Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Carrying Value and Estimated Fair Value of Financial Instruments

The following table summarizes the carrying value and estimated fair value of our financial instruments at September 30, 2017 and December 31, 2016:



September 30, 2017	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets	$	24,108	$	24,108	$	986	$	23,103	$	19
Federal funds sold and securities purchased under agreements to resell	15,827		15,827		—		15,827		—
Federal funds sold and securities purchased under agreements to resell designated under fair value option	1,309		1,309		—		1,309		—
Non-derivative trading assets	30,142		30,142		6,548		21,666		1,928
Derivatives	3,873		3,873		18		3,830		25
Securities	46,054		46,094		20,420		25,564		110
Commercial loans, net of allowance for credit losses	47,402		48,861		—		—		48,861
Commercial loans designated under fair value option and held for sale	375		375		—		375		—
Commercial loans held for sale	56		56		—		56		—
Consumer loans, net of allowance for credit losses	19,392		18,753		—		—		18,753
Consumer loans held for sale:
Residential mortgages	12		12		—		7		5
Other consumer	64		64		—		—		64
Financial liabilities:
Short-term financial liabilities	$	4,383	$	4,415	$	—	$	4,396	$	19
Deposits:
Without fixed maturities	102,720		102,720		—		102,720		—
Fixed maturities	10,462		10,489		—		10,489		—
Deposits designated under fair value option	7,628		7,628		—		6,683		945
Deposits held for sale	1,030		1,030		—		1,030		—
Non-derivative trading liabilities	1,474		1,474		1,373		101		—
Derivatives	3,059		3,059		13		3,034		12
Short-term borrowings designated under fair value option	3,609		3,609		—		3,609		—
Long-term debt	25,019		26,114		—		26,114		—
Long-term debt designated under fair value option	12,358		12,358		—		11,805		553



December 31, 2016	Carrying Value		Fair Value		Level 1		Level 2		Level 3
	(in millions)
Financial assets:
Short-term financial assets	$	21,500	$	21,500	$	1,235	$	20,238	$	27
Federal funds sold and securities purchased under agreements to resell	29,253		29,253		—		29,253		—
Federal funds sold and securities purchased under agreements to resell designated under fair value option	770		770		—		770		—
Non-derivative trading assets	12,439		12,439		3,560		5,811		3,068
Derivatives	5,004		5,004		12		4,961		31
Securities	49,719		49,748		25,145		24,498		105
Commercial loans, net of allowance for credit losses	53,286		54,938		—		—		54,938
Commercial loans designated under fair value option and held for sale	725		725		—		725		—
Commercial loans held for sale	119		119		—		119		—
Consumer loans, net of allowance for credit losses	19,572		18,833		—		—		18,833
Consumer loans held for sale:
Residential mortgages	894		912		—		9		903
Other consumer	71		71		—		—		71
Financial liabilities:
Short-term financial liabilities	$	2,456	$	2,489	$	—	$	2,462	$	27
Deposits:
Without fixed maturities	112,009		112,009		—		112,009		—
Fixed maturities	9,713		9,749		—		9,749		—
Deposits designated under fair value option	7,526		7,526		—		6,119		1,407
Non-derivative trading liabilities	1,122		1,122		1,060		62		—
Derivatives	4,535		4,535		8		4,511		16
Short-term borrowings designated under fair value option	2,672		2,672		—		2,672		—
Long-term debt	27,355		28,093		—		28,093		—
Long-term debt designated under fair value option	10,384		10,384		—		9,885		499

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following table presents information about our assets and liabilities measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value:



	Fair Value Measurements on a Recurring Basis
September 30, 2017	Level 1		Level 2		Level 3		Gross Balance		Netting⁽¹⁾			Net Balance
	(in millions)
Assets:
Securities purchased under agreements to resell⁽²⁾	$	—	$	1,309	$	—	$	1,309	$	—		$	1,309
Trading securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	4,250		338		—		4,588		—			4,588
Collateralized debt obligations	—		—		125		125		—			125
Asset-backed securities:
Residential mortgages	—		72		—		72		—			72
Student loans	—		91		—		91		—			91
Corporate and other domestic debt securities	—		—		1,803		1,803		—			1,803
Debt securities issued by foreign entities	2,298		2,029		—		4,327		—			4,327
Equity securities	—		12		—		12		—			12
Precious metals trading	—		19,124		—		19,124		—			19,124
Derivatives:⁽³⁾
Interest rate contracts	62		23,298		—		23,360		—			23,360
Foreign exchange contracts	43		15,577		10		15,630		—			15,630
Equity contracts	—		3,249		157		3,406		—			3,406
Precious metals contracts	99		980		—		1,079		—			1,079
Credit contracts	—		869		121		990		—			990
Other contracts⁽⁴⁾	—		1		6		7		—			7
Derivatives netting	—		—		—		—		(40,599		)	(40,599		)
Total derivatives	204		43,974		294		44,472		(40,599		)	3,873
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	19,773		10,313		—		30,086		—			30,086
Asset-backed securities:
Home equity	—		55		—		55		—			55
Other	—		399		110		509		—			509
Debt securities issued by foreign entities	647		242		—		889		—			889
Equity securities	—		154		—		154		—			154
Loans⁽⁵⁾	—		375		—		375		—			375
Other assets⁽⁶⁾	—		—		15		15		—			15
Total assets	$	27,172	$	78,487	$	2,347	$	108,006	$	(40,599	)	$	67,407
Liabilities:
Domestic deposits⁽²⁾	$	—	$	6,683	$	945	$	7,628	$	—		$	7,628
Trading liabilities, excluding derivatives	1,373		101		—		1,474		—			1,474
Derivatives:⁽³⁾
Interest rate contracts	105		23,219		—		23,324		—			23,324
Foreign exchange contracts	36		14,747		10		14,793		—			14,793
Equity contracts	—		2,291		101		2,392		—			2,392
Precious metals contracts	33		483		—		516		—			516
Credit contracts	—		962		6		968		—			968
Other contracts⁽⁴⁾	—		—		52		52		—			52
Derivatives netting	—		—		—		—		(38,986		)	(38,986		)
Total derivatives	174		41,702		169		42,045		(38,986		)	3,059
Short-term borrowings⁽²⁾	—		3,609		—		3,609		—			3,609
Long-term debt⁽²⁾	—		11,805		553		12,358		—			12,358
Total liabilities	$	1,547	$	63,900	$	1,667	$	67,114	$	(38,986	)	$	28,128



	Fair Value Measurements on a Recurring Basis
December 31, 2016	Level 1		Level 2		Level 3		Gross Balance		Netting⁽¹⁾			Net Balance
	(in millions)
Assets:
Securities purchased under agreements to resell⁽²⁾	$	—	$	770	$	—	$	770	$	—		$	770
Trading securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	3,560		246		—		3,806		—			3,806
Collateralized debt obligations	—		—		184		184		—			184
Asset-backed securities:
Residential mortgages	—		96		—		96		—			96
Student loans	—		85		—		85		—			85
Corporate and other domestic debt securities	—		—		2,884		2,884		—			2,884
Debt securities issued by foreign entities	—		3,597		—		3,597		—			3,597
Equity securities	—		15		—		15		—			15
Precious metals trading	—		1,772		—		1,772		—			1,772
Derivatives:⁽³⁾
Interest rate contracts	36		32,163		1		32,200		—			32,200
Foreign exchange contracts	24		24,014		18		24,056		—			24,056
Equity contracts	—		2,171		159		2,330		—			2,330
Precious metals contracts	81		1,038		—		1,119		—			1,119
Credit contracts	—		1,342		208		1,550		—			1,550
Other contracts⁽⁴⁾	—		—		5		5		—			5
Derivatives netting	—		—		—		—		(56,256		)	(56,256		)
Total derivatives	141		60,728		391		61,260		(56,256		)	5,004
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises	25,145		10,924		—		36,069		—			36,069
Asset-backed securities:
Home equity	—		61		—		61		—			61
Other	—		—		105		105		—			105
Debt securities issued by foreign entities	—		521		—		521		—			521
Equity securities	—		154		—		154		—			154
Loans⁽⁵⁾	—		725		—		725		—			725
Total assets	$	28,846	$	79,694	$	3,564	$	112,104	$	(56,256	)	$	55,848
Liabilities:
Domestic deposits⁽²⁾	$	—	$	6,119	$	1,407	$	7,526	$	—		$	7,526
Trading liabilities, excluding derivatives	1,060		62		—		1,122		—			1,122
Derivatives:⁽³⁾
Interest rate contracts	84		32,568		—		32,652		—			32,652
Foreign exchange contracts	6		22,658		18		22,682		—			22,682
Equity contracts	—		1,714		161		1,875		—			1,875
Precious metals contracts	13		867		—		880		—			880
Credit contracts	—		1,354		15		1,369		—			1,369
Other contracts⁽⁴⁾	—		—		14		14		—			14
Derivatives netting	—		—		—		—		(54,937		)	(54,937		)
Total derivatives	103		59,161		208		59,472		(54,937		)	4,535
Short-term borrowings⁽²⁾	—		2,672		—		2,672		—			2,672
Long-term debt⁽²⁾	—		9,885		499		10,384		—			10,384
Total liabilities	$	1,163	$	77,899	$	2,114	$	81,176	$	(54,937	)	$	26,239


⁽¹⁾	Represents counterparty and cash collateral netting which allow the offsetting of amounts relating to certain contracts if certain conditions are met.


⁽²⁾	See Note 10, "Fair Value Option," for additional information.


⁽³⁾	Includes trading derivative assets of $3,378 million and $4,411 million and trading derivative liabilities of $2,610 million and $3,786 million at September 30, 2017 and December 31, 2016, respectively, as well as derivatives held for hedging and commitments accounted for as derivatives.


⁽⁴⁾	Consists of swap agreements entered into in conjunction with the sales of certain Visa Class B Shares.


⁽⁵⁾	Includes certain commercial loans held for sale which we have elected to apply the fair value option. See Note 6, "Loans Held for Sale," for further information.


⁽⁶⁾	Represents contingent consideration receivable associated with the sale of a portion of our Private Banking business.

Changes in Fair Value of Level 3 Assets and Liabilities

The following table summarizes additional information about changes in the fair value of Level 3 assets and liabilities during the three and nine months ended September 30, 2017 and 2016. As a risk management practice, we may risk manage the Level 3 assets and liabilities, in whole or in part, using securities and derivative positions that are classified as Level 1 or Level 2 measurements within the fair value hierarchy. Since those Level 1 and Level 2 risk management positions are not included in the table below, the information provided does not reflect the effect of such risk management activities related to the Level 3 assets and liabilities.



	Jul. 1, 2017			Total Realized / Unrealized Gains (Losses) Included in						Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2017			Current Period Unrealized Gains (Losses)
	Jul. 1, 2017			Earnings			Other Compre-hensive Income			Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2017			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:⁽¹⁾
Collateralized debt obligations	$	131		$	2		$	—		$	—	$	—		$	(8	)	$	—		$	—		$	125		$	1
Corporate and other domestic debt securities	1,803			—			—			—		—			—			—			—			1,803			—
Derivatives, net:⁽²⁾
Interest rate contracts	—			—			—			—		—			—			—			—			—			—
Foreign exchange contracts	—			—			—			—		—			—			—			—			—			—
Equity contracts	32			33			—			—		—			(7		)	—			(2		)	56			26
Credit contracts	143			(5		)	—			—		—			(23		)	—			—			115			(2		)
Other contracts⁽³⁾	(44		)	(5		)	—			—		—			3			—			—			(46		)	—
Other asset-backed securities available-for-sale⁽⁴⁾	107			3			—			—		—			—			—			—			110			2
Other assets⁽⁵⁾	—			15			—			—		—			—			—			—			15			15
Total assets	$	2,172		$	43		$	—		$	—	$	—		$	(35	)	$	—		$	(2	)	$	2,178		$	42
Liabilities:
Domestic deposits⁽⁶⁾	$	(1,142	)	$	(19	)	$	(3	)	$	—	$	(50	)	$	191		$	(4	)	$	82		$	(945	)	$	(17	)
Long-term debt⁽⁶⁾	(541		)	(22		)	(1		)	—		(44		)	28			—			27			(553		)	(21		)
Total liabilities	$	(1,683	)	$	(41	)	$	(4	)	$	—	$	(94	)	$	219		$	(4	)	$	109		$	(1,498	)	$	(38	)



	Jan. 1, 2017			Total Realized / Unrealized Gains (Losses) Included in						Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3		Sep. 30, 2017			Current Period Unrealized Gains (Losses)
	Jan. 1, 2017			Earnings			Other Compre-hensive Income			Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3		Sep. 30, 2017			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:⁽¹⁾
Collateralized debt obligations	$	184		$	20		$	—		$	—	$	—		$	(79	)	$	—		$	—	$	125		$	6
Corporate and other domestic debt securities	2,884			—			—			—		—			(1,081		)	—			—		1,803			—
Derivatives, net:⁽²⁾
Interest rate contracts	1			(1		)	—			—		—			—			—			—		—			(1		)
Foreign exchange contracts	—			—			—			—		—			—			—			—		—			—
Equity contracts	(2		)	72			—			—		—			(15		)	—			1		56			52
Credit contracts	193			(9		)	—			—		—			(69		)	—			—		115			(18		)
Other contracts⁽³⁾	(9		)	(7		)	—			—		(35		)	5			—			—		(46		)	—
Other asset-backed securities available-for-sale⁽⁴⁾	105			5			—			—		—			—			—			—		110			5
Other assets⁽⁵⁾	—			15			—			—		—			—			—			—		15			15
Total assets	$	3,356		$	95		$	—		$	—	$	(35	)	$	(1,239	)	$	—		$	1	$	2,178		$	59
Liabilities:
Domestic deposits⁽⁶⁾	$	(1,407	)	$	(33	)	$	9		$	—	$	(141	)	$	468		$	(25	)	$	184	$	(945	)	$	(18	)
Long-term debt⁽⁶⁾	(499		)	(62		)	(7		)	—		(166		)	106			(2		)	77		(553		)	(56		)
Total liabilities	$	(1,906	)	$	(95	)	$	2		$	—	$	(307	)	$	574		$	(27	)	$	261	$	(1,498	)	$	(74	)



	Jul. 1, 2016			Total Realized / Unrealized Gains (Losses) Included in					Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2016			Current Period Unrealized Gains (Losses)
	Jul. 1, 2016			Earnings			Other Compre-hensive Income		Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2016			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:⁽¹⁾
Collateralized debt obligations	$	201		$	4		$	—	$	—	$	—		$	(14	)	$	—		$	—		$	191		$	2
Corporate and other domestic debt securities	2,879			1			—		4		—			—			—			—			2,884			1
Derivatives, net:⁽²⁾
Interest rate contracts	1			—			—		—		—			—			—			—			1			—
Foreign exchange contracts	—			—			—		—		—			—			—			—			—			—
Equity contracts	(15		)	20			—		—		—			(2		)	(1		)	3			5			—
Credit contracts	188			11			—		—		—			8			—			—			207			(3		)
Mortgage servicing rights⁽⁷⁾	104			(4		)	—		—		—			(5		)	—			(95		)	—			(4		)
Total assets	$	3,358		$	32		$	—	$	4	$	—		$	(13	)	$	(1	)	$	(92	)	$	3,288		$	(4	)
Liabilities:
Domestic deposits⁽⁶⁾	$	(1,677	)	$	(3	)	$	—	$	—	$	(42	)	$	300		$	(39	)	$	57		$	(1,404	)	$	(26	)
Long-term debt⁽⁶⁾	(573		)	(31		)	—		—		(86		)	110			—			67			(513		)	(42		)
Total liabilities	$	(2,250	)	$	(34	)	$	—	$	—	$	(128	)	$	410		$	(39	)	$	124		$	(1,917	)	$	(68	)



	Jan. 1, 2016			Total Realized / Unrealized Gains (Losses) Included in					Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2016			Current Period Unrealized Gains (Losses)
	Jan. 1, 2016			Earnings			Other Compre-hensive Income		Purch- ases		Issu- ances			Settle- ments			Transfers Into Level 3			Transfers Out of Level 3			Sep. 30, 2016			Current Period Unrealized Gains (Losses)
	(in millions)
Assets:
Trading assets, excluding derivatives:⁽¹⁾
Collateralized debt obligations	$	221		$	(4	)	$	—	$	—	$	—		$	(26	)	$	—		$	—		$	191		$	(9	)
Corporate and other domestic debt securities	2,870			—			—		14		—			—			—			—			2,884			—
Derivatives, net:⁽²⁾
Interest rate contracts	1			—			—		—		—			—			—			—			1			—
Foreign exchange contracts	—			—			—		—		—			—			—			—			—			—
Equity contracts	(83		)	75			—		—		—			10			—			3			5			50
Credit contracts	179			27			—		—		—			1			—			—			207			18
Mortgage servicing rights⁽⁷⁾	140			(28		)	—		—		—			(17		)	—			(95		)	—			(28		)
Total assets	$	3,328		$	70		$	—	$	14	$	—		$	(32	)	$	—		$	(92	)	$	3,288		$	31
Liabilities:
Domestic deposits⁽⁶⁾	$	(1,867	)	$	(74	)	$	—	$	—	$	(206	)	$	599		$	(54	)	$	198		$	(1,404	)	$	(46	)
Long-term debt⁽⁶⁾	(746		)	(23		)	—		—		(216		)	259			—			213			(513		)	(23		)
Total liabilities	$	(2,613	)	$	(97	)	$	—	$	—	$	(422	)	$	858		$	(54	)	$	411		$	(1,917	)	$	(69	)


⁽¹⁾	Gains (losses) on trading assets, excluding derivatives are included in trading revenue in the consolidated statement of income.


⁽²⁾	Level 3 net derivatives included derivative assets of $294 million and derivative liabilities of $169 million at September 30, 2017 and derivative assets of $335 million and derivative liabilities of $122 million at September 30, 2016. Gains (losses) on derivatives, net are predominantly included in trading revenue in the consolidated statement of income.


⁽³⁾	Consists of swap agreements entered into in conjunction with the sales of certain Visa Class B Shares.


⁽⁴⁾	Realized gains (losses) on securities available-for-sale are included in other securities gains, net in the consolidated statement income. Unrealized gains (losses) on securities available-for-sale are included in other comprehensive income (loss).


⁽⁵⁾	Represents contingent consideration receivable associated with the sale of a portion of our Private Banking business. Gains (losses) associated with this transaction are included in other income (loss) in the consolidated statement of income.


⁽⁶⁾	See Note 10, "Fair Value Option," for additional information. Beginning January 1, 2017, unrealized gains (losses) on fair value option liabilities attributable to our own credit spread is recorded in other comprehensive income (loss).


⁽⁷⁾	During the fourth quarter of 2016, we sold our remaining residential mortgage servicing rights portfolio to a third party. Gains (losses) on residential mortgage servicing rights were included in residential mortgage banking revenue (expense) in the consolidated statement of income.

Quantitative Information about Recurring Fair Value Measurement of Assets and Liabilities Classified as Level 3

The following table presents quantitative information about the unobservable inputs used to determine the recurring fair value measurement of assets and liabilities classified as Level 3 fair value measurements at September 30, 2017 and December 31, 2016:



September 30, 2017
Financial Instrument Type	Fair Value (in millions)			Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Collateralized debt obligations	$	125		Broker quotes or consensus pricing and, where applicable, discounted cash flows	Prepayment rates	1% - 6%
					Conditional default rates	6% - 8%
					Loss severity rates	85%
Corporate and other domestic debt securities	$	1,803		Discounted cash flows	Spread volatility on collateral assets	2% - 4%
					Correlation between insurance claim shortfall and collateral value	80%
Interest rate derivative contracts	$	—		Market comparable adjusted for probability to fund	Probability to fund for rate lock commitments	38% - 100%
Foreign exchange derivative contracts⁽¹⁾	$	—		Option pricing model	Implied volatility of currency pairs	8% - 12%
Equity derivative contracts⁽¹⁾	$	56		Option pricing model	Equity / Equity Index volatility	7% - 43%
					Equity / Equity and Equity / Index correlation	44% - 80%
					Equity dividend yields	0% - 9%
Credit derivative contracts	$	115		Option pricing model and, where applicable, discounted cash flows	Issuer by issuer correlation of defaults	82% - 83%
					Credit default swap spreads	181bps - 199bps
Other derivative contracts	$	(46	)	Discounted cash flows	Conversion rate	1.6 times
					Expected duration	2 - 5 years
Other asset-backed securities available-for-sale	$	110		Discounted cash flows	Market assumptions related to yields for comparable instruments	1% - 3%
Other assets	$	15		Discounted cash flows	Client transfer rates based on rating	50% - 95%
Domestic deposits (structured deposits)⁽¹⁾⁽²⁾	$	(945	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	8% - 12%
					Equity / Equity Index volatility	7% - 43%
					Equity / Equity and Equity / Index correlation	44% - 80%
Long-term debt (structured notes)⁽¹⁾⁽²⁾	$	(553	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	8% - 12%
					Equity / Equity Index volatility	7% - 43%
					Equity / Equity and Equity / Index correlation	44% - 80%



December 31, 2016
Financial Instrument Type	Fair Value (in millions)			Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Collateralized debt obligations	$	184		Broker quotes or consensus pricing and, where applicable, discounted cash flows	Prepayment rates	1% - 6%
					Conditional default rates	6% - 8%
					Loss severity rates	85%
Corporate and other domestic debt securities	$	2,884		Discounted cash flows	Spread volatility on collateral assets	3% - 4%
					Correlation between insurance claim shortfall and collateral value	80%
Interest rate derivative contracts	$	1		Market comparable adjusted for probability to fund	Probability to fund for rate lock commitments	38% - 100%
Foreign exchange derivative contracts⁽¹⁾	$	—		Option pricing model	Implied volatility of currency pairs	15% - 21%
Equity derivative contracts⁽¹⁾	$	(2	)	Option pricing model	Equity / Equity Index volatility	11% - 49%
					Equity / Equity and Equity / Index correlation	45% - 57%
					Equity dividend yields	0% - 14%
Credit derivative contracts	$	193		Option pricing model and, where applicable, discounted cash flows	Issuer by issuer correlation of defaults	82% - 83%
					Credit default swap spreads	150bps - 173bps
Other derivative contracts	$	(9	)	Discounted cash flows	Conversion rate	1.6 times
					Expected duration	3 - 5 years
Other asset-backed securities available-for-sale	$	105		Discounted cash flows	Market assumptions related to yields for comparable instruments	1% - 4%
Domestic deposits (structured deposits)⁽¹⁾⁽²⁾	$	(1,407	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	15% - 21%
					Equity / Equity Index volatility	11% - 49%
					Equity / Equity and Equity / Index correlation	45% - 57%
Long-term debt (structured notes)⁽¹⁾⁽²⁾	$	(499	)	Option adjusted discounted cash flows	Implied volatility of currency pairs	15% - 21%
					Equity / Equity Index volatility	11% - 49%
					Equity / Equity and Equity / Index correlation	45% - 57%


⁽¹⁾	We are the client-facing entity and we enter into identical but opposite derivatives to transfer the resultant risks to our affiliates. With the exception of counterparty credit risks, we are market neutral. The corresponding intra-group derivatives are presented as equity derivatives and foreign exchange derivatives in the table.


⁽²⁾	Structured deposits and structured notes contain embedded derivative features whose fair value measurements contain significant Level 3 inputs.

Assets and Liabilities Recorded at Fair Value on a Non Recurring Basis

The following table presents the fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded at September 30, 2017 and December 31, 2016. The gains (losses) during the three and nine months ended September 30, 2017 and 2016 are also included.



	Non-Recurring Fair Value Measurements at September 30, 2017								Total Gains (Losses) For the Three Months Ended September 30, 2017			Total Gains (Losses) For the Nine Months Ended September 30, 2017
	Level 1		Level 2		Level 3		Total
	(in millions)
Residential mortgage loans held for sale⁽¹⁾	$	—	$	—	$	3	$	3	$	—		$	7
Consumer loans⁽²⁾	—		21		—		21		(2		)	(10		)
Commercial loans held for sale⁽³⁾	—		34		—		34		4			4
Impaired commercial loans⁽⁴⁾	—		—		333		333		38			87
Real estate owned⁽⁵⁾	—		10		—		10		2			6
Total assets at fair value on a non-recurring basis	$	—	$	65	$	336	$	401	$	42		$	94



	Non-Recurring Fair Value Measurements at December 31, 2016								Total Gains (Losses) For the Three Months Ended September 30, 2016			Total Gains (Losses) For the Nine Months Ended September 30, 2016
	Level 1		Level 2		Level 3		Total
	(in millions)
Residential mortgage loans held for sale⁽¹⁾	$	—	$	6	$	769	$	775	$	(17	)	$	(61	)
Consumer loans⁽²⁾	—		46		—		46		(10		)	(19		)
Commercial loans held for sale⁽³⁾	—		79		—		79		(7		)	(37		)
Impaired commercial loans⁽⁴⁾	—		—		278		278		7			(295		)
Real estate owned⁽⁵⁾	—		17		—		17		2			6
Total assets at fair value on a non-recurring basis	$	—	$	148	$	1,047	$	1,195	$	(25	)	$	(406	)

⁽¹⁾

At September 30, 2017 and December 31, 2016, the fair value of the loans held for sale was below cost. Certain residential mortgage loans held for sale have been classified as Level 3 fair value measurements within the fair value hierarchy, including certain residential mortgage loans held for sale for which the underlying real estate properties used to determine fair value are illiquid assets as a result of market conditions and, at December 31, 2016, certain residential mortgage loans which were transferred to held for sale during 2016 and substantially sold during the nine months ended September 30, 2017 for which significant inputs in estimating fair value were unobservable. Additionally, the fair value of these properties is affected by, among other things, the location, the payment history and the completeness of the loan documentation.


⁽²⁾	Represents residential mortgage loans held for investment whose carrying amount was reduced during the periods presented based on the fair value of the underlying collateral. Total gains (losses) for the three and nine months ended September 30, 2016 include amounts recorded on loans that were subsequently transferred to held for sale.


⁽³⁾	At September 30, 2017 and December 31, 2016, the fair value of the loans held for sale was below cost.

⁽⁴⁾

Certain commercial loans have undergone troubled debt restructurings and are considered impaired. As a matter of practical expedient, we measure the credit impairment of a collateral-dependent loan based on the fair value of the collateral asset. The collateral often involves real estate properties that are illiquid due to market conditions. As a result, these loans are classified as a Level 3 fair value measurement within the fair value hierarchy.


⁽⁵⁾	Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value unadjusted for transaction costs.

Quantitative Information about Non Recurring Fair Value Measurement of Assets and Liabilities

The following tables present quantitative information about non-recurring fair value measurements of assets and liabilities classified with Level 3 of the fair value hierarchy at September 30, 2017 and December 31, 2016:



At September 30, 2017
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Residential mortgage loans held for sale	$	3	Third party appraisal valuation based on estimated loss severities, including collateral values	Loss severity rates	6% - 100%
Impaired commercial loans	333		Valuation of third party appraisal on underlying collateral	Loss severity rates	3% - 100%



At December 31, 2016
Financial Instrument Type	Fair Value (in millions)		Valuation Technique(s)	Significant Unobservable Inputs	Range of Inputs
Residential mortgage loans held for sale	$	769	Third party appraisal valuation based on estimated loss severities,	Loss severity rates	0% - 100%
			including collateral values and market discount rate	Market discount rate	8% - 14%
Impaired commercial loans	278		Valuation of third party appraisal on underlying collateral	Loss severity rates	4% - 100%

Additional Information Relating to Asset-Backed Securities and Collateralized Debt Obligations

The following tables provide additional information relating to asset-backed securities as well as certain collateralized debt obligations held at September 30, 2017:

Trading asset-backed securities:



Rating of Securities:⁽¹⁾	Collateral Type:	Level 2		Level 3		Total
		(in millions)
AAA -A	Residential mortgages - Alt A	$	31	$	—	$	31
	Residential mortgages - Subprime	25		—		25
	Student loans	91		—		91
	Total AAA -A	147		—		147
BBB -B	Collateralized debt obligations	—		125		125
CCC-Unrated	Residential mortgages - Subprime	16		—		16
		$	163	$	125	$	288

Available-for-sale securities backed by collateral:



Rating of Securities:⁽¹⁾	Collateral Type:	Level 2		Level 3		Total
		(in millions)
AAA -A	Home equity - Alt A	$	54	$	—	$	54
	Other	400		110		510
	Total AAA -A	$	454	$	110	$	564


⁽¹⁾	We utilize Standard and Poor's ("S&P") as the primary source of credit ratings in the tables above. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Ratings for collateralized debt obligations represent the ratings associated with the underlying collateral.