Derivative instruments (Tables)

3 Months Ended

Mar. 31, 2012

Ineffectiveness Related to Derivatives and Hedging Relationships Recorded in Income

Ineffectiveness related to derivatives and hedging relationships was recorded in income as follows:

Ineffectiveness	Three months ended
(in millions)	March 31, 2012			Dec. 31, 2011			March 31, 2011
Fair value hedges of securities	$	3.4		$	(3.5	)	$	(0.3	)
Fair value hedge of deposits and long-term debt		(3.5	)		(2.7	)		(5.8	)
Cash flow hedges		0.1			(0.1	)		(0.1	)
Other (a)		(0.1	)		0.1			0.1
Total	$	(0.1	)	$	(6.2	)	$	(6.1	)

(a) Includes ineffectiveness recorded on foreign exchange hedges.

Impact of Derivative Instruments on Balance Sheet

Impact of derivative instruments on the balance sheet
	Notional Value				Asset Derivatives Fair Value (a)						Liability Derivatives Fair Value (a)
(in millions)	March 31, 2012		Dec. 31, 2011		March 31, 2012			Dec. 31, 2011			March 31, 2012			Dec. 31, 2011
Derivatives designated as hedging instruments (b):
Interest rate contracts	$	19,783	$	18,281	$	986		$	965		$	178		$	298
Foreign exchange contracts		14,599		14,160		49			635			11			21
Total derivatives designated as hedging instruments					$	1,035		$	1,600		$	189		$	319
Derivatives not designated as hedging instruments (c):
Interest rate contracts	$	962,564	$	975,308	$	22,249		$	26,652		$	23,215		$	27,440
Equity contracts		9,746		8,205		498			418			461			330
Credit contracts		270		333		-			3			1			-
Foreign exchange contracts		406,788		379,235		4,120			4,632			3,853			4,355
Total derivatives not designated as hedging instruments					$	26,867		$	31,705		$	27,530		$	32,125
Total derivatives fair value (d)					$	27,902		$	33,305		$	27,719		$	32,444
Effect of master netting agreements						(23,059	)		(26,047	)		(22,085	)		(25,009	)
Fair value after effect of master netting agreements					$	4,843		$	7,258		$	5,634		$	7,435

(a) Derivative financial instruments are reported net of cash collateral received and paid of $1,148 million and $174 million, respectively, at March 31, 2012, and $1,269 million and $231 million, respectively at Dec. 31, 2011.

(b) The fair value of asset derivatives and liability derivatives designated as hedging instruments is recorded as other assets and other liabilities, respectively, on the balance sheet.

(c) The fair value of asset derivatives and liability derivatives not designated as hedging instruments is recorded as trading assets and trading liabilities, respectively, on the balance sheet.

(d) Fair values are on a gross basis, before consideration of master netting agreements, as required by ASC 815.

Impact of Derivative Instruments on Income Statement

Impact of derivative instruments on the income statement (in millions)
Derivatives in fair value hedging	Location of gain or (loss) recognized in income on		Gain or (loss) recognized in income on derivatives								Location of gain or (loss) recognized in income on		Gain or (loss) recognized in  hedged item
relationships	derivatives		1Q12		4Q11			1Q11			hedged item		1Q12			4Q11		1Q11
Interest rate contracts		Net interest revenue	$	127	$	(192	)	$	(79	)		Net interest revenue	$	(127	)	$	185	$	73

Derivatives in cash flow hedging	Gain or (loss) recognized in accumulated OCI on derivatives (effective portion)									Location of gain or (loss) reclassified from accumulated OCI into income	Gain  or (loss) reclassified from accumulated OCI  into income (effective portion)									Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from	Gain or (loss) recognized in income on derivatives (ineffectiveness portion  and amount excluded from effectiveness testing)
relationships	1Q12			4Q11			1Q11			(effective portion)	1Q12			4Q11			1Q11			effectiveness testing)	1Q12		4Q11			1Q11
FX contracts	$	(2	)	$	(61	)	$	(5	)	Net interest revenue	$	(4	)	$	(10	)	$	(11	)	Net interest revenue	$	-	$	-		$	-
FX contracts		3			-			-		Other revenue		2			(2	)		3		Other revenue		0.1		(0.1	)		(0.1	)
FX contracts		342			43			(491	)	Trading revenue		342			43			(491	)	Trading revenue		-		-			-
FX contracts		(1	)		-			3		Salary expense		(1	)		-			-		Salary expense		-		-			-
Total	$	342		$	(18	)	$	(493	)		$	339		$	31		$	(499	)		$	0.1	$	(0.1	)	$	(0.1	)

Derivatives in net investment hedging	Gain or (loss) recognized in accumulated OCI on derivatives (effective portion)								Location of gain or (loss) reclassified from accumulated OCI into income	Gain  or (loss) reclassified from accumulated OCI  into income (effective portion)						Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from	Gain or (loss) recognized in income on derivatives (ineffectiveness portion  and amount excluded from effectiveness testing)
relationships	1Q12			4Q11		1Q11			(effective portion)	1Q12		4Q11		1Q11		effectiveness testing)	1Q12			4Q11		1Q11
FX contracts	$	(139	)	$	36	$	(169	)	Net interest revenue	$	-	$	-	$	-	Other revenue	$	(0.1	)	$	0.1	$	0.1

Revenue from Foreign Exchange and Other Trading Activities

Revenue from foreign exchange and other trading included the following:

Foreign exchange and other trading revenue
	Quarter ended
	March 31,			Dec. 31,			March 31,
(in millions)	2012			2011			2011
Foreign exchange	$	136		$	183		$	173
Fixed income		47			41			17
Credit derivatives (a)		(2	)		(2	)		(1	)
Other		10			6			9
Total	$	191		$	228		$	198

(a) Used as economic hedges of loans.

Fair Value of Derivative Contracts Falling under Early Termination Provisions that were in Net Liability Position

The following table shows the fair value of contracts falling under early termination provisions that were in net liability positions as of March 31, 2012 for three key ratings triggers:

If The Bank of New York Mellon’s rating was changed to (Moody’s/S&P)	Potential close-out exposures (fair value) (a)
A3/A-	$	839 million
Baa2/BBB	$	1,146 million
Bal/BB+	$	2,431 million

(a) The change between rating categories is incremental, not cumulative.