Financial Derivatives

9 Months Ended

Sep. 30, 2012

Financial Derivatives [Abstract]

Financial Derivatives

Note13Financial Derivatives

We use derivative financial instruments (derivatives) primarily to help manage exposure to interest rate, market and credit risk and reduce the effects that changes in interest rates may have on net income, fair value of assets and liabilities, and cash flows. We also enter into derivatives with customers to facilitate their risk management activities.

Derivatives represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract. Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged and it is not recorded on the balance sheet. The notional amount is the basis to which the underlying is applied to determine required payments under the derivative contract. The underlying is a referenced interest rate(commonly LIBOR), security price, credit spread or other index. Residential and commercial real estate loan commitments associated with loans to be sold also qualify as derivative instruments.

All derivatives are carried on our Consolidated Balance Sheet at fair value. Derivative balances are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Cash collateral exchanged with counterparties is also netted against the applicable derivative fair values.

Further discussion on how derivatives are accounted for is included in Note 1 Accounting Policies in our 2011Form 10-K.

Derivatives Designated in Hedge Relationships

Certain derivatives used to manage interest rate risk as part of our asset and liability risk management activities are designated as accounting hedges under GAAP. Derivatives hedging the risks associated with changes in the fair value of assets or liabilities are considered fair value hedges, derivatives hedging the variability of expected future cash flows are considered cash flow hedges, and derivatives hedging a net investment in a foreign subsidiary are considered net investment hedges. Designating derivatives as accounting hedges allows for gains and losses on those derivatives, to the extent effective, to be recognized in the income statement in the same period the hedged items affect earnings.

Fair Value Hedges

We enter into receive-fixed, pay-variable interest rate swaps to hedge changes in the fair value of outstanding fixed-rate debt and borrowings caused by fluctuations in market interest rates. The specific products hedged may includebank notes, Federal Home Loan Bank borrowings, and senior and subordinated debt. We also enter into pay-fixed, receive-variable interest rate swaps, and zero-coupon swaps to hedge changes in the fair value of fixed rate and zero-coupon investment securities caused by fluctuations in market interest rates. The specific products hedged include US Treasury, government agency and other debt securities. For these hedge relationships, we use statistical regression analysis to assess hedge effectiveness at both the inception of the hedge relationship and on an ongoing basis. There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness.

The ineffective portion of the change in value of our fair value hedge derivatives resulted in net losses of $42million for the first nine months of 2012 compared with net losses of $15 million for the first nine months of 2011.

Cash Flow Hedges

We enter into receive-fixed, pay-variable interest rate swaps to modify the interest rate characteristics of designated commercial loans from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes. For these cash flow hedges, any changes in the fair value of the derivatives that are effective in offsetting changes in the forecasted interest cash flows are recorded in Accumulated other comprehensive income and are reclassified to interest income in conjunction with the recognition of interest receipts on the loans. In the 12 months that follow September 30, 2012, we expect to reclassify from the amount currently reported in Accumulated other comprehensive income net derivative gains of $244million pretax, or $158 million after-tax, in association with interest receipts on the hedged loans. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to September 30, 2012. The maximum length of time over which forecasted loan cash flows are hedged is 8years. We use statistical regression analysis to assess the effectiveness of these hedge relationships at both the inception of the hedge relationship and on an ongoing basis.

We also periodically enter into forward purchase and sale contracts to hedge the variability of the consideration that will be paid or received related to the purchase or sale of investment securities. The forecasted purchase or sale is consummated upon gross settlement of the forward contract itself. As a result, hedge ineffectiveness, if any, is typically minimal. Gains and losses on these forward contracts are recorded in Accumulated other comprehensive income and are recognized in earnings when the hedged cash flows affect earnings. In the 12 months that follow September 30, 2012, we expect to reclassify from the amount currently reported in Accumulated other comprehensive income, net derivative gains of $74 million pretax, or $48million after-tax, as adjustments of yield on investment securities. The maximum length of time we are hedging forecasted purchases is threemonths. With respect to forecasted sale of securities, there were no amounts in Accumulated other comprehensive income at September 30, 2012.

There were no components of derivative gains or losses excluded from the assessment of hedge effectiveness related to either cash flow hedge strategy.

During the first nine months of 2012and 2011, there were no gains or losses from cash flow hedge derivatives reclassified to earnings because it became probable that the original forecasted transaction would not occur. The amount of cash flow hedge ineffectiveness recognized in income for the first nine months of 2012 and 2011 was not material to PNC's results of operations.

Net Investment Hedges

We enter into foreign currency forward contracts to hedge non-U.S. Dollar (USD) net investments in foreign subsidiaries against adverse changes in foreign exchange rates. We assess whether the hedging relationship is highly effective in achieving offsetting changes in the value of the hedge and hedged item by qualitatively verifying that the critical terms of the hedge and hedged item match at the inception of the hedging relationship and on an ongoing basis. There were no components of derivative gains or losses excluded from the assessment of the hedge effectiveness.

At September 30, 2012, there was no net investment hedge ineffectiveness.

Further detail regarding the notional amounts, fair values and gains and losses recognized related to derivatives used in fair value, cash flow, and net investment hedge strategies is presented in the tables that follow.

Derivatives Not Designated in Hedge Relationships

We also enter into derivatives that are not designated as accounting hedges under GAAP.

The majority of these derivatives are used to manage risk related to residential and commercial mortgage banking activities and are considered economic hedges. Although these derivatives are used to hedge risk, they are not designated as accounting hedges because the contracts they are hedging are typically also carried at fair value on the balance sheet, resulting in symmetrical accounting treatment for both the hedging instrument and the hedged item.

Our residential mortgage banking activities consist of originating, selling and servicing mortgage loans. Residential mortgage loans that will be sold in the secondary market, and the related loan commitments, which are considered derivatives, are accounted for at fair value. Changes in the fair value of the loans and commitments due to interest rate risk are hedged with forward loan sale contracts as well asUS Treasury and Eurodollar futures and options. Gains and losses on the loans and commitments held for sale and the derivatives used to economically hedge them are included in Residential mortgage noninterest income on the Consolidated Income Statement.

We typically retain the servicing rights related to residential mortgage loans that we sell. Residential mortgage servicing rights are accounted for at fair value with changes in fair value influenced primarily by changes in interest rates. Derivatives used to hedge the fair value of residential mortgage servicing rights include interest rate futures, swaps, options (including caps, floors, and swaptions), and forward contracts to purchase mortgage-backed securities. Gains and losses on residential mortgage servicing rights and the related derivatives used for hedging are included in Residential mortgage noninterest income.

Certain commercial mortgage loans held for sale are accounted for at fair value. These loans, and the related loan commitments, which are considered derivatives, are accounted for at fair value. In addition we originate loans for sale into the secondary market that are carried at the lower of cost or fair value. The commitments related to these loans are also derivatives and are accounted for at fair value. Derivatives used to economically hedge these loans and commitments from changes in fair value due to interest rate risk and credit risk include forward loan sale contracts, interest rate swaps, and credit default swaps. Gains and losses on the commitments, loans and derivatives are included in Other noninterest income. Derivatives used to economically hedge the change in value of commercial mortgage servicing rights include interest rate swaps and futures. Gains or losses on these derivatives are included in Corporate Services noninterest income.

The residential and commercial mortgage loan commitments associated with loans to be sold which are accounted for as derivatives are valued based on the estimated fair value of the underlying loan and the probability that the loan will fund within the terms of the commitment. The fair value also takes into account the fair value of the embedded servicing right.

We offer derivatives to our customers in connection with their risk management needs. These derivatives primarily consist of interest rate swaps, interest rate caps, floors, swaptions, foreign exchange contracts, and equity contracts. We primarily manage our market risk exposure from customer transactions by entering into a variety of hedging transactions with third-party dealers. Gains and losses on customer-related derivatives are included in Other noninterest income.

The derivatives portfolio also includes derivatives used for other risk management activities. These derivatives are entered into based on stated risk management objectives.

This segment of the portfolio includes credit default swaps (CDS) used to mitigate the risk of economic loss on a portion of our loan exposure. We also sell loss protection to mitigate the net premium cost and the impact of mark-to-market accounting on CDS purchases to hedge the loan portfolio. The fair values of these derivatives typically are based on related credit spreads. Gains and losses on the derivatives entered into for other risk management are included in Other noninterest income.

Included in the customer, mortgage banking risk management, and other risk management portfolios are written interest-rate caps and floors entered into with customers and for risk management purposes. We receive an upfront premium from the counterparty and are obligated to make payments to the counterparty if the underlying market interest rate rises above or falls below a certain level designated in the contract. The fair value of the written caps and floors liability on our Consolidated Balance Sheet was $2 million at September 30, 2012 and $6million at December 31, 2011. Our ultimate obligation under written options is based on future market conditions and is only quantifiable at settlement.

In connection with the sale of a portion of our Visa Class B common shares in September 2012, we entered into a swap agreement with the purchaser in which we will make or receive payments based on subsequent changes in the conversion ratio of Class B into Class A common shares and to make payments calculated by reference to the market price of the Class A common shares. The fair value of the swap, included in Other liabilities on our Consolidated Balance Sheet, was $22 million at September 30, 2012.

Further detail regarding the derivatives not designated in hedging relationships is presented in the tables that follow.

Derivative Counterparty Credit Risk

By entering into derivative contracts we are exposed to credit risk. We seek to minimize credit risk through internal credit approvals, limits, monitoring procedures, executing master netting agreements and collateral requirements. We generally enter into transactions with counterparties that carry high quality credit ratings. Nonperformance risk including credit risk is included in the determination of the estimated net fair value.

We generally have established agreements with our major derivative dealer counterparties that provide for exchanges of marketable securities or cash to collateralize either party's positions. At September 30, 2012, we held cash, US government securities and mortgage-backed securities totaling $1.2billion under these agreements. We pledged cash and US government securities of $1.0billion under these agreements. To the extent not netted against derivative fair values under a master netting agreement, the receivable for cash pledged is included in Other assets and the obligation for cash held is included in Other borrowed funds on our Consolidated Balance Sheet.

The credit risk associated with derivatives executed with customers is essentially the same as that involved in extending loans and is subject to normal credit policies. We may obtain collateral based on our assessment of the customer's credit quality.

We periodically enter into risk participation agreements to share some of the credit exposure with other counterparties related to interest rate derivative contracts or to take on credit exposure to generate revenue. We will make/receive payments under these agreements if a customer defaults on its obligation to perform under certain derivative swap contracts. Risk participation agreements are included in thederivatives table that follows. Our exposure related to risk participations where we sold protection is discussed in the Credit Derivatives section below.

Contingent Features

Some of PNC's derivative instruments contain provisions that require PNC's debt to maintain an investment grade credit rating from each of the major credit rating agencies. If PNC's debt ratings were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions.

The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net liability position on September 30, 2012was $1.1billion for which PNC had posted collateral of $1.0billion in the normal course of business. The maximum amount of collateral PNC would have been required to post if the credit-risk-related contingent features underlying these agreements had been triggered on September 30, 2012, would be an additional $.1billion.

Table 115: Derivatives Total Notional or Contractual Amounts and Fair Values
					September 30, 2012						December 31, 2011
					Notional/		Asset		Liability		Notional/		Asset		Liability
					Contract		Fair		Fair		Contract		Fair		Fair
In millions					Amount		Value (a)		Value (b)		Amount		Value (a)		Value (b)
Derivatives designated as hedging instruments under GAAP
	Interest rate contracts:
		Cash flow hedges:
			Receive fixed swaps (c)	$	$13,770	$	562			$	13,902	$	529
			Forward purchase commitments		1,229		32				2,733		43
			Subtotal	$	14,999	$	594			$	16,635	$	572
		Fair value hedges:
			Receive fixed swaps (c)	$	11,000	$	1,428			$	10,476	$	1,316
			Pay fixed swaps (c) (d)		2,233		1	$	154		1,797			$	116
			Subtotal	$	13,233	$	1,429	$	154	$	12,273	$	1,316	$	116
	Foreign exchange contracts:
		Net investment hedge			597				18		326
Total derivatives designated as hedging instruments				$	28,829	$	2,023	$	172	$	29,234	$	1,888	$	116
Derivatives not designated as hedging instruments under GAAP
Derivatives used for residential mortgage banking activities:
Residential mortgage servicing
	Interest rate contracts:
		Swaps		$	83,142	$	2,855	$	2,404	$	98,406	$	3,127	$	2,673
		Swaptions			6,309		220		131		10,312		216		167
		Futures			46,281						63,616
		Future options			40,900		17		6		8,000
		Residential mortgage loan commitments			3,749		33		5		5,287		47		14
			Subtotal	$	180,381	$	3,125	$	2,546	$	185,621	$	3,390	$	2,854
Loan sales
	Interest rate contracts:
		Futures		$	820					$	634
		Bond options			1,400	$	2				1,250	$	3
		Residential mortgage loan commitments			13,075		161	$	99		9,486		65	$	39
			Subtotal	$	15,295	$	163	$	99	$	11,370	$	68	$	39
			Subtotal	$	195,676	$	3,288	$	2,645	$	196,991	$	3,458	$	2,893
Derivatives used for commercial mortgage banking activities
	Interest rate contracts:
		Swaps		$	1,222	$	61	$	92	$	1,180	$	43	$	77
		Swaptions									450		3
		Futures			2,000
		Future options			200		2
		Commercial mortgage loan commitments			1,090		13		13		995		8		3
			Subtotal	$	4,512	$	76	$	105	$	2,625	$	54	$	80
	Credit contracts:
		Credit default swaps			95		2				95		5
			Subtotal	$	4,607	$	78	$	105	$	2,720	$	59	$	80
Derivatives used for customer-related activities:
	Interest rate contracts:
		Swaps		$	124,095	$	4,146	$	4,233	$	122,088	$	3,649	$	3,863
		Caps/floors - Sold			4,241				2		5,861				6
		Caps/floors - Purchased			4,151		20				5,601		19
		Swaptions			2,161		97		41		1,713		136		73
		Futures			9,229						6,982
		Residential mortgage loan commitments			2,366		9		11		487				1
			Subtotal	$	146,243	$	4,272	$	4,287	$	142,732	$	3,804	$	3,943
	Foreign exchange contracts				12,732		157		162		11,920		231		222
	Equity contracts				146		1		4		184		5		8
	Credit contracts:
		Risk participation agreements			3,359		7		6		3,259		6		5
			Subtotal	$	162,480	$	4,437	$	4,459	$	158,095	$	4,046	$	4,178
Derivatives used for other risk management activities:
	Interest rate contracts:
		Swaps		$	623	$	4			$	1,704	$	5	$	39
		Swaptions									225		1
		Futures			351						1,740
			Subtotal	$	974	$	4			$	3,669	$	6	$	39
	Foreign exchange contracts				38			$	4		25				4
	Equity contracts				11		3		3
	Credit contracts:
		Credit default swaps			15						209		6
	Other contracts (e)				624				308		386				296
			Subtotal	$	1,662	$	7	$	315	$	4,289	$	12	$	339
Total derivatives not designated as hedging instruments				$	364,425	$	7,810	$	7,524	$	362,095	$	7,575	$	7,490
Total Gross Derivatives				$	393,254	$	9,833	$	7,696	$	391,329	$	9,463	$	7,606
Less: Legally enforceable master netting agreements							6,071		6,071				6,052		6,052
Less: Cash collateral							987		967				1,051		843
Total Net Derivatives						$	2,775	$	658			$	2,360	$	711
(a)		Included in Other assets on our Consolidated Balance Sheet.
(b)		Included in Other liabilities on our Consolidated Balance Sheet.
(c)		The floating rate portion of interest rate contracts is based on money-market indices. As a percent of notional amount, 54% were based on 1-month LIBOR and 46% on 3-month LIBOR at September 30, 2012 compared with 57% and 43%, respectively, at December 31, 2011.
(d)		Includes zero-coupon swaps.
(e)		Includes PNC's obligation to fund a portion of certain BlackRock LTIP programs, a forward purchase commitment for certain loans upon conversion from a variable rate to a fixed rate, and the swap entered into in connection with the sale of a portion of Visa Class B common shares.

Gains (losses) on derivative instruments and related hedged items follow:
Table 116: Derivatives Designated in GAAP Hedge Relationships - Fair Value Hedges
				September 30, 2012				September 30, 2011
					Gain (Loss)				Gain (Loss)
			Gain		on Related		Gain		on Related
			(Loss) on		Hedged		(Loss) on		Hedged
			Derivatives		Items		Derivatives		Items
			Recognized		Recognized		Recognized		Recognized
Nine months ended			in Income		in Income		in Income		in Income
In millions	Hedged Items	Location	Amount		Amount		Amount		Amount
Interest rate contracts	US Treasury and	Investment securities
	Government Agencies	(interest income)
	Securities		$	(40)	$	37	$	(154)	$	161
Interest rate contracts	Other Debt Securities	Investment securities
		(interest income)		(3)		3		(24)		24
Interest rate contracts	Subordinated debt	Borrowed funds
		(interest expense)		14		(43)		223		(236)
Interest rate contracts	Bank notes and	Borrowed funds
	senior debt	(interest expense)		113		(123)		269		(278)
Total			$	84	$	(126)	$	314	$	(329)
				September 30, 2012				September 30, 2011
					Gain (Loss)				Gain (Loss)
			Gain		on Related		Gain		on Related
			(Loss) on		Hedged		(Loss) on		Hedged
			Derivatives		Items		Derivatives		Items
			Recognized		Recognized		Recognized		Recognized
Three months ended			in Income		in Income		in Income		in Income
In millions	Hedged Items	Location	Amount		Amount		Amount		Amount
Interest rate contracts	US Treasury and	Investment securities
	Government Agencies	(interest income)
	Securities		$	(11)	$	11	$	(129)	$	135
Interest rate contracts	Other Debt Securities	Investment securities
		(interest income)		(1)		1		(15)		15
Interest rate contracts	Subordinated debt	Borrowed funds
		(interest expense)		6		(19)		193		(193)
Interest rate contracts	Bank notes and	Borrowed funds
	senior debt	(interest expense)		39		(43)		221		(220)
Total			$	33	$	(50)	$	270	$	(263)

Table 117: Derivatives Designated in GAAP Hedge Relationships - Cash Flow Hedges
		Gain (Loss) on Derivatives		Gain (Loss) Reclassified from Accumulated			Gain (Loss) Recognized in Income
Nine months ended		Recognized in OCI		OCI into Income			on Derivatives
In millions		(Effective Portion)		(Effective Portion)			(Ineffective Portion)
				Location	Amount		Location	Amount
September 30, 2012	Interest rate contracts	$	310	Interest income	$	345	Interest income
				Noninterest income		72
September 30, 2011	Interest rate contracts	$	703	Interest income	$	332	Interest income
				Noninterest income		41
		Gain (Loss) on Derivatives		Gain (Loss) Reclassified from Accumulated			Gain (Loss) Recognized in Income
Three months ended		Recognized in OCI		OCI into Income			on Derivatives
In millions		(Effective Portion)		(Effective Portion)			(Ineffective Portion)
				Location	Amount		Location	Amount
September 30, 2012	Interest rate contracts	$	103	Interest income	$	113	Interest income
				Noninterest income		13
September 30, 2011	Interest rate contracts	$	423	Interest income	$	120	Interest income
				Noninterest income		8

Table 118: Derivatives Designated in GAAP Hedge Relationships - Net Investment Hedges
		Gain (Loss) on Derivatives
Nine months ended		Recognized in OCI
In millions		(Effective Portion)
September 30, 2012	Foreign exchange contracts		$	(18)
		Gain (Loss) on Derivatives
Three months ended		Recognized in OCI
In millions		(Effective Portion)
September 30, 2012	Foreign exchange contracts		$	(18)

Table 119: Gains (Losses) on Derivatives Not Designated as Hedging Instruments under GAAP
				Three months ended			Nine months ended
				September 30				September 30
In millions				2012		2011		2012		2011
Derivatives used for residential mortgage banking activities:
Residential mortgage servicing
	Interest rate contracts		$	67	$	339	$	273	$	504
Loan sales
	Interest rate contracts			21		(12)		57		(15)
		Gains (losses) included in residential mortgage banking activities (a)	$	88	$	327	$	330	$	489
Derivatives used for commercial mortgage banking activities:
	Interest rate contracts (b) (c)		$	(4)	$	(7)	$	17	$	(12)
	Credit contracts (c)			(2)		4		(3)		8
		Gains (losses) from commercial mortgage banking activities	$	(6)	$	(3)	$	14	$	(4)
Derivatives used for customer-related activities:
	Interest rate contracts		$	37	$	6	$	64	$	46
	Foreign exchange contracts			13		42		69		64
	Equity contracts			1		1		(4)		(2)
	Credit contracts					2		(2)		4
		Gains (losses) from customer-related activities (c)	$	51	$	51	$	127	$	112
Derivatives used for other risk management activities:
	Interest rate contracts		$	(5)	$	(40)	$	(12)	$	(42)
	Foreign exchange contracts					3		(1)
	Credit contracts					1		(1)		(1)
	Other contracts (d)			(34)		80		(44)		50
		Gains (losses) from other risk management activities (c)	$	(39)	$	44	$	(58)	$	7
Total gains (losses) from derivatives not designated as hedging instruments			$	94	$	419	$	413	$	604
(a)		Included in Residential mortgage noninterest income.
(b)		Included in Corporate services noninterest income.
(c)		Included in Other noninterest income.
(d)		Includes BlackRock LTIP, a forward purchase commitment for certain loans upon conversion from a variable rate to a fixed rate, and the swap entered into in connection with the sale of a portion of Visa Class B common shares.

Credit Derivatives

The credit derivative underlying is based on the credit risk of a specific entity, entities, or an index. As discussed above, we enter into credit derivatives, specifically credit default swaps and risk participation agreements, as part of our commercial mortgage banking hedging activities and for customer and other risk management purposes. Detail regarding credit default swaps and risk participations sold follows.

Table 120: Credit Default Swaps
			September 30, 2012					December 31, 2011
						Weighted-					Weighted-
						Average					Average
						Remaining					Remaining
		Notional		Fair		Maturity	Notional		Fair		Maturity
Dollars in millions		Amount		Value		In Years	Amount		Value		In Years
Credit Default Swaps – Sold (a)
Single name							$	45	$	2	1.8
Index traded								49			2.0
	Total						$	94	$	2	1.9
Credit Default Swaps – Purchased
Single name		$	50			6.1	$	150	$	5	3.8
Index traded			60	$	2	36.4		60		4	37.2
	Total	$	110	$	2	22.6	$	210	$	9	13.3
Total		$	110	$	2	22.6	$	304	$	11	9.8
(a)	There were no credit default swaps sold as of September 30, 2012.

The notional amount of these credit default swaps by credit rating follows:

Table 121: Credit Ratings of Credit Default Swaps
		September 30			December 31
Dollars in millions			2012			2011
Credit Default Swaps – Sold (a)
Investment grade (b)						$	84
Subinvestment grade (c)							10
	Total					$	94
Credit Default Swaps – Purchased
Investment grade (b)			$	95		$	145
Subinvestment grade (c)				15			65
	Total		$	110		$	210
Total			$	110		$	304
(a)	There were no credit default swaps sold as of September 30, 2012.
(b)	Investment grade with a rating of BBB-/Baa3 or above based on published rating agency information.
(c)	Subinvestment grade with a rating below BBB-/Baa3 based on published rating agency information.

The referenced/underlying assets for these credit default swaps follow:

Table 122: Referenced/Underlying Assets of Credit Default Swaps
		Commercial
	Corporate	mortgage-backed
	Debt	securities	Loans
September 30, 2012	32%	54%	14%
December 31, 2011	59%	20%	21%

We enter into credit default swaps under which we buy loss protection from or sell loss protection to a counterparty for the occurrence of a credit event related to a referenced entity or index. The maximum amount we would be required to pay under the credit default swaps in which we sold protection, assuming all referenced underlyings experience a credit event at a total loss, without recoveries, was $94 million at December 31, 2011.

Risk Participation Agreements

We have sold risk participation agreements with terms ranging from less than 1 year to 24 years. We will be required to make payments under these agreements if a customer defaults on its obligation to perform under certain derivative swap contracts with third parties.

Table 123: Risk Participation Agreements Sold
					Weighted-Average
	Notional				Remaining Maturity
Dollars in millions	Amount		Fair Value		In Years
September 30, 2012	$	1,770	$	(6)	6.9
December 31, 2011	$	1,568	$	(5)	7.5

Based on our internal risk rating process of the underlying third parties to the swap contracts, the percentages of the exposure amount of risk participation agreements sold by internal credit rating follow:

Table 124: Internal Credit Ratings of Risk Participation Agreements Sold
		September 30, 2012		December 31, 2011
Pass (a)		99	%	99	%
Below pass (b)		1	%	1	%
(a)	Indicates the expected risk of default is currently low.
(b)	Indicates a higher degree of risk of default.

Assuming all underlying swap counterparties defaulted at September 30, 2012, the exposure from these agreements would be $157million based on the fair value of the underlying swaps, compared with $145million at December 31, 2011.