputs change in isolation:


•	The significant unobservable input used in the measurement of the fair value of our asset-backed securities and investment securities issued by state and political subdivisions is the credit spread. Significant increases (decreases) in the credit spread would result in measurements of significantly lower (higher) fair value.

•

The significant unobservable inputs used in the measurement of the fair value of our other non-U.S. debt securities, specifically securities collateralized by sovereign trade credit obligations, are discount rates, expected recovery and expected maturity. Significant increases (decreases) in the discount rate and the expected maturity in isolation would result in measurements of significantly lower (higher) fair value. A significant increase (decrease) in the expected recovery would result in measurements of significantly higher (lower) fair value. However, a change in the discount rate plays a much more significant role in the measurement of fair value.


•	The significant unobservable input used in the measurement of the fair value of our foreign exchange option contracts is the implied volatility surface. A significant increase (decrease) in the implied volatility surface would result in measurements of significantly higher (lower) fair value.

•

The significant unobservable input used in the measurement of the fair value of our other derivative instruments, specifically stable value wrap contracts, is participant redemptions. Increased volatility of redemptions may result in changes to the measurement of fair value. Generally, significant increases (decreases) in participant redemptions may result in measurements of significantly higher (lower) fair value of this liability.

Fair Values of Financial Instruments

Estimates of fair value for financial instruments not carried at fair value on a recurring basis in our consolidated statement of condition, as defined by GAAP, are generally subjective in nature, and are made as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Disclosure of fair value estimates is not required by GAAP for certain items, such as lease financing, equity-method investments, obligations for pension and other post-retirement plans, premises and equipment, other intangible assets and income-tax assets and liabilities. Accordingly, aggregate fair value estimates presented do not purport to represent, and should not be considered representative of, our underlying “market” or franchise value. In addition, because of potential differences in methodologies and assumptions used to estimate fair values, our estimates of fair value should not be compared to those of other financial institutions.

We use the following methods to estimate the fair values of our financial instruments:


•	For financial instruments that have quoted market prices, those quoted prices are used to estimate fair value.


•	For financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, we assume that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk.


•	For financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

The generally short duration of certain of our assets and liabilities results in a significant number of financial instruments for which fair value equals or closely approximates the amount reported in our consolidated statement of condition. These financial instruments are reported in the following captions in our consolidated statement of condition: cash and due from banks; interest-bearing deposits with banks; securities purchased under resale agreements; accrued income receivable; deposits; securities sold under repurchase agreements; federal funds purchased; and other short-term borrowings. In addition, due to the relatively short duration of certain of our net loans (excluding leases), we consider fair value for these loans to approximate their reported value. The fair value of other types of loans, such as purchased receivables and CRE loans, is estimated by discounting expected future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. Loan commitments have no reported value because their terms are at prevailing market rates.

The following table presents the reported amounts and estimated fair values of the financial instruments defined by GAAP, excluding financial assets and liabilities carried at fair value on a recurring basis, as they would be categorized within the fair-value hierarchy as of September 30, 2012.



					Fair Value Hierarchy
(In millions)	Reported Amount		Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
Financial Assets:
Cash and due from banks	$	6,432	$	6,432	$	6,432
Interest-bearing deposits with banks	31,583		31,583				$	31,583
Securities purchased under resale agreements	8,264		8,264		—		8,264
Investment securities held to maturity	8,360		8,622		—		8,622
Loans (excluding leases)	12,845		12,858		—		11,878		$	980
Financial Liabilities:
Deposits:
Noninterest-bearing	40,963		40,963		—		40,963		—
Interest-bearing-U.S.	11,107		11,107		—		11,107		—
Interest-bearing-non-U.S.	94,219		94,219		—		94,219		—
Securities sold under repurchase agreements	7,933		7,933		—		7,933		—
Federal funds purchased	169		169		—		169		—
Other short-term borrowings	5,181		5,181		—		5,181		—
Long-term debt	6,418		6,700		—		5,808		892

The following table presents the reported amounts and estimated fair values of the financial instruments defined by GAAP, excluding the aforementioned short-duration financial instruments and financial assets and liabilities carried at fair value on a recurring basis, as of December 31, 2011:



(In millions)	Reported Amount		Fair Value
Financial Assets:
Investment securities held to maturity	$	9,321	$	9,362
Net loans (excluding leases)	8,777		8,752

Financial Liabilities:
Long-term debt	8,131		8,206