Our primary objective for using derivatives is to manage risks, primarily interest rate risk. We use derivatives to manage volatility in interest income, interest expense, earnings, and capital by adjusting our interest rate sensitivity to minimize the impact of fluctuations in interest rates. Derivatives are used to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or liabilities as we consider advisable. We also assist clients with their risk management needs through the use of derivatives. For a more detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our 2021 Form 10-K.

Fair Value Hedges of Liabilities – At June 30, 2022, we had one receive-fixed interest rate swap with a notional amount of $500 million designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively converts the interest on our fixed-rate debt to floating. During the second quarter of 2022, derivatives designated as fair value hedges of debt decreased in value by $18 million, which was offset by changes in the fair value of the hedged debt instruments as shown in the schedules below. We had no cumulative unamortized debt basis adjustments related to previously terminated fair value hedges of debt at June 30, 2022.

Fair Value Hedges of Assets – At June 30, 2022, we had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $1.2 billion designated as fair value hedges of certain AFS securities. These swaps effectively convert the fixed interest income to a floating rate on the hedged portion of the securities. During the second quarter of 2022, derivatives designated as fair value hedges of fixed-rate AFS securities increased in value by $97 million, which was offset by changes in value of the hedged securities, as shown in the schedules below. We had $7 million of unamortized basis adjustments to AFS securities from previously designated fair value hedges.

Cash Flow Hedges – At June 30, 2022, we had $6.8 billion notional amount of receive-fixed interest rate swaps designated as cash flow hedges of pools of floating-rate commercial loans. Also during the quarter, our cash flow hedge portfolio decreased in value by $72 million, which was recorded in AOCI. The amounts deferred in AOCI are reclassified into earnings in the periods in which the hedged interest receipts occur (i.e., when the hedged forecasted transactions affect earnings).

Exposure to credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For a more detailed discussion of collateral and credit risk related to our derivative contracts, see Note 7 of our 2021 Form 10-K.

Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit-risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit-risk-related feature were triggered, such as a downgrade of our credit rating. However, in past situations, not all counterparties have demanded that additional collateral be pledged when provided for by the contractual terms. At June 30, 2022, the fair value of our derivative liabilities was $295 million, for which we were required to pledge cash collateral of $133 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at June 30, 2022, there would likely be less than $1 million of additional collateral required to be pledged.

Certain information with respect to notional amounts and recorded gross fair values at June 30, 2022 and December 31, 2021, and the related gain (loss) of derivative instruments is summarized as follows:


	June 30, 2022						December 31, 2021
	Notional amount		Fair value				Notional amount		Fair value
(In millions)			Other assets		Other liabilities				Other assets		Other liabilities
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets:

Receive-fixed interest rate swaps	$	6,833	$	—	$	2	$	6,883	$	—	$	—
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps	500		—		—		500		—		—
Asset hedges: Pay-fixed interest rate swaps	1,229		58		—		479		10		—
Total derivatives designated as hedging instruments	8,562		58		2		7,862		10		—
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives 1	6,609		14		284		6,587		192		36
Offsetting interest rate derivatives 2	6,609		298		14		6,587		38		197
Other interest rate derivatives	883		1		—		1,286		6		1
Foreign exchange derivatives	392		4		3		288		3		2
Total derivatives not designated as hedging instruments	14,493		317		301		14,748		239		236
Total derivatives	$	23,055	$	375	$	303	$	22,610	$	249	$	236

1 Customer-facing interest rate derivatives include a net credit valuation adjustment (“CVA”) of $13 million, reducing the fair value of the liability at June 30, 2022, and $3 million, reducing the fair value of the asset at December 31, 2021. These adjustments are required to reflect both our nonperformance risk and that of the respective counterparties.

2 The fair value amounts for these derivatives do not include the settlement amounts for those trades that are centrally cleared. Once the settlement amounts with the clearing houses are included, the total derivative fair values would be the following:


	June 30, 2022				December 31, 2021
(In millions)	Other assets		Other liabilities		Other assets		Other liabilities


Offsetting interest rate derivatives	$	75	$	6	$	8	$	12

The amount of derivative gains (losses) from cash flow and fair value hedges that was deferred in other comprehensive income (“OCI”) or recognized in earnings for the six months ended June 30, 2022 and 2021 is shown in the schedules below.


	Three Months Ended June 30, 2022
(In millions)	Effective portion of derivative gain/(loss) deferred in AOCI		Amount of gain/(loss) reclassified from AOCI into income		Interest on fair value hedges
Cash flow hedges of floating-rate assets:1
Purchased interest rate floors	$	—	$	—	$	—
Interest rate swaps	(66)		6		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		1
Basis amortization on terminated hedges 2, 3	—		—		—
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(66)	$	6	$	—


	Six Months Ended June 30, 2022
(In millions)	Effective portion of derivative gain/(loss) deferred in AOCI		Amount of gain/(loss) reclassified from AOCI into income		Interest on fair value hedges
Cash flow hedges of floating-rate assets: 1
Purchased interest rate floors	$	—	$	2	$	—
Interest rate swaps	(244)		17		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		3
Basis amortization on terminated hedges 2, 3	—		—		1
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(2)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(244)	$	19	$	2


	Three Months Ended June 30, 2021
(In millions)	Effective portion of derivative gain/(loss) deferred in AOCI		Amount of gain/(loss) reclassified from AOCI into income		Interest on fair value hedges
Cash flow hedges of floating-rate assets: 1
Purchased interest rate floors	$	—	$	2	$	—
Interest rate swaps	(4)		13		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		2
Basis amortization on terminated hedges 2, 3	—		—		3
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(4)	$	15	$	4


	Six Months Ended June 30, 2021
(In millions)	Effective portion of derivative gain/(loss) deferred in AOCI		Amount of gain/(loss) reclassified from AOCI into income		Interest on fair value hedges
Cash flow hedges of floating-rate assets: 1
Purchased interest rate floors	$	—	$	6	$	—
Interest rate swaps	(9)		25		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		4
Basis amortization on terminated hedges 2, 3	—		—		6
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(9)	$	31	$	9

3 There was no cumulative unamortized basis adjustment from previously terminated or redesignated fair value debt hedges and $7 million of terminated fair value asset hedges at June 30, 2022, compared with $5 million and $7 million as of June 30, 2021, respectively.


	Other Noninterest Income/(Expense)
(In millions)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022		Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives	$	(143)	$	(411)	$	87	$	(95)
Offsetting interest rate derivatives	160		441		(89)		117
Other interest rate derivatives	(1)		—		(6)		(10)
Foreign exchange derivatives	8		14		6		11
Total derivatives not designated as hedging instruments	$	24	$	44	$	(2)	$	23

The following schedule presents derivatives used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the periods presented.


	Gain/(loss) recorded in income
	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
(In millions)	Derivatives 2		Hedged items		Total income statement impact		Derivatives 2		Hedged items		Total income statement impact

Debt: Receive-fixed interest rate swaps 1, 2	$	(18)	$	18	$	—	$	12	$	(12)	$	—
Assets: Pay-fixed interest rate swaps 1, 2	97		(97)		—		(25)		25		—


	Gain/(loss) recorded in income
	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
(In millions)	Derivatives 2		Hedged items		Total income statement impact		Derivatives 2		Hedged items		Total income statement impact

Debt: Receive-fixed interest rate swaps 1, 2	$	(50)	$	50	$	—	$	(23)	$	23	$	—
Assets: Pay-fixed interest rate swaps 1, 2	150		(150)		—		23		(23)		—


	Par value of hedged assets/(liabilities)				Carrying amount of the hedged assets/(liabilities)1				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item
(In millions)	June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021

Long-term fixed-rate debt	$	(500)	$	(500)	$	(482)	$	(507)	$	18	$	(7)
Fixed-rate AFS securities	1,229		479		1,132		435		(97)		(44)