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Loans and Leases
 9 Months Ended
Sep. 30, 2013
Loans and Leases Receivable Disclosure [Abstract]  
Loans and Leases
 Loans and Leases
The following table presents our recorded investment in loans and leases, by segment and class, as of the dates indicated: 

(In millions)
September 30, 2013
 
December 31, 2012
Institutional:
 
 
 
Investment funds:
 
 
 
U.S.
$
10,017

 
$
8,376

Non-U.S.
1,998

 
829

Commercial and financial:
 
 
 
U.S.
1,486

 
613

Non-U.S.
509

 
520

Purchased receivables:
 
 
 
U.S.
231

 
276

Non-U.S.
60

 
118

Lease financing:
 
 
 
U.S.
357

 
380

Non-U.S.
754

 
784

Total institutional
15,412

 
11,896

Commercial real estate:
 
 
 
U.S.
166

 
411

Total loans and leases
15,578

 
12,307

Allowance for loan losses
(22
)
 
(22
)
Loans and leases, net of allowance for loan losses
$
15,556

 
$
12,285


The commercial-and-financial class in the institutional segment presented in the table above included approximately $375 million of senior secured bank loans as of September 30, 2013. We had no investment in senior secured bank loans as of December 31, 2012. These loans resulted from our participation in loan syndications in the non-investment-grade lending market in the three months ended September 30, 2013. These commercial-and-financial loans are included in the "speculative" category in the credit-quality-indicator table below as of September 30, 2013.
These loans present more significant exposure to potential credit losses. However, we seek to mitigate such exposure, in part through the limitation of our investment to larger, more liquid credits underwritten by major global financial institutions, the application of our internal credit analysis process to each potential investment, and diversification by counterparty and industry segment. As of September 30, 2013, we had no allowance for loan losses with respect to these commercial-and-financial loans.
Aggregate short-duration advances to our clients included in the investment-funds and commercial-and-financial classes in the institutional segment were $4.65 billion and $3.30 billion as of September 30, 2013 and December 31, 2012, respectively.
The following tables present our recorded investment in each class of loans and leases by credit quality indicator as of the dates indicated:
 
Institutional
 
Commercial Real Estate
 
 
September 30, 2013
Investment
Funds
 
Commercial and Financial
 
Purchased
Receivables
 
Lease
Financing
 
Property Development
 
Other
 
Total
Loans and
Leases
(In millions)
 
 
 
 
 
Investment grade(1)
$
11,574

 
$
1,456

 
$
291

 
$
1,079

 
$
—

 
$
29

 
$
14,429

Speculative(2)
441

 
519

 
—

 
32

 
137

 
—

 
1,129

Special mention(3)
—

 
20

 
—

 
—

 
—

 
—

 
20

Total
$
12,015

 
$
1,995

 
$
291

 
$
1,111

 
$
137

 
$
29

 
$
15,578

 
Institutional
 
Commercial Real Estate
 
 
December 31, 2012
Investment
Funds
 
Commercial and Financial
 
Purchased
Receivables
 
Lease
Financing
 
Property Development
 
Other
 
Total
Loans and
Leases
(In millions)
 
 
 
 
 
Investment grade(1)
$
8,937

 
$
1,041

 
$
394

 
$
1,137

 
$
—

 
$
29

 
$
11,538

Speculative(2)
268

 
92

 
—

 
27

 
377

 
5

 
769

Total
$
9,205

 
$
1,133

 
$
394

 
$
1,164

 
$
377

 
$
34

 
$
12,307

 
 
 
 
 
( 1) Investment grade loans and leases consist of counterparties with strong credit quality and low expected credit risk and probability of default. Ratings apply to counterparties with a strong capacity to support the timely repayment of any financial commitment.
(2) Speculative loans and leases consist of counterparties that face ongoing uncertainties or exposure to business, financial, or economic downturns. However, these counterparties may have financial flexibility or access to financial alternatives, which allow for financial commitments to be met.
(3) Special mention loans and leases consist of counterparties with potential weaknesses that, if uncorrected, may result in deterioration of repayment prospects.
Loans and leases are categorized in the rating categories presented in the table above that align with our internal risk-rating framework. Management considers the ratings to be current as of September 30, 2013. We use an internal risk-rating system to assess our risk of credit loss for each loan or lease. This risk-rating process incorporates the use of risk-rating tools in conjunction with management judgment. Qualitative and quantitative inputs are captured in a systematic manner, and following a formal review and approval process, an internal credit rating based on our credit scale is assigned.
In assessing the risk rating assigned to each individual loan or lease, among the factors considered are the borrower's debt capacity, collateral coverage, payment history and delinquency experience, financial flexibility and earnings strength, the expected amounts and sources of repayment, the level and nature of contingencies, if any, and the industry and geography in which the borrower operates. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation. Credit counterparties are evaluated and risk-rated on an individual basis at least annually.
The following table presents our recorded investment in loans and leases, disaggregated based on our impairment methodology, as of the dates indicated:
 
September 30, 2013
 
December 31, 2012
(In millions)
Institutional
 
Commercial Real Estate
 
Total Loans and Leases
 
Institutional
 
Commercial Real Estate
 
Total Loans and Leases
Loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
405

 
$
137

 
$
542

 
$
11

 
$
411

 
$
422

Collectively evaluated for impairment(1)
15,007

 
29

 
15,036

 
11,885

 
—

 
11,885

Total
$
15,412

 
$
166

 
$
15,578

 
$
11,896

 
$
411

 
$
12,307


 
 
 
 
(1) As of both September 30, 2013 and December 31, 2012, the entire $22 million allowance for loan losses was related to institutional loans collectively evaluated for impairment.
The following tables present information related to our recorded investment in impaired loans and leases as of the dates, or for the periods, indicated:
 
September 30, 2013
 
December 31, 2012
(In millions)
Recorded Investment
 
Unpaid
Principal
Balance
 
Related Allowance(1)
 
Recorded Investment
 
Unpaid
Principal
Balance
 
Related Allowance(1)
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
CRE—property development
$
130

 
$
143

 
$
—

 
$
197

 
$
224

 
$
—

CRE—property development—acquired credit-impaired
—

 
34

 
—

 
—

 
34

 
—

CRE—other—acquired credit-impaired
—

 
21

 
—

 
—

 
64

 
—

Total CRE
$
130

 
$
198

 
$
—

 
$
197

 
$
322

 
$
—

 
 
 
 
(1) As of both September 30, 2013 and December 31, 2012, we maintained an allowance for loan losses of $22 million associated with loans and leases that were not impaired.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Average Recorded Investment
 
Interest Revenue Recognized
 
Average Recorded Investment
 
Interest Revenue Recognized
(In millions)
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
With no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE—property development
$
130

 
$
199

 
$
2

 
$
4

 
$
160

 
$
199

 
$
17

 
$
12

CRE—other—acquired credit-impaired
—

 
5

 
—

 
—

 
—

 
17

 
—

 
—

With an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CRE—other—acquired credit-impaired
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Total CRE
$
130

 
$
204

 
$
2

 
$
4

 
$
160

 
$
216

 
$
17

 
$
12


As of September 30, 2013 and December 31, 2012, we held an aggregate of approximately $130 million and $197 million, respectively, of commercial real estate, or CRE, loans which were modified in troubled debt restructurings. No impairment loss was recognized upon restructuring of the loans, as the discounted cash flows of the modified loans exceeded the carrying amount of the original loans as of the modification date. During the nine months ended September 30, 2013 and the year ended December 31, 2012, no loans were modified in troubled debt restructurings.
The following table presents activity in the allowance for loan losses for the periods indicated:
 
Three Months Ended September 30,
 
2013
 
2012
(In millions)
Institutional
 
Commercial
Real Estate
 
Total Loans and Leases
 
Institutional
 
Commercial
Real Estate
 
Total Loans
and Leases
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
22

 
$
—

 
$
22

 
$
22

 
$
—

 
$
22

Provisions
—

 
—

 
—

 
—

 
—

 
—

Recoveries
—

 
—

 
—

 
—

 
—

 
—

Ending balance
$
22

 
$
—

 
$
22

 
$
22

 
$
—

 
$
22

 
Nine Months Ended September 30,
 
2013
 
2012
(In millions)
Institutional
 
Commercial
Real Estate
 
Total Loans and Leases
 
Institutional
 
Commercial
Real Estate
 
Total Loans
and Leases
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
22

 
$
—

 
$
22

 
$
22

 
$
—

 
$
22

Provisions
—

 
—

 
—

 
—

 
(1
)
 
(1
)
Recoveries
—

 
—

 
—

 
—

 
1

 
1

Ending balance
$
22

 
$
—

 
$
22

 
$
22

 
$
—

 
$
22


Loans and leases are reviewed on a regular basis, and any provisions for loan losses that are recorded reflect management's estimate of the amount necessary to maintain the allowance for loan losses at a level considered appropriate to absorb estimated incurred losses in the loan-and-lease portfolio.