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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2020

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 entered into in connection with our trading and asset-and-liability management activities as of the dates indicated:


(In millions)	September 30, 2020		December 31, 2019
Derivatives not designated as hedging instruments:
Interest-rate contracts:



Futures	$	4,136	$	4,368

Foreign exchange contracts:
Forward, swap and spot	2,775,208		2,378,808
Options purchased	1,676		1,581
Options written	921		1,110
Futures	1,562		1,040






Other:
Stable value contracts⁽¹⁾	30,405		26,895
Deferred value awards⁽²⁾	382		389
Derivatives designated as hedging instruments:
Interest-rate contracts:
Swap agreements	5,421		15,196
Foreign exchange contracts:
Forward and swap	4,837		3,176

⁽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⁾Represents grants of deferred value awards to employees; refer to pages 147 to 148 in Note 10 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2019 Form 10-K.

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.


	Fair Value
	Derivative Assets⁽¹⁾						Derivative Liabilities⁽²⁾
(In millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	16,866	$	15,140	$	15,452	$	15,054



Other derivative contracts	—		—		176		182
Total	$	16,866	$	15,140	$	15,628	$	15,236

Derivatives designated as hedging instruments:
Foreign exchange contracts	$	39	$	—	$	20	$	96
Interest-rate contracts	—		8		53		49
Total	$	39	$	8	$	73	$	145

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

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

Schedule of Derivative Liabilities at Fair Value


	Fair Value
	Derivative Assets⁽¹⁾						Derivative Liabilities⁽²⁾
(In millions)	September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019
Derivatives not designated as hedging instruments:
Foreign exchange contracts	$	16,866	$	15,140	$	15,452	$	15,054



Other derivative contracts	—		—		176		182
Total	$	16,866	$	15,140	$	15,628	$	15,236

Derivatives designated as hedging instruments:
Foreign exchange contracts	$	39	$	—	$	20	$	96
Interest-rate contracts	—		8		53		49
Total	$	39	$	8	$	73	$	145

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

⁽²⁾ Derivative liabilities are included within accrued expenses and 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:


	Location of Gain (Loss) on Derivative in Consolidated Statement of Income	Amount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
		Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)		2020		2019		2020		2019
Derivatives not designated as hedging instruments:
Foreign exchange contracts	Foreign exchange trading services revenue	$	164	$	160	$	712	$	476

Foreign exchange contracts	Interest expense	20		(37)		39		(135)
Interest rate contracts	Foreign exchange trading services revenue	—		(1)		3		(2)





Other derivative contracts	Compensation and employee benefits	(39)		(46)		(151)		(166)
Total		$	145	$	76	$	603	$	173

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,
		2020		2019				2020		2019
(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:


Interest rate contracts	Net interest income	$	5	$	1	Available-for-sale securities⁽¹⁾	Net interest income	$	(6)	$	(2)
Interest rate contracts	Net interest income	(19)		75		Long-term debt	Net interest income	17		(72)




Total		$	(14)	$	76			$	11	$	(74)

		Nine Months Ended September 30,								Nine Months Ended September 30,
		2020		2019				2020		2019
(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:


Interest rate contracts	Net interest income	$	(3)	$	(10)	Available-for-sale securities⁽²⁾	Net interest income	$	—	$	9
Interest rate contracts	Net interest income	564		366		Long-term debt	Net interest income	(557)		(357)




Total		$	561	$	356			$	(557)	$	(348)

⁽¹⁾In the three months ended September 30, 2020, $4 million of net unrealized gains on AFS investment securities designated in fair value hedges was recognized in OCI compared to $10 million of net unrealized gains in the same period in 2019.

⁽²⁾In the nine months ended September 30, 2020, zero of net unrealized losses on AFS investment securities designated in fair value hedges was recognized in OCI compared to $13 million of net unrealized gains in the same period in 2019.


	Three Months Ended September 30,							Three Months Ended September 30,
	2020		2019			2020		2019
(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	Net interest income	$	18	$	(3)
Foreign exchange contracts	(30)		12		Net interest income	6		7


Total derivatives designated as cash flow hedges	$	(30)	$	14		$	24	$	4

Derivatives designated as net investment hedges:
Foreign exchange contracts	$	(122)	$	57	Gains (Losses) related to investment securities, net	$	—	$	—
Total derivatives designated as net investment hedges	(122)		57			—		—
Total	$	(152)	$	71		$	24	$	4

	Nine Months Ended September 30,							Nine Months Ended September 30,
	2020		2019			2020		2019
(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	$	179	$	33	Net interest income	$	32	$	(7)
Foreign exchange contracts	(11)		24		Net interest income	20		21


Total derivatives designated as cash flow hedges	$	168	$	57		$	52	$	14

Derivatives designated as net investment hedges:
Foreign exchange contracts	$	(100)	$	75	Gains (losses) related to investment securities, net	$	—	$	—
Total derivatives designated as net investment hedges	(100)		75			—		—
Total	$	68	$	132		$	52	$	14

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, 2020
	Hedged Items Currently Designated						Hedged Items No Longer Designated⁽¹⁾
(In millions)	Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments		Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt⁽²⁾	$	—	$	—	$	10,517	$	733
Available-for-sale securities	847		49		—		—
Total	$	847	$	49	$	10,517	$	733

	December 31, 2019
	Hedged Items Currently Designated						Hedged Items No Longer Designated⁽¹⁾
(In millions)	Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments		Carrying Amount of Assets and Liabilities		Cumulative Hedge Accounting Basis Adjustments
Long-term debt	$	9,769	$	164	$	1,199	$	(8)
Available-for-sale securities	940		49		—		—
Total	$	10,709	$	213	$	1,199	$	(8)

⁽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⁾Interest rate swaps on long term debt were terminated in the third quarter of 2020.

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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+ Details