Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2015

Fair Value of Assets and Liabilities Measured on Recurring Basis

Certain assets and liabilities are measured at fair value on a recurring basis in accordance with GAAP. The following tables present these assets and liabilities at March 31, 2015, December 31, 2014, and March 31, 2014.

March 31, 2015
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations		—	$	668		—	$	668
States and political subdivisions		—		35		—		35
Collateralized mortgage obligations		—		—		—		—
Other mortgage-backed securities		—		51		—		51
Other securities	$	5		25		—		30
Total trading account securities		5		779		—		784
Commercial loans		—		5		—		5
Total trading account assets		5		784		—		789
Securities available for sale:
States and political subdivisions		—		22		—		22
Collateralized mortgage obligations		—		11,163		—		11,163
Other mortgage-backed securities		—		1,902		—		1,902
Other securities		23		—	$	10		33
Total securities available for sale		23		13,087		10		13,120
Other investments:
Principal investments:
Direct		1		—		73		74
Indirect		—		—		301		301
Total principal investments		1		—		374		375
Equity and mezzanine investments:
Direct		—		—		—		—
Indirect		—		—		9		9
Total equity and mezzanine investments		—		—		9		9
Total other investments		1		—		383		384
Derivative assets:
Interest rate		—		1,034		10		1,044
Foreign exchange		164		8		—		172
Commodity		—		581		—		581
Credit		—		2		3		5
Derivative assets		164		1,625		13		1,802
Netting adjustments (a)		—		—		—		(1,071	)
Total derivative assets		164		1,625		13		731
Accrued income and other assets		—		2		—		2
Total assets on a recurring basis at fair value	$	193	$	15,498	$	406	$	15,026
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions		—	$	607		—	$	607
Derivative liabilities:
Interest rate		—		692		—		692
Foreign exchange	$	138		9		—		147
Commodity		—		567		—		567
Credit		—		6	$	1		7
Derivative liabilities		138		1,274		1		1,413
Netting adjustments (a)		—		—		—		(588	)
Total derivative liabilities		138		1,274		1		825
Accrued expense and other liabilities		—		2		—		2
Total liabilities on a recurring basis at fair value	$	138	$	1,883	$	1	$	1,434

(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 applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

December 31, 2014
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations		—	$	555		—	$	555
States and political subdivisions		—		38		—		38
Collateralized mortgage obligations		—		—		—		—
Other mortgage-backed securities		—		124		—		124
Other securities	$	2		29		—		31
Total trading account securities		2		746		—		748
Commercial loans		—		2		—		2
Total trading account assets		2		748		—		750
Securities available for sale:
States and political subdivisions		—		23		—		23
Collateralized mortgage obligations		—		11,270		—		11,270
Other mortgage-backed securities		—		2,035		—		2,035
Other securities		22		—	$	10		32
Total securities available for sale		22		13,328		10		13,360
Other investments:
Principal investments:
Direct		2		—		102		104
Indirect		—		—		302		302
Total principal investments		2		—		404		406
Equity and mezzanine investments:
Direct		—		—		—		—
Indirect		—		—		10		10
Total equity and mezzanine investments		—		—		10		10
Total other investments		2		—		414		416
Derivative assets:
Interest rate		—		924		13		937
Foreign exchange		91		2		—		93
Commodity		—		608		—		608
Credit		—		2		3		5
Derivative assets		91		1,536		16		1,643
Netting adjustments (a)		—		—		—		(1,034	)
Total derivative assets		91		1,536		16		609
Accrued income and other assets		—		—		—		—
Total assets on a recurring basis at fair value	$	117	$	15,612	$	440	$	15,135
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions		—	$	423		—	$	423
Derivative liabilities:
Interest rate		—		644		—		644
Foreign exchange	$	77		4		—		81
Commodity		—		594		—		594
Credit		—		6	$	1		7
Derivative liabilities		77		1,248		1		1,326
Netting adjustments (a)		—		—		—		(542	)
Total derivative liabilities		77		1,248		1		784
Accrued expense and other liabilities		—		—		—		—
Total liabilities on a recurring basis at fair value	$	77	$	1,671	$	1	$	1,207

(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 applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

March 31, 2014
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations		—	$	533		—	$	533
States and political subdivisions		—		46		—		46
Collateralized mortgage obligations		—		9		—		9
Other mortgage-backed securities		—		199		—		199
Other securities	$	4		47		—		51
Total trading account securities		4		834		—		838
Commercial loans		—		2		—		2
Total trading account assets		4		836		—		840
Securities available for sale:
States and political subdivisions		—		37		—		37
Collateralized mortgage obligations		—		10,469		—		10,469
Other mortgage-backed securities		—		1,832		—		1,832
Other securities		21		—		—		21
Total securities available for sale		21		12,338		—		12,359
Other investments:
Principal investments:
Direct		—		—	$	141		141
Indirect		—		—		403		403
Total principal investments		—		—		544		544
Equity and mezzanine investments:
Direct		—		—		—		—
Indirect		—		—		20		20
Total equity and mezzanine investments		—		—		20		20
Total other investments		—		—		564		564
Derivative assets:
Interest rate		—		943		22		965
Foreign exchange		51		9		—		60
Commodity		—		110		—		110
Credit		—		1		4		5
Derivative assets		51		1,063		26		1,140
Netting adjustments (a)		—		—		—		(713	)
Total derivative assets		51		1,063		26		427
Accrued income and other assets		—		—		—		—
Total assets on a recurring basis at fair value	$	76	$	14,237	$	590	$	14,190
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	3	$	460		—	$	463
Derivative liabilities:
Interest rate		—		687		—		687
Foreign exchange		43		9		—		52
Commodity		—		105		—		105
Credit		—		11	$	1		12
Derivative liabilities		43		812		1		856
Netting adjustments (a)		—		—		—		(448	)
Total derivative liabilities		43		812		1		408
Accrued expense and other liabilities		—		—		—		—
Total liabilities on a recurring basis at fair value	$	46	$	1,272	$	1	$	871

(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 applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

Change in Fair Values of Level 3 Financial Instruments

Changes in Level 3 Fair Value Measurements

The following table shows the change in the fair values of our Level 3 financial instruments for the three months ended March 31, 2015, and March 31, 2014. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.

in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings			Purchases		Sales			Settlements		Transfers into Level 3 (d)			Transfers out of Level 3 (d)			End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
March 31, 2015
Securities available for sale
Other securities	$	10		—			—		—			—		—			—		$	10		—
Other investments
Principal investments
Direct		102	$	13	(b)	$	1	$	(43	)		—		—			—			73	$	—
Indirect		302		17	(b)		1		(19	)		—		—			—			301		(8	) (b)
Equity and mezzanine investments
Direct		—		2	(b)		—		(2	)		—		—			—			—		2	(b)
Indirect		10		(1	) (b)		—		—			—		—			—			9		(1	) (b)
Derivative instruments (a)
Interest rate		13		2	(c)		—		—			—		—		$	(5	) (e)		10		—
Commodity		—		—			—		—			—		—			—			—		—
Credit		2		(3	) (c)		—		—		$	3		—			—			2		—
in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings			Purchases		Sales			Settlements		Transfers into Level 3 (d)			Transfers out of Level 3 (d)			End of Period Balance (f)		Unrealized Gains (Losses) Included in Earnings
March 31, 2014
Other investments
Principal investments
Direct	$	141	$	4	(b)		—	$	(4	)		—		—			—		$	141	$	6	(b)
Indirect		413		20	(b)	$	1		(31	)		—		—			—			403		9	(b)
Equity and mezzanine investments
Direct		—		—			—		—			—		—			—			—		—
Indirect		23		(1	) (b)		—		(2	)				—			—			20		(1	) (b)
Derivative instruments (a)
Interest rate		25		1	(c)		2		(1	)		—	$	3	(e)	$	(8	) (e)		22		—
Commodity		—		—			—		—			—		—			—			—		—
Credit		3		(2	) (c)		—		—		$	2		—			—			3		—

(a) Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.

(b) Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized losses on private equity and mezzanine investments are reported in “other income” on the income statement.

(c) Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.

(d) Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.

(e) Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.

(f) There were no issuances for the three-month periods ended March 31, 2015, and March 31, 2014.

Assets Measured at Fair Value on Nonrecurring Basis

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis in accordance with GAAP. The adjustments to fair value generally result from the application of accounting guidance that requires assets and liabilities to be recorded at the lower of cost or fair value, or assessed for impairment. The following table presents our assets measured at fair value on a nonrecurring basis at March 31, 2015, December 31, 2014, and March 31, 2014:

	March 31, 2015
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	15	$	15
Loans held for sale (a)		—		—		—		—
Accrued income and other assets		—		—		18		18
Total assets on a nonrecurring basis at fair value		—		—	$	33	$	33
	December 31, 2014
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	5	$	5
Loans held for sale (a)		—		—		—		—
Accrued income and other assets		—		—		13		13
Total assets on a nonrecurring basis at fair value		—		—	$	18	$	18
	March 31, 2014
in millions	Level 1		Level 2		Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans		—		—	$	1	$	1
Loans held for sale (a)		—		—		—		—
Accrued income and other assets		—		—		13		13
Total assets on a nonrecurring basis at fair value		—		—	$	14	$	14

(a) During the first quarter of 2015, we transferred $10 million of commercial and consumer loans and leases at their current fair value from held-for-sale status to the held-to-maturity portfolio, compared to $11 million during 2014, and $2 million during the first quarter of 2014.

Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted-average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets at March 31, 2015, December 31, 2014, and March 31, 2014, along with the valuation techniques used, are shown in the following table:

March 31, 2015	Fair Value of			Significant	Range
dollars in millions	Level 3 Assets		Valuation Technique	Unobservable Input	(Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	73	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		5.40 - 6.00 (5.50)
Equity instruments of private companies				EBITDA multiple (where applicable)		N/A (6.00)
				Revenue multiple (where applicable)		N/A (4.30)
Nonrecurring
Impaired loans		15	Fair value of underlying collateral	Discount		00.00 - 100.00% (36.00%)
Goodwill		1,057	Discounted cash flow and market data	Earnings multiple of peers		11.40 - 15.90 (12.92)
				Equity multiple of peers		1.20 - 1.22 (1.21)
				Control premium		10.00 - 30.00% (19.70%)
				Weighted-average cost of capital		13.00 - 14.00% (13.52%)
December 31, 2014 dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	102	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		5.40 - 6.00 (5.50)
Equity instruments of private companies				EBITDA multiple (where applicable)		5.50 - 6.20 (5.80)
				Revenue multiple (where applicable)		4.30 - 4.30 (4.30)
Nonrecurring
Impaired loans		5	Fair value of underlying collateral	Discount		10.00 - 64.00% (62.00%)
Goodwill		1,057	Discounted cash flow and market data	Earnings multiple of peers		11.40 - 15.90 (12.92)
				Equity multiple of peers		1.20 - 1.22 (1.21)
				Control premium		10.00 - 30.00% (19.70%)
				Weighted-average cost of capital		13.00 - 14.00% (13.52%)
March 31, 2014	Fair Value of			Significant	Range
dollars in millions	Level 3 Assets		Valuation Technique	Unobservable Input	(Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	141	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple		5.40 - 6.00 (5.90)
Equity instruments of private companies				EBITDA multiple (where applicable)		4.90 - 10.00 (5.90)
				Revenue multiple (where applicable)		0.80 - 4.50 (4.10)
Nonrecurring
Impaired loans		1	Fair value of underlying collateral	Discount		0.00 - 80.00% (25.00%)
Goodwill		979	Discounted cash flow and market data	Earnings multiple of peers		10.10 - 14.40 (11.59)
				Equity multiple of peers		1.17 - 1.29 (1.24)
				Control premium		N/A (35.00 %)
				Weighted-average cost of capital		N/A (13.00%)

Fair Value Disclosures of Financial Instruments

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at March 31, 2015, December 31, 2014 and March 31, 2014, are shown in the following table.

	March 31, 2015
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total
ASSETS
Cash and short-term investments (a)	$	3,884	$	3,884		—		—		—		$	3,884
Trading account assets (b)		789		5	$	784		—		—			789
Securities available for sale (b)		13,120		23		13,087	$	10		—			13,120
Held-to-maturity securities (c)		5,005		—		5,003		—		—			5,003
Other investments (b)		730		1		346		383		—			730
Loans, net of allowance (d)		57,159		—		—		55,702		—			55,702
Loans held for sale (b)		1,649		—		—		1,649		—			1,649
Derivative assets (b)		731		164		1,625		13	$	(1,071	) (f)		731
LIABILITIES
Deposits with no stated maturity (a)	$	65,984		—	$	65,984		—		—		$	65,984
Time deposits (e)		5,638	$	488		5,210		—		—			5,698
Short-term borrowings (a)		1,125		—		1,125		—		—			1,125
Long-term debt (e)		8,713		8,559		549		—		—			9,108
Derivative liabilities (b)		825		138		1,274	$	1	$	(588	) (f)		825
	December 31, 2014
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total
ASSETS
Cash and short-term investments (a)	$	4,922	$	4,922		—		—		—		$	4,922
Trading account assets (b)		750		2	$	748		—		—			750
Securities available for sale (b)		13,360		22		13,328	$	10		—			13,360
Held-to-maturity securities (c)		5,015		—		4,974		—		—			4,974
Other investments (b)		760		2		344		414		—			760
Loans, net of allowance (d)		56,587		—		—		54,993		—			54,993
Loans held for sale (b)		734		—		—		734		—			734
Derivative assets (b)		609		91		1,536		16	$	(1,034	) (f)		609
LIABILITIES
Deposits with no stated maturity (a)	$	66,135		—	$	66,135		—		—		$	66,135
Time deposits (e)		5,863	$	564		5,361		—		—			5,925
Short-term borrowings (a)		998		—		998		—		—			998
Long-term debt (e)		7,875		7,625		626		—		—			8,251
Derivative liabilities (b)		784		77		1,248	$	1	$	(542	) (f)		784
	March 31, 2014
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Netting Adjustment			Total
ASSETS
Cash and short-term investments (a)	$	3,331	$	3,331		—		—		—		$	3,331
Trading account assets (b)		840		4	$	836		—		—			840
Securities available for sale (b)		12,359		21		12,338		—		—			12,359
Held-to-maturity securities (c)		4,826		—		4,733		—		—			4,733
Other investments (b)		899		—		335	$	564		—			899
Loans, net of allowance (d)		54,611		—		—		53,211		—			53,211
Loans held for sale (b)		401		—		—		401		—			401
Derivative assets (b)		427		51		1,063		26	$	(713	) (f)		427
LIABILITIES
Deposits with no stated maturity (a)	$	60,130		—	$	60,130		—		—		$	60,130
Time deposits (e)		7,136	$	617		6,599		—		—			7,216
Short-term borrowings (a)		1,181		3		1,178		—		—			1,181
Long-term debt (e)		7,712		7,610		459		—		—			8,069
Derivative liabilities (b)		408		43		812	$	1	$	(448	) (f)		408

Valuation Methods and Assumptions

(a) Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b) Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this note.

(c) Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d) The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.

(e) Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f) Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.

Private Equity and Mezzanine Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our indirect investments and related unfunded commitments at March 31, 2015. We did not provide any financial support to investees related to our direct and indirect investments for the three months ended March 31, 2015, and March 31, 2014.

March 31, 2015			Unfunded
in millions	Fair Value		Commitments
INVESTMENT TYPE
Indirect investments
Passive funds (a)	$	9	$	1
Co-managed funds (b)		—		—
Total	$	9	$	1

(a) We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to four years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to fund based on their ownership percentage, as noted in the Limited Partnership Agreements.

(b) We are a manager or co-manager of these funds, which have been written down to zero. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. In addition, we receive management fees. We can sell or transfer our interest in any of these funds with the written consent of a majority of the fund’s investors. In one instance, the other co-manager of the fund must consent to the sale or transfer of our interest in the fund. The funds will mature over a period of one to two years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to fund based on their ownership percentage, as noted in the Limited Partnership Agreements.

Principal Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at March 31, 2015, as well as financial support provided for the three months ended March 31, 2015, and March 31, 2014:

					Financial support provided
					Three months ended March 31,
	March 31, 2015				2015				2014
in millions	Fair Value		Unfunded Commitments		Funded Commitments		Funded Other		Funded Commitments		Funded Other
INVESTMENT TYPE
Direct investments (a)	$	74		—		—	$	1		—	$	1
Indirect investments (b)		301	$	57	$	2		—	$	2		—
Total	$	375	$	57	$	2	$	1	$	2	$	1

(a) Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b) Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to nine years. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.