Fair value measurement (Tables)

3 Months Ended

Mar. 31, 2012

Assets and Liabilities Measured at Fair Value on Recurring Basis

The following tables present the financial instruments carried at fair value at March 31, 2012 and Dec. 31, 2011, by caption on the consolidated balance sheet and by ASC 820 valuation hierarchy (as described above). We have included credit ratings information in certain of the tables because the information indicates the degree of credit risk to which we are exposed, and significant changes in ratings classifications could result in increased risk for us. There were no transfers between Level 1 and Level 2 during the first quarter of 2012.


Assets and liabilities measured at fair value on a recurring basis at March 31, 2012
(dollar amounts in millions)	Level 1			Level 2			Level 3			Netting (a)			Total carrying value
Available-for-sale securities:
U.S. Treasury	$	14,251		$	-		$	-		$	-		$	14,251
U.S. Government agencies		-			1,108			-			-			1,108
Sovereign debt		41			12,167			-			-			12,208
State and political subdivisions (b)		-			3,930			43			-			3,973
Agency RMBS		-			32,497			-			-			32,497
Alt-A RMBS		-			284			-			-			284
Prime RMBS		-			811			-			-			811
Subprime RMBS		-			421			-			-			421
Other RMBS		-			1,347			-			-			1,347
Commercial MBS		-			3,482			-			-			3,482
Asset-backed CLOs		-			1,338			-			-			1,338
Other asset-backed securities		-			582			-			-			582
Equity securities		14			20			-			-			34
Money market funds (b)		957			-			-			-			957
Corporate bonds		-			1,696			-			-			1,696
Other debt securities		-			1,946			-			-			1,946
Foreign covered bonds		2,496			711			-			-			3,207
Alt-A RMBS (c)		-			1,962			-			-			1,962
Prime RMBS (c)		-			1,153			-			-			1,153
Subprime RMBS (c)		-			117			-			-			117
Total available-for-sale		17,759			65,572			43			-			83,374
Trading assets:
Debt and equity instruments (d)		614			1,770			58			-			2,442
Derivative assets:
Interest rate		63			22,151			35			N/A
Foreign exchange		3,939			181			-			N/A
Equity		83			378			37			N/A
Total derivative assets		4,085			22,710			72			(23,059	) (g)		3,808
Total trading assets		4,699			24,480			130			(23,059	)		6,250
Loans		-			9			-			-			9
Other assets (e)		68			981			151			-			1,200
Subtotal assets of operations at fair value		22,526			91,042			324			(23,059	)		90,833
Percentage of assets prior to netting		20	%		80	%		-	%
Assets of consolidated investment management funds:
Trading assets		332			10,747			-			-			11,079
Other assets		371			159			-			-			530
Total assets of consolidated investment management funds		703			10,906			-			-			11,609
Total assets	$	23,229		$	101,948		$	324		$	(23,059	)	$	102,442
Percentage of assets prior to netting		19	%		81	%		-	%
Trading liabilities:
Debt and equity instruments	$	686		$	505		$	-		$	-		$	1,191
Derivative liabilities:
Interest rate		-			23,037			178			N/A
Foreign exchange		3,734			119			-			N/A
Equity		45			348			68			N/A
Other		-			1			-			N/A
Total derivative liabilities		3,779			23,505			246			(22,085	) (g)		5,445
Total trading liabilities		4,465			24,010			246			(22,085	)		6,636
Long-term debt (b)		-			320			-			-			320
Other liabilities (f)		-			275			-			-			275
Subtotal liabilities at fair value		4,465			24,605			246			(22,085	)		7,231
Percentage of liabilities prior to netting		15	%		84	%		1	%
Liabilities of consolidated investment management funds:
Trading liabilities		-			10,290			-			-			10,290
Other liabilities		2			36			-			-			38
Total liabilities of consolidated investment management funds		2			10,326			-			-			10,328
Total liabilities	$	4,467		$	34,931		$	246		$	(22,085	)	$	17,559
Percentage of liabilities prior to netting		11	%		88	%		1	%

(a)

ASC 815 permits the netting of derivative receivables and derivative payables under legally enforceable master netting agreements and permits the netting of cash collateral.

(b)

Includes certain interests in securitizations.

(c)

Previously included in the Grantor Trust.

(d)

Includes loans classified as trading assets and certain interests in securitizations.

(e)

Includes private equity investments, seed capital, a brokerage account, and derivatives in designated hedging relationships.

(f)

Includes the fair value adjustment for certain unfunded lending-related commitments and derivatives in designated hedging relationships and support agreements.

(g)

Netting cannot be disaggregated by product.


Assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2011
(dollar amounts in millions)	Level 1			Level 2			Level 3			Netting (a)			Total carrying value
Available-for-sale securities:
U.S. Treasury	$	17,326		$	-		$	-		$	-		$	17,326
U.S. Government agencies		-			958			-			-			958
Sovereign debt		44			11,910			-			-			11,954
State and political subdivisions (b)		-			2,694			45			-			2,739
Agency RMBS		-			26,796			-			-			26,796
Alt-A RMBS		-			273			-			-			273
Prime RMBS		-			815			-			-			815
Subprime RMBS		-			418			-			-			418
Other RMBS		-			903			-			-			903
Commercial MBS		-			3,339			-			-			3,339
Asset-backed CLOs		-			1,444			-			-			1,444
Other asset-backed securities		-			532			-			-			532
Equity securities		9			21			-			-			30
Money market funds (b)		973			-			-			-			973
Corporate bonds		-			1,738			-			-			1,738
Other debt securities		-			2,622			3			-			2,625
Foreign covered bonds		1,820			605			-			-			2,425
Alt-A RMBS (c)		-			1,879			-			-			1,879
Prime RMBS (c)		-			1,175			-			-			1,175
Subprime RMBS (c)		-			125			-			-			125
Total available-for-sale		20,172			58,247			48			-			78,467
Trading assets:
Debt and equity instruments (d)		485			1,655			63			-			2,203
Derivative assets:
Interest rate		164			26,434			54			N/A
Foreign exchange		4,519			113			-			N/A
Equity		91			284			43			N/A
Other		-			3			-			N/A
Total derivative assets		4,774			26,834			97			(26,047	) (g)		5,658
Total trading assets		5,259			28,489			160			(26,047	)		7,861
Loans		-			10			-			-			10
Other assets (e)		672			1,019			157			-			1,848
Subtotal assets of operations at fair value		26,103			87,765			365			(26,047	)		88,186
Percentage of assets prior to netting		23	%		77	%		-	%
Assets of consolidated investment management funds:
Trading assets		323			10,428			-			-			10,751
Other assets		453			143			-			-			596
Total assets of consolidated investment management funds		776			10,571			-			-			11,347
Total assets	$	26,879		$	98,336		$	365		$	(26,047	)	$	99,533
Percentage of assets prior to netting		22	%		78	%		-	%
Trading liabilities:
Debt and equity instruments	$	418		$	537		$	-		$	-		$	955
Derivative liabilities:
Interest rate		-			27,201			239			N/A
Foreign exchange		4,311			44			-			N/A
Equity		55			200			75			N/A
Total derivative liabilities		4,366			27,445			314			(25,009	) (g)		7,116
Total trading liabilities		4,784			27,982			314			(25,009	)		8,071
Long-term debt (b)		-			326			-			-			326
Other liabilities (f)		14			368			-			-			382
Subtotal liabilities at fair value		4,798			28,676			314			(25,009	)		8,779
Percentage of liabilities prior to netting		14	%		85	%		1	%
Liabilities of consolidated investment management funds:
Trading liabilities		-			10,053			-			-			10,053
Other liabilities		2			30			-			-			32
Total liabilities of consolidated investment management funds		2			10,083			-			-			10,085
Total liabilities	$	4,800		$	38,759		$	314		$	(25,009	)	$	18,864
Percentage of liabilities prior to netting		11	%		88	%		1	%

(a)

ASC 815 permits the netting of derivative receivables and derivative payables under legally enforceable master netting agreements and permits the netting of cash collateral.

(b)

Includes certain interests in securitizations.

(c)

Previously included in the Grantor Trust.

(d)

Includes loans classified as trading assets and certain interests in securitizations.

(e)

Includes private equity investments, seed capital, a brokerage account, and derivatives in designated hedging relationships.

(f)

Includes the fair value adjustment for certain unfunded lending-related commitments and derivatives in designated hedging relationships and support agreements.

(g)

Netting cannot be disaggregated by product.


Details of certain items measured at fair value on a recurring basis
	March 31, 2012														Dec. 31, 2011
			Ratings														Ratings
(dollar amounts in millions)	Total carrying value (a)		AAA/ AA-			A+/ A-			BBB+/ BBB-			BB+ and lower			Total carrying value (a)		AAA/ AA-			A+/ A-			BBB+/ BBB-			BB+ and lower
Alt-A RMBS, originated in:
2006-2007	$	110		-	%		-	%		-	%		100	%	$	99		-	%		-	%		-	%		100	%
2005		110		-			-			-			100			113		-			-			-			100
2004 and earlier		64		26			13			48			13			61		27			13			47			13
Total Alt-A RMBS	$	284		6	%		3	%		11	%		80	%	$	273		6	%		3	%		11	%		80	%
Prime RMBS, originated in:
2007	$	115		42	%		4	%		-	%		54	%	$	121		38	%		4	%		-	%		58	%
2006		74		-			-			-			100			75		-			-			-			100
2005		237		32			-			-			68			230		32			-			-			68
2004 and earlier		385		27			39			12			22			389		29			38			11			22
Total prime RMBS	$	811		28	%		19	%		6	%		47	%	$	815		28	%		19	%		5	%		48	%
Subprime RMBS, originated in:
2007	$	2		-	%		-	%		100	%		-	%	$	2		-	%		2	%		98	%		-	%
2005		89		23			12			27			38			82		23			12			29			36
2004 and earlier		330		4			15			19			62			334		5			15			18			62
Total subprime RMBS	$	421		8	%		14	%		21	%		57	%	$	418		8	%		14	%		21	%		57	%
Commercial MBS - Domestic, originated in:
2009-2012	$	238		100	%		-	%		-	%		-	%	$	200		100	%		-	%		-	%		-	%
2008		25		16			84			-			-			25		16			84			-			-
2007		832		60			32			8			-			789		66			26			8			-
2006		937		83			17			-			-			892		85			15			-			-
2005		721		94			6			-			-			696		94			6			-			-
2004 and earlier		409		96			3			1			-			403		97			2			1			-
Total commercial MBS - Domestic	$	3,162		82	%		16	%		2	%		-	%	$	3,005		84	%		14	%		2	%		-	%
Foreign covered bonds:
Germany	$	1,515		99	%		1	%		-	%		-	%	$	1,461		99	%		1	%		-	%		-	%
Canada		955		100			-			-			-			795		100			-			-			-
Other		737		100			-			-			-			169		100			-			-			-
Total foreign covered bonds	$	3,207		100	%		-	%		-	%		-	%	$	2,425		100	%		-	%		-	%		-	%
European floating rate notes – available-for-sale:
United Kingdom	$	855		64	%		36	%		-	%		-	%	$	686		72	%		28	%		-	%		-	%
Netherlands		335		90			10			-			-			47		35			65			-			-
Ireland		208		12			-			46			42			203		-			50			47			3
Italy		148		100			-			-			-			150		100			-			-			-
Luxembourg		146		-			100			-			-			140		-			100			-			-
Australia		95		92			8			-			-			101		91			9			-			-
Germany		71		-			8			91			1			93		21			6			73			-
France		10		100			-			-			-			9		100			-			-			-
Total European floating rate notes – available-for-sale	$	1,868		60	%		27	%		8	%		5	%	$	1,429		55	%		34	%		11	%		-	%
Sovereign debt:
United Kingdom	$	4,743		100	%		-	%		-	%		-	%	$	4,526		100	%		-	%		-	%		-	%
Netherlands		3,590		100			-			-			-			2,230		100			-			-			-
France		2,194		100			-			-			-			2,790		100			-			-			-
Germany		1,625		100			-			-			-			2,347		100			-			-			-
Other		56		98			2			-			-			61		97			3			-			-
Total sovereign debt	$	12,208		100	%		-	%		-	%		-	%	$	11,954		100	%		-	%		-	%		-	%
Alt-A RMBS (b), originated in:
2007	$	584		-	%		-	%		-	%		100	%	$	554		-	%		-	%		-	%		100	%
2006		521		-			-			-			100			488		-			-			-			100
2005		643		4			-			1			95			628		5			-			1			94
2004 and earlier		214		-			4			26			70			209		-			4			27			69
Total Alt-A RMBS (b)	$	1,962		2	%		-	%		3	%		95	%	$	1,879		2	%		-	%		3	%		95	%
Prime RMBS (b), originated in:
2007	$	361		-	%		-	%		-	%		100	%	$	370		-	%		-	%		-	%		100	%
2006		306		-			-			-			100			308		-			-			-			100
2005		452		1			3			-			96			465		-			4			-			96
2004 and earlier		34		8			-			22			70			32		9			-			22			69
Total prime RMBS (b)	$	1,153		-	%		1	%		1	%		98	%	$	1,175		-	%		2	%		1	%		97	%
Subprime RMBS (b), originated in:
2007	$	4		-	%		-	%		-	%		100	%	$	3		-	%		-	%		-	%		100	%
2006		66		-			-			-			100			74		-			-			-			100
2005		11		-			-			-			100			11		-			-			-			100
2004 and earlier		36		5			34			-			61			37		5			34			-			61
Total subprime RMBS (b)	$	117		2	%		10	%		-	%		88	%	$	125		2	%		10	%		-	%		88	%

(a)

At March 31, 2012 and Dec. 31, 2011, the German foreign covered bonds were considered Level 1 in the valuation hierarchy. All other assets in the table above are primarily Level 2 assets in the valuation hierarchy.

(b)

Previously included in the Grantor Trust.

Fair Value Measurements Using Significant Unobservable Inputs

The tables below include a roll forward of the balance sheet amounts (including the change in fair value) for financial instruments classified in Level 3 of the valuation hierarchy.

Our classification of a financial instrument in Level 3 of the valuation hierarchy is based on the significance of the unobservable factors to the overall fair value measurement. However, these instruments generally include other observable

components that are actively quoted or validated to third-party sources; accordingly, the gains and losses in the table below include changes in fair value due to observable parameters as well as the unobservable parameters in our valuation methodologies. We also frequently manage the risks of Level 3 financial instruments using securities and derivatives positions that are Level 1 or 2 instruments which are not included in the table; accordingly, the gains or losses below do not reflect the effect of our risk management activities related to the Level 3 instruments.


Fair value measurements for assets using significant unobservable inputs for three months ended March 31, 2012
	Available-for-sale securities						Trading assets
(in millions)	State and political subdivisions			Other debt securities			Debt and equity instruments			Derivative assets			Other assets			Total assets
Fair value at Dec. 31, 2011	$	45		$	3		$	63		$	97		$	157		$	365
Total gains or (losses) for the period:
Included in earnings (or changes in net assets)		-	(a)		(3	) (a)		(3	) (b)		(25	) (b)		3	(c)		(28	)
Purchases, sales and settlements:
Purchases		-			-			-			-			3			3
Sales		-			-			(2	)		-			(4	)		(6	)
Settlements		(2	)		-			-			-			(8	)		(10	)
Fair value at March 31, 2012	$	43		$	-		$	58		$	72		$	151		$	324
Change in unrealized gains or (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period							$	(3	)	$	(25	)	$	-		$	(28	)

(a)

Realized gains (losses) are reported in securities gains (losses). Unrealized gains (losses) are reported in accumulated other comprehensive income (loss) except for the credit portion of OTTI losses which are recorded in securities gains (losses).

(b)

Reported in foreign exchange and other trading revenue.

(c)

Reported in investment income.


Fair value measurements for liabilities using significant unobservable inputs for three months ended March 31, 2012
	Trading liabilities
	Derivative liabilities			Total liabilities
(in millions)	Derivative liabilities			Total liabilities
Fair value at Dec. 31, 2011	$	314		$	314
Total (gains) or losses for the period:
Included in earnings (or changes in net liabilities)		(68	) (a)		(68	)
Fair value at March 31, 2012	$	246		$	246
Change in unrealized (gains) or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period	$	(51	)	$	(51	)

(a)

Reported in foreign exchange and other trading revenue.


Fair value measurements for assets using significant unobservable inputs for three months ended March 31, 2011
	Available-for-sale securities						Trading assets
(in millions)	State and political subdivisions			Other debt securities			Debt and equity instruments			Derivative assets			Loans		Other assets			Total assets
Fair value at Dec. 31, 2010	$	10		$	58		$	32		$	119		$	6	$	113		$	338
Transfers into Level 3		-			6			-			1			-		-			7
Transfers out of Level 3		-			-			-			14			2		-			16
Total gains or (losses) for the period:
Included in earnings (or changes in net assets)		-	(a)		-	(a)		-	(b)		25	(b)		-		6	(c)		31
Purchases, issues, sales and settlements:
Purchases		-			-			-			-			-		1			1
Fair value at March 31, 2011	$	10		$	64		$	32		$	131		$	4	$	120		$	361
Change in unrealized gains or (losses) for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period							$	-		$	38		$	-	$	-		$	38

(a)

(b)

Reported in foreign exchange and other trading revenue.

(c)

Reported in investment income.


Fair value measurements for liabilities using significant unobservable inputs for three months ended March 31, 2011
	Trading liabilities
(in millions)	Debt and equity instruments			Derivative liabilities			Other liabilities		Total liabilities
Fair value at Dec. 31, 2010	$	6		$	171		$	2	$	179
Total (gains) or losses for the period:
Included in earnings (or changes in net assets)		-			(49	) (a)		-		(49	)
Purchases, issues, sales and settlements:
Settlements		(6	)		4			-		(2	)
Fair value at March 31, 2011	$	-		$	126		$	2	$	128
Change in unrealized (gains) or losses for the period included in earnings (or changes in net assets) for liabilities held at the end of the reporting period	$	-		$	(19	)	$	-	$	(19	)

(a)

Reported in foreign exchange and other trading revenue.

Quantitative Information about Level 3 Fair Value Measurements of Assets

Quantitative information about Level 3 fair value measurements of assets

(dollars in millions)

Fair value at
March 31, 2012

Valuation

techniques

Unobservable

input

Range

Measured on a recurring basis:

Available-for-sale securities:
State and political

subdivisions

Discounted cash flow

Expected credit loss

9 - 41%

Trading assets:

Debt and equity instruments:

Structured debt

Option pricing model

Correlation risk

15%

Long-term foreign exchange volatility

13-18%

Distressed debt

Discounted cash flows

Expected maturity

3-10 years

Credit spreads

200-900 bps

Derivative assets:

Interest rate:

Structured foreign
exchange swaptions

Option pricing model

Correlation risk

0-25%

Long-term foreign exchange volatility

13-18%

Equity:

Equity options

Option pricing model

Long-term equity volatility

23-32%

Measured on a nonrecurring basis:

Loans

Discounted cash flows

Timing of sale

0-21 months

Cap rate

5.5 – 8.0%

Cost to complete/sell

0-29%

Quantitative Information about Level 3 Fair Value Measurements of Liabilities

Quantitative information about Level 3 fair value measurements of liabilities

(dollars in millions)

Fair value at
March 31, 2012

Valuation

techniques

Unobservable

input

Range

Measured on a recurring basis:

Trading liabilities:

Derivative liabilities:

Interest rate:

Structured foreign
exchange swaptions

178

Option pricing model

Correlation risk

0-25

Long-term foreign exchange volatility

13-18

Equity:

Equity options

Option pricing model

Long-term equity volatility

23-32

(a) The option pricing model uses market inputs such as foreign currency exchange rates, interest rates and volatility to calculate the fair value of the option.

bps — basis points

Assets Measured at Fair Value on Nonrecurring Basis

The following tables present the financial instruments carried on the consolidated balance sheet by caption and by level in the fair value hierarchy as of March 31, 2012 and Dec. 31, 2011, for which a nonrecurring change in fair value has been recorded during the quarters ended March 31, 2012 and Dec. 31, 2011.


Assets measured at fair value on a nonrecurring basis at March 31, 2012							Total
(in millions)	Level 1		Level 2		Level 3		carrying value
Loans (a)	$	-	$	213	$	44	$	257
Other assets (b)		-		111		-		111
Total assets at fair value on a nonrecurring basis	$	-	$	324	$	44	$	368


Assets measured at fair value on a nonrecurring basis at Dec. 31, 2011							Total
(in millions)	Level 1		Level 2		Level 3		carrying value
Loans (a)	$	-	$	178	$	43	$	221
Other assets (b)		-		126		-		126
Total assets at fair value on a nonrecurring basis	$	-	$	304	$	43	$	347

(a)

During the quarters ended March 31, 2012 and Dec. 31, 2011, the fair value of these loans was reduced $13 million and $32 million, respectively, based on the fair value of the underlying collateral as allowed by ASC 310, Accounting by Creditors for Impairment of a Loan, with an offset to the allowance for credit losses.

(b)

Includes other assets received in satisfaction of debt and loans held for sale. Loans held for sale are carried on the balance sheet at the lower of cost or market value.

- Definition

Tabular disclosure of assets and liabilities by class, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). The disclosures that may be required or desired include: (a) the fair value measurements recorded during the period and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

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