12. Securities Financing Activities

We enter into repurchase and reverse repurchase agreements and securities borrowed transactions (securities financing agreements) primarily to finance our inventory positions, acquire securities to cover short positions, and to settle other securities obligations. We account for these securities financing agreements as collateralized financing transactions. Repurchase and reverse repurchase agreements are recorded on the balance sheet at the amounts at which the securities will be subsequently sold or repurchased. Securities borrowed transactions are recorded on the balance sheet at the amounts of cash collateral advanced. While our securities financing agreements incorporate a right of set off, the assets and liabilities are reported on a gross basis. Repurchase agreements and securities borrowed transactions are included in “Short-term investments” on the balance sheet; reverse repurchase agreements are included in “Federal funds purchased and securities sold under repurchase agreements.”

During the third quarter of 2014, our broker-dealer subsidiary, KeyBanc Capital Markets, Inc. (“KBCM”), moved from a self-clearing organization to using a third-party organization for clearing purposes. In connection with this change, KBCM became an introducing broker-dealer, whereby it no longer needs to fund its business operations by entering into repurchase, reverse repurchase, or securities borrowed agreements. KBCM had no securities financing agreements outstanding at March 31, 2015.

The following table summarizes our securities financing agreements at March 31, 2015, December 31, 2014, and March 31, 2014:


	March 31, 2015
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments^(a)			Collateral^(b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	2	$	(2	)		—			—
Securities borrowed		—		—			—			—

Total	$	2	$	(2	)		—			—

Offsetting of financial liabilities:
Repurchase agreements	$	4	$	(2	)	$	(2	)		—

Total	$	4	$	(2	)	$	(2	)		—


	December 31, 2014
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments^(a)			Collateral^(b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	3	$	(1	)	$	(2	)		—
Securities borrowed		—		—			—			—

Total	$	3	$	(1	)	$	(2	)		—

Offsetting of financial liabilities:
Repurchase agreements	$	1	$	(1	)		—			—

Total	$	1	$	(1	)		—			—


	March 31, 2014
in millions	Gross Amount Presented in Balance Sheet		Netting Adjustments^(a)			Collateral^(b)			Net Amounts
Offsetting of financial assets:
Reverse repurchase agreements	$	442	$	(306	)	$	(126	)	$	10
Securities borrowed		3		—			(3	)		—

Total	$	445	$	(306	)	$	(129	)	$	10

Offsetting of financial liabilities:
Repurchase agreements	$	568	$	(306	)	$	(262	)		—

Total	$	568	$	(306	)	$	(262	)		—

(a)	Netting adjustments take into account the impact of master netting agreements that allow us to settle with a single counterparty on a net basis.

(b)	These adjustments take into account the impact of bilateral collateral agreements that allow us to offset the net positions with the related collateral. The application of collateral cannot reduce the net position below zero. Therefore, excess collateral, if any, is not reflected above.

Like other financing transactions, securities financing agreements contain an element of credit risk. To mitigate and manage credit risk exposure, we generally enter into master netting agreements and other collateral arrangements that give us the right, in the event of default, to liquidate collateral held and to offset receivables and payables with the same counterparty. Additionally, we establish and monitor limits on our counterparty credit risk exposure by product type. For the reverse repurchase agreements, we monitor the value of the underlying securities we have received from counterparties and either request additional collateral or return a portion of the collateral based on the value of those securities. We generally hold collateral in the form of highly rated securities issued by the U.S. Treasury and fixed income securities. In addition, we may need to provide collateral to counterparties under our repurchase agreements and securities borrowed transactions. In general, the collateral we pledge and receive can be sold or repledged by the secured parties.