Fair Value Option (Tables)

9 Months Ended

Sep. 30, 2016

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		Fair Value over (under) Unpaid Principal Balance
	(in millions)
At September 30, 2016
Commercial loans held for sale	$	649	$	666	$	(17	)
Securities purchased under resale agreements	769		767		2
Securities sold under repurchase agreements	2,675		2,670		5
Fixed rate long-term debt	2,097		1,750		347
Hybrid instruments:
Structured deposits	7,472		7,361		111
Structured notes	7,902		7,796		106
At December 31, 2015
Commercial loans held for sale	$	151	$	159	$	(8	)
Securities sold under repurchase agreements	1,976		1,970		6
Fixed rate long-term debt	2,007		1,750		257
Hybrid instruments:
Structured deposits	6,919		7,016		(97		)
Structured notes	7,164		7,323		(159		)

Components of Gain on Instruments at Fair Value and Related Derivatives

The following table summarizes the 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			Securities Purchased Under Resale Agreements			Securities Sold Under Repurchase Agreements			Long-Term Debt			Hybrid Instruments			Total
	(in millions)
Three Months Ended September 30, 2016
Interest rate and other components⁽¹⁾	$	—		$	(4	)	$	1		$	(5	)	$	(220	)	$	(228	)
Credit risk component⁽²⁾⁽³⁾	6			—			—			5			(65		)	(54		)
Total mark-to-market on financial instruments designated at fair value	6			(4		)	1			—			(285		)	(282		)
Mark-to-market on the related derivatives	—			—			—			(10		)	188			178
Net realized gain on the related long-term debt derivatives	—			—			—			16			—			16
Gain (loss) on instruments designated at fair value and related derivatives	$	6		$	(4	)	$	1		$	6		$	(97	)	$	(88	)

Three Months Ended September 30, 2015
Interest rate and other components⁽¹⁾	$	—		$	—		$	(2	)	$	(100	)	$	499		$	397
Credit risk component⁽²⁾⁽³⁾	(1		)	—			—			96			61			156
Total mark-to-market on financial instruments designated at fair value	(1		)	—			(2		)	(4		)	560			553
Mark-to-market on the related derivatives	—			—			—			98			(503		)	(405		)
Net realized gain on the related long-term debt derivatives	—			—			—			17			—			17
Gain (loss) on instruments designated at fair value and related derivatives	$	(1	)	$	—		$	(2	)	$	111		$	57		$	165

Nine Months Ended September 30, 2016
Interest rate and other components⁽¹⁾	$	—		$	1		$	2		$	(202	)	$	(382	)	$	(581	)
Credit risk component⁽²⁾⁽³⁾	6			—			—			113			(19		)	100
Total mark-to-market on financial instruments designated at fair value	6			1			2			(89		)	(401		)	(481		)
Mark-to-market on the related derivatives	—			—			—			184			339			523
Net realized gain on the related long-term debt derivatives	—			—			—			48			—			48
Gain (loss) on instruments designated at fair value and related derivatives	$	6		$	1		$	2		$	143		$	(62	)	$	90

Nine Months Ended September 30, 2015
Interest rate and other components⁽¹⁾	$	—		$	—		$	(4	)	$	(50	)	$	423		$	369
Credit risk component⁽²⁾⁽³⁾	(9		)	—			—			214			18			223
Total mark-to-market on financial instruments designated at fair value	(9		)	—			(4		)	164			441			592
Mark-to-market on the related derivatives	—			—			—			41			(378		)	(337		)
Net realized gain on the related long-term debt derivatives	—			—			—			51			—			51
Gain (loss) on instruments designated at fair value and related derivatives	$	(9	)	$	—		$	(4	)	$	256		$	63		$	306


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


⁽²⁾	During the three and nine months ended September 30, 2016 and 2015, the gains in the credit risk component for long-term debt were attributable to the widening of our own credit spreads.

⁽³⁾

During the three months ended September 30, 2016, the loss in the credit risk component for hybrid instruments was attributable primarily to the tightening of our own credit spreads related to structured notes. During the nine months ended September 30, 2016, the loss in the credit risk component for hybrid instruments was attributable to the tightening of credit spreads on structured deposits, partially offset by the widening of our own credits spreads related to structured notes. During the three and nine months ended September 30, 2015, the gains in the credit risk component for hybrid instruments were attributable primarily to the widening of credit spreads on structured deposits and, in the three month period, the widening of our own credit spreads related to structured notes. These gains were partially offset in the year-to-date period by a loss due to changes in estimates associated with the valuation techniques used to measure the fair value of certain structured notes and deposits.

- 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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