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Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2021
Credit Loss [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
As discussed further in Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," beginning January 1, 2020, an allowance for credit losses is recognized based on lifetime ECL for loans, securities held-to-maturity and certain other financial assets measured at amortized cost, and an allowance for credit losses is also recognized for securities available-for-sale. Prior to January 1, 2020, an allowance for credit losses was recognized based on probable incurred losses for loans only while debt securities were assessed for other-than-temporary impairment. In addition, beginning January 1, 2020, the liability for off-balance sheet credit exposures is recognized based on lifetime ECL while, prior to January 1, 2020, it was recognized based on probable incurred losses. The new guidance also requires inclusion of expected recoveries of amounts previously written off, limited to the cumulative amount of prior write-offs, when estimating the allowance for credit losses for in scope financial assets (including collateral-dependent assets). Prior to January 1, 2020, these expected recoveries were not recognized.
Description of Economic Scenarios at December 31, 2021 and Other Changes During the Year Ended December 31, 2021 Although economic conditions improved during 2021, the impact of the COVID-19 pandemic continues to create uncertainty about the future economic environment. As a result, we updated our three Consensus Economic Scenarios and our Alternative Downside scenario to reflect management's current view of forecasted economic conditions and utilized the four updated scenarios for estimating lifetime ECL at December 31, 2021. Each of the four scenarios were assigned weightings with the majority of the weighting placed on the Central scenario, lower equal weights placed on the Downside and Alternative Downside scenarios, and the lowest weighting placed on the Upside scenario. This weighting was deemed appropriate for the estimation of lifetime ECL under current conditions. The following discussion summarizes the Central, Upside, Downside and Alternative Downside scenarios at December 31, 2021. The economic assumptions described in this section have been formed specifically for the purpose of calculating ECL.
In the Central scenario, GDP maintains its strong recovery path and carries its expansion into 2022, under the assumption that economic activities continue to grow while impact from new COVID-19 infections subsides. With a strong economic recovery, the unemployment rate continues on its downward trend, while demand for housing, combined with limited supply, continues to drive the residential housing market to carry its growth momentum into 2022. Commercial real estate prices continue the recent trend of appreciation, after a period of sluggish growth driven by pandemic induced adjustments. In the financial markets, growth in financial asset prices remains moderate, the federal funds rate remains at the current near-zero level until mid-2022, and the 10-year U.S. Treasury yield continues to rise.
In the Upside scenario, the economy is assumed to grow at a faster pace than in the Central scenario. As a result, the unemployment rate falls faster than in the Central scenario and, both commercial and residential real estate prices grow at faster rates than in the Central Scenario. In this scenario, the equity price index climbs with strong momentum, and overall optimism allows the Federal Reserve Board ("FRB") to start normalizing monetary policy earlier than currently anticipated, which consequently drives the 10-year U.S. Treasury yield to a level that is substantially higher than in the Central Scenario.
In the Downside scenario, the economy stagnates, with the unemployment rate reversing its downward trend and remaining at a higher level. In this scenario, the residential housing market slowly loses its momentum in 2022 due to weakness in the labor market, and the commercial real estate market suffers a heavier deceleration than the residential housing market. The equity price index in this scenario loses about half of its value by the middle of 2023, driven by an overall erosion of consumer and business sentiments, which also results in a lower 10-year U.S. Treasury yield than in the Central Scenario, and the federal funds rate remains at the lowest level for the next two years.
In the Alternative Downside scenario, the U.S. economy re-enters into a recession in early 2022 and stays in until mid-2023, followed by a very anemic recovery thereafter. An extended period of economic contraction keeps the unemployment rate at a very high level, which pressures residential housing prices to fall moderately, while at the same time, contracting corporate activities and rising unemployment pushes the commercial real estate market into a severe downturn. In this scenario, financial markets experience a major sell-off and volatility in the financial markets remains extremely high over the next year, widening corporate credit spreads substantially, and flight to safe haven assets pushes the 10-year U.S. Treasury yield lower.
The following table presents the forecasted key macroeconomic variables in our Central scenarios used for estimating lifetime ECL at December 31, 2021 and December 31, 2020:
For the Quarter Ended
June 30, 2022December 31, 2022
Unemployment rate (quarterly average):
Forecast at December 31, 20214.3 %4.0 %
Forecast at December 31, 20205.9 5.4 
GDP growth rate (year-over-year):
Forecast at December 31, 20214.1 2.8 
Forecast at December 31, 20203.1 1.8 
In addition to the updates to the economic scenarios, we decreased the management judgment allowance on our commercial loan portfolio for risk factors associated with economic uncertainty, large loan exposures and higher risk industry exposures that are not fully captured in the models. The decrease for risk factors associated with higher risk industry exposures reflects the transfer of certain commercial real estate loans to held for sale during the third quarter of 2021, which resulted in the reversal of the existing allowance for credit losses on these loans totaling $24 million. We also decreased the management judgment allowance on our consumer loan portfolio for risk factors associated with economic uncertainty and forbearance accounts that are not fully captured in the models. The decrease in the management judgment allowance on our consumer loan portfolio reflects the transfers of certain loans to held for sale. As previously disclosed, during the second quarter of 2021, we made the decision to exit our mass market retail banking business as well as our remaining retail credit card portfolio which resulted in the transfer of certain loans to held for sale and the reversal or charge-off of the existing allowances for credit losses on these loans which collectively totaled $157 million. During the fourth quarter of 2021, a portfolio of Premier credit cards was transferred back to held for investment which resulted in an increase in the allowance for credit losses of $14 million. During the fourth quarter of 2021, we also transferred certain non-performing mortgage loans and government-backed mortgage loans to held for sale which resulted in the reversal of the existing allowance for expected recoveries on these loans totaling $22 million.
While we believe that the assumptions used in our credit loss models are reasonable within the parameters for which the models have been built and calibrated to operate, the severe projections of macro-economic variables during the current COVID-19 pandemic represent events outside the parameters for which the models have been built. As a result, adjustments to model outputs to reflect consideration of management judgment are used with stringent governance in place to ensure an appropriate lifetime ECL estimate.
The circumstances around the COVID-19 pandemic are evolving and will continue to impact our business and our allowance for credit losses in future periods. The details of how various U.S. Government actions will impact our customers and therefore the impact on our allowance for credit losses remains uncertain. We will continue to monitor the COVID-19 situation closely and will continue to adapt our Consensus Economic Scenarios approach as necessary to reflect management's current view of forecasted economic conditions.
Allowance for Credit Losses / Liability for Off-Balance Sheet Credit Exposures The following table summarizes our allowance for credit losses and the liability for off-balance sheet credit exposures:
At December 31,20212020
 (in millions)
Allowance for credit losses:
Loans$447 $1,015 
Securities held-to-maturity(1)
1 2 
Other financial assets measured at amortized cost(2)
1 2 
Securities available-for-sale(1)
1 1 
Total allowance for credit losses$450 $1,020 
Liability for off-balance sheet credit exposures$103 $237 
(1)See Note 6, "Securities," for additional information regarding the allowance for credit losses associated with our security portfolios.
(2)Primarily includes accrued interest receivables and customer acceptances.
The following table summarizes the changes in the allowance for credit losses on loans by product or line of business during the years ended December 31, 2021, 2020 and 2019:
 Commercial LoansConsumer Loans 
Real Estate, including ConstructionBusiness
and Corporate Banking		Global
Banking		Other
Comm'l		Residential
Mortgages		Home
Equity
Mortgages		Credit
Cards		Other
Consumer		Total Loans
 (in millions)
Year Ended December 31, 2021
Allowance for credit losses – beginning of period
$145 $375 $287 $7 $(9)$22 $161 $27 $1,015 
Provision charged (credited) to income(1)
(72)(107)(174)(3)21 (18)(66)(18)(437)
Charge-offs(1)
— (29)(13)— (19)(5)(89)(10)(165)
Recoveries— 4 — — 15 6 8 1 34 
Net (charge-offs) recoveries— (25)(13)— (4)1 (81)(9)(131)
Allowance for credit losses – end of period
$73 $243 $100 $4 $8 $5 $14 $— $447 
Year Ended December 31, 2020
Allowance for credit losses – beginning of period
$153 $239 $106 $9 $12 $6 $105 $7 $637 
Cumulative effect adjustment to initially apply new accounting guidance for measuring credit losses(2)
(112)(60)51 (5)(86)7 32 3 (170)
Allowance for credit losses – beginning of period, adjusted
41 179 157 4 (74)13 137 10 467 
Provision charged (credited) to income116 274 149 2 55 6 107 27 736 
Charge-offs(12)(90)(20)— (2)(3)(90)(11)(228)
Recoveries— 12 1 1 12 6 7 1 40 
Net (charge-offs) recoveries(12)(78)(19)1 10 3 (83)(10)(188)
Allowance for credit losses – end of period
$145 $375 $287 $7 $(9)$22 $161 $27 $1,015 
Year Ended December 31, 2019
Allowance for credit losses – beginning of period
$116 $219 $108 $15 $13 $7 $58 $5 $541 
Provision charged (credited) to income37 62 1 (6)(3)(2)101 5 195 
Charge-offs— (45)(3)— (8)(4)(60)(5)(125)
Recoveries— 3 — — 10 5 6 2 26 
Net (charge-offs) recoveries— (42)(3)— 2 1 (54)(3)$(99)
Allowance for credit losses – end of period
$153 $239 $106 $9 $12 $6 $105 $7 $637 
(1)For loans that are transferred to held for sale, the existing allowance for credit losses at the time of transfer is recognized as a charge-off to the extent fair value is less than amortized cost and attributable to credit. Any remaining allowance for credit losses is released to the provision for credit losses.
During the second quarter of 2021, we made the decision to exit our mass market retail banking business as well as our remaining retail credit card portfolio which resulted in the transfer of certain loans to held for sale. As a result of transferring these loans to held for sale, we recognized $56 million of the existing allowance for credit losses on consumer loans as charge-offs, primarily related to non-performing credit cards, and released $100 million of the existing allowance for credit losses on consumer loans as reductions to the provision for credit losses, primarily related to credit cards. The existing commercial allowance for credit losses on the retail business banking loan portfolio transferred to held for sale was not material. See Note 4, "Branch Assets and Liabilities Held for Sale." During the fourth quarter of 2021, a portfolio of Premier credit cards was transferred back to held for investment which resulted in increases to the allowance for credit losses and provision for credit losses of $14 million.
During the third quarter of 2021, we transferred certain commercial real estate loans to held for sale and, as a result, we released $24 million of the existing allowance for credit losses as a reduction to the provision for credit losses.
During the fourth quarter of 2021, we also transferred certain non-performing mortgage loans and government-backed mortgage loans to held for sale. As a result, we recognized $4 million of the existing allowance for credit losses as charge-offs and released $22 million of the existing allowance for expected recoveries on these loans as an increase to the provision for credit losses.
(2)Reflects the adoption of new accounting guidance in 2020 as discussed above. In addition, see Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," for further discussion.
The following table summarizes the changes in the liability for off-balance sheet credit exposures during the years ended December 31, 2021, 2020 and 2019:
Year Ended December 31,202120202019
 (in millions)
Balance at beginning of period$237 $104 $96 
Cumulative effect adjustment to initially apply new accounting guidance for measuring credit losses(1)
— 54 — 
Balance at beginning of period, adjusted237 158 96 
Provision charged (credited) to income(134)79 8 
Balance at end of period$103 $237 $104 
(1)Reflects the adoption of new accounting guidance in 2020 as discussed above. In addition, see Note 2, "Summary of Significant Accounting Policies and New Accounting Pronouncements," for further discussion.
Accrued Interest Receivables The following table summarizes accrued interest receivables associated with financial assets carried at amortized cost and securities available-for-sale along with the related allowance for credit losses, which are reported net in other assets on the consolidated balance sheet. These accrued interest receivables are excluded from the amortized cost basis disclosures presented elsewhere in these financial statements, including Note 6, "Securities," and Note 7, "Loans."
At December 31,20212020
 (in millions)
Accrued interest receivables:
Loans$109 $140 
Securities held-to-maturity13 23 
Other financial assets measured at amortized cost1 1 
Securities available-for-sale82 100 
Total accrued interest receivables205 264 
Allowance for credit losses 1 2 
Accrued interest receivables, net$204 $262 
During 2021 and 2020, we charged-off accrued interest receivables by reversing interest income for loans of $5 million and $7 million, respectively.