We use derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. We designate certain derivatives as hedging instruments in qualifying hedge accounting relationships (fair value or cash flow hedges). Our remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation trading or other purposes. For additional information on our derivatives activities, see Note 14 (Derivatives) in our 2022 Form 10-K.

Table 11.1 presents the total notional or contractual amounts and fair values for our derivatives. Derivative transactions can be measured in terms of the notional amount, but this amount is not recorded on our consolidated balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged, but is used only as the basis on which derivative cash flows are determined.

Table 11.1: Notional or Contractual Amounts and Fair Values of Derivatives


	March 31, 2023					December 31, 2022
	Notional or contractual amount		Fair value			Notional or contractual amount	Fair value
			Derivative assets		Derivative liabilities		Derivative assets	Derivative liabilities
(in millions)
Derivatives designated as hedging instruments
Interest rate contracts	$	296,341	773		456	263,876	670	579
Commodity contracts	4,166		32		51	1,681	9	25
Foreign exchange contracts	11,251		91		874	15,544	161	1,015
Total derivatives designated as qualifying hedging instruments			896		1,381		840	1,619
Derivatives not designated as hedging instruments
Economic hedges:
Interest rate contracts	79,712		374		275	65,727	410	253
Equity contracts (1)	4,568		61		44	3,326	—	242
Foreign exchange contracts	44,033		369		612	38,139	490	968
Credit contracts	265		15		—	290	14	—
Subtotal			819		931		914	1,463
Customer accommodation trading and other derivatives:
Interest rate contracts	10,899,705		32,487		35,425	10,156,300	40,006	42,641
Commodity contracts	92,472		3,716		3,000	96,001	5,991	3,420
Equity contracts	409,253		11,044		11,223	390,427	9,573	8,012
Foreign exchange contracts	1,553,355		13,237		14,841	1,475,224	21,562	24,703
Credit contracts	54,133		53		32	45,359	52	36

Subtotal			60,537		64,521		77,184	78,812
Total derivatives not designated as hedging instruments			61,356		65,452		78,098	80,275
Total derivatives before netting			62,252		66,833		78,938	81,894
Netting			(45,135)		(49,936)		(56,164)	(61,827)
Total			$	17,117	16,897		22,774	20,067

(1) In first quarter 2023, we adopted ASU 2018-12 – Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. For additional information, see Note 1 (Summary of Significant Accounting Policies).

Balance Sheet Offsetting

We execute substantially all of our derivative transactions under master netting arrangements. Where legally enforceable, these master netting arrangements give the ability, in the event of default by the counterparty, to liquidate securities held as collateral and to offset receivables and payables with the same counterparty. We reflect all derivative balances and related cash collateral subject to enforceable master netting arrangements on a net basis on our consolidated balance sheet. We do not net non-cash collateral that we receive or pledge against derivative balances on our consolidated balance sheet.

For disclosure purposes, we present “Total Derivatives, net” which represents the aggregate of our net exposure to each counterparty after considering the balance sheet netting

adjustments and any non-cash collateral. We manage derivative exposure by monitoring the credit risk associated with each counterparty using counterparty-specific credit risk limits, using master netting arrangements and obtaining collateral.

Table 11.2 provides information on the fair values of derivative assets and liabilities subject to enforceable master netting arrangements, the balance sheet netting adjustments and the resulting net fair value amount recorded on our consolidated balance sheet, as well as the non-cash collateral associated with such arrangements. In addition to the netting amounts included in the table, we also have balance sheet netting related to resale and repurchase agreements that are disclosed within Note 15 (Pledged Assets and Collateral).

Table 11.2: Fair Values of Derivative Assets and Liabilities


	March 31, 2023			December 31, 2022
(in millions)	Derivative Assets		Derivative Liabilities	Derivative Assets	Derivative Liabilities
Interest rate contracts
Over-the-counter (OTC)	$	31,386	32,130	37,000	37,598
OTC cleared	733		639	649	845
Exchange traded	234		207	262	193
Total interest rate contracts	32,353		32,976	37,911	38,636
Commodity contracts
OTC	2,601		2,177	4,833	2,010
Exchange traded	927		724	876	1,134
Total commodity contracts	3,528		2,901	5,709	3,144
Equity contracts
OTC	4,542		6,829	4,269	4,475
Exchange traded	4,172		2,843	3,742	2,409
Total equity contracts	8,714		9,672	8,011	6,884
Foreign exchange contracts
OTC	13,445		15,975	21,537	26,127

Total foreign exchange contracts	13,445		15,975	21,537	26,127
Credit contracts
OTC	43		22	39	22

Total credit contracts	43		22	39	22
Total derivatives subject to enforceable master netting arrangements, gross	58,083		61,546	73,207	74,813
Less: Gross amounts offset
Counterparty netting (1)	(40,603)		(40,590)	(49,115)	(49,073)
Cash collateral netting	(4,532)		(9,346)	(7,049)	(12,754)
Total derivatives subject to enforceable master netting arrangements, net	12,948		11,610	17,043	12,986
Derivatives not subject to enforceable master netting arrangements (2)	4,169		5,287	5,731	7,081
Total derivatives recognized in consolidated balance sheet, net	17,117		16,897	22,774	20,067
Non-cash collateral	(2,307)		(1,968)	(3,517)	(582)
Total Derivatives, net	$	14,810	14,929	19,257	19,485

(1)Represents amounts with counterparties subject to enforceable master netting arrangements that have been offset in our consolidated balance sheet, including portfolio level counterparty valuation adjustments related to customer accommodation and other trading derivatives. Counterparty valuation adjustments related to derivative assets were $346 million and $372 million and debit valuation adjustments related to derivative liabilities were $333 million and $331 million as of March 31, 2023, and December 31, 2022, respectively, and were primarily related to interest rate contracts.

(2)In first quarter 2023, we adopted ASU 2018-12 – Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. For additional information, see Note 1 (Summary of Significant Accounting Policies).

Fair Value and Cash Flow Hedges

For fair value hedges, we use interest rate swaps to convert certain of our fixed-rate long-term debt and time certificates of deposit to floating rates to hedge our exposure to interest rate risk. We also enter into cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge our exposure to foreign currency risk and interest rate risk associated with the issuance of non-U.S. dollar denominated long-term debt. We also enter into futures contracts, forward contracts, and swap contracts to hedge our exposure to the price risk of physical commodities included in Other Assets. In addition, we use interest rate swaps, cross-currency swaps, cross-currency interest rate swaps and forward contracts to hedge against changes in fair value of certain investments in available-for-sale (AFS) debt securities due to changes in interest rates, foreign currency rates, or both. For certain fair value hedges of interest rate risk, we use the portfolio layer method to hedge stated amounts of closed portfolios of AFS debt securities. For certain fair value hedges of foreign currency risk, changes in fair value of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income

(OCI). See Note 20 (Other Comprehensive Income) for the amounts recognized in other comprehensive income.

For cash flow hedges, we use interest rate swaps to hedge the variability in interest payments received on certain interest-earning deposits with banks and certain floating-rate commercial loans, and interest paid on certain floating-rate debt due to changes in the contractually specified interest rate. We also use cross-currency swaps to hedge variability in interest payments on fixed-rate foreign currency-denominated long-term debt due to changes in foreign exchange rates.

We estimate $693 million pre-tax of deferred net losses related to cash flow hedges in OCI at March 31, 2023, will be reclassified into net interest income during the next twelve months. For cash flow hedges as of March 31, 2023, we are hedging our interest rate and foreign currency exposure to the variability of future cash flows for all forecasted transactions for a maximum of 9 years. For additional information on our accounting hedges, see Note 1 (Summary of Significant Accounting Policies) in our 2022 Form 10-K.

Table 11.3 and Table 11.4 show the net gains (losses) related to derivatives in cash flow and fair value hedging relationships, respectively.

Table 11.3: Gains (Losses) Recognized on Cash Flow Hedging Relationships


	Net interest income				Total recorded in net income	Total recorded in OCI
(in millions)	Loans		Other interest income	Long-term debt	Derivative gains (losses)	Derivative gains (losses)






















Quarter ended March 31, 2023

Total amounts presented in the consolidated statement of income and other comprehensive income	$	13,318	1,988	(2,511)	N/A	503
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(53)		(58)	—	(111)	111
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	N/A	383
Total gains (losses) (pre-tax) on interest rate contracts	(53)		(58)	—	(111)	494
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		—	(2)	(2)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	N/A	1
Total gains (losses) (pre-tax) on foreign exchange contracts	—		—	(2)	(2)	3
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(53)	(58)	(2)	(113)	497
Quarter ended March 31, 2022

Total amounts presented in the consolidated statement of income and other comprehensive income	$	7,218	90	(761)	N/A	27
Interest rate contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	(16)		4	—	(12)	12
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	N/A	(48)
Total gains (losses) (pre-tax) on interest rate contracts	(16)		4	—	(12)	(36)
Foreign exchange contracts:
Realized gains (losses) (pre-tax) reclassified from OCI into net income	—		—	(2)	(2)	2
Net unrealized gains (losses) (pre-tax) recognized in OCI	N/A		N/A	N/A	N/A	(3)
Total gains (losses) (pre-tax) on foreign exchange contracts	—		—	(2)	(2)	(1)
Total gains (losses) (pre-tax) recognized on cash flow hedges	$	(16)	4	(2)	(14)	(37)

Table 11.4: Gains (Losses) Recognized on Fair Value Hedging Relationships


	Net interest income				Noninterest income		Total recorded in net income		Total recorded in OCI
(in millions)	Debt securities		Deposits	Long-term debt		Other		Derivative gains (losses)		Derivative gains (losses)

Quarter ended March 31, 2023
Total amounts presented in the consolidated statement of income and other comprehensive income	$	3,783	(2,761)	(2,511)		580		N/A		503
Interest contracts
Amounts related to cash flows on derivatives	269		(30)	(682)		—		(443)		N/A
Recognized on derivatives	(700)		105	2,358		—		1,763		—
Recognized on hedged items	692		(108)	(2,360)		—		(1,776)		N/A
Total gains (losses) (pre-tax) on interest rate contracts	261		(33)	(684)		—		(456)		—
Foreign exchange contracts
Amounts related to cash flows on derivatives	—		—	(103)		—		(103)		N/A
Recognized on derivatives	—		—	52		35		87		6
Recognized on hedged items	—		—	(60)		(29)		(89)		N/A
Total gains (losses) (pre-tax) on foreign exchange contracts	—		—	(111)		6		(105)		6
Commodity contracts
Recognized on derivatives	—		—	—		(12)		(12)		—
Recognized on hedged items	—		—	—		25		25		N/A
Total gains (losses) (pre-tax) on commodity contracts	—		—	—		13		13		—
Total gains (losses) (pre-tax) recognized on fair value hedges	$	261	(33)	(795)		19		(548)		6

Quarter ended March 31, 2022
Total amounts presented in the consolidated statement of income and other comprehensive income	$	2,563	(83)	(761)		692		N/A		27
Interest contracts
Amounts related to cash flows on derivatives	(41)		41	481		—		481		N/A
Recognized on derivatives	1,262		(145)	(6,869)		—		(5,752)		—
Recognized on hedged items	(1,248)		143	6,813		—		5,708		N/A
Total gains (losses) (pre-tax) on interest rate contracts	(27)		39	425		—		437		—
Foreign exchange contracts
Amounts related to cash flows on derivatives	—		—	4		—		4		N/A
Recognized on derivatives	—		—	(456)		(242)		(698)		64
Recognized on hedged items	—		—	445		241		686		N/A
Total gains (losses) (pre-tax) on foreign exchange contracts	—		—	(7)		(1)		(8)		64
Commodity contracts
Recognized on derivatives	—		—	—		(92)		(92)		—
Recognized on hedged items	—		—	—		87		87		N/A
Total gains (losses) (pre-tax) on commodity contracts	—		—	—		(5)		(5)		—
Total gains (losses) (pre-tax) recognized on fair value hedges	$	(27)	39	418		(6)		424		64

Table 11.5 shows the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships.

Table 11.5: Hedged Items in Fair Value Hedging Relationships


	Hedged items currently designated			Hedged items no longer designated
(in millions)	Carrying amount of assets/(liabilities) (1)(2)		Hedge accounting basis adjustment assets/(liabilities) (3)	Carrying amount of assets/(liabilities) (2)	Hedge accounting basis adjustment assets/(liabilities)
March 31, 2023
Available-for-sale debt securities (4)(5)	$	59,752	(3,160)	15,822	656
Other assets	1,652		100	—	—
Deposits	(51,456)		97	(10)	—
Long-term debt	(132,434)		11,421	(32)	5
December 31, 2022
Available-for-sale debt securities (4)	$	39,423	(3,859)	16,100	722
Other assets	1,663		38	—	—
Deposits	(41,687)		205	(10)	—
Long-term debt	(130,997)		13,862	(5)	—

(1)Does not include the carrying amount of hedged items where only foreign currency risk is the designated hedged risk. The carrying amount excluded for debt securities was $710 million and for long-term debt was $0 million as of March 31, 2023, and $739 million for debt securities and $0 million for long-term debt as of December 31, 2022.

(2)Represents the full carrying amount of the hedged asset or liability item as of the balance sheet date, except for circumstances in which only a portion of the asset or liability was designated as the hedged item in which case only the portion designated is presented.

(3)The balance includes $37 million and $586 million of debt securities and long-term debt cumulative basis adjustments as of March 31, 2023, respectively, and $39 million and $334 million of debt securities and long-term debt cumulative basis adjustments as of December 31, 2022, respectively, on terminated hedges whereby the hedged items have subsequently been re-designated into existing hedges.

(4)Carrying amount represents the amortized cost.

(5)The balance includes cumulative basis adjustments of $(6) million for hedged items currently designated as of March 31, 2023, related to certain AFS debt securities designated as the hedged item in a fair value hedge using the portfolio layer method. At March 31, 2023, the aggregated designated hedged items using the portfolio layer method had a carrying amount of $19.9 billion from closed portfolios of financial assets totaling $23.3 billion.

Derivatives Not Designated as Hedging Instruments

Derivatives not designated as hedging instruments include economic hedges and derivatives entered into for customer accommodation trading purposes.

We use economic hedge derivatives to manage our exposure to interest rate risk, equity price risk, foreign currency risk, and credit risk. We also use economic hedge derivatives to mitigate the periodic earnings volatility caused by mismatches between the changes in fair value of the hedged item and hedging instrument recognized on our fair value accounting hedges.

Changes in the fair values of derivatives used to economically hedge the deferred compensation plan are reported in personnel expense.

For additional information on our derivatives activities, see Note 14 (Derivatives) in our 2022 Form 10-K.

Table 11.6 shows the net gains (losses), recognized by income statement lines, related to derivatives not designated as hedging instruments.

Table 11.6: Gains (Losses) on Derivatives Not Designated as Hedging Instruments


	Noninterest income					Noninterest expense
(in millions)	Mortgage banking		Net gains from trading and securities	Other	Total		Personnel expense

Quarter ended March 31, 2023
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	146	—	48	194		—
Equity contracts	—		—	(80)	(80)		(191)
Foreign exchange contracts	—		—	(366)	(366)		—
Credit contracts	—		—	(1)	(1)		—
Subtotal	146		—	(399)	(253)		(191)
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	(2)		(336)	—	(338)		—
Commodity contracts	—		112	—	112		—
Equity contracts	—		(1,470)	(64)	(1,534)		—
Foreign exchange contracts	—		(99)	—	(99)		—
Credit contracts	—		(7)	—	(7)		—
Subtotal	(2)		(1,800)	(64)	(1,866)		—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	144	(1,800)	(463)	(2,119)		(191)

Quarter ended March 31, 2022
Net gains (losses) recognized on economic hedges derivatives:
Interest contracts (1)	$	(368)	—	(26)	(394)		—
Equity contracts (2)	—		—	5	5		266
Foreign exchange contracts	—		—	231	231		—
Credit contracts	—		—	5	5		—
Subtotal	(368)		—	215	(153)		266
Net gains (losses) recognized on customer accommodation trading and other derivatives:
Interest contracts	(498)		3,214	—	2,716		—
Commodity contracts	—		113	—	113		—
Equity contracts	—		1,003	(38)	965		—
Foreign exchange contracts	—		327	—	327		—
Credit contracts	—		12	—	12		—
Subtotal	(498)		4,669	(38)	4,133		—
Net gains (losses) recognized related to derivatives not designated as hedging instruments	$	(866)	4,669	177	3,980		266

(1)Mortgage banking amounts for first quarter 2023 are comprised of gains (losses) of $185 million related to derivatives used as economic hedges of MSRs measured at fair value offset by gains (losses) of $(39) million related to derivatives used as economic hedges of mortgage loans held for sale and derivative loan commitments. The corresponding amounts for first quarter 2022 are comprised of gain (losses) of $(1.6) billion offset by gains (losses) of $1.3 billion.

Credit Derivatives

Credit derivative contracts are arrangements whose value is derived from the transfer of credit risk of a reference asset or entity from one party (the purchaser of credit protection) to another party (the seller of credit protection). We generally use credit derivatives to assist customers with their risk management objectives by purchasing and selling credit protection on corporate debt obligations through the use of credit default swaps or through risk participation swaps to help manage counterparty exposure. We would be required to perform under the credit derivatives we sold in the event of default by the referenced obligors. Events of default include events such as bankruptcy, capital restructuring or lack of principal and/or interest payment.

Table 11.7 provides details of sold credit derivatives.

Table 11.7: Sold Credit Derivatives


	Notional amount
(in millions)	Protection sold		Protection sold – non-investment grade
March 31, 2023
Credit default swaps	$	17,033	2,200
Risk participation swaps	6,782		6,571
Total credit derivatives	$	23,815	8,771
December 31, 2022
Credit default swaps	$	12,733	1,860
Risk participation swaps	6,728		6,518
Total credit derivatives	$	19,461	8,378

Protection sold represents the estimated maximum exposure to loss that would be incurred if, upon an event of default, the value of our interests and any associated collateral declined to zero, and does not take into consideration any of recovery value from the referenced obligation or offset from collateral held or any economic hedges.

The amounts under non-investment grade represent the notional amounts of those credit derivatives on which we have a higher risk of being required to perform under the terms of the credit derivative and are a function of the underlying assets.

We consider the credit risk to be low if the underlying assets under the credit derivative have an external rating that is investment grade. If an external rating is not available, we classify the credit derivative as non-investment grade.

Our maximum exposure to sold credit derivatives is managed through posted collateral and purchased credit derivatives with identical or similar reference positions in order to achieve our desired credit risk profile. The credit risk management is designed to provide an ability to recover a significant portion of any amounts that would be paid under sold credit derivatives.

Credit-Risk Contingent Features

Certain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. Table 11.8 illustrates our exposure to OTC bilateral derivative contracts with credit-risk contingent features, collateral we have posted, and the additional collateral we would be required to post if the credit rating of our debt was downgraded below investment grade.

Table 11.8: Credit-Risk Contingent Features


(in billions)	Mar 31, 2023		Dec 31, 2022
Net derivative liabilities with credit-risk contingent features	$	17.4	20.7
Collateral posted	17.3		17.4
Additional collateral to be posted upon a below investment grade credit rating (1)	0.1		3.3

(1)Any credit rating below investment grade requires us to post the maximum amount of collateral.