Derivative instruments (Tables)

6 Months Ended

Jun. 30, 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	Six months ended
(in millions)	June 30, 2012			June 30, 2011
Fair value hedge of securities	$	0.7		$	(4.0	)
Fair value hedge of deposits and long-term debt		(1.4	)		(4.2	)
Cash flow hedges		0.1			(0.1	)
Other (a)		(0.1	)		(0.1	)
Total	$	(0.7	)	$	(8.4	)

(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						Liability Derivatives Fair Value
(in millions)	June 30, 2012		Dec. 31, 2011		June 30, 2012			Dec. 31, 2011			June 30, 2012			Dec. 31, 2011
Derivatives designated as hedging instruments (a):
Interest rate contracts	$	20,325	$	18,281	$	995		$	965		$	458		$	298
Foreign exchange contracts		12,729		14,160		237			635			4			21
Total derivatives designated as hedging instruments					$	1,232		$	1,600		$	462		$	319
Derivatives not designated as hedging instruments (b):
Interest rate contracts	$	896,213	$	975,308	$	27,672		$	26,652		$	28,637		$	27,440
Equity contracts		11,612		8,205		399			418			445			330
Credit contracts		221		333		-			3			-			-
Foreign exchange contracts		379,003		379,235		3,179			4,632			3,114			4,355
Total derivatives not designated as hedging instruments					$	31,250		$	31,705		$	32,196		$	32,125
Total derivatives fair value (c)					$	32,482		$	33,305		$	32,658		$	32,444
Effect of master netting agreements (d)						(27,357	)		(26,047	)		(26,316	)		(25,009	)
Fair value after effect of master netting agreements					$	5,125		$	7,258		$	6,342		$	7,435

(a)

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.

(b)

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.

(c)

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

(d)

Master netting agreements are reported net of cash collateral received and paid of $1,298 million and $257 million, respectively, at June 30, 2012, and $1,269 million and $231 million, respectively at Dec. 31, 2011.

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		2Q12			1Q12		2Q11		hedged item		2Q12		1Q12			2Q11
Interest rate contracts		Net interest revenue	$	(249	)	$	127	$	95		Net interest revenue	$	248	$	(127	)	$	(97	)


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 (effective portion)	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 effectiveness testing)	Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing)
relationships	2Q12			1Q12			2Q11				2Q12			1Q12			2Q11				2Q12		1Q12		2Q11
FX contracts	$	9		$	(2	)	$	(56	)	Net interest revenue	$	8		$	(4	)	$	(50	)	Net interest revenue	$	-	$	-	$	-
FX contracts		(1	)		3			(3	)	Other revenue		(1	)		2			(3	)	Other revenue		-		0.1		-
FX contracts		81			342			155		Trading revenue		81			342			156		Trading revenue		-		-		-
FX contracts		1			(1	)		1		Salary expense		-			(1	)		1		Salary expense		-		-		-
Total	$	90		$	342		$	97			$	88		$	339		$	104			$	-	$	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	2Q12		1Q12			2Q11			(effective portion)	2Q12		1Q12		2Q11		effectiveness testing)	2Q12		1Q12			2Q11
FX contracts	$	110	$	(139	)	$	(12	)	Net interest revenue	$	-	$	-	$	-	Other revenue	$	-	$	(0.1	)	$	-

Impact of derivative instruments on the income statement

(in millions)


Derivatives in fair value hedging relationships	Location of gain or (loss) recognized in income on derivatives		Gain or (loss) recognized in income on derivatives Six months ended				Location of gain or (loss) recognized in income on hedged item		Gain or (loss) in hedged item Six months ended
Derivatives in fair value hedging relationships			June 30, 2012		June 30, 2011				June 30, 2012		June 30, 2011
Interest rate contracts		Net interest revenue	$	(122)	$	16		Net interest revenue	$	121	$	(24	)


Derivatives in cash flow hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives (effective portion) Six months ended					Location of gain or (loss) reclassified from accumulated OCI into income (effective portion)		Gain or (loss) reclassified from accumulated OCI into income (effective portion) Six months ended						Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)		Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing) Six months ended
Derivatives in cash flow hedging relationships	June 30, 2012		June 30, 2011					June 30, 2012			June 30, 2011					June 30, 2012		June 30, 2011
FX contracts	$	7	$	(61	)		Net interest revenue	$	4		$	(61	)		Net interest revenue	$	-	$	-
FX contracts		2		(8	)		Other revenue		1			(4	)		Other revenue		0.1		(0.1	)
FX contracts		423		(331	)		Trading revenue		423			(331	)		Trading revenue		-		-
FX contracts		-		4			Salary expense		(1	)		1			Salary expense		-		-
Total	$	432	$	(396	)			$	427		$	(395	)			$	0.1	$	(0.1	)


Derivatives in net investment hedging relationships	Gain or (loss) recognized in accumulated OCI on derivatives (effective portion) Six months ended						Location of gain or (loss) reclassified from accumulated OCI into income (effective portion)		Gain or (loss) reclassified from accumulated OCI into income (effective portion) Six months ended				Location of gain or (loss) recognized in income on derivatives (ineffective portion and amount excluded from effectiveness testing)	Gain or (loss) recognized in income on derivatives (ineffectiveness portion and amount excluded from effectiveness testing) Six months ended
Derivatives in net investment hedging relationships	June 30, 2012			June 30, 2011					June 30, 2012		June 30, 2011			June 30, 2012			June 30, 2011
FX contracts	$	(29	)	$	(181	)		Net interest revenue	$	-	$	-	Other revenue	$	(0.1	)	$	(0.1)

Revenue from Foreign Exchange and Other Trading

Revenue from foreign exchange and other trading included the following:


Foreign exchange and other trading revenue
									Year-to-date
(in millions)	2Q12		1Q12			2Q11			2012			2011
Foreign exchange	$	157	$	136		$	184		$	293		$	357
Fixed income		16		47			28			63			45
Credit derivatives (a)		1		(2	)		(1	)		(1	)		(2	)
Other		6		10			11			16			20
Total	$	180	$	191		$	222		$	371		$	420

(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 June 30, 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-	$	893 million
Baa2/BBB	$	1,235 million
Bal/BB+	$	2,912 million

(a)

The change between rating categories is incremental, not cumulative.

- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

+ References+ Details

- Definition

Tabular disclosure of gains and losses on derivative instruments included in an entity's trading activities.

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- Definition

Tabular disclosure of the location and fair value amounts of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments) reported in the statement of financial position.

+ References+ Details