Fair Value Option (Tables)

6 Months Ended

Jun. 30, 2014

Changes in fair value under the fair value option election

The following table presents the changes in fair value included in the Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013, for items for which the fair value option was elected. The profit and loss information presented below only includes the financial instruments that were elected to be measured at fair value; related risk management instruments, which are required to be measured at fair value, are not included in the table.



	Three months ended June 30,
	2014										2013
(in millions)	Principal transactions			Other income				Total changes in fair value recorded			Principal transactions			Other income				Total changes in fair value recorded
Federal funds sold and securities purchased under resale agreements	$	96		$	—			$	96		$	(287	)	$	—			$	(287	)
Securities borrowed	(2		)	—				(2		)	(8		)	—				(8		)
Trading assets:
Debt and equity instruments, excluding loans	245			3			^(b)	248			(14		)	4			^(b)	(10		)
Loans reported as trading assets:
Changes in instrument-specific credit risk	391			3			^(b)	394			211			26			^(b)	237
Other changes in fair value	38			400			^(b)	438			(94		)	253			^(b)	159
Loans:
Changes in instrument-specific credit risk	20			—				20			(1		)	—				(1		)
Other changes in fair value	24			—				24			21			—				21
Other assets	7			(30		)	^(c)	(23		)	22			(20		)	^(c)	2
Deposits^(a)	(107		)	—				(107		)	219			—				219
Federal funds purchased and securities loaned or sold under repurchase agreements	(18		)	—				(18		)	41			—				41
Other borrowed funds^(a)	(911		)	—				(911		)	734			—				734
Trading liabilities	(3		)	—				(3		)	(14		)	—				(14		)
Beneficial interests issued by consolidated VIEs	(48		)	—				(48		)	(69		)	—				(69		)
Other liabilities	(27		)	—				(27		)	—			—				—
Long-term debt:
Changes in instrument-specific credit risk^(a)	82			—				82			159			—				159
Other changes in fair value	(773		)	—				(773		)	1,000			—				1,000



	Six months ended June 30,
	2014										2013
(in millions)	Principal transactions			Other income				Total changes in fair value recorded			Principal transactions			Other income				Total changes in fair value recorded
Federal funds sold and securities purchased under resale agreements	$	56		$	—			$	56		$	(358	)	$	—			$	(358	)
Securities borrowed	(5		)	—				(5		)	18			—				18
Trading assets:
Debt and equity instruments, excluding loans	475			1			^(b)	476			242			7			^(b)	249
Loans reported as trading assets:
Changes in instrument-specific credit risk	754			12			^(b)	766			539			38			^(b)	577
Other changes in fair value	102			692			^(b)	794			(78		)	1,205			^(b)	1,127
Loans:
Changes in instrument-specific credit risk	28			—				28			(6		)	—				(6		)
Other changes in fair value	31			—				31			21			—				21
Other assets	12			(142		)	^(c)	(130		)	21			(89		)	^(c)	(68		)
Deposits^(a)	(211		)	—				(211		)	297			—				297
Federal funds purchased and securities loaned or sold under repurchase agreements	(34		)	—				(34		)	45			—				45
Other borrowed funds^(a)	(1,171		)	—				(1,171		)	380			—				380
Trading liabilities	(9		)	—				(9		)	(32		)	—				(32		)
Beneficial interests issued by consolidated VIEs	(137		)	—				(137		)	(97		)	—				(97		)
Other liabilities	(27		)	—				(27		)	—			(1		)	^(c)	(1		)
Long-term debt:
Changes in instrument-specific credit risk^(a)	5			—				5			192			—				192
Other changes in fair value^(b)	(791		)	—				(791		)	969			—				969


(a)	Total changes in instrument-specific credit risk (DVA) related to structured notes were $134 million and $251 million for the three months ended June 30, 2014 and 2013 and $19 million and $382 million for the six months ended June 30, 2014 and 2013, respectively. These totals include such changes for structured notes classified within deposits and other borrowed funds, as well as long-term debt.


(b)	Reported in mortgage fees and related income.


(c)	Reported in other income.

Difference between aggregate fair value and aggregate remaining contractual principal balance outstanding

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of June 30, 2014, and December 31, 2013, for loans, long-term debt and long-term beneficial interests for which the fair value option has been elected.



	June 30, 2014								December 31, 2013
(in millions)	Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding			Contractual principal outstanding			Fair value		Fair value over/(under) contractual principal outstanding
Loans^(a)
Nonaccrual loans
Loans reported as trading assets	$	4,462		$	1,270	$	(3,192	)	$	5,156		$	1,491	$	(3,665	)
Loans	214			154		(60		)	209			154		(55		)
Subtotal	4,676			1,424		(3,252		)	5,365			1,645		(3,720		)
All other performing loans
Loans reported as trading assets	35,185			31,920		(3,265		)	33,069			29,295		(3,774		)
Loans	3,934			3,877		(57		)	1,618			1,563		(55		)
Total loans	$	43,795		$	37,221	$	(6,574	)	$	40,052		$	32,503	$	(7,549	)
Long-term debt
Principal-protected debt	$	15,634	^(c)	$	15,882	$	248		$	15,797	^(c)	$	15,909	$	112
Nonprincipal-protected debt^(b)	NA			15,260		NA			NA			12,969		NA
Total long-term debt	NA			$	31,142	NA			NA			$	28,878	NA
Long-term beneficial interests
Nonprincipal-protected debt^(b)	NA			$	2,094	NA			NA			$	1,996	NA
Total long-term beneficial interests	NA			$	2,094	NA			NA			$	1,996	NA


(a)	There were no performing loans that were ninety days or more past due as of June 30, 2014, and December 31, 2013.

(b)

Remaining contractual principal is not applicable to nonprincipal-protected notes. Unlike principal-protected structured notes, for which the Firm is obligated to return a stated amount of principal at the maturity of the note, nonprincipal-protected structured notes do not obligate the Firm to return a stated amount of principal at maturity, but to return an amount based on the performance of an underlying variable or derivative feature embedded in the note. However, investors are exposed to the credit risk of the Firm as issuer for both nonprincipal-protected and principal protected notes.


(c)	Where the Firm issues principal-protected zero-coupon or discount notes, the balance reflected as the remaining contractual principal is the final principal payment at maturity.

Fair value, option, structured notes by balance sheet classification and primary embedded derivative risk

The table below presents the fair value of the structured notes issued by the Firm, by balance sheet classification and the primary risk to which the structured notes’ embedded derivative relates.



	June 30, 2014								December 31, 2013
(in millions)	Long-term debt		Other borrowed funds		Deposits		Total		Long-term debt		Other borrowed funds		Deposits		Total
Risk exposure
Interest rate	$	10,505	$	461	$	1,735	$	12,701	$	9,516	$	615	$	1,270	$	11,401
Credit	4,429		124		—		4,553		4,248		13		—		4,261
Foreign exchange	2,307		136		16		2,459		2,321		194		27		2,542
Equity	12,512		13,510		4,184		30,206		11,082		11,936		3,736		26,754
Commodity	1,154		589		1,570		3,313		1,260		310		1,133		2,703
Total structured notes	$	30,907	$	14,820	$	7,505	$	53,232	$	28,427	$	13,068	$	6,166	$	47,661

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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