Fair Value Option (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value, Option, Quantitative Disclosures

The following table summarizes the fair value and unpaid principal balance for items we account for under FVO:



	Fair Value		Unpaid Principal Balance
	(in millions)
September 30, 2013
Commercial leveraged acquisition finance loans	$	1	$	1
Fixed rate long-term debt	1,845		1,750
Hybrid instruments:
Interest bearing deposits in domestic offices	7,851		7,693
Structured notes	5,002		4,852
December 31, 2012
Commercial leveraged acquisition finance loans	$	465	$	486
Fixed rate long-term debt	2,016		1,750
Hybrid instruments:
Interest bearing deposits in domestic offices	8,692		8,399
Structured notes	5,264		5,030

Components of Gain on Instruments at Fair Value and Related Derivatives

he components of gain (loss) on instruments designated at fair value and related derivatives related to the changes in fair value of the financial instrument accounted for under FVO:



	Loans			Long-Term Debt			Hybrid Instruments			Total
	(in millions)
Three Months Ended September 30, 2013
Interest rate and other components⁽¹⁾	$	—		$	40		$	(280	)	$	(240	)
Credit risk component	—			(63		)	39			(24		)
Total mark-to-market on financial instruments designated at fair value	—			(23		)	(241		)	(264		)
Mark-to-market on the related derivatives	—			(39		)	280			241
Net realized gain on the related long-term debt derivatives	—			17			—			17
Gain (loss) on instruments designated at fair value and related derivatives	$	—		$	(45	)	$	39		$	(6	)

Three Months Ended September 30, 2012
Interest rate and other components⁽¹⁾	$	1		$	14		$	(389	)	$	(374	)
Credit risk component	14			(179		)	(39		)	(204		)
Total mark-to-market on financial instruments designated at fair value	15			(165		)	(428		)	(578		)
Net realized loss on financial instruments	1			—			—			1
Mark-to-market on the related derivatives	—			(21		)	396			375
Net realized gain on the related long-term debt derivatives	—			15			—			15
Gain (loss) on instruments designated at fair value and related derivatives	$	16		$	(171	)	$	(32	)	$	(187	)

Nine Months Ended September 30, 2013
Interest rate and other components⁽¹⁾	$	—		$	223		$	(392	)	$	(169	)
Credit risk component	21			(52		)	126			95
Total mark-to-market on financial instruments designated at fair value	21			171			(266		)	(74		)
Net realized loss on financial instruments	(8		)	—			—			(8		)
Mark-to-market on the related derivatives	—			(229		)	344			115
Net realized gain on the related long-term debt derivatives	—			49			—			49
Gain (loss) on instruments designated at fair value and related derivatives	$	13		$	(9	)	$	78		$	82

Nine Months Ended September 30, 2012
Interest rate and other components⁽¹⁾	$	2		$	(26	)	$	(744	)	$	(768	)
Credit risk component	48			(269		)	(62		)	(283		)
Total mark-to-market on financial instruments designated at fair value	50			(295		)	(806		)	(1,051		)
Mark-to-market on the related derivatives	—			6			741			747
Net realized gain on the related long-term debt derivatives	—			46			—			46
Gain (loss) on instruments designated at fair value and related derivatives	$	50		$	(243	)	$	(65	)	$	(258	)


⁽¹⁾	As it relates to hybrid instruments, interest rate and other components includes interest rate, foreign exchange and equity contract risks.

- 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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