Derivatives and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2013

Derivatives and Hedging Activities (Tables) [Abstract]

Schedule of derivative instruments in statement of financial position, fair value

The following table summarizes the total fair value, excluding interest accruals, of derivative assets and liabilities as of September 30, 2013 and December 31, 2012:

		Other Assets				Other Liabilities
		Fair Value				Fair Value
(Millions)		2013		2012		2013		2012
Derivatives designated as hedging instruments:
Interest rate contracts
	Fair value hedges	$	517	$	824	$	―	$	―
Total return contract
	Fair value hedge		―		―		6		19
Foreign exchange contracts
	Net investment hedges		49		43		164		150
Total derivatives designated as hedging instruments		$	566	$	867	$	170	$	169
Derivatives not designated as hedging instruments:
	Interest rate contracts	$	―	$	―	$	―	$	―
	Foreign exchange contracts, including certain embedded derivatives(a)		96		75		105		158
	Equity-linked embedded derivative(b)		―		―		―		2
Total derivatives not designated as hedging instruments			96		75		105		160
Total derivatives, gross		$	662	$	942	$	275	$	329
Cash collateral netting(c)			(380)		(326)		(14)		(21)
Derivative asset and derivative liability netting(d)			(27)		(23)		(27)		(23)
Total derivatives, net(e)		$	255	$	593	$	234	$	285

• Includes foreign currency derivatives embedded in certain operating agreements.
• Represents an equity-linked derivative embedded in one of the Company's investment securities.
• Represents the offsetting of derivative instruments and the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) executed with the same counterparty under an enforceable master netting arrangement.Additionally, the Company received noncash collateral in the form of security interest in U.S. Treasury securities with a fair value of nil and $335 million as of September 30, 2013 and December 31, 2012, respectively, none of which was sold or repledged.Such noncash collateral effectively further reduces the Company's risk exposure to $255 million and $258 million as of September 30, 2013 and December 31, 2012, respectively, but does not reduce the net exposure on the Company's Consolidated Balance Sheets. Additionally, the Company posted $33 million and nil as of September 30, 2013 and December 31, 2012, respectively, as initial margin on its centrally cleared interest rate swaps not netted against the derivative balances.
• Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement.
• The Company has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterparty. The total net derivative assets and derivative liabilities are presented within other assets and other liabilities on the Company's Consolidated Balance Sheets.

Effect of fair value hedges on results of operations

The following table summarizes the impact on the Consolidated Statements of Income associated with the Company's hedges ofits fixed-rate long-term debtand its investment in ICBC for the three and ninemonths ended September 30:

For the Three Months Ended September 30: (Millions)
	Gains (losses) recognized in income
	Derivative contract					Hedged item					Net hedge
		Amount					Amount				ineffectiveness
Derivative relationship	Income Statement Line Item	2013		2012		Income Statement Line Item	2013		2012		2013		2012
Interest rate contracts	Other, net expenses	$	(11)	$	(28)	Other, net expenses	$	5	$	(2)	$	(6)	$	(30)
Total return contract	Other non-interest revenues		(21)		(19)	Other non-interest revenues		21		19		―		―

For the Nine Months Ended September 30: (Millions)
	Gains (losses) recognized in income
	Derivative contract					Hedged item					Net hedge
		Amount					Amount				ineffectiveness
Derivative relationship	Income Statement Line Item	2013		2012		Income Statement Line Item	2013		2012		2013		2012
Interest rate contracts	Other, net expenses	$	(305)	$	(64)	Other, net expenses	$	295	$	25	$	(10)	$	(39)
Total return contract	Other non-interest revenues		(10)		2	Other non-interest revenues		10		(2)		―		―

Derivative instruments gain loss recognized in income

The following table summarizes the impact on pretax earnings of derivatives not designated as hedges, as reported on the Consolidated Statements of Income for thethree and nine months ended September 30:

For the Three Months Ended September 30: (Millions)
	Pretax gains (losses)
		Amount
Description	Income Statement Line Item	2013		2012
Interest rate contracts	Other, net expenses	$	1	$	(1)
Foreign exchange contracts (a)	Other, net expenses		25		(13)
Equity-linked contract	Other non-interest revenues		―		―
Total		$	26	$	(14)

For the Nine Months Ended September 30: (Millions)
	Pretax gains (losses)
		Amount
Description	Income Statement Line Item	2013		2012
Interest rate contracts	Other, net expenses	$	1	$	(2)
Foreign exchange contracts(a)	Other, net expenses		106		31
Equity-linked contract	Other non-interest revenues		2		2
Total		$	109	$	31

• Foreign exchange contracts include embedded foreign currency derivatives. Gains (losses) on these embedded derivatives are included in other expenses.