Offsetting Arrangements

We manage credit and counterparty risk by entering into enforceable netting agreements and other collateral arrangements with counterparties to derivative financial instruments and secured financing transactions, including resale and repurchase agreements, and principal securities borrowing and lending agreements. These netting agreements mitigate our counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement. In limited cases, a netting agreement may also provide for the periodic netting of settlement payments with respect to multiple different transaction types in the normal course of business.

Certain of our derivative contracts are executed under either standardized netting agreements or, for exchange-traded derivatives, the relevant contracts for a particular exchange which contain enforceable netting provisions. In certain cases, we may have cross-product netting arrangements which allow for netting and set-off of a variety of types of derivatives with a single counterparty. A derivative netting arrangement creates an enforceable right of set-off that becomes effective, and affects the realization or settlement of individual financial assets and liabilities, only following a specified event of default. Collateral requirements associated with our derivative contracts are determined after a review of the creditworthiness of each counterparty, and the requirements are monitored and adjusted daily, typically based on net exposure by counterparty. Collateral is generally in the form of cash or highly liquid U.S. government securities.

In connection with our secured financing activities, we enter into netting agreements and other collateral arrangements with counterparties, which provide for the right to liquidate collateral upon an event of default. Required collateral is generally in the form of cash, equities or fixed-income securities. Default events may include the failure to make payments or deliver securities timely, material adverse changes in financial condition or insolvency, the breach of minimum regulatory capital requirements, or loss of license, charter or other legal authorization necessary to perform under the contract.

In order for an arrangement to be eligible for netting, we must have a basis to conclude that such netting arrangements are legally enforceable. The analysis of the legal enforceability of an arrangement differs by jurisdiction, depending on the laws of that jurisdiction. In many jurisdictions, specific legislation exists that provides for the enforceability in bankruptcy of close-out netting under a netting agreement, typically by way of specific exception from more general prohibitions on the exercise of creditor rights.

When we have a basis to conclude that a legally enforceable netting arrangement exists between us and the derivative counterparty and the relevant transaction is the type of transaction that is recorded in our consolidated statement of condition, we offset derivative assets and liabilities, and the related collateral received and provided, in our consolidated statement of condition. We also offset secured financing assets and liabilities with the same counterparty or clearinghouse which have the same maturity date and are settled in the normal course of business on a net basis.

The following table presents derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements and are offset in our consolidated statement of condition in conformity with GAAP, as of the dates indicated:



Assets:	March 31, 2013								December 31, 2012
(In millions)	Gross Amounts of Recognized Assets		Gross Amounts Offset in Statement of Condition			Net Amounts of Assets Presented in Statement of Condition			Gross Amounts of Recognized Assets		Gross Amounts Offset in Statement of Condition			Net Amounts of Assets Presented in Statement of Condition
Derivatives subject to netting arrangements:
Interest-rate contracts	$	86	$	(12	)	$	74		$	223	$	(19	)	204
Foreign exchange contracts	6,024		(3,567		)	2,457			5,255		(3,575		)	1,680
Cross-product and cash collateral netting	—		(2,209		)	(2,209		)	—		(1,451		)	(1,451		)
Total derivatives subject to netting arrangements⁽¹⁾	$	6,110	$	(5,788	)	$	322		$	5,478	$	(5,045	)	$	433
Other financial instruments subject to netting arrangements:
Resale agreements and securities borrowing⁽²⁾	$	45,060	$	(27,266	)	$	17,794		$	34,853	$	(23,005	)	$	11,848
Total assets subject to netting arrangements	$	51,170	$	(33,054	)	$	18,116		$	40,331	$	(28,050	)	$	12,281

⁽¹⁾In addition to the $322 million and $433 million as of March 31, 2013 and December 31, 2012, respectively. we have $4,189 million and $4,123 million, respectively, of derivative assets not determined to be subject to enforceable netting arrangements. Refer to notes 2 and 10 for additional information with respect to derivative financial instrument balances recorded in our consolidated statement of condition.

⁽²⁾Included in the $17,794 million as of March 31, 2013 was $8,703 million of resale agreements and $9,091 million of securities borrowing. Included in the $11,848 million as of December 31, 2012 was $5,016 million of resale agreements and $6,832 million of securities borrowing. Resale agreements and securities borrowing were recorded in securities purchased under resale agreements and other assets, respectively, in our consolidated statement of condition. Refer to notes 6 and 7 for additional information with respect to these arrangements.

The following table presents derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements, but do not meet the applicable offsetting criteria and therefore were not offset in our consolidated statement of condition, as of the dates indicated:



	March 31, 2013									December 31, 2012
			Gross Amounts Not Offset in Statement of Condition									Gross Amounts Not Offset in Statement of Condition
(In millions)	Net Amount of Assets Presented in Statement of Condition		Financial Instruments			Cash Collateral Received		Net Amount		Net Amount of Assets Presented in Statement of Condition		Financial Instruments			Cash Collateral Received		Net Amount
Derivatives⁽¹⁾	$	322	$	—		$	—	$	322	$	433	$	—		$	—	$	433
Resale agreements and securities borrowing⁽²⁾	17,794		(202		)	—		17,592		11,848		(126		)	—		11,722
Total	$	18,116	$	(202	)	$	—	$	17,914	$	12,281	$	(126	)	$	—	$	12,155

⁽¹⁾Excludes the impact of non-cash collateral of $42 million and $105 million as of March 31, 2013 and December 31, 2012, respectively.

⁽²⁾Excludes the impact of non-cash collateral. These secured financing transactions are fully collateralized.



Liabilities:	March 31, 2013								December 31, 2012
(In millions)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in Statement of Condition			Net Amounts of Liabilities Presented in Statement of Condition			Gross Amounts of Recognized Liabilities		Gross Amounts Offset in Statement of Condition			Net Amounts of Liabilities Presented in Statement of Condition
Derivatives subject to netting arrangements:
Interest-rate contracts	$	313	$	(12	)	$	301		$	345	$	(19	)	326
Foreign exchange contracts	4,465		(3,567		)	898			4,054		(3,575		)	479
Cross-product and cash collateral netting	—		(1,016		)	(1,016		)	—		(477		)	(477		)
Total derivatives subject to netting arrangements⁽¹⁾	$	4,778	$	(4,595	)	$	183		$	4,399	$	(4,071	)	$	328
Other financial instruments subject to netting arrangements:
Repurchase agreements and securities lending⁽²⁾	$	18,643	$	—		$	18,643		$	12,992	$	—		$	12,992
Total liabilities subject to netting arrangements	$	23,421	$	(4,595	)	$	18,826		$	17,391	$	(4,071	)	$	13,320

⁽¹⁾In addition to the $183 million and $328 million as of March 31, 2013 and December 31, 2012, respectively, we have $5,187 million and $5,039 million, respectively, of derivative liabilities not determined to be subject to enforceable netting arrangements. Refer to notes 2 and 10 for additional information with respect to derivative financial instrument balances recorded in our consolidated statement of condition.

⁽²⁾Included in the $18,643 million as of March 31, 2013 was $11,538 million of repurchase agreements and $7,105 million of securities lending. Included in the $12,992 million as of December 31, 2012 was $8,006 million of repurchase agreements and $4,986 million of securities lending. Repurchase agreements and securities lending were recorded in securities sold under repurchase agreements and other liabilities, respectively, in our consolidated statement of condition. Refer to note 7 for additional information with respect to these arrangements.

The following table presents derivative financial instruments and secured financing transactions subject to enforceable netting arrangements that do not meet the applicable offsetting criteria and therefore were not offset in our consolidated statement of condition, as of the dates indicated:



	March 31, 2013									December 31, 2012
			Gross Amounts Not Offset in Statement of Condition									Gross Amounts Not Offset in Statement of Condition
(In millions)	Net Amount of Liabilities Presented in Statement of Condition		Financial Instruments			Cash Collateral Provided		Net Amount		Net Amount of Liabilities Presented in Statement of Condition		Financial Instruments			Cash Collateral Provided		Net Amount
Derivatives	$	183	$	—		$	—	$	183	$	328	$	—		$	—	$	328
Repurchase agreements and securities lending⁽¹⁾	18,643		(202		)	—		18,441		12,992		(126		)	—		12,866
Total	$	18,826	$	(202	)	$	—	$	18,624	$	13,320	$	(126	)	$	—	$	13,194

⁽¹⁾Excludes the impact of non-cash collateral. These secured financing transactions are fully collateralized.