Fair Value

Fair Value Measurements

We carry trading account assets and liabilities, AFS debt securities, certain equity 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 131 to 138 in Note 2 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2017 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, 2018, no assets or liabilities were transferred between levels 1 and 2. Approximately $9 million of assets were transferred between levels 1 and 2 during the year ended December 31, 2017.



	Fair Value Measurements on a Recurring Basis
	As of June 30, 2018
(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	374		135		—					509
Other	79		533		—					612
Total trading account assets	492		668		—					1,160
AFS investment securities:
U.S. Treasury and federal agencies:
Direct obligations	11		—		—					11
Mortgage-backed securities	—		15,893		—					15,893
Total U.S. Treasury and federal agencies	11		15,893		—					15,904
Asset-backed securities:
Student loans	—		1,567		—					1,567
Credit cards	—		617		—					617
CLOs	—		—		851					851
Total asset-backed securities	—		2,184		851					3,035
Non-U.S. debt securities:
Mortgage-backed securities	—		2,615		—					2,615
Asset-backed securities	—		1,183		474					1,657
Government securities	—		13,072		—					13,072
Other⁽²⁾	—		4,283		169					4,452
Total non-U.S. debt securities	—		21,153		643					21,796
State and political subdivisions	—		4,228		—					4,228
Collateralized mortgage obligations	—		319		—					319
Other U.S. debt securities	—		2,066		—					2,066
Total AFS investment securities	11		45,843		1,494					47,348
Other assets:
Derivative instruments:
Foreign exchange contracts	—		17,373		7		(11,231		)	6,149
Other derivative contracts	2		—		—		—			2
Total derivative instruments	2		17,373		7		(11,231		)	6,151
Other	—		449		—		—			449
Total assets carried at fair value	$	505	$	64,333	$	1,501	$	(11,231	)	$	55,108
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:
Other	70		—		—		—			70
Derivative instruments:
Foreign exchange contracts	—		17,552		6		(12,608		)	4,950
Interest-rate contracts	4		102		—		—			106
Other derivative contracts	2		268		—		—			270
Total derivative instruments	6		17,922		6		(12,608		)	5,326
Total liabilities carried at fair value	$	76	$	17,922	$	6	$	(12,608	)	$	5,396

⁽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 $1,557 million and $2,934 million, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of June 30, 2018, the fair value of other non-U.S. debt securities was primarily composed of $1,959 million of covered bonds and $1,735 million of corporate bonds.



	Fair Value Measurements on a Recurring Basis
	As of December 31, 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	389		93		—					482
Other	44		528		—					572
Total trading account assets	472		621		—					1,093
AFS investment securities:
U.S. Treasury and federal agencies:
Direct obligations	11		212		—					223
Mortgage-backed securities	—		10,872		—					10,872
Total U.S. Treasury and federal agencies	11		11,084		—					11,095
Asset-backed securities:
Student loans	—		3,358		—					3,358
Credit cards	—		1,542		—					1,542
CLOs	—		89		1,358					1,447
Total asset-backed securities	—		4,989		1,358					6,347
Non-U.S. debt securities:
Mortgage-backed securities	—		6,576		119					6,695
Asset-backed securities	—		2,545		402					2,947
Government securities	—		10,721		—					10,721
Other⁽²⁾	—		5,904		204					6,108
Total non-U.S. debt securities	—		25,746		725					26,471
State and political subdivisions	—		9,108		43					9,151
Collateralized mortgage obligations	—		1,054		—					1,054
Other U.S. debt securities	—		2,560		—					2,560
U.S. equity securities	—		46		—					46
U.S. money-market mutual funds	—		397		—					397
Total AFS investment securities	11		54,984		2,126					57,121
Other assets:
Derivatives instruments:
Foreign exchange contracts	—		11,596		1		(7,593		)	4,004
Interest-rate contracts	8		—		—		—			8
Other derivative contracts	1		—		—		—			1
Total derivative instruments	9		11,596		1		(7,593		)	4,013
Total assets carried at fair value	$	492	$	67,201	$	2,127	$	(7,593	)	$	62,227
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:
Other	39		—		—		—			39
Derivative instruments:
Foreign exchange contracts	—		11,467		1		(5,970		)	5,498
Interest-rate contracts	—		100		—		—			100
Other derivative contracts	1		283		—		—			284
Total derivative instruments	1		11,850		1		(5,970		)	5,882
Total liabilities carried at fair value	$	40	$	11,850	$	1	$	(5,970	)	$	5,921

⁽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 $2,045 million and $422 million, respectively, for cash collateral received from and provided to derivative counterparties.

⁽²⁾As of December 31, 2017, the fair value of other non-U.S. debt securities was primarily composed of $3,537 million of covered bonds and $1,885 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, 2018 and 2017, respectively, including total realized and unrealized gains and losses. 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, 2018 and 2017, transfers into level 3 were mainly related to certain ABS, including non-U.S. debt securities. During the three and six months ended June 30, 2018 and 2017, 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 June 30, 2018
	Fair Value as of March 31, 2018		Total Realized and Unrealized Gains (Losses)					Purchases		Sales			Settlements			Fair Value as of June 30, 2018⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2018
(In millions)			Recorded in Revenue⁽¹⁾		Recorded in Other Comprehensive Income⁽¹⁾
Assets:
AFS Investment securities:
Asset-backed securities:
CLOs	$	826	$	1	$	(2	)	$	—	$	—		$	26		$	851
Total asset-backed securities	826		1		(2		)	—		—			26			851
Non-U.S. debt securities:
Asset-backed securities	272		—		—			269		—			(67		)	474
Other	178		—		—			—		—			(9		)	169
Total non-U.S. debt securities	450		—		—			269		—			(76		)	643
State and political subdivisions	37		—		—			—		(37		)	—			—
Total AFS investment securities	1,313		1		(2		)	269		(37		)	(50		)	1,494
Other assets:
Derivative instruments:
Foreign exchange contracts	3		3		—			4		—			(3		)	7		$	2
Total derivative instruments	3		3		—			4		—			(3		)	7		2
Total assets carried at fair value	$	1,316	$	4	$	(2	)	$	273	$	(37	)	$	(53	)	$	1,501	$	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, 2018
	Fair Value as of December 31, 2017		Total Realized and Unrealized Gains (Losses)					Purchases			Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value as of June 30, 2018⁽¹⁾		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of June 30, 2018
(In millions)			Recorded in Revenue⁽¹⁾		Recorded in Other Comprehensive Income⁽¹⁾
Assets:
AFS Investment securities:
Asset-backed securities:
CLOs	$	1,358	$	2	$	(3	)	$	318		$	(636	)	$	21		$	—	$	(209	)	$	851
Total asset-backed securities	1,358		2		(3		)	318			(636		)	21			—		(209		)	851
Non-U.S. debt securities:
Mortgage-backed securities	119		—		—			—			—			—			—		(119		)	—
Asset-backed securities	402		—		(1		)	380			(311		)	(64		)	68		—			474
Other	204		—		—			—			—			(35		)	—		—			169
Total non-U.S. debt securities	725		—		(1		)	380			(311		)	(99		)	68		(119		)	643
State and political subdivisions	43		—		—			(1		)	(37		)	—			—		(5		)	—
Total AFS investment securities	2,126		2		(4		)	697			(984		)	(78		)	68		(333		)	1,494
Other assets:
Derivative instruments:
Foreign exchange contracts	1		1		—			5			—			—			—		—			7		$	2
Total derivative instruments	1		1		—			5			—			—			—		—			7		2
Total assets carried at fair value	$	2,127	$	3	$	(4	)	$	702		$	(984	)	$	(78	)	$	68	$	(333	)	$	1,501	$	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
	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	)	$	—
CLOs	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	)	$	—
CLOs	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

⁽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.

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, 2018		As of December 31, 2017		Valuation Technique	Significant Unobservable Input⁽¹⁾	As of June 30, 2018		As of December 31, 2017
Significant unobservable inputs readily available to State Street:
Assets:
Derivative instruments, foreign exchange contracts	$	7	$	1	Option model	Volatility	8.4	%	7.2	%
Total	$	7	$	1
Liabilities:
Derivative instruments, foreign exchange contracts	$	6	$	1	Option model	Volatility	8.3	%	7.2	%
Total	$	6	$	1

⁽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, 2018
Financial Assets:
Cash and due from banks	$	3,886	$	3,886	$	3,886	$	—	$	—
Interest-bearing deposits with banks	76,366		76,366		—		76,366		—
Securities purchased under resale agreements	3,583		3,583		—		3,583		—
Investment securities held-to-maturity	39,594		38,805		15,639		23,043		123
Net loans (excluding leases)⁽¹⁾	23,638		23,613		—		23,571		42
Other⁽²⁾	7,000		7,000		—		7,000		—
Financial Liabilities:
Deposits:
Non-interest-bearing	$	52,316	$	52,316	$	—	$	52,316	$	—
Interest-bearing - U.S.	57,407		57,407		—		57,407		—
Interest-bearing - non-U.S.	76,940		76,940		—		76,940		—
Securities sold under repurchase agreements	3,088		3,088		—		3,088		—
Other short-term borrowings	1,103		1,103		—		1,103		—
Long-term debt	10,387		10,597		—		10,346		251
Other⁽²⁾	7,000		7,000		—		7,000		—

⁽¹⁾ Includes $22 million of loans classified as held-for-sale that were measured at fair value on a non-recurring basis as of June 30, 2018.

⁽²⁾ Represents a portion of underlying client assets related to our enhanced custody business, which assets clients have allowed us to transfer and re-pledge.



					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, 2017
Financial Assets:
Cash and due from banks	$	2,107	$	2,107	$	2,107	$	—	$	—
Interest-bearing deposits with banks	67,227		67,227		—		67,227		—
Securities purchased under resale agreements	3,241		3,241		—		3,241		—
Investment securities held-to-maturity	40,458		40,255		16,814		23,318		123
Net loans (excluding leases)⁽¹⁾	22,577		22,482		—		22,431		51
Financial Liabilities:
Deposits:
Non-interest-bearing	$	47,175	$	47,175	$	—	$	47,175	$	—
Interest-bearing - U.S.	50,139		50,139		—		50,139		—
Interest-bearing - non-U.S.	87,582		87,582		—		87,582		—
Securities sold under repurchase agreements	2,842		2,842		—		2,842		—
Other short-term borrowings	1,144		1,144		—		1,144		—
Long-term debt	11,620		11,919		—		11,639		280

⁽¹⁾ Includes $3 million of loans classified as held-for-sale that were measured at fair value on a non-recurring basis as of December 31, 2017.