v3.26.1
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
We use derivative financial instruments to support our clients' needs and to manage our interest rate, currency and other market risks. These financial instruments consist of FX contracts such as forwards, futures and options contracts; interest rate contracts such as interest rate swaps (cross currency and single currency) and futures; and other derivative contracts. Derivative instruments used for risk management purposes that are highly effective in offsetting the risk being hedged are generally designated as hedging instruments in hedge accounting relationships, while others are economic hedges and not designated in hedge accounting relationships. For additional information on our use and accounting policies on derivative financial instruments, including derivatives not designated as hedging instruments, refer to Note 10 of the notes to consolidated financial statements in our 2025 Form 10-K.
Derivatives Designated as Hedging Instruments
For additional information on our derivatives designated as hedging instruments, including our risk management objectives and hedging documentation methodologies, refer to Note 10 of the notes to consolidated financial statements in our 2025 Form 10-K.
Fair Value Hedges
Derivatives designated as fair value hedges are utilized to mitigate the risk of changes in the fair values of recognized assets and liabilities, including long-term debt and AFS securities. We use interest rate and FX contracts in this manner to manage our exposure to changes in the fair value of hedged items caused by changes in interest rates and FX rates, respectively.
Changes in the fair value of the derivative and changes in fair value of the hedged item due to changes in the hedged risk are recognized in earnings in the same line item. If a hedge is terminated, but the hedged item was not derecognized, all remaining adjustments to the carrying amount of the hedged item are amortized over a period that is consistent with the amortization of other discounts or premiums associated with the hedged item.
Cash Flow Hedges
Derivatives designated as cash flow hedges are utilized to offset the variability of cash flows of recognized assets, liabilities or forecasted transactions. We have entered into FX contracts to hedge the change in cash flows attributable to FX movements in foreign currency denominated investment securities. Additionally, we have entered into interest rate swap agreements to hedge the forecasted cash flows associated with EURIBOR indexed floating-rate loans and Deposit Facility Interest Rate (DFR) indexed ECB deposits. The interest rate swaps synthetically convert the interest receipts from a variable-rate to a fixed-rate, thereby mitigating the risk attributable to changes in the EURIBOR and DFR.
Changes in fair value of the derivatives designated as cash flow hedges are initially recorded in AOCI and then reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged item. If the hedge relationship is terminated, the change in fair value on the derivative recorded in AOCI is reclassified into earnings consistent with the timing of the hedged item. During the second quarter of 2026, approximately $11 million of net losses associated with terminated cash flow hedges were reclassified from AOCI, and we expect net losses of approximately $7 million to be reclassified from AOCI in the third quarter of 2026. The net loss associated with all cash flow hedges expected to be reclassified from AOCI within 12 months of June 30, 2026 is approximately $23 million, which includes a net loss of approximately $5 million related to terminated hedges. These losses could differ from amounts recognized in future periods due to changes in interest rates, hedge de-designations or the addition of other hedges after June 30, 2026. For hedge relationships that are discontinued because a forecasted transaction is not expected to occur according to the original hedge terms, any related derivative values recorded in AOCI are immediately recognized in earnings. The maximum length of time over which forecasted cash flows are hedged is five years.
Net Investment Hedges
Derivatives categorized as net investment hedges are entered into to protect the net investment in our foreign operations against adverse changes in exchange rates. We use FX forward contracts to convert the foreign currency risk to U.S. dollars to mitigate our exposure to fluctuations in FX rates. The changes in fair value of the FX forward contracts are recorded, net of taxes, in the foreign currency translation component of other comprehensive income (OCI).
The following table presents the aggregate contractual, or notional, amounts of derivative financial instruments, including those entered into for trading and asset and liability management activities as of the dates indicated:
(In millions)June 30, 2026December 31, 2025
Derivatives not designated as hedging instruments:
Interest rate contracts:
Futures$40,050 $97,035 
Foreign exchange contracts:
Forward, swap and spot3,369,461 2,768,458 
Options purchased2,321 436 
Options written1,675 110 
Futures165 472 
Other:
Futures226 159 
Stable value contracts(1)
10,366 12,271 
Deferred value awards(2)
169 222 
Derivatives designated as hedging instruments:
Interest rate contracts:
Swap agreements43,136 42,708 
Foreign exchange contracts:
Forward and swap13,852 12,350 
(1) The notional value of the stable value contracts represents our maximum exposure. However, exposure to various stable value contracts is generally contractually limited to substantially lower amounts than the notional values.
(2) Represents grants of deferred value awards to employees. Refer to Note 10 of the notes to consolidated financial statements in our 2025 Form 10-K.
Notional amounts are provided here as an indication of the volume of our derivative activity and serve as a reference to calculate the fair values of the derivative.
The following table presents the fair value of derivative financial instruments, excluding the impact of master netting agreements, recorded in our consolidated statement of condition as of the dates indicated. The impact of master netting agreements is provided in Note 8.
Derivative Assets(1)
Derivative Liabilities(2)
(In millions)June 30, 2026December 31, 2025June 30, 2026December 31, 2025
Derivatives not designated as hedging instruments:
Foreign exchange contracts$23,832 $14,200 $24,206 $13,993 
Other derivative contracts— 1 118 159 
Total$23,832 $14,201 $24,324 $14,152 
Derivatives designated as hedging instruments:
Foreign exchange contracts$272 $24 $22 $104 
Interest rate contracts11 34 16 5 
Total$283 $58 $38 $109 
(1) Derivative assets are included within other assets in our consolidated statement of condition.
(2) Derivative liabilities are included within accrued expenses and other liabilities in our consolidated statement of condition.
The following table presents the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:
Three Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In millions)Location of Gain (Loss) on Derivative in Consolidated Statement of IncomeAmount of Gain (Loss) on Derivative Recognized in Consolidated Statement of Income
Derivatives not designated as hedging instruments:
Foreign exchange contractsForeign exchange trading services revenue$376 $279 $699 $512 
Foreign exchange contractsInterest expense4 42 33 125 
Interest rate contractsForeign exchange trading services revenue4 6 5 12 
Other derivative contractsOther fee revenue(24)(10)(16)(4)
Other derivative contractsCompensation and employee benefits(12)(16)(26)(51)
Total$348 $301 $695 $594 
The following table shows the carrying amount and associated cumulative basis adjustments related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities in fair value hedging relationships:
June 30, 2026
Cumulative Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount
(In millions)Carrying Amount of Hedged Assets/LiabilitiesActive
De-designated(1)
Long-term debt$16,302 $(244)$64 
Available-for-sale securities(2)(3)
23,512 (188)— 
December 31, 2025
Cumulative Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount
(In millions)Carrying Amount of Hedged Assets/LiabilitiesActive
De-designated(1)
Long-term debt$15,553 $(76)$72 
Available-for-sale securities(2)(3)
22,804 99 — 
(1) Represents hedged items no longer designated in qualifying fair value hedging relationships for which an associated basis adjustment exists at the balance sheet date.
(2) Included in these amounts is the amortized cost of the financial assets designated under the portfolio layer hedging relationships (hedged item is the hedged layer of a closed portfolio of financial assets expected to remain outstanding at the end of the hedging relationship). At June 30, 2026 and December 31, 2025, the amortized cost of the closed portfolios used in these hedging relationships was $2.69 billion and $3.30 billion, respectively, of which $1.43 billion and $1.73 billion, respectively, was designated under the portfolio layer hedging relationship for both periods. At June 30, 2026 and December 31, 2025, the cumulative adjustment associated with these hedging relationships was $6 million and $21 million, respectively.
(3) Carrying amount represents amortized cost.
As of June 30, 2026 and December 31, 2025, the total notional amount of the interest rate swaps of fair value hedges was $37.59 billion and $36.12 billion, respectively.
The following tables present the impact of our use of derivative financial instruments on our consolidated statement of income for the periods indicated:
Three Months Ended June 30,Three Months Ended June 30,
2026202520262025
(In millions)Location of Gain (Loss) on Derivative in Consolidated Statement of IncomeAmount of Gain
(Loss) on Derivative
Recognized in
Consolidated
Statement of Income		Hedged Item in Fair Value Hedging RelationshipLocation of Gain (Loss) on Hedged Item in Consolidated Statement of IncomeAmount of Gain
(Loss) on Hedged
Item Recognized in
Consolidated
Statement of Income
Derivatives designated as fair value hedges:
Interest rate contractsNet interest income$153 $(154)
Available-for-sale securities(1)
Net interest income
$(153)$154 
Interest rate contractsNet interest income(105)95 Long-term debtNet interest income105 (95)
Foreign exchange contractsOther fee revenue(2)(4)Available-for-sale securitiesOther fee revenue2 4 
Total$46 $(63)(46)63 
Six Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In millions)Location of Gain (Loss) on Derivative in Consolidated Statement of IncomeAmount of Gain
(Loss) on Derivative
Recognized in
Consolidated
Statement of Income		Hedged Item in Fair Value Hedging RelationshipLocation of Gain (Loss) on Hedged Item in Consolidated Statement of IncomeAmount of Gain
(Loss) on Hedged
Item Recognized in
Consolidated
Statement of Income
Derivatives designated as fair value hedges:
Interest rate contractsNet interest income$279 $(388)
Available-for-sale securities(2)
Net interest income$(279)$388 
Interest rate contractsNet interest income(168)245 Long-term debtNet interest income168 (245)
Foreign exchange contractsOther fee revenue(25)(1)Available-for-sale securitiesOther fee revenue25 1 
Total$86 $(144)$(86)$144 
(1) In the three months ended June 30, 2026, approximately $114 million of net unrealized gains on AFS investment securities designated in fair value hedges were recognized in OCI, compared to $110 million of net unrealized losses in the same period of 2025.
(2) In the six months ended June 30, 2026, approximately $219 million of net unrealized gains on AFS investment securities designated in fair value hedges were recognized in OCI, compared to $320 million of net unrealized losses in the same period of 2025.
Three Months Ended June 30,Three Months Ended June 30,
20262025Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income20262025
(In millions)Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Interest rate contracts(1)
$15 $10 Net interest income$(11)$(36)
Total derivatives designated as cash flow hedges$15 $10 $(11)$(36)
Derivatives designated as net investment hedges:
Foreign exchange contracts$89 $(622)$— $— 
Total derivatives designated as net investment hedges89 (622)— — 
Total$104 $(612)$(11)$(36)
Six Months Ended June 30,Six Months Ended June 30,
2026202520262025
(In millions)Amount of Gain or (Loss) Recognized in Other Comprehensive Income on DerivativeLocation of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into IncomeAmount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Derivatives designated as cash flow hedges:
Interest rate contracts(1)
$(22)$12 Net interest income$(37)$(73)
Total derivatives designated as cash flow hedges$(22)$12 $(37)$(73)
Derivatives designated as net investment hedges:
Foreign exchange contracts$219 $(907)$— $— 
Total derivatives designated as net investment hedges219 (907)— — 
Total$197 $(895)$(37)$(73)
(1) As of June 30, 2026, the maximum maturity date of the underlying hedged items is approximately 5.0 years.
Derivatives Netting and Credit Contingencies
Netting
Derivatives receivable and payable as well as cash collateral from the same counterparty are netted in the consolidated statement of condition for those counterparties with whom we have legally binding master netting agreements in place. In addition to cash collateral received and transferred presented on a net basis, we also receive and transfer collateral in the form of securities, which mitigate credit risk but are not eligible for netting. Additional information on netting is provided in Note 8.
Credit Contingencies
Certain of our derivatives are subject to master netting agreements with our derivative counterparties containing credit risk-related contingent features, which requires us to maintain an investment grade credit rating with the various credit rating agencies. If our rating falls below investment grade, we would be in violation of the provisions, and counterparties to the derivatives could request immediate payment or demand full overnight collateralization on derivative instruments in liability positions. The aggregate fair value of all derivatives with credit contingent features and in a net liability position as of June 30, 2026 totaled approximately $8.04 billion, against which we provided $6.68 billion of collateral in the normal course of business. If our credit-related contingent features underlying these agreements were triggered as of June 30, 2026, the maximum additional collateral we would be required to post to our counterparties is approximately $1.36 billion.