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. For information about our valuation techniques for financial assets and financial liabilities measured at fair value and the fair value hierarchy, refer to pages 135 to 142 in Note 2 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2016 Form 10-K.

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. During the six months ended June 30, 2017, approximately $9 million of assets were transferred between levels 1 and 2. No transfers of financial assets or liabilities between levels 1 and 2 occurred during the year ended December 31, 2016.



	Fair-Value Measurements on a Recurring Basis
	as of June 30, 2017
(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	$	39	$	—	$	—				$	39
Non-U.S. government securities	383		114		—					497
Other	—		360		—					360
Total trading account assets	422		474		—					896
AFS Investment securities:
U.S. Treasury and federal agencies:
Direct obligations	231		402		—					633
Mortgage-backed securities	—		11,414		—					11,414
Asset-backed securities:
Student loans	—		5,887		—					5,887
Credit cards	—		1,556		—					1,556
Sub-prime	—		243		—					243
Other⁽²⁾	—		209		951					1,160
Total asset-backed securities	—		7,895		951					8,846
Non-U.S. debt securities:
Mortgage-backed securities	—		6,962		—					6,962
Asset-backed securities	—		2,828		63					2,891
Government securities	—		6,600		—					6,600
Other⁽³⁾	—		6,002		274					6,276
Total non-U.S. debt securities	—		22,392		337					22,729
State and political subdivisions	—		10,000		38					10,038
Collateralized mortgage obligations	—		2,443		—					2,443
Other U.S. debt securities	—		2,780		19					2,799
U.S. equity securities	—		45		—					45
Non-U.S. equity securities	—		1		—					1
U.S. money-market mutual funds	—		77		—					77
Total investment securities available-for-sale	231		57,449		1,345					59,025
Other assets:
Derivative instruments:
Foreign exchange contracts	—		13,366		5		$	(9,243	)	4,128
Total derivative instruments	—		13,366		5		(9,243		)	4,128
Other	56		—		—		—			56
Total assets carried at fair value	$	709	$	71,289	$	1,350	$	(9,243	)	$	64,105
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	—	$	13,309	$	3	$	(7,337	)	$	5,975
Interest-rate contracts	15		109		—		(2		)	122
Other derivative contracts	—		356		—		—			356
Total derivative instruments	15		13,774		3		(7,339		)	6,453
Other	56		—		—		—			56
Total liabilities carried at fair value	$	71	$	13,774	$	3	$	(7,339	)	$	6,509

⁽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 $3,097 million and $1,193 million, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of June 30, 2017, the fair value of other asset-backed securities was primarily composed of $1,160 million of collateralized loan obligations.

⁽³⁾As of June 30, 2017, the fair value of other non-U.S. debt securities was primarily composed of $3,968 million of covered bonds and $1,264 million of corporate bonds.



	Fair-Value Measurements on a Recurring Basis
	as of December 31, 2016
(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	$	30	$	—	$	—				$	30
Non-U.S. government securities	495		174		—					669
Other	—		325		—					325
Total trading account assets	525		499		—					1,024
AFS Investment securities:
U.S. Treasury and federal agencies:
Direct obligations	3,824		439		—					4,263
Mortgage-backed securities	—		13,257		—					13,257
Asset-backed securities:
Student loans	—		5,499		97					5,596
Credit cards	—		1,351		—					1,351
Sub-prime	—		272		—					272
Other⁽²⁾	—		—		905					905
Total asset-backed securities	—		7,122		1,002					8,124
Non-U.S. debt securities:
Mortgage-backed securities	—		6,535		—					6,535
Asset-backed securities	—		2,484		32					2,516
Government securities	—		5,836		—					5,836
Other⁽³⁾	—		5,365		248					5,613
Total non-U.S. debt securities	—		20,220		280					20,500
State and political subdivisions	—		10,283		39					10,322
Collateralized mortgage obligations	—		2,577		16					2,593
Other U.S. debt securities	—		2,469		—					2,469
U.S. equity securities	—		42		—					42
Non-U.S. equity securities	—		3		—					3
U.S. money-market mutual funds	—		409		—					409
Non-U.S. money-market mutual funds	—		16		—					16
Total investment securities available-for-sale	3,824		56,837		1,337					61,998
Other assets:
Derivatives instruments:
Foreign exchange contracts	—		16,476		8		$	(9,163	)	7,321
Interest-rate contracts	—		68		—		(68		)	—
Total derivative instruments	—		16,544		8		(9,231		)	7,321
Total assets carried at fair value	$	4,349	$	73,880	$	1,345	$	(9,231	)	$	70,343
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	—	$	15,948	$	8	$	(10,456	)	$	5,500
Interest-rate contracts	—		348		—		(226		)	122
Other derivative contracts	—		380		—		—			380
Total derivative instruments	—		16,676		8		(10,682		)	6,002
Total liabilities carried at fair value	$	—	$	16,676	$	8	$	(10,682	)	$	6,002

⁽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 $906 million and $2,356 million, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of December 31, 2016, the fair value of other asset-backed securities was primarily composed of $905 million of collateralized loan obligations.

⁽³⁾As of December 31, 2016, the fair value of other non-U.S. debt securities was primarily composed of $3,769 million of covered bonds and $988 million of corporate bonds.

The following tables present activity related to our level 3 financial assets during the three and six months ended June 30, 2017 and 2016, respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. During the three and six months ended June 30, 2017 and 2016, 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
	Three Months Ended June 30, 2017
	Fair Value as of March 31, 2017		Total Realized and Unrealized Gains (Losses)					Purchases		Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of June 30, 2017		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2017
(In millions)			Recorded in Revenue⁽¹⁾		Recorded in Other Comprehensive Income⁽¹⁾
Assets:
AFS Investment securities:
Asset-backed securities:
Student loans	$	99	$	—	$	—		$	—	$	—		$	—	$	(99	)	$	—
Other	771		1		(1		)	199		(120		)	101		—			951
Total asset-backed securities	870		1		(1		)	199		(120		)	101		(99		)	951
Non-U.S. debt securities:
Asset-backed securities	59		1		(1		)	—		(16		)	51		(31		)	63
Other	256		—		—			—		18			—		—			274
Total Non-U.S. debt securities	315		1		(1		)	—		2			51		(31		)	337
State and political subdivisions	39		—		—			—		(1		)	—		—			38
Collateralized mortgage obligations	39		—		—			—		—			—		(39		)	—
Other U.S. debt securities	—		—		—			19		—			—		—			19
Total AFS investment securities	1,263		2		(2		)	218		(119		)	152		(169		)	1,345
Other assets:
Derivative instruments:
Foreign exchange contracts	2		1		—			2		—			—		—			5		$	2
Total derivative instruments	2		1		—			2		—			—		—			5		2
Total assets carried at fair value	$	1,265	$	3	$	(2	)	$	220	$	(119	)	$	152	$	(169	)	$	1,350	$	2

⁽¹⁾Total realized and unrealized gains (losses) on AFS investment securities are included within gains (losses) related to investment securities, net. Total realized and unrealized gains (losses) on derivative instruments are included within trading services.



	Fair Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2017
	Fair Value as of December 31, 2016		Total Realized and Unrealized Gains (Losses)						Purchases		Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of June 30, 2017		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2017
(In millions)			Recorded in Revenue⁽¹⁾			Recorded in Other Comprehensive Income⁽¹⁾
Assets:
AFS Investment securities:
Asset-backed securities:
Student loans	$	97	$	—		$	2		$	—	$	—		$	—	$	(99	)	$	—
Other	905		2			(1		)	354		(410		)	101		—			951
Total asset-backed securities	1,002		2			1			354		(410		)	101		(99		)	951
Non-U.S. debt securities:
Asset-backed securities	32		1			(1		)	31		(20		)	51		(31		)	63
Other	248		—			—			5		21			—		—			274
Total Non-U.S. debt securities	280		1			(1		)	36		1			51		(31		)	337
State and political subdivisions	39		—			—			—		(1		)	—		—			38
Collateralized mortgage obligations	16		—			—			23		—			—		(39		)	—
Other U.S. debt securities	—		—			—			19		—			—		—			19
Total AFS investment securities	1,337		3			—			432		(410		)	152		(169		)	1,345
Other assets:
Derivative instruments:
Foreign exchange contracts	8		(6		)	—			7		(4		)	—		—			5		$	2
Total derivative instruments	8		(6		)	—			7		(4		)	—		—			5		2
Total assets carried at fair value	$	1,345	$	(3	)	$	—		$	439	$	(414	)	$	152	$	(169	)	$	1,350	$	2



	Fair-Value Measurements Using Significant Unobservable Inputs
	Three Months Ended June 30, 2016
	Fair Value as of March 31, 2016		Total Realized and Unrealized Gains (Losses)					Purchases		Settlements			Transfers out of Level 3			Fair Value as of June 30, 2016⁽²⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2016
(In millions)			Recorded in Revenue⁽¹⁾		Recorded in Other Comprehensive Income⁽¹⁾
Assets:
AFS Investment securities:
U.S. Treasury and federal agencies, mortgage-backed securities	$	300	$	—	$	—		$	—	$	—		$	(275	)	$	25
Asset-backed securities:
Student loans	186		1		3			—		—			—			190
Other	1,813		9		(2		)	19		(129		)	—			1,710
Total asset-backed securities	1,999		10		1			19		(129		)	—			1,900
Non-U.S. debt securities:
Asset-backed securities	127		—		—			53		(16		)	(53		)	111
Other	295		—		2					(7		)	(29		)	261
Total non-U.S. debt securities	422		—		2			53		(23		)	(82		)	372
State and political subdivisions	32		—		1			—		—			—			33
Collateralized mortgage obligations	82		—		—			—		(14		)	—			68
Total AFS investment securities	2,835		10		4			72		(166		)	(357		)	2,398
Total assets carried at fair value	$	2,835	$	10	$	4		$	72	$	(166	)	$	(357	)	$	2,398	$	—

⁽²⁾ There were no transfers of assets into level 3 during the three months ended June 30, 2016.



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2016
	Fair Value as of December 31, 2015		Total Realized and Unrealized Gains (Losses)					Purchases		Settlements			Transfers out of Level 3			Fair Value as of June 30, 2016⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2016
(In millions)			Recorded in Revenue		Recorded in Other Comprehensive Income
Assets:
AFS Investment securities:
U.S. Treasury and federal agencies, mortgage-backed securities	$	—	$	—	$	—		$	300	$	—		$	(275	)	$	25
Asset-backed securities:
Student loans	189		1		—			—		—			—			190
Other	1,764		16		(13		)	132		(189		)	—			1,710
Total asset-backed securities	1,953		17		(13		)	132		(189		)	—			1,900
Non-U.S. debt securities:
Asset-backed securities	174		—		(1		)	107		(34		)	(135		)	111
Other	255		—		—			29		6			(29		)	261
Total non-U.S. debt securities	429		—		(1		)	136		(28		)	(164		)	372
State and political subdivisions	33		—		1			—		(1		)	—			33
Collateralized mortgage obligations	39		—		—			50		(21		)	—			68
Other U.S. debt securities	10		—		—			—		(10		)	—			—
Total AFS investment securities	2,464		17		(13		)	618		(249		)	(439		)	2,398
Other assets:
Derivative instruments:
Foreign exchange contracts	5		3		—			—		(8		)	—			—		$	—
Total derivative instruments	5		3		—			—		(8		)	—			—		—
Total assets carried at fair value	$	2,469	$	20	$	(13	)	$	618	$	(257	)	$	(439	)	$	2,398	$	—



	Fair-Value Measurements Using Significant Unobservable Inputs
	Six Months Ended June 30, 2016
	Fair Value as of December 31, 2015		Total Realized and Unrealized (Gains) Losses		Settlements			Fair Value as of June 30, 2016⁽²⁾		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of June 30, 2016
(In millions)	Fair Value as of December 31, 2015		Recorded in Revenue		Settlements			Fair Value as of June 30, 2016⁽²⁾
Liabilities:
Accrued expenses and other liabilities:
Derivative instruments:
Foreign exchange contracts	$	5	$	5	$	(10	)	$	—	$	—
Total derivative instruments	5		5		(10		)	—		—
Total liabilities carried at fair value	$	5	$	5	$	(10	)	$	—	$	—

⁽¹⁾There were no transfers of assets into level 3 during the six months ended June 30, 2016.

⁽²⁾ There were no transfers of liabilities into or out of level 3 during the six months ended June 30, 2016.

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 June 30, 2017		As of December 31, 2016		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of June 30, 2017		As of December 31, 2016
Significant unobservable inputs readily available to State Street:
Assets:
Asset-backed securities, other	$	—	$	1	Discounted cash flows	Credit spread	—	%	0.3	%
State and political subdivisions	38		39		Discounted cash flows	Credit spread	1.9		1.8
Derivative instruments, foreign exchange contracts	5		8		Option model	Volatility	7.1		14.4
Total	$	43	$	48
Liabilities:
Derivative instruments, foreign exchange contracts	$	3	$	8	Option model	Volatility	6.4		14.4
Total	$	3	$	8

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

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.

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
(In millions)	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)
June 30, 2017
Financial Assets:
Cash and due from banks	$	3,156	$	3,156	$	3,156	$	—	$	—
Interest-bearing deposits with banks	63,617		63,617		—		63,617		—
Securities purchased under resale agreements	3,172		3,172		—		3,172		—
Investment securities held-to-maturity	36,230		36,169		17,392		18,651		126
Net loans (excluding leases)	23,547		23,545		—		23,486		59
Financial Liabilities:
Deposits:
Non-interest-bearing	$	50,957	$	50,957	$	—	$	50,957	$	—
Interest-bearing - U.S.	24,438		24,438		—		24,438		—
Interest-bearing - non-U.S.	106,021		106,021		—		106,021		—
Securities sold under repurchase agreements	3,856		3,856		—		3,856		—
Other short-term borrowings	1,465		1,465		—		1,465		—
Long-term debt	11,737		12,022		—		11,710		312



					Fair-Value Hierarchy
(In millions)	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)
December 31, 2016
Financial Assets:
Cash and due from banks	$	1,314	$	1,314	$	1,314	$	—	$	—
Interest-bearing deposits with banks	70,935		70,935		—		70,935		—
Securities purchased under resale agreements	1,956		1,956		—		1,956		—
Investment securities held-to-maturity	35,169		34,994		17,400		17,439		155
Net loans (excluding leases)	18,862		18,877		—		18,781		96
Financial Liabilities:
Deposits:
Non-interest-bearing	$	59,397	$	59,397	$	—	$	59,397	$	—
Interest-bearing - U.S.	30,911		30,911		—		30,911		—
Interest-bearing - non-U.S.	96,855		96,855		—		96,855		—
Securities sold under repurchase agreements	4,400		4,400		—		4,400		—
Other short-term borrowings	1,585		1,585		—		1,585		—
Long-term debt	11,430		11,618		—		11,282		336