Fair Value Option (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021
Student loans held for investment	$	27	$	29	$	(2)
Commercial loans held for sale	63		63		—


Fixed rate long-term debt	945		741		204
Hybrid instruments:
Structured deposits	2,970		2,706		264
Structured notes	8,790		7,609		1,181
At December 31, 2020
Student loans held for investment	$	32	$	34	$	(2)
Commercial loans held for sale	36		36		—


Fixed rate long-term debt	1,030		741		289
Hybrid instruments:
Structured deposits	4,155		3,844		311
Structured notes	9,695		8,332		1,363

Components of Gain on Instruments at Fair Value and Related Derivatives

The following table summarizes the components of gain on instruments designated at fair value and related derivatives reflected in the consolidated statement of income (loss) for the three and nine months ended September 30, 2021 and 2020:


	Loans and Loans Held for Sale		Long-Term Debt		Hybrid Instruments		Total
	(in millions)
Three Months Ended September 30, 2021
Interest rate and other components(1)	$	—	$	16	$	62	$	78
Credit risk component(2)	—		—		—		—
Total mark-to-market on financial instruments designated at fair value	—		16		62		78
Mark-to-market on related derivatives	—		(19)		(61)		(80)
Net realized gain on related long-term debt derivatives	—		10		—		10
Gain (loss) on instruments designated at fair value and related derivatives	$	—	$	7	$	1	$	8

Three Months Ended September 30, 2020
Interest rate and other components(1)	$	—	$	18	$	(292)	$	(274)
Credit risk component(2)	(4)		—		—		(4)
Total mark-to-market on financial instruments designated at fair value	(4)		18		(292)		(278)
Mark-to-market on related derivatives	—		(24)		307		283
Net realized gain on related long-term debt derivatives	—		10		—		10
Gain (loss) on instruments designated at fair value and related derivatives	$	(4)	$	4	$	15	$	15

Nine Months Ended September 30, 2021
Interest rate and other components(1)	$	—	$	75	$	(791)	$	(716)
Credit risk component(2)	1		—		—		1
Total mark-to-market on financial instruments designated at fair value	1		75		(791)		(715)
Mark-to-market on related derivatives	—		(85)		804		719
Net realized gain on related long-term debt derivatives	—		29		—		29
Gain (loss) on instruments designated at fair value and related derivatives	$	1	$	19	$	13	$	33

Nine Months Ended September 30, 2020
Interest rate and other components(1)	$	—	$	(114)	$	198	$	84
Credit risk component(2)(3)	(53)		—		—		(53)
Total mark-to-market on financial instruments designated at fair value	(53)		(114)		198		31
Mark-to-market on related derivatives	37		126		(203)		(40)
Net realized gain on related long-term debt derivatives	—		24		—		24
Gain (loss) on instruments designated at fair value and related derivatives	$	(16)	$	36	$	(5)	$	15

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

(2)The fair value movement on fair value option liabilities attributable to our own credit spread is recorded in other comprehensive income (loss).

(3)During the nine months ended September 30, 2020, the loss in the credit risk component for loans and loans held for sale was attributable to the widening of credit spreads associated with certain commercial loans held for sale which were impacted by the COVID-19 pandemic.