Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments

The following table presents the fair value of derivative contracts by major product type on a gross basis. Gross fair values exclude the effects of both counterparty netting as well as collateral, and therefore are not representative of our exposure. The table below also presents the amounts of counterparty netting and cash collateral that have been offset in the consolidated balance sheet, as well as cash and securities collateral posted and received under enforceable master netting agreements that do not meet the criteria for netting. Derivative assets and liabilities which are not subject to an enforceable master netting agreement, or are subject to a netting agreement where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, have not been netted in the following table. Where we have received or posted collateral under netting agreements where an appropriate legal opinion to determine such agreements are enforceable has not been either sought or obtained, the related collateral also has not been netted in the following table.

	December 31, 2020				December 31, 2019
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in millions)
Derivatives accounted for as fair value hedges(1)
OTC-cleared(2)	$	—	$	—	$	—	$	1
Bilateral OTC(2)	—		2		—		164
Interest rate contracts	—		2		—		165
Derivatives accounted for as cash flow hedges(1)
Foreign exchange contracts - bilateral OTC(2)	—		53		16		20
Interest rate contracts - bilateral OTC(2)	—		—		—		1
Total derivatives accounted for as hedges	—		55		16		186
Trading derivatives not accounted for as hedges(3)
Exchange-traded(2)	14		9		110		3
OTC-cleared(2)	—		58		167		29
Bilateral OTC(2)	6,584		6,555		11,990		13,324
Interest rate contracts(4)	6,598		6,622		12,267		13,356
Exchange-traded(2)	—		—		80		—
OTC-cleared (2)	168		—		—		—
Bilateral OTC(2)	18,299		18,549		16,440		15,786
Foreign exchange contracts	18,467		18,549		16,520		15,786
Equity contracts - Bilateral OTC(2)	4,009		4,200		3,753		3,993
Exchange-traded(2)	—		28		71		80
Bilateral OTC(2)	1,323		1,550		1,087		1,309
Precious metals contracts	1,323		1,578		1,158		1,389
OTC-cleared(2)	—		—		1		—
Bilateral OTC(2)	367		233		1,138		1,024
Credit contracts	367		233		1,139		1,024
Other non-qualifying derivatives not accounted for as hedges(1)
Interest rate contracts - bilateral OTC(2)	89		1		128		51
Foreign exchange contracts - bilateral OTC(2)	—		1		—		—
Equity contracts - bilateral OTC(2)	1,607		91		1,354		75
OTC-cleared(2)	—		14		—		—
Bilateral OTC(2)	—		50		—		44
Credit contracts	—		64		—		44
Other contracts - bilateral OTC(2)(5)	8		67		10		85
Total derivatives	32,468		31,461		36,345		35,989
Less: Gross amounts of receivable / payable subject to enforceable master netting agreements(6)(8)	25,537		25,537		29,510		29,510
Less: Gross amounts of cash collateral received / posted subject to enforceable master netting agreements(7)(8)	4,079		3,377		3,683		4,390
Net amounts of derivative assets / liabilities presented in the balance sheet	2,852		2,547		3,152		2,089
Less: Gross amounts of financial instrument collateral received / posted subject to enforceable master netting agreements but not offset in the consolidated balance sheet	817		691		891		553
Net amounts of derivative assets / liabilities	$	2,035	$	1,856	$	2,261	$	1,536

(1)Derivative assets / liabilities related to cash flow hedges, fair value hedges and derivative instruments held for purposes other than for trading are recorded in other assets / interest, taxes and other liabilities on the consolidated balance sheet.

(2)Over-the-counter ("OTC") derivatives include derivatives executed and settled bilaterally with counterparties without the use of an organized exchange or central clearing house. The credit risk associated with bilateral OTC derivatives is managed through obtaining collateral and enforceable master netting agreements. OTC-cleared derivatives are executed bilaterally in the OTC market but then novated to a central clearing counterparty, whereby the central clearing counterparty becomes the counterparty to each of the original counterparties. Exchange traded derivatives are executed directly on an organized exchange. Credit risk is minimized for OTC-cleared derivatives and exchange traded derivatives through daily margining requirements. In addition, OTC-cleared interest rate and credit derivatives with certain central clearing counterparties are settled daily.

(3)Trading related derivative assets / liabilities are recorded in trading assets / trading liabilities on the consolidated balance sheet.

(4)The decreases in interest rate derivative assets and liabilities at December 31, 2020 primarily reflects reduced positions driven by the exit or transfer of certain contracts as part of our Restructuring Plan. See Note 3, "Strategic Initiatives," for additional information.

(5)Consists of swap agreements entered into in conjunction with the sales of Visa Inc. ("Visa") Class B common shares ("Class B Shares").

(6)Represents the netting of derivative receivable and payable balances for the same counterparty under enforceable netting agreements.

(7)Represents the netting of cash collateral posted and received by counterparty under enforceable netting agreements.

(8)Netting is performed at a counterparty level in cases where enforceable master netting agreements are in place, regardless of the type of derivative instrument. Therefore, we have not allocated netting to the different types of derivative instruments shown in the table above.

^[1]

Schedule of Gains and Losses on Fair Value Hedging Instruments

The following table presents the carrying amount of hedged items in fair value hedges recognized in the consolidated balance sheet at December 31, 2020 and 2019, along with the cumulative amount of fair value hedging adjustments included in the carrying amount of those hedged items:

	Carrying Amount of Hedged Items(1)		Cumulative Amount of Fair Value Hedging Adjustments Increasing (Decreasing) the Carrying Amount of Hedged Items
			Active		Discontinued		Total
	(in millions)
At December 31, 2020
Securities available-for-sale ("AFS")	$	7,966	$	681	$	738	$	1,419
Deposits(2)	5,214		214		—		214
Long-term debt	2,227		242		(15)		227
At December 31, 2019
Securities AFS	7,277		554		428		982
Long-term debt	10,975		285		(32)		253

(1)The carrying amount of securities AFS represents the amortized cost basis.

(2)During 2020, $5.0 billion of fixed-rate senior debt obligations issued to HSBC North America were recharacterized as time deposits. The cumulative amount of fair value hedging adjustments associated with this debt was reclassified to deposits. See Note 23, "Related Party Transactions," for additional information.

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments and the hedged items in fair value hedges and their locations on the consolidated statement of income (loss):

	Gain (Loss) on Derivatives(1)				Gain (Loss) on Hedged Items(1)				Net Ineffective Gain (Loss) Recognized(1)
	Net Interest Income		Other Income		Net Interest Income		Other Income		Other Income
	(in millions)
Year Ended December 31, 2020
Interest rate contracts / Securities AFS	$	(731)	$	—	$	900	$	—	$	—
Interest rate contracts / Deposits	148		—		(261)		—		—
Interest rate contracts / Long-term debt	165		—		(261)		—		—
Total	$	(418)	$	—	$	378	$	—	$	—
Year Ended December 31, 2019
Interest rate contracts / Securities AFS	$	(776)	$	—	$	1,086	$	—	$	—
Interest rate contracts / Long-term debt	235		—		(703)		—		—
Total	$	(541)	$	—	$	383	$	—	$	—
Year Ended December 31, 2018
Interest rate contracts / Securities AFS	$	(41)	$	322	$	362	$	(309)	$	13
Interest rate contracts / Long-term debt	(58)		74		(233)		(74)		—
Total	$	(99)	$	396	$	129	$	(383)	$	13

(1)As a result of adopting new accounting guidance in 2019, beginning January 1, 2019, we report gains and losses on the derivatives and the hedged items in fair value hedges in net interest income. Prior to January 1, 2019, fair value hedge ineffectiveness was separately measured and reported in other income.

Schedule of Gains and Losses on Cash Flow Hedging Instruments

The following table presents information on gains and losses on derivative instruments designated and qualifying as hedging instruments in cash flow hedges (including amounts recognized in AOCI from discontinued cash flow hedges) and their locations on the consolidated statement of income (loss):

	Gain (Loss) Recognized in AOCI on Derivatives(1)						Location of Gain (Loss) Reclassified from AOCI into Income(1)	Gain (Loss) Reclassified From AOCI into Income(1)
	2020		2019		2018			2020		2019		2018
	(in millions)
Year Ended December 31,
Foreign exchange contracts	$	—	$	3	$	(2)	Net interest income	$	—	$	—	$	—
Interest rate contracts	84		(27)		31		Net interest income	(11)		(35)		(23)
Total	$	84	$	(24)	$	29		$	(11)	$	(35)	$	(23)

(1)As a result of adopting new accounting guidance in 2019, beginning January 1, 2019, gains and losses on the derivatives in cash flow hedges are initially reported in AOCI and then reclassified into earnings in the same accounting period in which the designated forecasted transaction or hedged item affects earnings. Prior to January 1, 2019, cash flow hedge ineffectiveness was separately measured and reported immediately in other income. Cash flow hedge ineffectiveness was immaterial during 2018.

Schedule of Gains and Losses on Derivative Instruments Included in Trading Activities

The following table presents information on gains and losses on derivative instruments held for trading purposes and their locations on the consolidated statement of income (loss):

	Location of Gain (Loss) Recognized in Income on Derivatives	Gain (Loss) Recognized in Income on Derivatives
		Year Ended December 31,
		2020		2019		2018
		(in millions)
Interest rate contracts	Trading revenue	$	396	$	(89)	$	303
Foreign exchange contracts	Trading revenue	(747)		310		105
Equity contracts	Trading revenue	57		(496)		100
Precious metals contracts	Trading revenue	594		312		376
Credit contracts	Trading revenue	(556)		(445)		(52)
Total		$	(256)	$	(408)	$	832

Schedule of Gains and Losses on Derivative Instruments Held for Non-qualifying Hedging Activities

The following table presents information on gains and losses on derivative instruments held for non-qualifying hedging and other activities and their locations on the consolidated statement of income (loss):

	Location of Gain (Loss) Recognized in Income on Derivatives	Gain (Loss) Recognized in Income on Derivatives
		Year Ended December 31,
		2020		2019		2018
		(in millions)
Interest rate contracts	Gain (loss) on instruments designated at fair value and related derivatives	$	229	$	364	$	(120)
Interest rate contracts	Other income	(6)		(1)		(1)
Foreign exchange contracts	Gain (loss) on instruments designated at fair value and related derivatives	(1)		(3)		(11)
Equity contracts	Gain (loss) on instruments designated at fair value and related derivatives	592		1,809		(981)
Credit contracts	Gain (loss) on instruments designated at fair value and related derivatives	37		—		—
Credit contracts	Other income	(18)		(24)		(3)
Other contracts(1)	Other income	(9)		(63)		(15)
Total		$	824	$	2,082	$	(1,131)

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

Credit-Risk Related Contingent Features

The following table presents the amount of additional collateral that we would be required to post (from the current collateral level) related to derivative instruments with credit-risk related contingent features if our long-term ratings were downgraded by one or two notches. A downgrade by a single rating agency that does not result in a rating lower than a preexisting corresponding rating provided by another rating agency will generally not result in additional collateral.

	One-notch downgrade		Two-notch downgrade
	(in millions)
Amount of additional collateral to be posted upon downgrade	$	—	$	121

Notional Value of Derivative Contracts

The following table summarizes the notional values of derivative contracts:

At December 31,	2020		2019
	(in millions)
Interest rate:
Futures and forwards	$	37,098	$	597,980
Swaps	406,609		2,130,442
Options written	33,269		158,861
Options purchased	32,427		164,265
Total interest rate	509,403		3,051,548
Foreign exchange:
Swaps, futures and forwards	1,195,449		1,362,959
Options written	53,200		44,876
Options purchased	53,595		46,085
Spot	57,040		67,060
Total foreign exchange	1,359,284		1,520,980
Commodities, equities and precious metals:
Swaps, futures and forwards	54,458		55,678
Options written	17,078		39,035
Options purchased	27,083		49,517
Total commodities, equities and precious metals	98,619		144,230
Credit derivatives	52,611		90,049
Other contracts(1)	1,216		1,044
Total	$	2,021,133	$	4,807,851

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

[1] Netting is performed at a counterparty level in cases where enforceable master netting agreements are in place, regardless of the type of derivative instrument. Therefore, we have not allocated netting to the different types of derivative instruments shown in the table above.