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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value Option and Fair Value Measurements [Abstract]

Carrying value and estimated fair value of financial instruments


		June 30, 2012																				December 31, 2011
		Carrying Value				Fair Value				Level 1				Level 2				Level 3				Carrying Value				Fair Value
		(in millions)
Financial assets:
Short-term financial assets		$	20,740			$	20,740			$	1,528			$	18,809			$	403			$	27,534			$	27,534
Federal funds sold and securities purchased under resale agreements			13,666				13,666				-				13,666				-				3,109				3,104
Non-derivative trading assets			25,968				25,968				1,931				21,080				2,957				30,028				30,028
Derivatives			11,255				11,255				25				11,001				229				9,826				9,826
Securities			62,347				62,583				35,383				27,200				-				55,316				55,579
Commercial loans, net of allowance for credit losses			37,078				37,583				-				-				37,583				33,207				33,535
Commercial loans designated under fair value option and held for sale			411				411				-				411				-				378				378
Commercial loans held for sale			464				464				-				-				464				587				587
Consumer loans, net of allowance for credit losses			18,367				15,057				-				-				15,057				17,917				14,301
Consumer loans held for sale:
Residential mortgages			903				918				-				-				918				2,058				2,071
Credit cards			94				94				-				-				94				416				416
Other consumer			110				110				-				-				110				231				231
Financial liabilities:
Short-term financial liabilities		$	11,167			$	11,167			$	-			$	11,167			$	-			$	18,497			$	18,497
Deposits:
Without fixed maturities			108,115				108,115				-				108,115				-				123,720				122,710
Fixed maturities			5,215				5,228				-				5,228				-				6,210				6,232
Deposits designated under fair value option			9,897				9,897				-				6,989				2,908				9,799				9,799
Non-derivative trading liabilities			7,274				7,274				316				6,958				-				7,342				7,342
Derivatives			14,556				14,556				18				14,367				171				8,440				8,440
Long-term debt			13,244				13,310				-				13,310				-				11,666				11,653
Long-term debt designated under fair value option			6,770				6,770				-				6,483				287				5,043				5,043

Assets and Liabilities Recorded at Fair Value on a Recurring Basis


		Fair Value Measurements on a Recurring Basis
		Level 1				Level 2				Level 3				Gross Balance				Netting⁽¹⁾				Net Balance
		(in millions)
June 30, 2012:
Assets:
Trading securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises		$	1,931			$	216			$	-			$	2,147			$	-			$	2,147
Collateralized debt obligations			-				95				658				753				-				753
Asset-backed securities:
Residential mortgages			-				274				-				274				-				274
Corporate and other domestic debt securities			-				950				1,599				2,549				-				2,549
Debt securities issued by foreign entities:
Corporate			-				637				688				1,325				-				1,325
Government			-				4,425				-				4,425				-				4,425
Equity securities			-				24				12				36				-				36
Precious metals trading			-				14,459				-				14,459				-				14,459
Derivatives⁽²⁾:
Interest rate contracts			145				71,454				12				71,611				-				71,611
Foreign exchange contracts			16				15,096				214				15,326				-				15,326
Equity contracts			-				1,035				181				1,216				-				1,216
Precious metals contracts			58				899				8				965				-				965
Credit contracts			-				9,124				1,616				10,740				-				10,740
Other contracts			-				1				-				1				-				1
Derivatives netting			-				-				-				-				(88,604	)			(88,604	)

Total derivatives			219				97,609				2,031				99,859				(88,604	)			11,255
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises			35,342				16,760				-				52,102				-				52,102
Obligations of U.S. states and political subdivisions			-				681				-				681				-				681
Asset-backed securities:
Residential mortgages			-				5				-				5				-				5
Commercial mortgages			-				305				-				305				-				305
Home equity			-				251				-				251				-				251
Student loans			-				9				-				9				-				9
Other			-				85				-				85				-				85
Corporate and other domestic debt securities			-				42				-				42				-				42
Debt securities issued by foreign entities:
Corporate			-				1,374				-				1,374				-				1,374
Government			41				5,415				-				5,456				-				5,456
Equity securities			-				193				-				193				-				193
Loans⁽³⁾			-				446				-				446				-				446
Intangible⁽⁴⁾			-				-				187				187				-				187

Total assets		$	37,533			$	144,255			$	5,175			$	186,963			$	(88,604	)		$	98,359

Liabilities:
Deposits in domestic offices⁽⁵⁾		$	-			$	6,989			$	2,908			$	9,897			$	-			$	9,897
Trading liabilities, excluding derivatives			316				6,958				-				7,274				-				7,274
Derivatives⁽²⁾:
Interest rate contracts			81				71,914				-				71,995				-				71,995
Foreign exchange contracts			4				14,363				239				14,606				-				14,606
Equity contracts			-				835				227				1,062				-				1,062
Precious metals contracts			37				802				8				847				-				847
Credit contracts			-				10,259				695				10,954				-				10,954
Other			-				5				-				5				-				5
Derivatives netting			-				-				-				-				(84,913	)			(84,913	)

Total derivatives			122				98,178				1,169				99,469				(84,913	)			14,556
Long-term debt⁽⁶⁾			-				6,483				287				6,770				-				6,770

Total liabilities		$	438			$	118,608			$	4,364			$	123,410			$	(84,913	)		$	38,497


		Fair Value Measurements on a Recurring Basis
		Level 1				Level 2				Level 3				Gross Balance				Netting⁽¹⁾				Net Balance
		(in millions)
December 31, 2011:
Assets:
Trading securities, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises		$	259			$	38			$	-			$	297			$	-			$	297
Collateralized debt obligations			-				52				703				755				-				755
Asset-backed securities:
Residential mortgages			-				274				-				274				-				274
Home equity			-				1				-				1				-				1
Student loans			-				2				-				2				-				2
Corporate and other domestic debt securities			-				226				1,679				1,905				-				1,905
Debt securities issued by foreign entities:
Corporate			-				1,958				253				2,211				-				2,211
Government			-				7,461				-				7,461				-				7,461
Equity securities			-				27				13				40				-				40
Precious metals trading			-				17,082				-				17,082				-				17,082
Derivatives⁽²⁾:
Interest rate contracts			135				61,565				9				61,709				-				61,709
Foreign exchange contracts			4				15,440				221				15,665				-				15,665
Equity contracts			-				1,047				169				1,216				-				1,216
Precious metals contracts			171				1,641				30				1,842				-				1,842
Credit contracts			-				12,297				2,093				14,390				-				14,390
Derivatives netting			-				-				-				-				(84,996	)			(84,996	)

Total derivatives			310				91,990				2,522				94,822				(84,996	)			9,826
Securities available-for-sale:
U.S. Treasury, U.S. Government agencies and sponsored enterprises			22,467				22,142				-				44,609				-				44,609
Obligations of U.S. states and political subdivisions			-				600				-				600				-				600
Asset-backed securities:
Residential mortgages			-				5				-				5				-				5
Commercial mortgages			-				451				-				451				-				451
Home equity			-				270				-				270				-				270
Student loans			-				12				-				12				-				12
Other			-				80				-				80				-				80
Corporate and other domestic debt securities			-				544				-				544				-				544
Debt securities issued by foreign entities:
Corporate			-				1,235				-				1,235				-				1,235
Government			40				5,295				-				5,335				-				5,335
Equity securities			-				140				-				140				-				140
Loans⁽³⁾			-				367				11				378				-				378
Intangible⁽⁴⁾			-				-				220				220				-				220

Total assets		$	23,076			$	150,252			$	5,401			$	178,729			$	(84,996	)		$	93,733

Liabilities:
Deposits in domestic offices⁽⁵⁾		$	-			$	6,932			$	2,867			$	9,799			$	-			$	9,799
Trading liabilities, excluding derivatives			321				7,021				-				7,342				-				7,342
Derivatives⁽²⁾:
Interest rate contracts			66				62,702				-				62,768				-				62,768
Foreign exchange contracts			13				15,191				222				15,426				-				15,426
Equity contracts			-				999				252				1,251				-				1,251
Precious metals contracts			32				1,186				30				1,248				-				1,248
Credit contracts			-				13,553				740				14,293				-				14,293
Derivatives netting			-				-				-				-				(86,546	)			(86,546	)

Total derivatives			111				93,631				1,244				94,986				(86,546	)			8,440
Long-term debt⁽⁶⁾			-				4,957				86				5,043				-				5,043

Total liabilities		$	432			$	112,541			$	4,197			$	117,170			$	(86,546	)		$	30,624

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

⁽²⁾	Includes trading derivative assets of $9.8 billion and $8.8 billion and trading derivative liabilities of $12.9 billion and $6.8 billion as of June 30, 2012 and December 31, 2011, respectively, as well as derivatives held for hedging and commitments accounted for as derivatives.

⁽³⁾	Includes leveraged acquisition finance and other commercial loans held for sale or risk-managed on a fair value basis for which we have elected to apply the fair value option. See Note 8, “Loans Held for Sale,” for further information.

⁽⁴⁾	Represents residential mortgage servicing rights. See Note 9, “Intangible Assets,” for further information on residential mortgage servicing rights.

⁽⁵⁾	Represents structured deposits risk-managed on a fair value basis for which we have elected to apply the fair value option.

⁽⁶⁾	Includes structured notes and own debt issuances which we have elected to measure on a fair value basis.

Changes in the fair value of Level 3 assets and liabilities


		Apr. 1, 2012				Total Gains and (Losses) Included in⁽¹⁾												Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2012				Current Period Unrealized Gains (Losses)
		Apr. 1, 2012				Trading Revenue (Loss)				Other Revenue				Other Comprehensive Income				Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2012				Current Period Unrealized Gains (Losses)
		(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations		$	661			$	18			$	-			$	-			$	24			$	-			$	(45	)		$	-			$	-			$	658			$	16
Corporate and other domestic debt securities			1,753				(2	)			-				-				19				-				(171	)			-				-				1,599				(6	)
Corporate debt securities issued by foreign entities			294				25				-				-				389				-				(20	)			-				-				688				25
Equity securities			13				(1	)			-				-				-				-				-				-				-				12				(1	)
Derivatives⁽²⁾:
Interest rate contracts			9				-				3				-				-				-				-				-				-				12				3
Foreign exchange contracts			(5	)			(18	)			-				-				-				(5	)			2				-				1				(25	)			(17	)
Equity contracts			(53	)			13				-				-				-				-				(10	)			(1	)			5				(46	)			(1	)
Credit contracts			984				(13	)			-				-				-				-				(50	)			-				-				921				(22	)
Loans⁽³⁾			-				-				-				-				-				-				-				-				-				-				-
Mortgage servicing rights⁽⁴⁾			228				-				(47	)			-				-				(8	)			14				-				-				187				(46	)

Total assets		$	3,884			$	22			$	(44	)		$	-			$	432			$	(13	)		$	(280	)		$	(1	)		$	6			$	4,006			$	(49	)

Liabilities:
Deposits in domestic offices		$	(2,964	)		$	(21	)		$	-			$	-			$	-			$	(269	)		$	79			$	(46	)		$	313			$	(2,908	)		$	(14	)
Long-term debt			(160	)			10				-				-				-				(132	)			1				(7	)			1				(287	)			5

Total liabilities		$	(3,124	)		$	(11	)		$	-			$	-			$	-			$	(401	)		$	80			$	(53	)		$	314			$	(3,195	)		$	(9	)


		Jan. 1, 2012				Total Gains and (Losses) Included in⁽¹⁾												Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2012				Current Period Unrealized Gains (Losses)
		Jan. 1, 2012				Trading Revenue (Loss)				Other Revenue				Other Comprehensive Income				Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2012				Current Period Unrealized Gains (Losses)
		(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations		$	703			$	57			$	-			$	-			$	25			$	-			$	(127	)		$				$				$	658			$	49
Corporate and other domestic debt securities			1,679				18				-				-				101				-				(199	)			-				-				1,599				8
Corporate debt securities issued by foreign entities			253				66				-				-				389				-				(20	)			-				-				688				66
Equity securities			13				(1	)			-				-				-				-				-				-				-				12				(1	)
Derivatives⁽²⁾:
Interest rate contracts			9				-				3				-				-				-				-				-				-				12				3
Foreign exchange contracts			(1	)			(19	)			-				-				-				(5	)			2				(3	)			1				(25	)			(19	)
Equity contracts			(83	)			63				-				-				-				-				(29	)			(1	)			4				(46	)			22
Credit contracts			1,353				(388	)			-				-				-				-				(44	)			-				-				921				(355	)
Loans⁽³⁾			11				-				-				-				-				-				-				-				(11	)			-				(12	)
Mortgage servicing rights⁽⁴⁾			220				-				(47	)			-				-				-				14				-				-				187				(47	)

Total assets		$	4,157			$	(204	)		$	(44	)		$	-			$	515			$	(5	)		$	(403	)		$	(4	)		$	(6	)		$	4,006			$	(286	)

Liabilities:
Deposits in domestic offices		$	(2,867	)		$	(77	)		$	-			$	-			$	-			$	(556	)		$	160			$	(43	)		$	475			$	(2,908	)		$	(50	)
Long-term debt			(86	)			9				-				-				-				(221	)			5				(7	)			13				(287	)			4

Total liabilities		$	(2,953	)		$	(68	)		$	-			$	-			$	-			$	(777	)		$	165			$	(50	)		$	488			$	(3,195	)		$	(46	)


		Apr. 1, 2011				Total Gains and (Losses) Included in⁽¹⁾												Purc- hases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2011				Current Period Unrealized Gains (Losses)
		Apr. 1, 2011				Trading Revenue (Loss)				Other Revenue				Other Comprehensive Income				Purc- hases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2011				Current Period Unrealized Gains (Losses)
		(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations		$	800			$	17			$	-			$	-			$	93			$	-			$	(140	)		$	-			$	-			$	770			$	13
Corporate and other domestic debt securities			866				(16	)			-				-				771				-				(6	)			-				-				1,615				(16	)
Corporate debt securities issued by foreign entities			269				1				-				-				-				-				1				-				-				271				1
Equity securities			16				1				-				-				-				-				(1	)			-				-				16				1
Derivatives⁽²⁾:
Interest rate contracts			4				-				(1	)			-				-				-				1				-				-				4				(1	)
Foreign exchange contracts			(3	)			4				-				-				-				-				-				-				-				1				4
Equity contracts			(45	)			72				-				-				-				-				(86	)			35				(5	)			(29	)			(12	)
Credit contracts			1,077				108				-				-				-				-				(116	)			-				-				1,069				6
Loans⁽³⁾			12				-				-				-				-				-				(1	)			-				-				11				-
Mortgage servicing rights⁽⁴⁾			396				-				(42	)			-				-				9				-				-				-				363				(42	)

Total assets		$	3,392			$	187			$	(43	)		$	-			$	864			$	9			$	(348	)		$	35			$	(5	)		$	4,091			$	(46	)

Liabilities:
Deposits in domestic offices		$	(4,078	)		$	(81	)		$	-			$	-			$	-			$	(724	)		$	151			$	(17	)		$	30				(4,719	)		$	(30	)
Long-term debt			(196	)			(3	)			-				-				-				(524	)			28				(3	)			13				(685	)			(1	)

Total liabilities		$	(4,274	)		$	(84	)		$	-			$	-			$	-			$	(1,248	)		$	179			$	(20	)		$	43			$	(5,404	)		$	(31	)

		Jan. 1, 2011				Total Gains and (Losses) Included in⁽¹⁾												Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2011				Current Period Unrealized Gains (Losses)
		Jan. 1, 2011				Trading Revenue (Loss)				Other Revenue				Other Comprehensive Income				Purch- ases				Issua- nces				Settle- ments				Transfers Into Level 3				Transfers Out of Level 3				Jun. 30, 2011				Current Period Unrealized Gains (Losses)
		(in millions)
Assets:
Trading assets, excluding derivatives:
Collateralized debt obligations		$	793			$	28			$	-			$	-			$	93			$	-			$	(144	)		$	-			$	-			$	770			$	17
Corporate and other domestic debt securities			833				(4	)			-				-				792				-				(6	)			-				-				1,615				(4	)
Corporate debt securities issued by foreign entities			243				27				-				-				-				-				1				-				-				271				27
Equity securities			17				-				-				-				-				-				(1	)			-				-				16				-
Derivatives⁽²⁾:
Interest rate contracts			(1	)			-				4				-				-				-				1				-				-				4				4
Foreign exchange contracts			(4	)			5				-				-				-				-				-				-				-				1				5
Equity contracts			12				96				-				-				-				-				(156	)			33				(14	)			(29	)			(52	)
Credit contracts			1,202				(51	)			-				-				-				-				(144	)			-				62				1,069				(159	)
Loans⁽³⁾			11				-				-				-				-				-				-				-				-				11				-
Mortgage servicing rights⁽⁴⁾			394				-				(56	)			-				-				25				-				-				-				363				(56	)

Total assets		$	3,500			$	101			$	(52	)		$	-			$	885			$	25			$	(449	)		$	33			$	48			$	4,091			$	(218	)

Liabilities:
Deposits in domestic offices		$	(3,612	)		$	(98	)		$	-			$	-			$	-			$	(1,277	)		$	249			$	(25	)		$	44				(4,719	)		$	(17	)
Long-term debt			(301	)			(12	)			-				-				-				(599	)			144				(3	)			86				(685	)			(2	)

Total liabilities		$	(3,913	)		$	(110	)		$	-			$	-			$	-			$	(1,876	)		$	393			$	(28	)		$	130			$	(5,404	)		$	(19	)

⁽¹⁾	Includes realized and unrealized gains and losses.

⁽²⁾	Level 3 net derivatives included derivative assets of $2.4 billion and $2.2 billion and derivative liabilities of $1.5 billion and $1.1 billion as of June 30, 2012 and 2011, respectively.

⁽³⁾	Includes Level 3 corporate lending activities risk-managed on a fair value basis for which we have elected the fair value option.

⁽⁴⁾	See Note 9, “Intangible Assets,” for additional information.

Quantitative information about recurring fair value measurement of assets and liabilities classified as Level 3


Financial Instrument Type		Fair Value (in millions)				Valuation Technique(s)		Significant Unobservable Inputs		Range of Inputs

Collateralized debt obligations		$	658			Broker quotes or consensus pricing and, where applicable, discounted cash flows		Prepayment rates		0% - 35%
								Constant default rates		4% - 14%
								Loss severity rates		50% - 100%
Corporate and other domestic debt securities			1,599			Option adjusted discounted cash flows		Option adjusted spread		446 basis points
						Discounted cash flows		Spread volatility on collateral assets		1.7% - 4.2%
								Correlation between insurance claim shortfall and collateral value		80%
Corporate debt securities issued by foreign entities			688			Discounted cash flows		Correlations of default among a portfolio of credit names of embedded credit derivatives		61% - 73%
Equity securities (investments in hedge funds)			12			Net asset value of hedge funds		Range of fair value adjustments to reflect restrictions on timing and amount of redemption and realization risks		0% - 90%
Interest rate derivative contracts			12			Market comparable adjusted for probability to fund		Probability to fund for rate lock commitments		NM⁽¹⁾
Foreign exchange derivative contracts⁽⁴⁾			(25	)		Option pricing model		Foreign exchange volatility and correlation of a basket of currencies		NM^{(2) (3)}
Equity derivative contracts			(46	)		Option pricing model		Price volatility of underlying equity and correlations of equities with a basket or index		NM⁽²⁾ ⁽³⁾
Credit derivative contracts⁽⁴⁾			921			Option pricing model		Correlation of defaults of a portfolio of reference credit names		12% - 33%
								Industry by industry correlation of defaults		40% - 76%
Mortgage servicing right			187			Option adjusted discounted cash flow		Constant prepayment rates		8.1% - 34.8%
								Option adjusted spread		8.1% - 19.1%
								Estimated annualized costs to service		$98 - $263 per account
Deposits in domestic offices (Structured deposits)			(2,908	)		Option adjusted discounted cash flows		Foreign exchange volatility and correlations of a currency basket within the embedded derivative feature		NM⁽³⁾
								Equity price volatility and correlations of equity baskets or index within the embedded derivative feature
Long-term debt (Structured notes)			(287	)		Option adjusted discounted cash flows		Foreign exchange volatility and correlations of a currency basket within the embedded derivative feature		NM⁽³⁾
								Equity price volatility and correlations of equity baskets or index within the embedded derivative feature

⁽¹⁾	Insignificant Level 3 measurement. Disclosure is not meaningful to users.

⁽²⁾

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. As a result, the range of significant unobservable inputs is not meaningful as the net risk positions are not significant.

⁽³⁾

The structured notes and structured deposits contain embedded equity or foreign currency derivatives. For financial reporting purposes, we measure the financial instruments at fair value in entirety with changes in fair value recorded in the income statement. For the presentation of this table, we have separated the embedded derivatives from the financial instruments and included them in the equity derivative and foreign currency derivative categories to reflect the underlying risks are managed through identical but offsetting derivatives with affiliates (also see note (2) above).

⁽⁴⁾	Excludes Level 3 inputs for a partially funded total return swap with a third party investor for which we fully hedge the market risks by holding the underlying foreign currency denominated security.

Fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded


		Non-Recurring Fair Value Measurements as of June 30, 2012																Total Gains (Losses) For the Three Months Ended June 30, 2012				Total Gains (Losses) For the Six Months Ended June 30, 2012
		Level 1				Level 2				Level 3				Total
		(in millions)
Residential mortgage loans held for sale⁽¹⁾		$	-			$	4			$	188			$	192			$	(4	)		$	(6	)
Other consumer loans held for sale⁽¹⁾			-				-				67				67				-				-
Impaired loans⁽²⁾			-				-				289				289				(12	)			(23	)
Real estate owned⁽³⁾			-				19				-				19				-				2
Commercial loans held for sale			-				349				-				349				-				-

Total assets at fair value on a non-recurring basis		$	-			$	372			$	544			$	916			$	(16	)		$	(27	)


		Non-Recurring Fair Value Measurements as of June 30, 2011																Total Gains (Losses) For the Three Months Ended June 30, 2011				Total Gains (Losses) For the Six Months Ended June 30, 2011
		Level 1				Level 2				Level 3				Total
		(in millions)
Residential mortgage loans held for sale⁽¹⁾		$	-			$	38			$	248			$	286			$	(7	)		$	(6	)
Other consumer loans held for sale⁽¹⁾			-				-				74				74				-				-
Impaired loans⁽²⁾			-				-				440				440				7				8
Real estate owned⁽³⁾			-				42				-				42				1				(3	)
Commercial loans held for sale			-				13				-				13				-				-
Impairment of certain previously capitalized software development costs⁽⁴⁾			-				-				-				-				(16	)			(94	)
Building held for sale			-				-				8				8				(5	)			(5	)

Total assets at fair value on a non-recurring basis		$	-			$	93			$	770			$	863			$	(20	)		$	(100	)

⁽¹⁾

As of June 30, 2012 and 2011, the fair value of the loans held for sale was below cost. Certain residential mortgage loans held for sale have been classified as a Level 3 fair value measurement within the fair value hierarchy as the underlying real estate properties which determine fair value are illiquid assets as a result of market conditions and 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 impaired commercial loans. 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 commercial loans are classified as a Level 3 fair value measurement within the fair value hierarchy.

⁽³⁾	Real estate owned are 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.

⁽⁴⁾

In the first quarter of 2011 it was determined that certain previously capitalized software development costs were no longer realizable as a result of the decision to cancel certain projects and, therefore, we recorded an impairment charge of $78 million representing the full amount of the developed software capitalized associated with these projects. The impairment charge was recorded in other expenses in our consolidated statement of income and is included in the results of our RBWM and CMB segment. During the second quarter of 2011, HSBC completed a comprehensive review of all platforms currently under development which resulted in additional projects being cancelled. As a result, we recorded an additional charge of $16 million relating to the impairment of certain previously capitalized software development costs relating to these projects which were determined to be no longer realizable. The impairment charges were recorded in other expenses in our consolidated statement of income and are included in the results of our segments principally in RBWM and CMB.

Quantitative information about Non recurring fair value measurement of assets and liabilities


Financial Instrument Type		Fair Value (in millions)				Valuation Technique(s)		Significant Unobservable Inputs		Range of Inputs
Residential mortgage loans held for sale		$	188			Valuation of third party appraisal on underlying collateral		Loss severity rates		30% - 70%
Impaired loans			289			Valuation by third party appraisal on underlying collateral		Loss severity rates		3% - 100%

Additional information relating to asset-backed securities and collateralized debt obligations


				Prime								Alt-A								Sub-prime
Rating of Securities:		Collateral Type:		Level 2				Level 3				Level 2				Level 3				Level 2				Level 3				Total
				(in millions)
AAA -A		Residential mortgages		$	-			$	-			$	71			$	-			$	198			$	-			$	269
		Home equity			-				-				-				-				-				-				-
		Student loans			-				-				-				-				-				-				-
		Other			-				-				-				-				-				-				-

		Total AAA -A			-				-				71				-				198				-				269

BBB -B		Residential mortgages			-				-				1				-				-				-				1
		Home equity			-				-				-				-				-				-				-

		Total BBB -B			-				-				1				-				-				-				1

CCC -Unrated		Residential mortgages			-				-				-				-				4				-				4
		Home equity			-				-				-				-				-				-				-
		Other			-				-				-				-				-				-				-

		Total CCC -Unrated			-				-				-				-				4				-				4

				$	-			$	-			$	72			$	-			$	202			$	-			$	274

Trading collateralized debt obligations and related collateral:


Rating of Securities:		Collateral Type:		Level 2				Level 3
		(in millions)
AAA -A		Commercial mortgages		$	-			$	-
		Residential mortgages			-				-
		Student loans			55				-
		Other			-				-

		Total AAA -A			55				-

BBB -B		Commercial mortgages			-				163
		Corporate loans			-				331
		Other			-				141

		Total BBB -B			-				635

CCC -Unrated		Commercial mortgages			-				64
		Corporate loans			-				-
		Other			-				-

		Total CCC -Unrated			-				64

				$	55			$	699

Available-for-sale securities backed by collateral:


				Commercial Mortgages								Prime								Alt-A								Sub-prime
Rating of Securities:		Collateral Type:		Level 2				Level 3				Level 2				Level 3				Level 2				Level 3				Level 2				Level 3				Total
				(in millions)
AAA -A		Residential mortgages		$	-			$	-			$	-			$	-			$	3			$	-			$	-			$	-			$	3
		Commercial mortgages			305				-				-				-				-				-				-				-				305
		Home equity			-				-				-				-				108				-				-				-				108
		Student loans			-				-				-				-				9				-				-				-				9
		Other			-				-				-				-				85				-				-				-				85

		Total AAA -A			305				-				-				-				205				-				-				-				510

BBB -B		Residential mortgages			-				-				-				-				-				-				-				-				-
		Home equity			-				-				-				-				79				-				1				-				80

		Total BBB -B			-				-				-				-				79				-				1				-				80

CCC -Unrated		Residential mortgages			-				-				-				-				2				-				-				-				2
		Home equity			-				-				-				-				63				-				-				-				63

		Total CCC -Unrated			-				-				-				-				65				-				-				-				65

				$	305			$	-			$	-			$	-			$	349			$	-			$	1			$	-			$	655

Tabular disclosure of assets and liabilities by class, including financial instruments measured at fair value that are classified in shareholders' equity, if any, that are measured at fair value on a nonrecurring basis in periods after initial recognition (for example, impaired assets). Disclosures may include, but are not limited to: (a) the fair value measurements recorded and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements are categorized in their entirety (levels 1, 2, 3).

+ References+ Details

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details