XML 42 R27.htm IDEA: XBRL DOCUMENT v3.3.1.900
Related Party Transactions
12 Months Ended
Dec. 31, 2015
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions
Effective July 1, 2014, the U.S. branch banking operations of BTMU were integrated under the Bank's operations. The integration did not involve a legal entity combination, but rather an integration of personnel and certain business and support activities. As a result of this initiative, all of BTMU's banking activities in the Americas are managed by employees of the Bank, which includes the addition of approximately 2,300 U.S. employees formerly employed by BTMU. This initiative also included the transfer of ownership of BTMU’s U.S. corporate customer list, available-for-sale securities of $70 million and employee-related liabilities to the Bank. Immediately after the transfer, the transferred liabilities were adjusted to conform to the Company's GAAP accounting policies resulting in a $9 million increase in retained earnings and a $9 million decrease in liabilities, resulting in total liabilities transferred of $30 million. The Company's additional paid-in capital increased by $31 million.
As a result of this initiative, the Bank and BTMU entered into a master services agreement, which provides for employees of the Bank to perform and make available various business, banking, financial, and administrative and support services (the Services) and facilities for BTMU in connection with the operation and administration of BTMU's businesses in the U.S. (including BTMU's U.S. branches). In consideration for the Services, BTMU pays the Bank fee income, which reflects market-based pricing. Costs related to the Services performed by the transferred employees are primarily reflected in salaries and employee benefits expense. For the year ended December 31, 2015, the Company recorded $747 million in fee income from this initiative. This fee income included $546 million related to support services provided by the Company to BTMU, which was substantially offset by $507 million of expenses, primarily in salaries and benefits expense, related to these support services. The remaining fee income was recognized through revenue sharing agreements with BTMU, with associated costs included within the Company’s 2015 results. The Company also recorded $21 million of expenses due to BTMU, which are included within noninterest expense. Amounts due from and to BTMU, which are included in other assets and other liabilities, respectively, are generally settled monthly and were $71 million and $23 million, respectively, at December 31, 2015.
Prior to July 1, 2014, independent of the business integration initiative, the Company had, and expects to have in the future, banking transactions and other transactions in the ordinary course of business with BTMU and with its affiliates. During 2015, 2014 and 2013, such transactions included, but were not limited to, purchases and sales of loans, interest rate derivatives and foreign exchange transactions, funds transfers, custodianships, investment advice and management, customer referrals, facility leases, and administrative and trust services. In September 2008, the Company established a $500 million, three-year unsecured revolving credit facility with BTMU. This credit facility was renewed and expires in July 2018. As of December 31, 2015, the Company had no outstanding balance under this facility. In the opinion of management, these transactions were made at rates, terms and conditions prevailing in the market and do not involve more than the normal risk of collectability or present other unfavorable features. In addition, some compensation for services rendered to the Company is paid to the expatriate officers from BTMU, and is reimbursed by the Company to BTMU under a service agreement. The Company incurred expenditures related to the implementation of Basel III, which were reimbursed by BTMU, of $11 million and $15 million in 2015 and 2014, respectively, and expenditures related to the implementation of Basel II, which were reimbursed by BTMU, of $19 million in 2013.
At December 31, 2015 the Company had $4.6 billion of senior and subordinated debt due to BTMU. Of this $4.6 billion, $0.3 billion was issued by MUAH and $4.3 billion was issued by MUB with maturities ranging from January 2018 to December 2023. See Note 9 to these consolidated financial statements for more information on senior and subordinated debt due to BTMU.
At December 31, 2015 and 2014, the Company had derivative contracts totaling $669 million and $634 million, respectively, in notional balances, with $7 million and $1 million in net unrealized gains with BTMU and its affiliates in 2015 and 2014, respectively. In 2015, 2014 and 2013, the Company recorded noninterest income of $44 million, $38 million and $33 million, respectively, and noninterest expenses of $21 million, $9 million and $13 million, respectively, for fees paid, revenue sharing, and facility and staff arrangements with BTMU and its affiliates.
The Company may extend credit to BTMU, in the form of daylight overdrafts in BTMU's accounts with the Company in the ordinary course of business. There were no overdraft balances outstanding as of December 31, 2015 or 2014.