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Derivatives and Hedging Activities | 9 Months Ended
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Sep. 30, 2015
Derivative Instruments And Hedging Activities Disclosure [Abstract] |
Derivatives and Hedging Activities | 9. Derivatives and Hedging Activities The Company uses derivative financial instruments (derivatives) to manage exposures to various market risks. These instruments derive their value from an underlying variable or multiple variables, including interest rate, foreign exchange rates, and equity index or price, and are carried at fair value on the Consolidated Balance Sheets. These instruments enable end users to increase, reduce or alter exposure to various market risks and, for that reason, are a n integral component of the Company’s market risk management. The Company does not transact in derivatives for trading purposes. In relation to the Company’s credit risk, under the terms of the derivative agreements it has with its various counterparties, the Company is not required to either immediately settle any outstanding liability balances or post collateral upon the occurrence of a specified credit risk-related event. Based on the assessment of credit risk of the Company’s derivative counterparties a s of September 30, 2015 and December 31, 2014, the Company does not have derivative positions that warrant credit valuation adjustments. The following t able summarizes the total fair value, excluding interest acc ruals, of derivative assets and l iabilities as of September 30, 2015 and December 31, 2014:
|  |  | Other Assets |  | Other Liabilities
|  |  | Fair Value |  | Fair Value
(Millions) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  |  |  |  |  |  |  |  |  |  |
| Fair value hedges |  | $ | 391 |  | $ | 314 |  | $ | ― |  | $ | 4
Foreign exchange contracts |  |  |  |  |  |  |  |  |  |  |  |
| Net investment hedges |  |  | 385 |  |  | 492 |  |  | 102 |  |  | 46
Total derivatives designated as hedging instruments |  |  | 776 |  |  | 806 |  |  | 102 |  |  | 50
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |
| Foreign exchange contracts, including certain embedded derivatives(a) |  |  | 146 |  |  | 185 |  |  | 116 |  |  | 114
Total derivatives, gross |  |  | 922 |  |  | 991 |  |  | 218 |  |  | 164
Less: Cash collateral netting(b) |  |  | (307) |  |  | (158) |  |  | ― |  |  | (4)
Derivative asset and derivative liability netting(c) |  |  | (130) |  |  | (122) |  |  | (130) |  |  | (122)
Total derivatives, net(d) |  | $ | 485 |  | $ | 711 |  | $ | 88 |  | $ | 38
Includes foreign currency derivatives embedded in certain operating agreements. Represents the offsetting of derivative instruments and the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) executed with the same counterparty under an enforceable master netting arrangement. From time to time, the Company also receives non-cash collateral from counterparties in the form of security interests in U.S. Treasury secur ities, which reduces the Company’s risk exposure, but does not reduce the net exposure on the Company’s Consolidated Balance Sheets. The Company had such non-cash collateral as of December 31, 2014 with a fair value of $91 million, none of which was sold or repledged. The Company did not have any such non-cash collateral as of September 30, 2015. Additionally, the Company posted $155 million and $114 million as of September 30, 2015 and December 31, 2014, respectively, as initial marg in on its centrally cleared interest rate swaps; such amounts are recorded within Other receivables on the Company’s Consolidated Balance Sheets and are not netted against the derivative balances. Represents the amount of netting of derivative assets and derivative liabilities executed with the same counterparty under an enforceable master netting arrangement. The Company has no individually significant derivative counterparties and therefore, no significant risk exposure to any single derivative counterpa rty. The total net derivative assets and derivative liabilities are presented within O ther assets and O ther liabilities on the Company’s Consolidated Balance Sheets. A majority of the Company’s derivative assets and liabilities as of September 30, 2015 and December 31, 2014 are subject to master netting agreements with its derivative counterparties. In addition, the Company has no derivative amounts subject to enforceable master netting arrangements that are not offset on the Company’s Consolidated B alance Sheets. Fair Value Hedges Interest Rate Contracts The Company is exposed to interest rate risk associated with its fixed-rate long-term debt. The Company uses interest rate swaps to economically convert certain fixed-rate debt obligations to floating-rate obligations at the time of issuance. As of September 30, 2015 and December 31, 2014, the Company hedged $18.5 billion and $17.6 billion, respectively, of its fixed-rate debt to floating-rate debt using interest rate swaps. Total Return Contract The Company hedged its exposure to changes in the fair value of its equity investment in Industrial and Commercial Bank of China (ICBC) in local currency. The Company used a total return contract (TRC) to transfer its exposure to its derivative counterparty. On July 18, 2014, the Company sold its remaining shares in ICBC and terminated the TRC. The following table summarizes the impact on the Consolidated Statements of Income associated with the Company’s fair value hedges for the three and nine months ended September 30:
Three Months Ended September 30: (Millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Gains (losses) recognized in income
|  | Derivative contract |  | Hedged item |  | Net hedge
|  |  |  | Amount |  |  |  | Amount |  | ineffectiveness
Derivative relationship |  | Income Statement Line Item |  | 2015 |  | 2014 |  | Income Statement Line Item |  | 2015 |  | 2014 |  | 2015 |  | 2014
Interest rate contracts |  | Other expenses |  | $ | 108 |  | $ | (109) |  | Other expenses |  | $ | (114) |  | $ | 112 |  | $ | (6) |  | $ | 3
Nine Months Ended September 30: (Millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Gains (losses) recognized in income
|  | Derivative contract |  | Hedged item |  | Net hedge
|  |  |  | Amount |  |  |  | Amount |  | ineffectiveness
Derivative relationship |  | Income Statement Line Item |  | 2015 |  | 2014 |  | Income Statement Line Item |  | 2015 |  | 2014 |  | 2015 |  | 2014
Interest rate contracts |  | Other expenses |  | $ | 82 |  | $ | (170) |  | Other expenses |  | $ | (85) |  | $ | 176 |  | $ | (3) |  | $ | 6
Total return contract |  | Other non-interest revenues |  |  | ― |  |  | 11 |  | Other non-interest revenues |  |  | ― |  |  | (11) |  |  | ― |  |  | ―
The Company also recognized a net reduction in interest expense on long-term debt of $73 million and $74 million for the three months ended September 30, 2015 and 2014, respectively, and $214 million and $217 million for the nine months ended September 30, 2015 and 2014, respectively, primarily related to the net settlements (interest accruals) on the Company’s interest rate derivatives designated as fair value hedges. Net Investment Hedges The effective portion of the gain on net investment hedges, net of taxes, recorded in Accumulated Other Comprehensive Loss as part of the cumulative translation adjustment was $384 million and $246 million for the three months ended September 30, 2015 and 2014, respectively, and $545 million and $113 million for the nine months ended September 30, 2015 and 2014, respectively, with any ineffective portion recognized in Other expenses during the period of change. During the three months ended September 30, 2015 and 2014, the Company reclassified nil and $(1) million, respectively, and $1 million and $9 million for the nine months ended September 30, 2015 and 2014, respectively, from Accumul ated Other Comprehensive Loss to earnings as a component of Other expenses, including i neffectiveness associated with net investment hedges of nil and $1 million for the three and nine months ended September 30, 2015, respectively. The f ollowing table summarizes the impact on the Consolidated Statements of Income associated with the Company’s derivatives n ot designated as hedges:
|  |  |  | Pretax (losses) gains
|  |  |  | Three Months Ended |  | Nine Months Ended
|  |  |  | September 30, |  | September 30,
|  |  |  | Amount |  | Amount
Description (Millions) |  | Income Statement Line Item |  | 2015 |  | 2014 |  | 2015 |  | 2014
Foreign exchange contracts (a) |  | Other expenses |  | $ | (19) |  | $ | 2 |  | $ | 15 |  | $ | 84
|  | Cost of Card Member services |  |  | 4 |  |  | ― |  |  | (2) |  |  | 4
Total |  |  |  | $ | (15) |  | $ | 2 |  | $ | 13 |  | $ | 88
Foreign exchange contracts include forwards and embedded foreign currency derivatives.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=35706170&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35706170&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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