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 nine months ended September 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 September 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	387		174		—					561
Other	20		515		—					535
Total trading account assets	446		689		—					1,135
AFS investment securities:
U.S. Treasury and federal agencies:
Direct obligations	231		389		—					620
Mortgage-backed securities	—		10,975		25					11,000
Asset-backed securities:
Student loans	—		4,626		200					4,826
Credit cards	—		1,548		—					1,548
Other⁽²⁾	—		35		1,186					1,221
Total asset-backed securities	—		6,209		1,386					7,595
Non-U.S. debt securities:
Mortgage-backed securities	—		6,956		118					7,074
Asset-backed securities	—		2,742		97					2,839
Government securities	—		6,658		—					6,658
Other⁽³⁾	—		5,617		201					5,818
Total non-U.S. debt securities	—		21,973		416					22,389
State and political subdivisions	—		9,700		38					9,738
Collateralized mortgage obligations	—		1,528		—					1,528
Other U.S. debt securities	—		2,909		19					2,928
U.S. equity securities	—		46		—					46
U.S. money-market mutual funds	—		394		—					394
Total AFS investment securities	231		54,123		1,884					56,238
Other assets:
Derivative instruments:
Foreign exchange contracts	—		11,735		2		$	(7,026	)	4,711
Interest-rate contracts	—		3		—		(2		)	1
Total derivative instruments	—		11,738		2		(7,028		)	4,712
Other	22		—		—		—			22
Total assets carried at fair value	$	699	$	66,550	$	1,886	$	(7,028	)	$	62,107
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:
Other	$	19	$	—	$	—	$	—		$	19
Derivative instruments:
Foreign exchange contracts	—		11,581		2		(7,465		)	4,118
Interest-rate contracts	10		97		—		(1		)	106
Other derivative contracts	—		319		—		—			319
Total derivative instruments	10		11,997		2		(7,466		)	4,543
Other	22		—		—		—			22
Total liabilities carried at fair value	$	51	$	11,997	$	2	$	(7,466	)	$	4,584

⁽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 $637 million and $1,074 million, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of September 30, 2017, the fair value of other ABS was primarily composed of $1,221 million of CLOs.

⁽³⁾As of September 30, 2017, the fair value of other non-U.S. debt securities was primarily composed of $3,600 million of covered bonds and $1,503 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 AFS investment securities	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 ABS was primarily composed of $905 million of CLOs.

⁽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 nine months ended September 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 nine months ended September 30, 2017, transfers into level 3 were mainly related to certain ABS and MBS, including non-U.S. debt securities, for which fair value was measured using information obtained from third-party sources, including non-binding broker or dealer quotes. During the nine months ended September 30, 2017 and 2016, transfers out of level 3 were mainly related to certain MBS and ABS, 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 September 30, 2017
	Fair Value as of June 30, 2017		Total Realized and Unrealized Gains (Losses)				Purchases		Sales			Settlements			Transfers into Level 3		Fair Value as of September 30, 2017⁽²⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2017
(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	$	—	$	—	$	—	$	—	—			$	—		$	25	$	25
Asset-backed securities:
Student loans	—		—		—		200		—			—			—		200
Other	951		1		1		60		—			(2		)	175		1,186
Total asset-backed securities	951		1		1		260		—			(2		)	175		1,386
Non-U.S. debt securities:
Mortgage-backed securities	—		—		—		118		—			—			—		118
Asset-backed securities	63		—		—		29		(10		)	—			15		97
Other	274		—		—		—		(80		)	7			—		201
Total non-U.S. debt securities	337		—		—		147		(90		)	7			15		416
State and political subdivisions	38		—		—		—		—			—			—		38
Other U.S. debt securities	19		—		—		—		—			—			—		19
Total AFS investment securities	1,345		1		1		407		(90		)	5			215		1,884
Other assets:
Derivative instruments:
Foreign exchange contracts	5		—		—		2		—			(5		)	—		2		$	(2	)
Total derivative instruments	5		—		—		2		—			(5		)	—		2		(2		)
Total assets carried at fair value	$	1,350	$	1	$	1	$	409	$	(90	)	$	—		$	215	$	1,886	$	(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.

⁽²⁾ There were no transfers of assets out of level 3 during the three months ended September 30, 2017.



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2017
	Fair Value as of December 31, 2016		Total Realized and Unrealized Gains (Losses)						Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of September 30, 2017		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 30, 2017
(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	$	—	$	—		$	—		$	—	$	—		$	—		$	25	$	—		$	25
Asset-backed securities:
Student loans	97		—			1			200		—			—			—		(98		)	200
Other	905		2			—			415		—			(412		)	276		—			1,186
Total asset-backed securities	1,002		2			1			615		—			(412		)	276		(98		)	1,386
Non-U.S. debt securities:
Mortgage-backed securities	—		—			—			118		—			—			—		—			118
Asset-backed securities	32		1			(1		)	60		(10		)	(21		)	67		(31		)	97
Other	248		—			—			5		(80		)	28			—		—			201
Total non-U.S. debt securities	280		1			(1		)	183		(90		)	7			67		(31		)	416
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			—			840		(90		)	(406		)	368		(168		)	1,884
Other assets:
Derivative instruments:
Foreign exchange contracts	8		(6		)	—			4		—			(4		)	—		—			2		$	(1	)
Total derivative instruments	8		(6		)	—			4		—			(4		)	—		—			2		(1		)
Total assets carried at fair value	$	1,345	$	(3	)	$	—		$	844	$	(90	)	$	(410	)	$	368	$	(168	)	$	1,886	$	(1	)



	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended September 30, 2016
	Fair Value as of June 30, 2016		Total Realized and Unrealized Gains (Losses)					Purchases		Settlements			Transfers out of Level 3			Fair Value as of September 30, 2016⁽²⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 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	$	25	$	—	$	—		$	25	$	—		$	—		$	50
Asset-backed securities:
Student loans	190		—		2			—		—			—			192
Other	1,710		13		(8		)	118		(560		)	—			1,273
Total asset-backed securities	1,900		13		(6		)	118		(560		)	—			1,465
Non-U.S. debt securities:
Mortgage-backed securities	—		—		—			90		—			—			90
Asset-backed securities	111		—		—			90		(9		)	(54		)	138
Other	261		—		—			194		3			—			458
Total non-U.S. debt securities	372		—		—			374		(6		)	(54		)	686
State and political subdivisions	33		—		7			—		—			—			40
Collateralized mortgage obligations	68		—		1			36		(3		)	—			102
Total AFS investment securities	2,398		13		2			553		(569		)	(54		)	2,343
Total assets carried at fair value	$	2,398	$	13	$	2		$	553	$	(569	)	$	(54	)	$	2,343	$	—

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



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 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 September 30, 2016⁽²⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of September 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	$	—	$	—	$	—		$	325	$	—		$	(275	)	$	50
Asset-backed securities:
Student loans	189		1		2			—		—			—			192
Other	1,764		29		(21		)	250		(749		)	—			1,273
Total asset-backed securities	1,953		30		(19		)	250		(749		)	—			1,465
Non-U.S. debt securities:
Mortgage-backed securities	—		—		—			90		—			—			90
Asset-backed securities	174		—		(1		)	196		(43		)	(188		)	138
Other	255		—		—			223		9			(29		)	458
Total non-U.S. debt securities	429		—		(1		)	509		(34		)	(217		)	686
State and political subdivisions	33		—		9			—		(2		)	—			40
Collateralized mortgage obligations	39		—		2			86		(25		)	—			102
Other U.S. debt securities	10		—		—			—		(10		)	—			—
Total AFS investment securities	2,464		30		(9		)	1,170		(820		)	(492		)	2,343
Other assets:
Derivative instruments:
Foreign exchange contracts	5		3		—			—		(8		)	—			—		$	—
Total derivative instruments	5		3		—			—		(8		)	—			—		—
Total assets carried at fair value	$	2,469	$	33	$	(9	)	$	1,170	$	(828	)	$	(492	)	$	2,343	$	—



	Fair Value Measurements Using Significant Unobservable Inputs
	Nine Months Ended September 30, 2016
	Fair Value as of December 31, 2015		Total Realized and Unrealized (Gains) Losses		Settlements			Fair Value as of September 30, 2016⁽³⁾		Change in Unrealized (Gains) Losses Related to Financial Instruments Held as of September 30, 2016
(In millions)	Fair Value as of December 31, 2015		Recorded in Revenue		Settlements			Fair Value as of September 30, 2016⁽³⁾
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⁾ 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.

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

⁽³⁾ There were no transfers of liabilities into or out of level 3 during the nine months ended September 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 September 30, 2017		As of December 31, 2016		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of September 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	1.7		1.8
Derivative instruments, foreign exchange contracts	2		8		Option model	Volatility	8.3		14.4
Total	$	40	$	48
Liabilities:
Derivative instruments, foreign exchange contracts	$	2	$	8	Option model	Volatility	8.3		14.4
Total	$	2	$	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)
September 30, 2017
Financial Assets:
Cash and due from banks	$	3,939	$	3,939	$	3,939	$	—	$	—
Interest-bearing deposits with banks	60,956		60,956		—		60,956		—
Securities purchased under resale agreements	3,465		3,465		—		3,465		—
Investment securities held-to-maturity	36,850		36,836		17,362		19,351		123
Net loans (excluding leases)	22,868		22,866		—		22,811		55
Financial Liabilities:
Deposits:
Non-interest-bearing	$	49,850	$	49,850	$	—	$	49,850	$	—
Interest-bearing - U.S.	49,394		49,394		—		49,394		—
Interest-bearing - non-U.S.	80,019		80,019		—		80,019		—
Securities sold under repurchase agreements	3,867		3,867		—		3,867		—
Other short-term borrowings	1,253		1,253		—		1,253		—
Long-term debt	11,716		12,022		—		11,725		297



					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