Fair Value

Fair-Value Measurements:

We carry trading account assets, AFS investment securities 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 AOCI within shareholders' equity in our consolidated statement of condition.

We measure fair value for the above-described financial assets and liabilities in conformity with U.S. 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 U.S. 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 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 levels of the valuation hierarchy 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. 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 carried in trading account assets. We may 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 and non-cash collateral received from counterparties in connection with our enhanced custody business.

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 non-U.S. debt securities carried in trading account assets and various types of fixed-income investment securities available-for-sale, as well as various types of foreign exchange and interest-rate derivative instruments.

Fair value for our investment securities available-for-sale 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 fair value. Valuation adjustments associated with derivative instruments were not material to those instruments for the years ended December 31, 2015, 2014 and 2013.

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 measurement of fair value. 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.

•

The fair value of 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 measure 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, primarily 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.

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 December 31, 2015, on a gross basis, we categorized in level 3 approximately 3% of our financial assets carried at fair value on a recurring basis. As of the same date and on the same basis, the percentage of our financial liabilities categorized in level 3 to our financial liabilities carried at fair value on a recurring basis was de minimis. The fair value of investment securities categorized in level 3 that was measured using non-binding quotes and internally-developed pricing-model inputs was approximately 98% and 2%, respectively, of the total fair value of our investment securities categorized in level 3 as of December 31, 2015.

The process used to measure the fair value of our level-3 financial assets and liabilities is overseen by a valuation group within Corporate Finance, separate from the business units that manage the assets and liabilities. This function, which develops and manages the valuation process, reports to State Street's Valuation Committee. The Valuation Committee comprises senior management from separate business units, Enterprise Risk Management, a corporate risk oversight group, and Corporate Finance, and oversees adherence to State Street's valuation policies.

The valuation group performs 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 unexpected pricing movements. These sample prices are then corroborated through price recalculations, when applicable, using available market information, which is obtained separately from third-party pricing sources. 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, the adjustment is presented to the Valuation Committee for review and consideration.

Validation is also performed on fair-value measurements determined using internally-developed pricing models. The pricing models are subject to validation through our Model Assessment Committee, a corporate risk oversight committee that provides technical support and input 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 separately 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 our 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 2015 or 2014.



	Fair-Value Measurements on a Recurring Basis
	as of December 31, 2015
(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	$	32	$	—	$	—				$	32
Non-U.S. government securities	479		—		—					479
Other	10		328		—					338
Total trading account assets	521		328		—					849
AFS Investment securities:
U.S. Treasury and federal agencies:
Direct obligations	5,206		512		—					5,718
Mortgage-backed securities	—		18,165		—					18,165
Asset-backed securities:
Student loans	—		6,987		189					7,176
Credit cards	—		1,341		—					1,341
Sub-prime	—		419		—					419
Other⁽²⁾	—		—		1,764					1,764
Total asset-backed securities	—		8,747		1,953					10,700
Non-U.S. debt securities:
Mortgage-backed securities	—		7,071		—					7,071
Asset-backed securities	—		3,093		174					3,267
Government securities	—		4,355		—					4,355
Other⁽³⁾	—		4,579		255					4,834
Total non-U.S. debt securities	—		19,098		429					19,527
State and political subdivisions	—		9,713		33					9,746
Collateralized mortgage obligations	—		2,948		39					2,987
Other U.S. debt securities	—		2,614		10					2,624
U.S. equity securities	—		39		—					39
Non-U.S. equity securities	—		3		—					3
U.S. money-market mutual funds	—		542		—					542
Non-U.S. money-market mutual funds	—		19		—					19
Total investment securities available for sale	5,206		62,400		2,464					70,070
Other assets:
Derivative instruments:
Foreign exchange contracts	—		11,311		5		$	(6,562	)	4,754
Interest-rate contracts	—		135		—		(115		)	20
Other derivative contracts	—		5		—		(2		)	3
Total derivative instruments	—		11,451		5		(6,679		)	4,777
Other	2		—		—		—			2
Total assets carried at fair value	$	5,729	$	74,179	$	2,469	$	(6,679	)	$	75,698
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:
U.S. government securities	$	5	$	—	$	—	$	—		$	5
Non-U.S. government securities	76		—		—		—			76
Other	5		13		—		—			18
Derivative instruments:
Foreign exchange contracts	—		10,863		5		(6,995		)	3,873
Interest-rate contracts	—		182		—		(24		)	158
Other derivative contracts	—		103		—		(2		)	101
Total derivative instruments	—		11,148		5		(7,021		)	4,132
Other	2		—		—		—			2
Total liabilities carried at fair value	$	88	$	11,161	$	5	$	(7,021	)	$	4,233

⁽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 $776 million and $1.12 billion, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of December 31, 2015 the fair value of other asset-backed securities was primarily composed of $1.76 billion of collateralized loan obligations.

⁽³⁾As of December 31, 2015 the fair value of other non-U.S. debt securities was primarily composed of $3.18 billion of covered bonds and $613 million of corporate bonds.



	Fair-Value Measurements on a Recurring Basis
	as of December 31, 2014
(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	378		—		—					378
Other	20		506		—					526
Total trading account assets	418		506		—					924
AFS Investment securities:
U.S. Treasury and federal agencies:
Direct obligations	10,056		599		—					10,655
Mortgage-backed securities	—		20,714		—					20,714
Asset-backed securities:
Student loans	—		12,201		259					12,460
Credit cards	—		3,053		—					3,053
Sub-prime	—		951		—					951
Other⁽²⁾	—		365		3,780					4,145
Total asset-backed securities	—		16,570		4,039					20,609
Non-U.S. debt securities:
Mortgage-backed securities	—		9,606		—					9,606
Asset-backed securities	—		2,931		295					3,226
Government securities	—		3,909		—					3,909
Other⁽³⁾	—		5,057		371					5,428
Total non-U.S. debt securities	—		21,503		666					22,169
State and political subdivisions	—		10,782		38					10,820
Collateralized mortgage obligations	—		4,725		614					5,339
Other U.S. debt securities	—		4,100		9					4,109
U.S. equity securities	—		39		—					39
Non-U.S. equity securities	—		2		—					2
U.S. money-market mutual funds	—		449		—					449
Non-U.S. money-market mutual funds	—		8		—					8
Total investment securities available for sale	10,056		79,491		5,366					94,913
Other assets:
Derivatives instruments:
Foreign exchange contracts	—		15,054		81		$	(7,211	)	7,924
Interest-rate contracts	—		77		—		(68		)	9
Other derivative contracts	—		2		—		(1		)	1
Total derivative instruments	—		15,133		81		(7,280		)	7,934
Total assets carried at fair value	$	10,474	$	95,130	$	5,447	$	(7,280	)	$	103,771
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	—	$	14,851	$	74	$	(8,879	)	$	6,046
Interest-rate contracts	—		239		—		(46		)	193
Other derivative contracts	—		61		9		(1		)	69
Total derivative instruments	—		15,151		83		(8,926		)	6,308
Total liabilities carried at fair value	$	—	$	15,151	$	83	$	(8,926	)	$	6,308

⁽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 $983 million and $2.63 billion, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of December 31, 2014, the fair value of other asset-backed securities was primarily composed of $3.8 billion of collateralized loan obligations and approximately $315 million of automobile loan securities.

⁽³⁾As of December 31, 2014, the fair value of other non-U.S. debt securities was primarily composed of $3.3 billion of covered bonds and $1.2 billion of corporate bonds.

The following tables present activity related to our level-3 financial assets and liabilities during the years ended December 31, 2015 and 2014, respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. During the years ended December 31, 2015 and 2014, transfers out of level 3 were mainly related to certain mortgage- and asset-backed securities, including 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
	Year Ended December 31, 2015
	Fair Value as of December 31, 2014		Total Realized and Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of December 31, 2015⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of December 31, 2015
(In millions)			Recorded in Revenue			Recorded in Other Comprehensive Income
Assets:
AFS Investment securities:
Asset-backed securities:
Student loans	$	259	$	1		$	(4	)	$	—	—			$	(6	)	$	—	$	(61	)	$	189
Other	3,780		53			(50		)	—		(1,105		)	(914		)	—		—			1,764
Total asset-backed securities	4,039		54			(54		)	—		(1,105		)	(920		)	—		(61		)	1,953
Non-U.S. debt securities:
Mortgage-backed securities	—		—			—			43		—			—			97		(140		)	—
Asset-backed securities	295		2			(1		)	249		—			(190		)	4		(185		)	174
Other	371		—			(1		)	111		—			(39		)	—		(187		)	255
Total non-U.S. debt securities	666		2			(2		)	403		—			(229		)	101		(512		)	429
State and political subdivisions	38		1			(3		)	—		—			(3		)	—		—			33
Collateralized mortgage obligations	614		(1		)	(2		)	294		(88		)	(105		)	—		(673		)	39
Other U.S. debt securities	9		—			—			—		—			—			10		(9		)	10
Total investment securities available for sale	5,366		56			(61		)	697		(1,193		)	(1,257		)	111		(1,255		)	2,464
Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts	81		48			—			9		—			(133		)	—		—			5		$	(4	)
Total derivative instruments	81		48			—			9		—			(133		)	—		—			5		(4		)
Total assets carried at fair value	$	5,447	$	104		$	(61	)	$	706	$	(1,193	)	$	(1,390	)	$	111	$	(1,255	)	$	2,469	$	(4	)



	Fair-Value Measurements Using Significant Unobservable Inputs
	Year Ended December 31, 2015
	Fair Value as of December 31, 2014		Total Realized and Unrealized (Gains) Losses		Issuances		Settlements			Fair Value as of December 31, 2015⁽¹⁾		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of December 31, 2015
(In millions)	Fair Value as of December 31, 2014		Recorded in Revenue		Issuances		Settlements			Fair Value as of December 31, 2015⁽¹⁾
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	74	$	23	$	12	$	(104	)	$	5	$	(7	)
Other	9		—		—		(9		)	—		—
Total derivative instruments	83		23		12		(113		)	5		(7		)
Total liabilities carried at fair value	$	83	$	23	$	12	$	(113	)	$	5	$	(7	)

⁽¹⁾ There were no transfers of liabilities into or out of level 3 during the year ended December 31, 2015.



	Fair-Value Measurements Using Significant Unobservable Inputs
	Twelve Months Ended December 31, 2014
	Fair Value as of December 31, 2013		Total Realized and Unrealized Gains (Losses)					Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of December 31, 2014		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of December 31, 2014
(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	$	716	$	—	$	—		$	168	$	—		$	(14	)	$	—	$	(870	)	$	—
Asset-backed securities:
Student loans	423		2		1			24		(75		)	(37		)	—		(79		)	259
Credit cards	24		—		—			—		—			(24		)	—		—			—
Other	4,532		65		(28		)	282		—			(1,071		)	—		—			3,780
Total asset-backed securities	4,979		67		(27		)	306		(75		)	(1,132		)	—		(79		)	4,039
Non-U.S. debt securities:
Mortgage-backed securities	375		—		—			—		—			—			—		(375		)	—
Asset-backed securities	798		6		(1		)	—		—			(272		)	76		(312		)	295
Other	464		—		1			55		(1		)	(41		)	85		(192		)	371
Total non-U.S. debt securities	1,637		6		—			55		(1		)	(313		)	161		(879		)	666
State and political subdivisions	43		1		(3		)	—		—			(3		)	—		—			38
Collateralized mortgage obligations	162		—		1			633		(6		)	(32		)	—		(144		)	614
Other U.S. debt securities	8		—		1			—		—			—			—		—			9
Total investment securities available for sale	7,545		74		(28		)	1,162		(82		)	(1,494		)	161		(1,972		)	5,366
Other assets:
Derivative instruments:
Derivative instruments, Foreign exchange contracts⁽¹⁾	19		36		—			36		—			(10		)	—		—			81		$	44
Total derivative instruments	19		36		—			36		—			(10		)	—		—			81		44
Total assets carried at fair value	$	7,564	$	110	$	(28	)	$	1,198	$	(82	)	$	(1,504	)	$	161	$	(1,972	)	$	5,447	$	44



	Fair-Value Measurements Using Significant Unobservable Inputs
	Twelve Months Ended December 31, 2014
	Fair Value as of December 31, 2013		Total Realized and Unrealized (Gains) Losses		Issuances		Settlements			Fair Value as of December 31, 2014⁽¹⁾		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of December 31, 2014
(In millions)	Fair Value as of December 31, 2013		Recorded in Revenue		Issuances		Settlements			Fair Value as of December 31, 2014⁽¹⁾
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts⁽²⁾	$	17	$	25	$	39	$	(7	)	$	74	$	35
Other	9		—		—		—			9		—
Total derivative instruments	26		25		39		(7		)	83		35
Total liabilities carried at fair value	$	26	$	25	$	39	$	(7	)	$	83	$	35

⁽¹⁾ There were no transfers of liabilities into or out of level 3 during the year ended December 31, 2014.

The following table presents total realized and unrealized gains and losses for our level-3 financial assets and liabilities and where they are presented in our consolidated statement of income for the years indicated:



	Twelve Months Ended December 31,
	Total Realized and Unrealized Gains (Losses) Recorded in Revenue						Change in Unrealized Gains (Losses) Related to Financial instruments Held as of December 31,
(In millions)	2015		2014		2013		2015		2014		2013
Fee revenue:
Trading services	$	25	$	11	$	63	$	3	$	9	$	(1	)
Total fee revenue	25		11		63		3		9		(1		)
Net interest revenue	56		74		62		—		—		—
Total revenue	$	81	$	85	$	125	$	3	$	9	$	(1	)

The following table presents quantitative information, as of the dates indicated, 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
	Fair Value						Weighted-Average
(Dollars in millions)	As of December 31, 2015		As of December 31, 2014		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of December 31, 2015		As of December 31, 2014
Significant unobservable inputs readily available to State Street:
Assets:
Asset-backed securities, other	$	28	$	59	Discounted cash flows	Credit spread	0.1	%	0.2	%
State and political subdivisions	33		38		Discounted cash flows	Credit spread	2.2		2.1
Derivative instruments, foreign exchange contracts	5		81		Option model	Volatility	9.3		9.1
Total	$	66	$	178
Liabilities:
Derivative instruments, foreign exchange contracts	$	5	$	74	Option model	Volatility	9.2		9.0
Derivative instruments, other⁽²⁾	—		9		Discounted cash flows	Participant redemptions	—		5.2
Total	$	5	$	83

⁽¹⁾Significant changes in these unobservable inputs would result in significant changes in fair value measure.

⁽²⁾ Relates to stable value wrap contracts; refer to the sensitivity discussion following the tables presented below, and to Note 12.

The following tables present information with respect to the composition of our level-3 financial assets and liabilities, by availability of significant unobservable inputs, as of the dates indicated:



December 31, 2015	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
(In millions)
Assets:
Asset-backed securities, student loans	$	—	$	189	$	189
Asset-backed securities, other	28		1,736		1,764
Non-U.S. debt securities, asset-backed securities	—		174		174
Non-U.S. debt securities, other	—		255		255
State and political subdivisions	33		—		33
Collateralized mortgage obligations	—		39		39
Other U.S. debt securities	—		10		10
Derivative instruments, foreign exchange contracts	5		—		5
Total	$	66	$	2,403	$	2,469
Liabilities:
Derivative instruments, foreign exchange contracts	$	5	$	—	$	5
Total	$	5	$	—	$	5

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

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



December 31, 2014	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
(In millions)
Assets:
Asset-backed securities, student loans	$	—	$	259	$	259
Asset-backed securities, other	59		3,721		3,780
Non-U.S. debt securities, asset-backed securities	—		295		295
Non-U.S. debt securities, other	—		371		371
State and political subdivisions	38		—		38
Collateralized mortgage obligations	—		614		614
Other U.S. debt securities	—		9		9
Derivative instruments, foreign exchange contracts	81		—		81
Total	$	178	$	5,269	$	5,447
Liabilities:
Derivative instruments, foreign exchange contracts	$	74	$	—	$	74
Derivative instruments, other	9		—		9
Total	$	83	$	—	$	83

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

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

We use internally-developed pricing models that incorporate discounted cash flow and option model techniques to measure the fair value of certain level-3 financial assets and liabilities. 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, resulting in a potentially muted impact on 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.

Fair Value Estimates:

Estimates of fair value for financial instruments not carried at fair value on a recurring basis in our consolidated statement of condition are generally subjective in nature, and are determined 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 U.S. 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 recorded 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 interest and fees 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 senior secured bank loans, commercial real estate loans, purchased receivables and municipal loans is estimated using information obtained from independent third parties or 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. Commitments to lend have no reported value because their terms are at prevailing market rates.

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities not carried at fair value on a recurring basis, as they would be categorized within the fair-value hierarchy, as of the dates indicated.



					Fair-Value Hierarchy
December 31, 2015	Reported Amount		Estimated 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)
(In millions)
Financial Assets:
Cash and due from banks	$	1,207	$	1,207	$	1,207	$	—	$	—
Interest-bearing deposits with banks	75,338		75,338		—		75,338		—
Securities purchased under resale agreements	3,404		3,404		—		3,404		—
Investment securities held to maturity	29,952		29,798		—		29,798		—
Net loans (excluding leases)⁽¹⁾	17,838		17,792		—		17,667		125
Financial Liabilities:
Deposits:
Noninterest-bearing	$	65,800	$	65,800	$	—	$	65,800	$	—
Interest-bearing - U.S.	29,958		29,958		—		29,958		—
Interest-bearing - non-U.S.	95,869		95,869		—		95,869		—
Securities sold under repurchase agreements	4,499		4,499		—		4,499		—
Federal funds purchased	6		6		—		6		—
Other short-term borrowings	1,748		1,748		—		1,748		—
Long-term debt	11,534		11,604		—		11,215		389

⁽¹⁾Includes $14 million of loans classified as held-for-sale that were measured at fair value on a non-recurring basis as of December 31, 2015.



					Fair-Value Hierarchy
December 31, 2014	Reported Amount		Estimated 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)
(In millions)
Financial Assets:
Cash and due from banks	$	1,855	$	1,855	$	1,855	$	—	$	—
Interest-bearing deposits with banks	93,523		93,523		—		93,523		—
Securities purchased under resale agreements	2,390		2,390		—		2,390		—
Investment securities held to maturity	17,723		17,842		—		17,842		—
Net loans (excluding leases)	17,158		17,131		—		16,964		167
Financial Liabilities:
Deposits:
Noninterest-bearing	$	70,490	$	70,490	$	—	$	70,490	$	—
Interest-bearing - U.S.	33,012		33,012		—		33,012		—
Interest-bearing - non-U.S.	105,538		105,538		—		105,538		—
Securities sold under repurchase agreements	8,925		8,925		—		8,925		—
Federal funds purchased	21		21		—		21		—
Other short-term borrowings	4,381		4,381		—		4,381		—
Long-term debt	10,042		10,229		—		9,382		847