Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Notional Amounts of Outstanding Derivative Positions

The following table presents the aggregate contractual, or notional, amounts of derivative financial instruments including those entered into for trading and asset-and-liability management activities as of the dates indicated:

(In millions)	September 30, 2019		December 31, 2018
Derivatives not designated as hedging instruments:
Interest rate contracts:
Futures	$	6,539	$	2,348
Foreign exchange contracts:
Forward, swap and spot	2,480,037		2,238,819
Options purchased	1,219		578
Options written	618		576
Futures	1,546		49
Other:
Stable value contracts(1)	27,023		26,634
Deferred value awards(2)	450		434
Derivatives designated as hedging instruments:
Interest rate contracts:
Swap agreements	12,758		10,596
Foreign exchange contracts:
Forward and swap	3,285		3,412

⁽¹⁾ The notional value of the stable value contracts represents our maximum exposure. However, exposure to various stable value contracts is generally contractually limited to substantially lower amounts than the notional values.

⁽²⁾ For additional information on our derivatives not designated as hedging instruments, including deferred value awards, refer to page 55 in Note 10 to the consolidated financial statements under Item 8, Financial Statements and Supplementary Data, in the 2018 Annual Financial Statements.

Schedule of Derivative Assets at Fair Value

The following tables present the fair value of derivative financial instruments, excluding the impact of master netting agreements, recorded in our consolidated statement of condition as of the dates indicated. The impact of master netting agreements is provided in Note 8.

	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
(In millions)	Derivative Assets(1)				Derivative Liabilities(2)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	13,883	$	16,369	$	14,111	$	16,434
Other derivative contracts	—		—		207		214
Total	$	13,883	$	16,369	$	14,318	$	16,648
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	29	$	17	$	78	$	88
Interest rate contracts	22		13		51		71
Total	$	51	$	30	$	129	$	159

⁽¹⁾ Derivative assets are included within other assets in our consolidated statement of condition.

⁽²⁾ Derivative liabilities are included within other liabilities in our consolidated statement of condition.

Schedule of Derivative Liabilities at Fair Value

The following tables present the fair value of derivative financial instruments, excluding the impact of master netting agreements, recorded in our consolidated statement of condition as of the dates indicated. The impact of master netting agreements is provided in Note 8.

	September 30, 2019		December 31, 2018		September 30, 2019		December 31, 2018
(In millions)	Derivative Assets(1)				Derivative Liabilities(2)
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	13,883	$	16,369	$	14,111	$	16,434
Other derivative contracts	—		—		207		214
Total	$	13,883	$	16,369	$	14,318	$	16,648
Derivatives designated as hedging instruments:
Foreign exchange contracts	$	29	$	17	$	78	$	88
Interest rate contracts	22		13		51		71
Total	$	51	$	30	$	129	$	159

⁽¹⁾ Derivative assets are included within other assets in our consolidated statement of condition.

⁽²⁾ Derivative liabilities are included within other liabilities in our consolidated statement of condition.

Impact of Derivative Financial Instruments On Statement of Income

The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:

		Three Months Ended September 30,						Nine Months Ended September 30,
		2019			2018			2019			2018
(In millions)	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange trading services revenue	$	160		$	170		$	476		$	549
Foreign exchange contracts	Interest Expense	(37		)	(3		)	(135		)	(18		)
Interest rate contracts	Foreign exchange trading services revenue	(1		)	(2		)	(2		)	(6		)
Interest rate contracts	Processing fees and other revenue	—			(1		)	—			(1		)
Other derivative contracts	Foreign exchange trading services revenue	—			3			—			3
Other derivative contracts	Compensation and employee benefits	(46		)	(34		)	(166		)	(140		)
Total		$	76		$	133		$	173		$	387

The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:

		Three Months Ended September 30,								Three Months Ended September 30,
		2019			2018					2019			2018
(In millions)	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income						Hedged Item in Fair Value Hedging Relationship	Location of Gain (Loss) on Hedged Item in Consolidated Statement of Income	Amount of Gain (Loss) on Hedged Item Recognized in Consolidated Statement of Income
Derivatives designated as fair value hedges:
Foreign exchange contracts	Processing fees and other revenue	$	—		$	(14	)	Investment securities	Processing fees and other revenue	$	—		$	14
Foreign exchange contracts	Processing fees and other revenue	—			33			Foreign exchange deposit	Processing fees and other revenue	—			(33		)
Interest rate contracts	Net interest income	1			9			Available-for-sale securities(1)	Net interest income	(2		)	(8		)
Interest rate contracts	Net interest income	75			(40		)	Long-term debt	Net interest income	(72		)	39
Total		$	76		$	(12	)			$	(74	)	$	12
		Nine Months Ended September 30,								Nine Months Ended September 30,
		2019			2018					2019			2018
(In millions)	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income						Hedged Item in Fair Value Hedging Relationship	Location of Gain (Loss) on Hedged Item in Consolidated Statement of Income	Amount of Gain (Loss) on Hedged Item Recognized in Consolidated Statement of Income
Derivatives designated as fair value hedges:
Foreign exchange contracts	Processing fees and other revenue	$	—		$	(57	)	Investment securities	Processing fees and other revenue	$	—		$	57
Foreign exchange contracts	Processing fees and other revenue	—			(320		)	Foreign exchange deposit	Processing fees and other revenue	—			320
Interest rate contracts	Net interest income	(10		)	40			Available-for-sale securities(2)	Net interest income	9			(38		)
Interest rate contracts	Net interest income	366			(254		)	Long-term debt	Net interest income	(357		)	239
Total		$	356		$	(591	)			$	(348	)	$	578

⁽¹⁾ In the three months ended September 30, 2019, $10 million of net unrealized gains on AFS investment securities designated in fair value hedges was recognized in OCI compared to $6 million of net unrealized gains in the same period in 2018.

⁽²⁾ In the nine months ended September 30, 2019, $13 million of net unrealized gains on AFS investment securities designated in fair value hedges was recognized in OCI compared to $29 million of net unrealized gains in the same period in 2018.

	Three Months Ended September 30,						Three Months Ended September 30,
	2019		2018				2019			2018
(In millions)	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative					Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Interest rate contracts	$	2	$	(7	)	Net interest income	$	(3	)	$	(1	)
Foreign exchange contracts	12		38			Net interest income	7			6
Total derivatives designated as cash flow hedges	$	14	$	31			$	4		$	5
Derivatives designated as net investment hedges:
Foreign exchange contracts	$	57	$	19		Gains (Losses) related to investment securities, net	$	—		$	—
Total derivatives designated as net investment hedges	57		19				—			—
Total	$	71	$	50			$	4		$	5
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2019		2018				2019			2018
(In millions)	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative					Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Interest rate contracts	$	33	$	(35	)	Net interest income	$	(7	)	$	—
Foreign exchange contracts	24		14			Net interest income	21			20
Total derivatives designated as cash flow hedges	$	57	$	(21	)		$	14		$	20
Derivatives designated as net investment hedges:
Foreign exchange contracts	$	75	$	54		Gains (losses) related to investment securities, net	$	—		$	—
Total derivatives designated as net investment hedges	75		54				—			—
Total	$	132	$	33			$	14		$	20

Schedule of Outstanding Hedges: (Notional Amount)

The following table shows the carrying amount and associated cumulative basis adjustments related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships:

	September 30, 2019
	Hedged Items Currently Designated					Hedged Items No Longer Designated(1)
(In millions)	Carrying Amount of Assets and Liabilities(2)		Cumulative Hedge Accounting Basis Adjustments			Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt	$	8,274	$	254		$	1,199	$	(11	)
Available-for-sale securities	985		56			—		—
Total	$	9,259	$	310		$	1,199	$	(11	)
	December 31, 2018
	Hedged Items Currently Designated					Hedged Items No Longer Designated(1)
(In millions)	Carrying Amount of Assets and Liabilities(2)		Cumulative Hedge Accounting Basis Adjustments			Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt	$	8,270	$	(137	)	$	1,197	$	(20	)
Available-for-sale securities	1,496		72			50		1
Total	$	9,766	$	(65	)	$	1,247	$	(19	)

⁽¹⁾ Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.

⁽²⁾ Does not include the carrying amount of hedged items when only foreign currency risk is the designated hedged risk. The carrying amount excluded for investment securities was zero and $458 million for September 30, 2019 and December 31, 2018, respectively.