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Derivatives and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Fair Values, Volume of Activity and Gain (Loss) Information Related to Derivative Instruments

Our derivative instruments are included in “derivative assets” or “derivative liabilities” on the balance sheet, as indicated in the following table:


	September 30, 2013								December 31, 2012								September 30, 2012
			Fair Value								Fair Value								Fair Value
in millions	Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate	$	13,762	$	332		$	36		$	19,085	$	579		$	30		$	16,596	$	604		$	31
Foreign exchange		190		—			1			196		—			7			264		—			10

Total		13,952		332			37			19,281		579			37			16,860		604			41
Derivatives not designated as hedging instruments:
Interest rate		47,315		799			762			51,633		1,144			1,122			55,391		1,260			1,252
Foreign exchange		4,479		70			68			5,025		75			68			5,126		81			73
Energy and commodity		1,890		137			131			1,688		156			150			1,749		183			178
Credit		971		6			11			955		9			10			2,242		19			18
Equity		—		—			—			7		—			—			13		—			—

Total		54,655		1,012			972			59,308		1,384			1,350			64,521		1,543			1,521
Netting adjustments ^(a)		—		(869	)		(559	)		—		(1,270	)		(803	)		—		(1,376	)		(905	)

Net derivatives in the balance sheet		68,607		475			450			78,589		693			584			81,381		771			657
Other collateral ^(b)		—		(81	)		(356	)		—		(163	)		(475	)		—		(186	)		(552	)

Net derivative amounts	$	68,607	$	394		$	94		$	78,589	$	530		$	109		$	81,381	$	585		$	105

(a)	Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance.

(b)

Other collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The other collateral consists of securities and is exchanged under bilateral collateral and master netting agreements that allow us to offset the net derivative position with the related collateral. The application of the other collateral cannot reduce the net derivative position below zero. Therefore, any excess other collateral is not reflected above.

Pre-Tax Net Gains (Losses) on Fair Value Hedges

The following table summarizes the pre-tax net gains (losses) on our fair value hedges for the nine-month periods ended September 30, 2013, and 2012, and where they are recorded on the income statement.

Nine months ended September 30, 2013

in millions

Income Statement Location of

Net Gains (Losses) on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location of
Net Gains (Losses) on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(167

)

Long-term debt

Other income

167

^(a)

Interest rate

Interest expense — Long-term debt

Total

(70

)

167

Nine months ended September 30, 2012

in millions

Income Statement Location of

Net Gains (Losses) on Derivative

Net Gains
(Losses) on
Derivative

Hedged Item

Income Statement Location of
Net Gains (Losses) on Hedged Item

Net Gains
(Losses) on
Hedged Item

Interest rate

Other income

(14

)

Long-term debt

Other income

^(a)

Interest rate

Interest expense — Long-term debt

123

Foreign exchange

Other income

Long-term debt

Other income

) ^(a)

Foreign exchange

Interest expense — Long-term debt

Long-term debt

Interest expense – Long-term debt

) ^(b)

Total

115

(a)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in interest rates.

(b)	Net gains (losses) on hedged items represent the change in fair value caused by fluctuations in foreign currency exchange rates.

Derivative Instrument Cash Flow Hedge Earning Recognized by Income Statement Location

The following table summarizes the pre-tax net gains (losses) on our cash flow and net investment hedges for the nine-month periods ended September 30, 2013 and 2012, and where they are recorded on the income statement. The table includes the effective portion of net gains (losses) recognized in OCI during the period, the effective portion of net gains (losses) reclassified from OCI into income during the current period, and the portion of net gains (losses) recognized directly in income, representing the amount of hedge ineffectiveness.


	Nine months ended September 30, 2013
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	(25	)	Interest income — Loans	$	52		Other income		—
Interest rate		18		Interest expense — Long-term debt		(7	)	Other income		—
Interest rate		(2	)	Investment banking and debt placement fees		—		Other income		—

Net Investment Hedges
Foreign exchange contracts		6		Other Income		(3	)	Other income		—

Total	$	(3	)		$	42				—


	Nine months ended September 30, 2012
in millions	Net Gains (Losses) Recognized in OCI (Effective Portion)			Income Statement Location of Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)	Net Gains (Losses) Reclassified From OCI Into Income (Effective Portion)			Income Statement Location of Net Gains (Losses) Recognized in Income (Ineffective Portion)	Net Gains (Losses) Recognized in Income (Ineffective Portion)
Cash Flow Hedges
Interest rate	$	106		Interest income — Loans	$	45		Other income		—
Interest rate		(8	)	Interest expense — Long-term debt		(7	)	Other income		—
Interest rate		—		Investment banking and debt placement fees		—		Other income		—

Net Investment Hedges
Foreign exchange contracts		(15	)	Other Income		—		Other income		—

Total	$	83			$	38				—

After-Tax Change in AOCI Resulting from Cash Flow Hedges

The after-tax change in AOCI resulting from cash flow and net investment hedges is as follows:


in millions	December 31, 2012		2013 Hedging Activity			Reclassification of Gains to Net Income			September 30, 2013
AOCI resulting from cash flow and net investment hedges	$	18	$	(2	)	$	(27	)	$	(11	)

Pre-Tax Net Gains (Losses) on Derivatives Not Designated as Hedging Instruments

The following table summarizes the pre-tax net gains (losses) on our derivatives that are not designated as hedging instruments for the nine-month periods ended September 30, 2013, and 2012, and where they are recorded on the income statement.


	Nine months ended September 30, 2013								Nine months ended September 30, 2012
in millions	Corporate Services Income		Other Income			Total			Corporate Services Income		Other Income			Total
NET GAINS (LOSSES)
Interest rate	$	13		—		$	13		$	18	$	(2	)	$	16
Foreign exchange		29		—			29			27		—			27
Energy and commodity		4		—			4			8		—			8
Credit		1	$	(11	)		(10	)		—		(16	)		(16	)

Total net gains (losses)	$	47	$	(11	)	$	36		$	53	$	(18	)	$	35

Largest Exposure to Individual Counterparty

The following table summarizes our largest exposure to an individual counterparty at the dates indicated.


in millions	September 30, 2013		December 31, 2012		September 30, 2012
Largest gross exposure (derivative asset) to an individual counterparty	$	129	$	182	$	197
Collateral posted by this counterparty		44		66		67
Derivative liability with this counterparty		123		191		216
Collateral pledged to this counterparty		45		82		91
Net exposure after netting adjustments and collateral		7		7		5

Fair Value of Derivative Assets by Type

The following table summarizes the fair value of our derivative assets by type. These assets represent our gross exposure to potential loss after taking into account the effects of bilateral collateral and master netting agreements and other means used to mitigate risk.


in millions	September 30, 2013		December 31, 2012		September 30, 2012
Interest rate	$	708	$	1,114	$	1,195
Foreign exchange		28		23		24
Energy and commodity		65		47		51
Credit		1		3		4

Derivative assets before collateral		802		1,187		1,274
Less: Related collateral		327		494		503

Total derivative assets	$	475	$	693	$	771

Fair Value of Credit Derivatives Purchased and Sold

The following table summarizes the fair value of our credit derivatives purchased and sold by type as of September 30, 2013, December 31, 2012 and September 30, 2012. The fair value of credit derivatives presented below does not take into account the effects of bilateral collateral or master netting agreements.


	September 30, 2013								December 31, 2012									September 30, 2012
in millions	Purchased			Sold		Net			Purchased			Sold			Net			Purchased			Sold			Net
Single name credit default swaps	$	(4	)	$	—	$	(4	)	$	(1	)	$	1			—		$	(6	)	$	4		$	(2	)
Traded credit default swap indices		(1	)		—		(1	)		—			—			—			(1	)		5			4
Other		—			—		—			—			(1	)	$	(1	)		—			(1	)		(1	)

Total credit derivatives	$	(5	)	$	—	$	(5	)	$	(1	)		—		$	(1	)	$	(7	)	$	8		$	1

Credit Derivatives Sold and Held

The following table provides information on the types of credit derivatives sold by us and held on the balance sheet at September 30, 2013, December 31, 2012, and September 30, 2012. The notional amount represents the maximum amount that the seller could be required to pay. The payment/performance risk assessment is based on the default probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a weighted-average of the default probabilities for all reference entities in the respective portfolios. These default probabilities are directly correlated to the probability that we will have to make a payment under the credit derivative contracts.


	September 30, 2013							December 31, 2012							September 30, 2012
dollars in millions	Notional Amount		Average Term (Years)		Payment / Performance Risk			Notional Amount		Average Term (Years)		Payment / Performance Risk			Notional Amount		Average Term (Years)		Payment / Performance Risk

Single name credit default swaps	$	67		0.91		21.26	%	$	146		0.92		11.62	%	$	420		2.00		4.32	%
Traded credit default swap indices		—		—		—			—		—		—			466		2.66		3.56
Other		16		5.11		8.72			23		5.35		10.77			27		5.32		11.53

Total credit derivatives sold	$	83		—		—		$	169		—		—		$	913		—		—

Credit Risk Contingent Feature

The following table summarizes the additional cash and securities collateral that KeyBank would have been required to deliver had the credit risk contingent features been triggered for the derivative contracts in a net liability position as of September 30, 2013, December 31, 2012, and September 30, 2012. The additional collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two or three ratings as of September 30, 2013, and take into account all collateral already posted. A similar calculation was performed for KeyCorp and additional collateral of $2 million would have been required as of September 30, 2013, and $3 million as of December 31, 2012 and September 30, 2012.


	September 30, 2013				December 31, 2012				September 30, 2012
in millions	Moody’s		S&P		Moody’s		S&P		Moody’s		S&P
KeyBank’s long-term senior unsecured credit ratings		A3		A-		A3		A-		A3		A-
One rating downgrade	$	6	$	6	$	6	$	6	$	6	$	6
Two rating downgrades		11		11		11		11		11		11
Three rating downgrades		11		11		11		11		13		13