Derivative Financial Instruments And Hedging Activities

6 Months Ended

Jun. 30, 2013

General Discussion of Derivative Instruments and Hedging Activities [Abstract]

Derivative Financial Instruments And Hedging Activities

Derivative Financial Instruments

Derivative swap and cap agreements consist of the following (in millions):

	June 30, 2013
	Notional		Fair Value(a)
Assets
Interest rate swaps	$	2,313	$	7
Interest rate caps	2,419		7
Foreign exchange swaps(b)	2,002		17
Total assets(c)	$	6,734	$	31
Liabilities
Interest rate swaps	$	2,502	$	20
Interest rate caps	2,266		7
Foreign exchange swaps(b)	1,500		3
Total liabilities(d)	$	6,268	$	30

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(a) See Note 9 - "Fair Values of Assets and Liabilities" for further discussion of fair value disclosure related to the derivatives.

(b) The foreign exchange swaps relate to (i) an intercompany loan denominated in foreign currencies (notional balances on the intercompany loan of 748 million Euro (€), 331 million Pound (£) and 190 million Swedish krona (SEK) have been translated to USD) and (ii) a cross currency swap for an international operations securitization.

(c) Included in Other Assets on the Consolidated Balance Sheets.

(d) Included in Other Liabilities on the Consolidated Balance Sheets.

At December 31, 2012, we had derivative assets and liabilities with notional amounts of $775.1 million, which had an insignificant fair value.

Generally, we purchase interest rate cap agreements to limit floating rate exposures on securities issued in our revolving secured debt. We utilize interest rate swap agreements to convert floating rate exposures on securities issued in securitization transactions to fixed rates, thereby hedging the variability in interest expense paid.

In connection with the closing of the acquisition of the international operations from Ally Financial , we provided a loan denominated in foreign currencies (Euro, British Pound and Swedish Krona) to an acquired entity for the equivalent of $1.5 billion. We purchase foreign exchange swaps to hedge against any valuation change in the loan due to changes in foreign exchange rates.

The following table summarizes the location and amount of gains and losses on derivative instruments reported in our consolidated statement of income and comprehensive income (in millions).

	Three Months Ended			Six Months Ended
	June 30, 2013
Gain (loss) recognized in interest expense
Interest rate contracts	$	(3	)	$	(3	)
Gain (loss) recognized in operating expenses
Foreign exchange swaps	(12		)	(12		)

The gain/loss amounts recognized in interest expense for the three and six months ended June 30, 2012 was insignificant.

Under the terms of our derivative financial instruments, we are required to pledge certain funds to be held in restricted cash accounts as collateral for the outstanding derivative transactions. As of June 30, 2013 and December 31, 2012, these restricted cash accounts totaled $14 million and $4 million, and are included in other assets on the consolidated balance sheets.