Investment Securities

12 Months Ended

Dec. 31, 2015

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Investment securities held by us are classified as either trading, AFS, or HTM at the time of purchase and reassessed periodically, based on management’s intent.

Generally, trading assets are debt and equity securities purchased in connection with our trading activities and, as such, are expected to be sold in the near term. Our trading activities typically involve active and frequent buying and selling with the objective of generating profits on short-term movements. AFS investment securities are those securities that we intend to hold for an indefinite period of time. AFS investment securities include securities utilized as part of our asset-and-liability management activities that may be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. HTM securities are debt securities that management has the intent and the ability to hold to maturity.

Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in trading services revenue in our consolidated statement of income. Debt and marketable equity securities classified as AFS are carried at fair value, and after-tax net unrealized gains and losses are recorded in AOCI. Gains or losses realized on sales of AFS investment securities are computed using the specific identification method and are recorded in gains (losses) related to investment securities, net, in our consolidated statement of income. HTM investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts.

The following table presents the amortized cost and fair value, and associated unrealized gains and losses, of investment securities as of the dates indicated:

	December 31, 2015								December 31, 2014
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
(In millions)			Gains		Losses						Gains		Losses
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	5,717	$	6	$	5	$	5,718	$	10,573	$	83	$	1	$	10,655
Mortgage-backed securities	18,168		131		134		18,165		20,648		193		127		20,714
Asset-backed securities:
Student loans(1)	7,358		16		198		7,176		12,478		106		124		12,460
Credit cards	1,378		—		37		1,341		3,077		10		34		3,053
Sub-prime	448		2		31		419		1,005		2		56		951
Other(2)	1,724		43		3		1,764		4,055		100		10		4,145
Total asset-backed securities	10,908		61		269		10,700		20,615		218		224		20,609
Non-U.S. debt securities:
Mortgage-backed securities	7,010		72		11		7,071		9,442		168		4		9,606
Asset-backed securities	3,272		2		7		3,267		3,215		11		—		3,226
Government securities	4,348		7		—		4,355		3,899		10		—		3,909
Other(3)	4,817		29		12		4,834		5,383		52		7		5,428
Total non-U.S. debt securities	19,447		110		30		19,527		21,939		241		11		22,169
State and political subdivisions	9,402		371		27		9,746		10,532		325		37		10,820
Collateralized mortgage obligations	2,993		16		22		2,987		5,280		71		12		5,339
Other U.S. debt securities	2,611		31		18		2,624		4,033		88		12		4,109
U.S. equity securities	33		9		3		39		29		10		—		39
Non-U.S. equity securities	3		—		—		3		2		—		—		2
U.S. money-market mutual funds	542		—		—		542		449		—		—		449
Non-U.S. money-market mutual funds	19		—		—		19		8		—		—		8
Total	$	69,843	$	735	$	508	$	70,070	$	94,108	$	1,229	$	424	$	94,913
Held to maturity(4):
U.S. Treasury and federal agencies:
Direct obligations	$	20,878	$	2	$	217	$	20,663	$	5,114	$	—	$	147	$	4,967
Mortgage-backed securities	610		2		8		604		62		4		—		66
Asset-backed securities:
Student loans(1)	1,592		—		47		1,545		1,814		2		4		1,812
Credit cards	897		—		1		896		897		2		—		899
Other	366		2		1		367		577		3		1		579
Total asset-backed securities	2,855		2		49		2,808		3,288		7		5		3,290
Non-U.S. debt securities:
Mortgage-backed securities	2,202		109		26		2,285		3,787		177		22		3,942
Asset-backed securities	1,415		4		3		1,416		2,868		14		1		2,881
Government securities	239		—		1		238		154		—		—		154
Other	65		—		—		65		72		—		—		72
Total non-U.S. debt securities	3,921		113		30		4,004		6,881		191		23		7,049
State and political subdivisions	1		—		—		1		9		—		—		9
Collateralized mortgage obligations	1,687		60		29		1,718		2,369		107		15		2,461
Total	$	29,952	$	179	$	333	$	29,798	$	17,723	$	309	$	190	$	17,842

⁽¹⁾ Primarily composed of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.

⁽²⁾ As of December 31, 2015 and 2014, the fair value of other ABS was primarily composed of $1.76 billion and $3.8 billion, respectively, of collateralized loan obligations and approximately zero and $315 million, respectively, of automobile loan securities.

⁽³⁾ As of December 31, 2015 and December 31, 2014, the fair value of other non-U.S. debt securities was primarily composed of $3.18 billion and $3.3 billion of covered bonds and $613 million and $1.2 billion, as of December 31, 2015 and December 31, 2014, respectively, of corporate bonds.

⁽⁴⁾ At amortized cost or fair value on the date of transfer from AFS.

Aggregate investment securities with carrying values of $34.18 billion and $44.02 billion as of December 31, 2015 and 2014, respectively, were designated as pledged for public and trust deposits, short-term borrowings and for other purposes as provided by law.

In the fourth quarter of 2015, $7.1 billion of U.S. Treasuries previously classified as AFS were transferred to HTM, reflecting our intent to hold these securities until their maturity. These securities were transferred at fair value, which included a net unrealized gain of $89 million within accumulated other comprehensive loss which will be accreted into interest income over the life of the transferred security.

The following tables present the aggregate fair values of investment securities that have been in a continuous unrealized loss position for less than 12 months, and those that have been in a continuous unrealized loss position for 12 months or longer, as of the dates indicated:

	Less than 12 months				12 months or longer				Total
December 31, 2015	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
(In millions)
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	3,123	$	4	$	121	$	1	$	3,244	$	5
Mortgage-backed securities	5,729		48		3,166		86		8,895		134
Asset-backed securities:
Student loans	2,841		54		3,217		144		6,058		198
Credit cards	838		7		490		30		1,328		37
Sub-prime	7		—		387		31		394		31
Other	720		3		43		—		763		3
Total asset-backed securities	4,406		64		4,137		205		8,543		269
Non-U.S. debt securities:
Mortgage-backed securities	1,457		7		437		4		1,894		11
Asset-backed securities	2,190		7		22		—		2,212		7
Government securities	1,691		—		—		—		1,691		—
Other	1,548		5		527		7		2,075		12
Total non-U.S. debt securities	6,886		19		986		11		7,872		30
State and political subdivisions	206		1		658		26		864		27
Collateralized mortgage obligations	1,511		14		217		8		1,728		22
Other U.S. debt securities	475		9		178		9		653		18
U.S. equity securities	—		—		5		3		5		3
Total	$	22,336	$	159	$	9,468	$	349	$	31,804	$	508
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	16,370	$	120	$	3,005	$	97	$	19,375	$	217
Mortgage-backed	560		8		—		—		560		8
Asset-backed securities:
Student loans	896		25		615		22		1,511		47
Credit cards	636		1		—		—		636		1
Other	102		—		31		1		133		1
Total asset-backed securities	1,634		26		646		23		2,280		49
Non-U.S. mortgage-backed securities:
Mortgage-backed securities	338		2		524		24		862		26
Asset-backed securities	1,015		3		69		—		1,084		3
Government securities	128		1		—		—		128		1
Other	—		—		43		—		43		—
Total non-U.S. debt securities	1,481		6		636		24		2,117		30
Collateralized mortgage obligations	634		9		537		20		1,171		29
Total	$	20,679	$	169	$	4,824	$	164	$	25,503	$	333

	Less than 12 months				12 months or longer				Total
December 31, 2014	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
(In millions)
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	—	$	—	$	167	$	1	$	167	$	1
Mortgage-backed securities	2,569		9		6,466		118		9,035		127
Asset-backed securities:
Student loans	1,473		15		5,025		109		6,498		124
Credit cards	344		1		1,270		33		1,614		34
Sub-prime	—		—		896		56		896		56
Other	547		1		791		9		1,338		10
Total asset-backed securities	2,364		17		7,982		207		10,346		224
Non-U.S. debt securities:
Mortgage-backed securities	1,350		2		170		2		1,520		4
Other	581		4		328		3		909		7
Total non-U.S. debt securities	1,931		6		498		5		2,429		11
State and political subdivisions	610		3		1,315		34		1,925		37
Collateralized mortgage obligations	731		2		311		10		1,042		12
Other U.S. debt securities	327		2		244		10		571		12
Total	$	8,532	$	39	$	16,983	$	385	$	25,515	$	424
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	76	$	1	$	4,891	$	146	$	4,967	$	147
Asset-backed securities:
Student Loans	780		3		192		1		972		4
Other	124		1		—		—		124		1
Total asset-backed securities	904		4		192		1		1,096		5
Non-U.S. debt securities:
Mortgage-backed securities	507		3		590		19		1,097		22
Asset-backed securities	699		1		—		—		699		1
Total non-U.S. debt securities	1,206		4		590		19		1,796		23
Collateralized mortgage obligations	422		4		547		11		969		15
Total	$	2,608	$	13	$	6,220	$	177	$	8,828	$	190

The following table presents contractual maturities of debt investment securities by carrying amount as of December 31, 2015:

	Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years		Total
(In millions)
Available for sale:
U.S. Treasury and federal agencies:
Direct obligations	$	2,000	$	3,223	$	40	$	455	$	5,718
Mortgage-backed securities	78		2,501		3,858		11,728		18,165
Asset-backed securities:
Student loans	339		3,702		2,054		1,081		7,176
Credit cards	2		259		1,080		—		1,341
Sub-prime	1		5		3		410		419
Other	19		220		1,260		265		1,764
Total asset-backed securities	361		4,186		4,397		1,756		10,700
Non-U.S. debt securities:
Mortgage-backed securities	1,103		3,375		648		1,945		7,071
Asset-backed securities	485		2,394		220		168		3,267
Government securities	2,736		1,619		—		—		4,355
Other	1,410		2,886		538		—		4,834
Total non-U.S. debt securities	5,734		10,274		1,406		2,113		19,527
State and political subdivisions	542		2,450		5,001		1,753		9,746
Collateralized mortgage obligations	350		80		472		2,085		2,987
Other U.S. debt securities	948		1,500		142		34		2,624
Total	$	10,013	$	24,214	$	15,316	$	19,924	$	69,467
Held to maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	—	$	11,348	$	9,440	$	90	$	20,878
Mortgage-backed securities	1		12		—		597		610
Asset-backed securities:
Student loans	—		193		304		1,095		1,592
Credit cards	—		680		217		—		897
Other	60		227		76		3		366
Total asset-backed securities	60		1,100		597		1,098		2,855
Non-U.S. debt securities:
Mortgage-backed securities	435		507		95		1,165		2,202
Asset-backed securities	201		1,067		147		—		1,415
Government securities	129		110		—		—		239
Other	22		43		—		—		65
Total non-U.S. debt securities	787		1,727		242		1,165		3,921
State and political subdivisions	1		—		—		—		1
Collateralized mortgage obligations	251		142		489		805		1,687
Total	$	1,100	$	14,329	$	10,768	$	3,755	$	29,952

The maturities of asset-backed securities, mortgage-backed securities, and collateralized mortgage obligations are based on expected principal payments.

The following tables present gross realized gains and losses from sales of AFS investment securities, and the components of net impairment losses included in net gains and losses related to investment securities, for the years ended December 31:

(In millions)	2015			2014			2013
Gross realized gains from sales of AFS investment securities	$	57		$	64		$	104
Gross realized losses from sales of AFS investment securities	(62		)	(49		)	(90		)
Net impairment losses:
Gross losses from OTTI	(1		)	(1		)	(21		)
Losses reclassified (from) to other comprehensive income	—			(10		)	(2		)
Net impairment losses(1)	(1		)	(11		)	(23		)
Gains (losses) related to investment securities, net	$	(6	)	$	4		$	(9	)
(1) Net impairment losses, recognized in our consolidated statement of income, were composed of the following:
Impairment associated with expected credit losses	$	—		$	(10	)	$	(11	)
Impairment associated with management's intent to sell impaired securities prior to recovery in value	—			—			(6		)
Impairment associated with adverse changes in timing of expected future cash flows	(1		)	(1		)	(6		)
Net impairment losses	$	(1	)	$	(11	)	$	(23	)

The following table presents a roll-forward with respect to net impairment losses that have been recognized in income for the periods indicated.

	Twelve Months Ended December 31,
(In millions)	2015			2014			2013
Balance, beginning of period	$	115		$	122		$	124
Additions:
Losses for which OTTI was not previously recognized	1			—			14
Losses for which OTTI was previously recognized	—			11			9
Deductions:
Previously recognized losses related to securities sold or matured	(24		)	(12		)	(25		)
Losses related to securities intended or required to be sold	—			(6		)	—
Balance, end of period	$	92		$	115		$	122

Interest revenue related to debt securities is recognized in our consolidated statement of income using the effective interest method, or on a basis approximating a level rate of return over the contractual or estimated life of the security. The level rate of return considers any nonrefundable fees or costs, as well as purchase premiums or discounts, resulting in amortization or accretion, accordingly.

For debt securities acquired for which we consider it probable as of the date of acquisition that we will be unable to collect all contractually required principal, interest and other payments, the excess of our estimate of undiscounted future cash flows from these securities over their initial recorded investment is accreted into interest revenue on a level-yield basis over the securities’ estimated remaining terms. Subsequent decreases in these securities’ expected future cash flows are either recognized prospectively through an adjustment of the yields on the securities over their remaining terms, or are evaluated for other-than-temporary impairment. Increases in expected future cash flows are recognized prospectively over the securities’ estimated remaining terms through the recalculation of their yields.

For certain debt securities acquired which are considered to be beneficial interests in securitized financial assets, the excess of our estimate of undiscounted future cash flows from these securities over their initial recorded investment is accreted into interest revenue on a level-yield basis over the securities’ estimated remaining terms. Subsequent decreases in these securities’ expected future cash flows are either recognized prospectively through an adjustment of the yields on the securities over their remaining terms, or are evaluated for other-than-temporary impairment. Increases in expected future cash flows are recognized prospectively over the securities’ estimated remaining terms through the recalculation of their yields.

Impairment:

We conduct periodic reviews of individual securities to assess whether OTTI exists. Impairment exists when the current fair value of an individual security is below its amortized cost basis. When the decline in the security's fair value is deemed to be other than temporary, the loss is recorded in our consolidated statement of income. In addition, for AFS and HTM debt securities, impairment is recorded in our consolidated statement of income when management intends to sell (or may be required to sell) the securities before they recover in value, or when management expects the present value of cash flows expected to be collected from the securities to be less than the amortized cost of the impaired security (a credit loss).

 Our review of impaired securities generally includes:

• the identification and evaluation of securities that have indications of potential OTTI, such as issuer-specific concerns, including deteriorating financial condition or bankruptcy;

• the analysis of expected future cash flows of securities, based on quantitative and qualitative factors;

• the analysis of the collectability of those future cash flows, including information about past events, current conditions, and reasonable and supportable forecasts;

• the analysis of the underlying collateral for mortgage- and asset-backed securities;

• the analysis of individual impaired securities, including consideration of the length of time the security has been in an unrealized loss position, the anticipated recovery period, and the magnitude of the overall price decline;

• evaluation of factors or triggers that could cause individual securities to be deemed OTTI and those that would not support OTTI; and

• documentation of the results of these analyses.

Factors considered in determining whether impairment is other than temporary include:

• certain macroeconomic drivers;

• certain industry-specific drivers;

• the length of time the security has been impaired;

• the severity of the impairment;

• the cause of the impairment and the financial condition and near-term prospects of the issuer;

• activity in the market with respect to the issuer's securities, which may indicate adverse credit conditions; and

• our intention not to sell, and the likelihood that we will not be required to sell, the security for a period of time sufficient to allow for its recovery in value.

Substantially all of our investment securities portfolio is composed of debt securities. A critical component of our assessment of OTTI of these debt securities is the identification of credit-impaired securities for which management does not expect to receive cash flows sufficient to recover the entire amortized cost basis of the security.

Debt securities that are not deemed to be credit-impaired are subject to additional management analysis to assess whether management intends to sell, or, more likely than not, would be required to sell, the security before the expected recovery of its amortized cost basis.

The following provides a description of our process for the identification and assessment of OTTI, as well as information about OTTI recorded in 2015 and 2014 and changes in period-end unrealized losses, for major security types as of December 31, 2015.

U.S. Agency Securities

Our portfolio of U.S. agency direct obligations and mortgage-backed securities receives the implicit or explicit backing of the U.S. government in conjunction with specified financial support of the U.S. Treasury. We recorded no OTTI on these securities in 2015, 2014 or 2013. The overall increase in the unrealized losses on these securities as of December 31, 2015 was primarily attributable to interest rate increases in 2015.

Asset-Backed Securities - Student Loans

Asset-backed securities collateralized by student loans are primarily composed of securities collateralized by FFELP loans. FFELP loans benefit from a federal government guarantee of at least 97% of defaulted principal and accrued interest, with additional credit support provided in the form of over-collateralization, subordination and excess spread, which collectively total in excess of 100%. Accordingly, the vast majority of FFELP loan-backed securities are protected from traditional consumer credit risk.

We recorded no OTTI on these securities in 2015, 2014 or 2013. The gross unrealized losses in our FFELP loan-backed securities portfolio as of December 31, 2015 were primarily attributable to the widening FFELP spreads during the year as some rating agencies are reviewing the FFELP market for bonds with cash flows that might extend past their legal final maturities.

Our assessment of OTTI of these securities considers, among many other factors, the strength of the U.S. government guarantee, the performance of the underlying collateral, and the remaining average term of the FFELP loan-backed securities portfolio, which was approximately 4.3 years as of December 31, 2015.

Our total exposure to private student loan-backed securities was less than $300 million as of December 31, 2015. Our assessment of OTTI of private student loan-backed securities considers, among other factors, the impact of high unemployment rates on the collateral performance of private student loans. We recorded no OTTI on these securities in 2015, 2014 or 2013.

Non-U.S. Mortgage- and Asset-Backed Securities

Non-U.S. mortgage- and asset-backed securities are primarily composed of U.K., Australian and Dutch securities collateralized by residential mortgages and German securities collateralized by automobile loans and leases. Our assessment of impairment with respect to these securities considers the location of the underlying collateral, collateral enhancement and structural features, expected credit losses under base-case and stressed conditions and the macroeconomic outlook for the country in which the collateral is located, including housing prices and unemployment. Where appropriate, any potential loss after consideration of the above-referenced factors is further evaluated to determine whether any OTTI exists.

We recorded OTTI of $1 million, $1 million, and $6 million for the years ended December 31, 2015, 2014 and 2013, respectively, on non-U.S. residential mortgage-backed securities in our consolidated statement of income associated with adverse changes in the timing of expected future cash flows from the securities.

In addition, in the year ended December 31, 2013, we recorded OTTI of $6 million on these securities in our consolidated statement of income associated with management's intent to sell the impaired security prior to its recovery in value.

Our assessment of OTTI of these securities takes into account government intervention in the corresponding mortgage markets and assumes a conservative baseline macroeconomic environment for this region, factoring in slower economic growth and continued government austerity measures. Our baseline view assumes a recessionary period characterized by high unemployment and by additional housing price declines of between 3% and 17% across these four countries. Our evaluation of OTTI in our base case does not assume a disorderly sovereign-debt restructuring or a break-up of the Eurozone. In addition, we perform stress testing and sensitivity analysis in order to understand the impact of more severe assumptions on potential OTTI.

State and Political Subdivisions and Other U.S. Debt Securities

Our municipal securities portfolio primarily includes securities issued by U.S. states and their municipalities. A portion of this portfolio is held in connection with our tax-exempt investment program, more fully described in Note 14. Our portfolio of other U.S. debt securities is primarily composed of securities issued by U.S. corporations. 

Our assessment of OTTI of these portfolios considers, among other factors, adverse conditions specifically related to the industry, geographic area or financial condition of the issuer; the structure of the security, including collateral, if any, and payment schedule; rating agency changes to the security's credit rating; the volatility of the fair value changes; and our intent and ability to hold the security until its recovery in value.  If the impairment of the security is credit-related, we estimate the future cash flows from the security, tailored to the security and considering the above-described factors, and any resulting impairment deemed to be other-than-temporary is recorded in our consolidated statement of income.  

We recorded no OTTI on these securities in 2015, 2014 or 2013. The decline in the unrealized losses on these securities as of December 31, 2015 was primarily attributable to the narrowing of spreads and U.S. Treasury rates in 2015.

U.S. Non-Agency Residential Mortgage-Backed Securities

We assess OTTI of our portfolio of U.S. non-agency residential mortgage-backed securities using cash flow models, tailored for each security, that estimate the future cash flows from the underlying mortgages, using the security-specific collateral and transaction structure. Estimates of future cash flows are subject to management judgment. The future cash flows and performance of our portfolio of U.S. non-agency residential mortgage-backed securities are a function of a number of factors, including, but not limited to, the condition of the U.S. economy, the condition of the U.S. residential mortgage markets, and the level of loan defaults, prepayments and loss severities. Management's estimates of future losses for each security also consider the underwriting and historical performance of each specific security, the underlying collateral type, vintage, borrower profile, third-party guarantees, current levels of subordination, geography and other factors.

We recorded no OTTI on these securities in 2015, 2014 or 2013.

U.S. Non-Agency Commercial Mortgage-Backed Securities

With respect to our portfolio of U.S. non-agency commercial mortgage-backed securities, OTTI is assessed by considering a number of factors, including, but not limited to, the condition of the U.S. economy and the condition of the U.S. commercial real estate market, as well as capitalization rates. Management estimates of future losses for each security also consider the underlying collateral type, property location, vintage, debt-service coverage ratios, expected property income, servicer advances and estimated property values, as well as current levels of subordination. We recorded no OTTI on these securities in 2015. In 2014 and 2013 , we recorded $10 million and $11 million, respectively, of OTTI on these securities, all associated with expected credit losses.

The estimates, assumptions and other risk factors utilized in our assessment of impairment as described above are used by management to identify securities which are subject to further analysis of potential credit losses. Additional analyses are performed using more stressful assumptions to further evaluate the sensitivity of losses relative to the above-described factors. However, since the assumptions are based on the unique characteristics of each security, management uses a range of estimates for prepayment speeds, default, and loss severity forecasts that reflect the collateral profile of the securities within each asset class. In addition, in measuring expected credit losses, the individual characteristics of each security are examined to determine whether any additional factors would increase or mitigate the expected loss. Once losses are determined, the timing of the loss will also affect the ultimate OTTI, since the loss is ultimately subject to a discount commensurate with the purchase yield of the security.

After a review of the investment portfolio, taking into consideration current economic conditions, adverse situations that might affect our ability to fully collect principal and interest, the timing of future payments, the credit quality and performance of the collateral underlying mortgage- and asset-backed securities and other relevant factors, and excluding OTTI recorded in 2015, management considers the aggregate decline in fair value of the investment securities portfolio and the resulting gross pre-tax unrealized losses of $841 million related to 1,289 securities as of December 31, 2015 to be temporary, and not the result of any material changes in the credit characteristics of the securities.