Offsetting Arrangements

We manage credit and counterparty risk by entering into enforceable netting agreements and other collateral arrangements with counterparties to derivative contracts and secured financing transactions, including resale and repurchase agreements, and principal securities borrowing and lending agreements. These netting agreements mitigate our counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement. In limited cases, a netting agreement may also provide for the periodic netting of settlement payments with respect to multiple different transaction types in the normal course of business. Certain of our derivative contracts are executed under either standardized netting agreements or, for exchange-traded derivatives, the relevant contracts for a particular exchange which contain enforceable netting provisions. In certain cases, we may have cross-product netting arrangements which allow for netting and set-off of a variety of types of derivatives with a single counterparty. A derivative netting arrangement creates an enforceable right of set-off that becomes effective, and effects the realization or settlement of individual financial assets and liabilities, only following a specified event of default. Collateral requirements associated with our derivative contracts are determined after a review of the creditworthiness of each counterparty, and the requirements are monitored and adjusted daily, typically based on net exposure by counterparty. Collateral is generally in the form of cash or highly liquid U.S. government securities.

In connection with secured financing transactions, we enter into netting agreements and other collateral arrangements with counterparties, which provide for the right to liquidate collateral in the event of default. Collateral is generally required in the form of cash, equity securities or fixed-income securities. Default events may include the failure to make payments or deliver securities timely, material adverse changes in financial condition or insolvency, the breach of minimum regulatory capital requirements, or loss of license, charter or other legal authorization necessary to perform under the contract.

In order for an arrangement to be eligible for netting, we must have a reasonable basis to conclude that such netting arrangements are legally enforceable. The analysis of the legal enforceability of an arrangement differs by jurisdiction, depending on the laws of that jurisdiction. In many jurisdictions, specific legislation exists that provides for the enforceability in bankruptcy of close-out netting under a netting agreement, typically by way of specific exception from more general prohibitions on the exercise of creditor rights.

When we have a legally enforceable netting arrangement between us and the derivative counterparty and the relevant transaction is the type of transaction that is recorded in our consolidated statement of condition, we offset derivative assets and liabilities, and the related collateral received and provided, in our consolidated statement of condition. We also offset assets and liabilities related to secured financing transactions with the same counterparty or clearinghouse which have the same maturity date and are settled in the normal course of business on a net basis.

Collateral that we receive in the form of securities in connection with secured financing transactions and derivative contracts can be transferred or re-pledged as collateral in many instances to enter into repurchase agreements or securities finance or derivative transactions. The securities collateral received in connection with our securities finance activities is recorded at fair value in other assets in our consolidated statement of condition, with a related liability to return the collateral, if we have the right to transfer or re-pledge the collateral. As of December 31, 2017 and December 31, 2016, the fair value of securities received as collateral from third parties where we are permitted to transfer or re-pledge the securities totaled $2.47 billion and $1.77 billion, respectively, and the fair value of the portion that had been transferred or re-pledged as of the same dates was $15 million and $166 million, respectively.

The following tables present information about the offsetting of assets related to derivative contracts and secured financing transactions, as of the dates indicated:



Assets:	December 31, 2017
									Gross Amounts Not Offset in Statement of Condition
(In millions)	Gross Amounts of Recognized Assets⁽¹⁾⁽²⁾		Gross Amounts Offset in Statement of Condition⁽³⁾			Net Amounts of Assets Presented in Statement of Condition			Cash and Securities Received⁽⁴⁾			Net Amount⁽⁵⁾
Derivatives:
Foreign exchange contracts	$	11,597	$	(5,548	)	$	6,049					$	6,049
Interest-rate contracts⁽⁶⁾	8		—			8						8
Other derivative contracts	1		—			1						1
Cash collateral and securities netting	NA		(2,045		)	(2,045		)	$	(124	)	(2,169		)
Total derivatives	11,606		(7,593		)	4,013			(124		)	3,889
Other financial instruments:
Resale agreements and securities borrowing⁽⁷⁾	70,079		(47,434		)	22,645			(22,645		)	—
Total derivatives and other financial instruments	$	81,685	$	(55,027	)	$	26,658		$	(22,769	)	$	3,889



Assets:	December 31, 2016
									Gross Amounts Not Offset in Statement of Condition
(In millions)	Gross Amounts of Recognized Assets⁽¹⁾⁽²⁾		Gross Amounts Offset in Statement of Condition⁽³⁾			Net Amounts of Assets Presented in Statement of Condition			Cash and Securities Received⁽⁴⁾			Net Amount⁽⁵⁾
Derivatives:
Foreign exchange contracts	$	16,484	$	(8,257	)	$	8,227					$	8,227
Interest-rate contracts	68		(68		)	—						—
Cash collateral and securities netting	NA		(906		)	(906		)	$	(247	)	(1,153		)
Total derivatives	16,552		(9,231		)	7,321			(247		)	7,074
Other financial instruments:
Resale agreements and securities borrowing⁽⁷⁾	58,677		(35,517		)	23,160			(22,939		)	221
Total derivatives and other financial instruments	$	75,229	$	(44,748	)	$	30,481		$	(23,186	)	$	7,295

⁽¹⁾Amounts include all transactions regardless of whether or not they are subject to an enforceable netting arrangement.

⁽²⁾Derivative amounts are carried at fair value and securities financing amounts are carried at amortized cost, except for securities collateral which is also carried at fair value. Refer to Note 1 and Note 2 for additional information about the measurement basis of these instruments.

⁽³⁾Amounts subject to netting arrangements which have been determined to be legally enforceable and eligible for netting in the consolidated statement of condition.

⁽⁴⁾ Includes securities in connection with our securities borrowing transactions.

⁽⁵⁾Includes amounts secured by collateral not determined to be subject to enforceable netting arrangements.

⁽⁶⁾Variation margin payments presented as settlements rather than collateral.

⁽⁷⁾Included in the $22,645 million as of December 31, 2017 were $3,241 million of resale agreements and $19,404 million of collateral provided related to securities borrowing. Included in the $23,160 million as of December 31, 2016 were $1,956 million of resale agreements and $21,204 million of collateral provided related to securities borrowing. Resale agreements and collateral provided related to securities borrowing were recorded in securities purchased under resale agreements and other assets, respectively, in our consolidated statement of condition. Refer to Note 12 for additional information with respect to principal securities finance transactions.

^NA Not applicable

The following tables present information about the offsetting of liabilities related to derivative contracts and secured financing transactions, as of the dates indicated:



Liabilities:	December 31, 2017
									Gross Amounts Not Offset in Statement of Condition
(In millions)	Gross Amounts of Recognized Liabilities⁽¹⁾⁽²⁾		Gross Amounts Offset in Statement of Condition⁽³⁾			Net Amounts of Liabilities Presented in Statement of Condition			Cash and Securities Provided⁽⁴⁾			Net Amount⁽⁵⁾
Derivatives:
Foreign exchange contracts	$	11,467	$	(5,548	)	$	5,919					$	5,919
Interest-rate contracts⁽⁶⁾	100		—			100						100
Other derivative contracts	285		—			285						285
Cash collateral and securities netting	NA		(422		)	(422		)	$	(450	)	(872		)
Total derivatives	11,852		(5,970		)	5,882			(450		)	5,432
Other financial instruments:
Repurchase agreements and securities lending⁽⁷⁾	54,127		(47,434		)	6,693			(4,299		)	2,394
Total derivatives and other financial instruments	$	65,979	$	(53,404	)	$	12,575		$	(4,749	)	$	7,826



Liabilities:	December 31, 2016
									Gross Amounts Not Offset in Statement of Condition
(In millions)	Gross Amounts of Recognized Liabilities⁽¹⁾⁽²⁾		Gross Amounts Offset in Statement of Condition⁽³⁾			Net Amounts of Liabilities Presented in Statement of Condition			Cash and Securities Provided⁽⁴⁾			Net Amount⁽⁵⁾
Derivatives:
Foreign exchange contracts	$	15,956	$	(8,253	)	$	7,703					$	7,703
Interest-rate contracts	348		(73		)	275						275
Other derivative contracts	380		—			380						380
Cash collateral and securities netting	NA		(2,356		)	(2,356		)	$	(180	)	(2,536		)
Total derivatives	16,684		(10,682		)	6,002			(180		)	5,822
Other financial instruments:
Resale agreements and securities lending⁽⁷⁾	44,933		(35,517		)	9,416			(7,059		)	2,357
Total derivatives and other financial instruments	$	61,617	$	(46,199	)	$	15,418		$	(7,239	)	$	8,179

⁽¹⁾Amounts include all transactions regardless of whether or not they are subject to an enforceable netting arrangement.

⁽³⁾Amounts subject to netting arrangements which have been determined to be legally enforceable and eligible for netting in the consolidated statement of condition.

⁽⁴⁾ Includes securities provided in connection with our securities lending transactions.

⁽⁵⁾Includes amounts secured by collateral not determined to be subject to enforceable netting arrangements.

⁽⁶⁾Variation margin payments presented as settlements rather than collateral.

⁽⁷⁾Included in the $6,693 million as of December 31, 2017 were $2,842 million of repurchase agreements and $3,851 million of collateral received related to securities lending. Included in the $9,416 million as of December 31, 2016 were $4,400 million of repurchase agreements and $5,016 million of collateral received related to securities lending. Repurchase agreements and collateral received related to securities lending were recorded in securities sold under repurchase agreements and accrued expenses and other liabilities, respectively, in our consolidated statement of condition. Refer to Note 12 for additional information with respect to principal securities finance transactions.

^NA Not applicable

The securities transferred under resale and repurchase agreements typically are U.S. Treasury, agency and agency MBS. In our principal securities borrowing and lending arrangements, the securities transferred are predominantly equity securities and some corporate debt securities. The fair value of the securities transferred may increase in value to an amount greater than the amount received under our repurchase and securities lending arrangements, which exposes the Company with counterparty risk. We require the review of the price of the underlying securities in relation to the carrying value of the repurchase agreements and securities lending arrangements on a daily basis and when appropriate, adjust the cash or security to be obtained or returned to counterparties that is reflective of the required collateral levels.

The following tables summarize our repurchase agreements and securities lending transactions by category of collateral pledged and remaining maturity of these agreements as of the periods indicated:



	Remaining Contractual Maturity of the Agreements
	As of December 31, 2017
(In millions)	Overnight and Continuous		Up to 30 days		30 – 90 days		Total
Repurchase agreements:
U.S. Treasury and agency securities	$	43,072	$	—	$	—	$	43,072
Total	43,072		—		—		43,072
Securities lending transactions:
Corporate debt securities	35		—		—		35
Equity securities	11,020		—		—		11,020
Non-U.S. sovereign debt	—		—		—		—
Total	11,055		—		—		11,055
Gross amount of recognized liabilities for repurchase agreements and securities lending	$	54,127	$	—	$	—	$	54,127



	Remaining Contractual Maturity of the Agreements
	As of December 31, 2016
(In millions)	Overnight and Continuous		Up to 30 days		30 – 90 days		Total
Repurchase agreements:
U.S. Treasury and agency securities	$	35,509	$	—	$	—	$	35,509
Total	35,509		—		—		35,509
Securities lending transactions:
Corporate debt securities	53		—		—		53
Equity securities	8,337		—		1,034		9,371
Total	8,390		—		1,034		9,424
Gross amount of recognized liabilities for repurchase agreements and securities lending	$	43,899	$	—	$	1,034	$	44,933