Quarterly report pursuant to Section 13 or 15(d)

Fair Value Disclosures (Tables)

v2.4.0.6
Fair Value Disclosures (Tables)
 6 Months Ended
Jun. 30, 2012
Fair Value Disclosures [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
(dollars in millions)
 
Fair Value Measurements on a Recurring Basis
 
as of December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Netting
Adj(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Securities segregated for regulatory purposes or deposited with clearing organizations:
 
 
 
 
 
 
 
 
 
Corporate debt
$
—

 
$
295

 
$
—

 
$
—

 
$
295

Non-U.S. governments and agencies
—

 
1,757

 
—

 
—

 
1,757

U.S. Government and agencies
1,796

 
740

 
—

 
—

 
2,536

Total securities segregated for regulatory purposes or deposited with clearing organizations
1,796

 
2,792

 
—

 
—

 
4,588

Receivables under resale agreements
—

 
85,652

 
—

 
—

 
85,652

Receivables under securities borrowed transactions
—

 
259

 
—

 
—

 
259

Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
14,962

 
5,860

 
179

 
—

 
21,001

Convertible debentures
—

 
4,519

 
99

 
—

 
4,618

Non-U.S. governments and agencies
28,026

 
1,871

 
342

 
—

 
30,239

Corporate debt
—

 
13,027

 
3,962

 
—

 
16,989

Preferred stock
—

 
89

 
227

 
—

 
316

Mortgages, mortgage-backed and asset-backed
—

 
5,055

 
3,199

 
—

 
8,254

U.S. Government and agencies
22,183

 
20,820

 
—

 
—

 
43,003

Municipals and money markets
1,067

 
9,755

 
2,047

 
—

 
12,869

Physical commodities and other
—

 
175

 
—

 
—

 
175

 Total trading assets, excluding derivative contracts
66,238

 
61,171

 
10,055

 
—

 
137,464

  Derivative contracts(2)
1,810

 
722,108

 
10,110

 
(699,015
)
 
35,013

Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. treasury securities and agency debentures
398

 
—

 
—

 
—

 
398

Securities, mortgage-backed and asset backed
 
 
 
 
 
 
 
 
 
     Non-agency MBS
—

 
249

 
—

 
—

 
249

     Corporate ABS
—

 
—

 
47

 
—

 
47

Total investment securities available-for-sale
398

 
249

 
47

 
—

 
694

Investment securities non-qualifying
2,624

 
328

 
574

 
—

 
3,526

Total investment securities
3,022

 
577

 
621

 
—

 
4,220

Securities received as collateral
13,058

 
658

 
—

 
—

 
13,716

Loans, notes and mortgages
—

 
596

 
1,726

 
—

 
2,322

Other assets
—

 
—

 
1,349

 
—

 
1,349

Liabilities:
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
—

 
34,235

 
—

 
—

 
34,235

Short-term borrowings
—

 
5,908

 
—

 
—

 
5,908

Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
10,868

 
1,230

 
—

 
—

 
12,098

Convertible debentures
—

 
125

 
—

 
—

 
125

Non-U.S. governments and agencies
15,911

 
643

 
—

 
—

 
16,554

Corporate debt
—

 
6,927

 
52

 
—

 
6,979

Preferred stock
—

 
89

 
16

 
—

 
105

U.S. Government and agencies
15,603

 
1,373

 
—

 
—

 
16,976

Municipals, money markets and other
549

 
51

 
45

 
—

 
645

Total trading liabilities, excluding derivative contracts
42,931

 
10,438

 
113

 
—

 
53,482

Derivative contracts(2)
1,419

 
724,713

 
5,615

 
(705,508
)
 
26,239

Obligation to return securities received as collateral
13,058

 
658

 
—

 
—

 
13,716

Other payables — interest and other
—

 
163

 
10

 
—

 
173

Long-term borrowings
—

 
28,139

 
2,186

 
—

 
30,325

 
 
 
 
 
 
 
 
 
 
(1)
Represents counterparty and cash collateral netting.
(2)
Refer to Note 6 for product level detail.

The following tables present Merrill Lynch’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011, respectively.

(dollars in millions)
 
Fair Value Measurements on a Recurring Basis
 
as of June 30, 2012
 
Level 1
 
Level 2
 
Level 3
 
Netting
Adj(1)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Securities segregated for regulatory purposes or deposited with clearing organizations:
 
 
 
 
 
 
 
 
 
Corporate debt
$
—

 
$
88

 
$
—

 
$
—

 
$
88

Non-U.S. governments and agencies
143

 
1,723

 
—

 
—

 
1,866

U.S. Government and agencies
3,658

 
250

 
—

 
—

 
3,908

Total securities segregated for regulatory purposes or deposited with clearing organizations
3,801

 
2,061

 
—

 
—

 
5,862

Receivables under resale agreements
—

 
90,533

 
—

 
—

 
90,533

Receivables under securities borrowed transactions
—

 
500

 
—

 
—

 
500

Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
15,700

 
8,546

 
185

 
—

 
24,431

Convertible debentures
—

 
4,109

 
34

 
—

 
4,143

Non-U.S. governments and agencies
32,731

 
3,445

 
389

 
—

 
36,565

Corporate debt
—

 
11,686

 
2,106

 
—

 
13,792

Preferred stock
—

 
89

 
228

 
—

 
317

Mortgages, mortgage-backed and asset-backed
—

 
4,917

 
4,578

 
—

 
9,495

U.S. Government and agencies
30,094

 
23,816

 
—

 
—

 
53,910

Municipals and money markets
1,077

 
8,567

 
1,730

 
—

 
11,374

Physical commodities and other
—

 
174

 
—

 
—

 
174

Total trading assets, excluding derivative contracts
79,602

 
65,349

 
9,250

 
—

 
154,201

Derivative contracts(2)
1,997

 
675,105

 
8,001

 
(657,031
)
 
28,072

Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
U.S. treasury securities and agency debentures
404

 
—

 
—

 
—

 
404

Securities, mortgage-backed and asset backed
 
 
 
 
 
 
 
 
 
     Non-agency MBS
—

 
57

 
—

 
—

 
57

     Corporate ABS
—

 
230

 
8

 
—

 
238

Total investment securities available-for-sale
404

 
287

 
8

 
—

 
699

Investment securities non-qualifying
2,489

 
780

 
333

 
—

 
3,602

Total investment securities
2,893

 
1,067

 
341

 
—

 
4,301

Securities received as collateral
15,972

 
563

 
—

 
—

 
16,535

Loans, notes and mortgages
—

 
1,046

 
1,776

 
—

 
2,822

   Other assets
—

 
—

 
1,263

 
—

 
1,263

Liabilities:
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
—

 
48,663

 
—

 
—

 
48,663

Short-term borrowings
—

 
3,816

 
—

 
—

 
3,816

Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
Equities
20,285

 
2,038

 
—

 
—

 
22,323

Convertible debentures
—

 
214

 
—

 
—

 
214

Non-U.S. governments and agencies
17,012

 
1,307

 
—

 
—

 
18,319

Corporate debt
—

 
8,094

 
9

 
—

 
8,103

Preferred stock
—

 
120

 
9

 
—

 
129

U.S. Government and agencies
17,285

 
1,335

 
—

 
—

 
18,620

Municipals, money markets and other
446

 
72

 
44

 
—

 
562

Total trading liabilities, excluding derivative contracts
55,028

 
13,180

 
62

 
—

 
68,270

 Derivative contracts(2)
1,727

 
680,654

 
4,587

 
(662,709
)
 
24,259

Obligation to return securities received as collateral
15,972

 
563

 
—

 
—

 
16,535

Other payables — interest and other
—

 
131

 
2

 
—

 
133

Long-term borrowings
—

 
29,334

 
1,469

 
—

 
30,803

 
 
 
 
 
 
 
 
 
 

D
Fair Value, Assets and Liabilities Measured on Recurring Basis, Gain (Loss) Included in Earnings
(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Financial Assets and Liabilities
Three Months Ended June 30, 2011
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains or (Losses) to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
215

 
$
1

 
$
—

 
$
—

 
$
1

 
$
—

 
(38
)
 
48

 
$
—

 
$
(63
)
 
$
—

 
$
—

 
$
163

Convertible debentures
119

 
7

 
—

 
—

 
7

 
—

 
(84
)
 
110

 
—

 
—

 
—

 
—

 
152

Non-U.S. governments and agencies
252

 
80

 
—

 
—

 
80

 
—

 
(11
)
 
74

 
—

 
(3
)
 
3

 
(4
)
 
391

Corporate debt
3,998

 
42

 
—

 
—

 
42

 
—

 
(1,027
)
 
777

 
—

 
(69
)
 
151

 
(26
)
 
3,846

Preferred stock
325

 
19

 
—

 
—

 
19

 
—

 
(93
)
 
27

 
—

 
(52
)
 
81

 
—

 
307

Mortgages, mortgage-backed and asset-backed
5,433

 
55

 
—

 
—

 
55

 
—

 
(1,572
)
 
952

 
—

 
(20
)
 
—

 
—

 
4,848

Municipals and money markets
2,350

 
12

 
—

 
—

 
12

 
—

 
(743
)
 
948

 
—

 
(149
)
 
68

 
—

 
2,486

Total trading assets, excluding derivative contracts
12,692

 
216

 
—

 
—

 
216

 
—

 
(3,568
)
 
2,936

 
—

 
(356
)
 
303

 
(30
)
 
12,193

Derivative contracts, net
5,554

 
284

 
—

 
—

 
284

 
—

 
(250
)
 
296

 
—

 
(424
)
 
—

 
(359
)
 
5,101

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities — agency CMOs
56

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
—

 
55

Mortgage-backed securities — non-agency MBSs
103

 
—

 
(6
)
 
—

 
(6
)
 
(3
)
 
—

 
2

 
—

 
—

 
—

 
—

 
96

Corporate ABS
—

 
—

 
—

 
—

 
—

 
—

 
—

 
86

 
—

 
—

 
—

 
—

 
86

Total investment securities available-for-sale
159

 
—

 
(6
)
 
—

 
(6
)
 
(3
)
 
—

 
88

 
—

 
(1
)
 
—

 
—

 
237

Investment securities non-qualifying
1,095

 
—

 
125

 
—

 
125

 
—

 
(48
)
 
24

 
—

 
—

 
375

 
—

 
1,571

Total investment securities
1,254

 
—

 
119

 
—

 
119

 
(3
)
 
(48
)
 
112

 
—

 
(1
)
 
375

 
—

 
1,808

Loans, notes and mortgages
1,993

 
—

 
54

 
9

 
63

 
—

 
(327
)
 
113

 
215

 
(113
)
 
22

 
(26
)
 
1,940

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
52

 
(1
)
 
—

 
—

 
(1
)
 
—

 
20

 
(45
)
 
—

 
—

 
—

 
—

 
28

Preferred stock
23

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
23

Municipals, money markets and other
22

 
—

 
—

 
—

 
—

 
—

 
—

 
(19
)
 
—

 
—

 
—

 
—

 
3

Total trading liabilities, excluding derivative contracts
97

 
(1
)
 
—

 
—

 
(1
)
 
—

 
20

 
(64
)
 
—

 
—

 
—

 
—

 
54

Other payables - interest and other
100

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
9

 
—

 
—

 
—

 
108

Long-term borrowings
2,364

 
(10
)
 
20

 
—

 
10

 
—

 
55

 
(50
)
 
205

 
(95
)
 
229

 
(166
)
 
2,532

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Sales of mortgages, mortgage-backed and asset-backed securities primarily relates to the sale of CDO positions in conjunction with the liquidation of a VIE and sales of collateralized loan obligation (“CLO”) positions due to the unwind of the proprietary trading business. Sales and purchases of municipal securities is primarily due to dealer activity in student loan ARS.
Transfers in for corporate debt are primarily due to corporate bond private placements with limited market activity. Transfers out for net derivative contracts primarily relates to increased price observability for certain equity derivative positions. Transfers in for investment securities non-qualifying are due to a change in the valuation methodology for a private equity fund. Transfers in and out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.

(dollars in millions)
 
Level 3 Financial Assets and Liabilities
Six Months Ended June 30, 2011
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
170

 
$
35

 
$
—

 
$
—

 
$
35

 
$
—

 
$
(86
)
 
$
108

 
$
—

 
$
(63
)
 
$
—

 
$
(1
)
 
$
163

Convertible debentures
—

 
7

 
—

 
—

 
7

 
—

 
(84
)
 
229

 
—

 
—

 
—

 
—

 
152

Non-U.S. governments and agencies
243

 
85

 
—

 
—

 
85

 
—

 
(15
)
 
122

 
—

 
(3
)
 
3

 
(44
)
 
391

Corporate debt
4,605

 
327

 
—

 
—

 
327

 
—

 
(2,096
)
 
1,118

 
—

 
(108
)
 
247

 
(247
)
 
3,846

Preferred stock
287

 
28

 
—

 
—

 
28

 
—

 
(106
)
 
30

 
—

 
(52
)
 
120

 
—

 
307

Mortgages, mortgage-backed and asset-backed
5,747

 
384

 
—

 
—

 
384

 
—

 
(2,408
)
 
1,513

 
—

 
(39
)
 
1

 
(350
)
 
4,848

Municipals and money markets
2,327

 
31

 
—

 
—

 
31

 
—

 
(1,652
)
 
1,884

 
—

 
(172
)
 
72

 
(4
)
 
2,486

Total trading assets, excluding derivative contracts
13,379

 
897

 
—

 
—

 
897

 
—

 
(6,447
)
 
5,004

 
—

 
(437
)
 
443

 
(646
)
 
12,193

Derivative contracts, net
6,368

 
27

 
—

 
—

 
27

 
—

 
(682
)
 
633

 
—

 
(862
)
 
299

 
(682
)
 
5,101

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities — agency CMOs
—

 
—

 
—

 
—

 
—

 
—

 
—

 
56

 
—

 
(1
)
 
—

 
—

 
55

Mortgage-backed securities — non-agency MBSs
213

 
—

 
(15
)
 
—

 
(15
)
 
(22
)
 
(82
)
 
2

 
—

 
—

 
—

 
—

 
96

Corporate ABS
—

 
—

 
—

 
—

 
—

 
—

 
—

 
86

 
—

 
—

 
—

 
—

 
86

Total investment securities available-for-sale
213

 
—

 
(15
)
 
—

 
(15
)
 
(22
)
 
(82
)
 
144

 
—

 
(1
)
 
—

 
—

 
237

Investment securities non-qualifying
3,394

 
—

 
345

 
—

 
345

 
—

 
(852
)
 
46

 
—

 
(189
)
 
375

 
(1,548
)
 
1,571

Total investment securities
3,607

 
—

 
330

 
—

 
330

 
(22
)
 
(934
)
 
190

 
—

 
(190
)
 
375

 
(1,548
)
 
1,808

Loans, notes and mortgages
1,891

 
—

 
229

 
17

 
246

 
—

 
(496
)
 
144

 
215

 
(155
)
 
135

 
(40
)
 
1,940

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
—

 
(1
)
 
—

 
—

 
(1
)
 
—

 
72

 
(45
)
 
—

 
—

 
—

 
—

 
28

Preferred stock
—

 
—

 
—

 
—

 
—

 
—

 
23

 
—

 
—

 
—

 
—

 
—

 
23

Municipals, money markets and other
—

 
—

 
—

 
—

 
—

 
—

 
22

 
(19
)
 
—

 
—

 
—

 
—

 
3

Total trading liabilities, excluding derivative contracts
—

 
(1
)
 
—

 
—

 
(1
)
 
—

 
117

 
(64
)
 
—

 
—

 
—

 
—

 
54

Other payables - interest and other
126

 
—

 
25

 
—

 
25

 
—

 
4

 
(6
)
 
9

 
—

 
—

 
—

 
108

Long-term borrowings
2,396

 
(102
)
 
(15
)
 
—

 
(117
)
 
—

 
55

 
(112
)
 
248

 
(326
)
 
529

 
(375
)
 
2,532

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tables provide a summary of changes in Merrill Lynch’s Level 3 financial assets and liabilities for the three and six months ended June 30, 2012 and June 30, 2011.

(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Financial Assets and Liabilities
Three Months Ended June 30, 2012
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains or (Losses) to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
178

 
$
(6
)
 
$
—

 
$
—

 
$
(6
)
 
$
—

 
(13
)
 
1

 
$
—

 
—

 
$
25

 
$
—

 
$
185

Convertible debentures
43

 
(2
)
 
—

 
—

 
(2
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(7
)
 
34

Non-U.S. governments and agencies
546

 
(26
)
 
—

 
—

 
(26
)
 
—

 
(164
)
 
35

 
—

 
(1
)
 
—

 
(1
)
 
389

Corporate debt(1)
3,418

 
6

 
—

 
—

 
6

 
—

 
(1,232
)
 
189

 
—

 
(285
)
 
92

 
(82
)
 
2,106

Preferred stock
207

 
(1
)
 
—

 
—

 
(1
)
 
—

 
(22
)
 
44

 
—

 
—

 
—

 
—

 
228

Mortgages, mortgage-backed and asset-backed(1)
3,768

 
(38
)
 
—

 
—

 
(38
)
 
—

 
(163
)
 
1,164

 
—

 
(153
)
 
—

 
—

 
4,578

Municipals and money markets
2,009

 
15

 
—

 
—

 
15

 
—

 
(187
)
 
73

 
—

 
(180
)
 
—

 
—

 
1,730

Total trading assets, excluding derivative contracts
10,169

 
(52
)
 
—

 
—

 
(52
)
 
—

 
(1,781
)
 
1,506

 
—

 
(619
)
 
117

 
(90
)
 
9,250

Derivative contracts, net
3,207

 
159

 
—

 
—

 
159

 
—

 
(121
)
 
207

 
—

 
29

 
(38
)
 
(29
)
 
3,414

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate ABS
45

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(37
)
 
—

 
—

 
8

Total investment securities available-for-sale
45

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(37
)
 
—

 
—

 
8

Investment securities non-qualifying
421

 
—

 
1

 
—

 
1

 
—

 
(77
)
 
—

 
—

 
(12
)
 
—

 
—

 
333

Total investment securities
466

 
—

 
1

 
—

 
1

 
—

 
(77
)
 
—

 
—

 
(49
)
 
—

 
—

 
341

Loans, notes and mortgages
1,809

 
—

 
19

 
8

 
27

 
—

 
(16
)
 
3

 
—

 
(47
)
 
—

 
—

 
1,776

Other assets
1,302

 
—

 
(39
)
 
—

 
(39
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,263

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
—

 
—

 
—

 
—

 
—

 
—

 
16

 
(6
)
 
—

 
1

 
1

 
(3
)
 
9

Preferred stock
14

 
—

 
—

 
—

 
—

 
—

 
9

 
(1
)
 
—

 
—

 
—

 
(13
)
 
9

Municipals, money markets and other
45

 
4

 
—

 
—

 
4

 
—

 
3

 
—

 
—

 
—

 
—

 
—

 
44

Total trading liabilities, excluding derivative contracts
59

 
4

 
—

 
—

 
4

 
—

 
28

 
(7
)
 
—

 
1

 
1

 
(16
)
 
62

Other payables - interest and other
3

 
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

Long-term borrowings
1,743

 
80

 
9

 
—

 
89

 
—

 
—

 
(30
)
 
53

 
(252
)
 
219

 
(175
)
 
1,469

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
During the second quarter of 2012, approximately $900 million was reclassified from Corporate debt to Mortgages, mortgage-backed and asset-backed.  In the table above, this reclassification is presented as a sale of Corporate debt and as a purchase of Mortgages, mortgage-backed and asset-backed trading assets.
Transfers in and out for corporate debt primarily relate to changes in market liquidity for certain corporate loans. Transfers in and out related to long-term borrowings are primarily due to changes in the impact of unobservable inputs on the value of certain equity-linked structured notes.


(dollars in millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 Financial Assets and Liabilities
Six Months Ended June 30, 2012
 
 
 
Total Realized and Unrealized
Gains or (Losses) included in Income
 
Total Realized
and Unrealized Gains
or (Losses)
included in Income
 
Unrealized
Gains or (Losses) to
OCI
 
Sales
 
Purchases
 
Issuances
 
Settlements
 
 
 
 
 
 
 
Beginning
Balance
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
 
 
 
 
 
 
Transfers
In
 
Transfers
Out
 
Ending
Balance
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
179

 
$
(5
)
 
$
—

 
$
—

 
$
(5
)
 
$
—

 
(52
)
 
42

 
$
—

 
(9
)
 
$
32

 
$
(2
)
 
$
185

Convertible debentures
99

 
—

 
—

 
—

 
—

 
—

 
(53
)
 
—

 
—

 
—

 
5

 
(17
)
 
34

Non-U.S. governments and agencies
342

 
(2
)
 
—

 
—

 
(2
)
 
—

 
(245
)
 
308

 
—

 
(1
)
 
—

 
(13
)
 
389

Corporate debt(1)
3,962

 
91

 
—

 
—

 
91

 
—

 
(1,755
)
 
557

 
—

 
(439
)
 
148

 
(458
)
 
2,106

Preferred stock
227

 
11

 
—

 
—

 
11

 
—

 
(92
)
 
82

 
—

 
(1
)
 
1

 
—

 
228

Mortgages, mortgage-backed and asset-backed(1)
3,199

 
52

 
—

 
—

 
52

 
—

 
(393
)
 
1,330

 
—

 
(233
)
 
736

 
(113
)
 
4,578

Municipals and money markets
2,047

 
9

 
—

 
—

 
9

 
—

 
(319
)
 
207

 
—

 
(191
)
 
—

 
(23
)
 
1,730

Total trading assets, excluding derivative contracts
10,055

 
156

 
—

 
—

 
156

 
—

 
(2,909
)
 
2,526

 
—

 
(874
)
 
922

 
(626
)
 
9,250

Derivative contracts, net
4,495

 
(542
)
 
—

 
—

 
(542
)
 
—

 
(379
)
 
560

 
—

 
(346
)
 
21

 
(395
)
 
3,414

Investment securities available-for-sale :
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate ABS
47

 
—

 
(2
)
 
—

 
(2
)
 
—

 
—

 
—

 
—

 
(37
)
 
—

 
—

 
8

Total investment securities available-for-sale
47

 
—

 
(2
)
 
—

 
(2
)
 
—

 
—

 
—

 
—

 
(37
)
 
—

 
—

 
8

Investment securities non-qualifying
574

 
—

 
(6
)
 
—

 
(6
)
 
—

 
(90
)
 
9

 
—

 
(154
)
 
—

 
—

 
333

Total investment securities
621

 
—

 
(8
)
 
—

 
(8
)
 
—

 
(90
)
 
9

 
—

 
(191
)
 
—

 
—

 
341

Loans, notes and mortgages
1,726

 
—

 
114

 
15

 
129

 
—

 
(16
)
 
7

 
—

 
(70
)
 
—

 
—

 
1,776

Other assets
1,349

 
—

 
(86
)
 
—

 
(86
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,263

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
52

 
—

 
—

 
—

 
—

 
—

 
35

 
(44
)
 
—

 
1

 
2

 
(37
)
 
9

Preferred stock
16

 
(2
)
 
—

 
—

 
(2
)
 
—

 
9

 
(5
)
 
—

 
—

 
—

 
(13
)
 
9

Municipals, money markets and other
45

 
5

 
—

 
—

 
5

 
—

 
9

 
(6
)
 
1

 
—

 
—

 
—

 
44

Total trading liabilities, excluding derivative contracts
113

 
3

 
—

 
—

 
3

 
—

 
53

 
(55
)
 
1

 
1

 
2

 
(50
)
 
62

Other payables - interest and other
10

 
—

 
4

 
—

 
4

 
—

 
—

 
(1
)
 
—

 
—

 
—

 
(3
)
 
2

Long-term borrowings
2,186

 
(59
)
 
(35
)
 
—

 
(94
)
 
—

 
33

 
(98
)
 
81

 
(629
)
 
441

 
(639
)
 
1,469

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
During the six months ended June 30, 2012, approximately $900 million was reclassified from Corporate debt to Mortgages, mortgage-backed and asset-backed.  In the table above, this reclassification is presented as a sale of Corporate debt and as a purchase of Mortgages, mortgage-backed and asset-backed trading assets.
Fair Value, Measured on Recurring Basis, Unrecognized Gain (Loss) Included in Earnings on Assets and Liabilities related to Level 3 Still Held
The following tables provide the portion of gains or losses included in income for the three and six months ended June 30, 2012 and June 30, 2011 attributable to unrealized gains or losses relating to those Level 3 assets and liabilities held at June 30, 2012 and June 30, 2011, respectively.


(dollars in millions)
 
Unrealized Gains or (Losses) for Level 3
Assets and Liabilities Still Held
 
Three Months ended June 30, 2012
 
Six Months ended June 30, 2012
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
Total
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
(6
)
 
$
—

 
$
—

 
$
(6
)
 
$
1

 
$
—

 
$
—

 
$
1

Convertible debentures
(2
)
 
—

 
—

 
(2
)
 
—

 
—

 
—

 
—

Non-U.S. governments and agencies
(25
)
 
—

 
—

 
(25
)
 
—

 
—

 
—

 
—

Corporate debt
(35
)
 
—

 
—

 
(35
)
 
3

 
—

 
—

 
3

Preferred stock
(1
)
 
—

 
—

 
(1
)
 
2

 
—

 
—

 
2

Mortgages, mortgage-backed and asset-backed
(45
)
 
—

 
—

 
(45
)
 
(7
)
 
—

 
—

 
(7
)
Municipals and money markets
6

 
—

 
—

 
6

 
(3
)
 
—

 
—

 
(3
)
Total trading assets, excluding derivative contracts
(108
)
 
—

 
—

 
(108
)
 
(4
)
 
—

 
—

 
(4
)
Derivative contracts, net
173

 
—

 
—

 
173

 
(429
)
 
—

 
—

 
(429
)
Investment securities non-qualifying
—

 
1

 
—

 
1

 
—

 
(10
)
 
—

 
(10
)
Loans, notes and mortgages
—

 
13

 
—

 
13

 
—

 
110

 
—

 
110

Other assets
—

 
(39
)
 
—

 
(39
)
 
—

 
(86
)
 
—

 
(86
)
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
—

 
—

 
—

 
—

 
(2
)
 
—

 
—

 
(2
)
Municipals, money markets and other
3

 
—

 
—

 
3

 
3

 
—

 
—

 
3

Total trading liabilities, excluding derivative contracts
3

 
—

 
—

 
3

 
1

 
—

 
—

 
1

Other payables — interest and other
—

 
1

 
—

 
1

 
—

 
—

 
—

 
—

Long-term borrowings
82

 
9

 
—

 
91

 
(12
)
 
—

 
—

 
(12
)

(dollars in millions)
 
Unrealized Gains or (Losses) for Level 3
Assets and Liabilities Still Held
 
Three Months ended June 30, 2011
 
Six Months ended June 30, 2011
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
Total
 
Principal
Transactions
 
Other
Revenue
 
Interest
 
Total
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equities
$
(61
)
 
$
—

 
$
—

 
$
(61
)
 
$
(46
)
 
$
—

 
$
—

 
$
(46
)
Convertible debentures
3

 
—

 
—

 
3

 
3

 
—

 
—

 
3

Non-U.S. governments and agencies
67

 
—

 
—

 
67

 
70

 
—

 
—

 
70

Corporate debt
(44
)
 
—

 
—

 
(44
)
 
154

 
—

 
—

 
154

Preferred stock
17

 
—

 
—

 
17

 
23

 
—

 
—

 
23

Mortgages, mortgage-backed and asset-backed
(42
)
 
—

 
—

 
(42
)
 
201

 
—

 
—

 
201

Municipals and money markets
(3
)
 
—

 
—

 
(3
)
 
16

 
—

 
—

 
16

Total trading assets, excluding derivative contracts
(63
)
 
—

 
—

 
(63
)
 
421

 
—

 
—

 
421

Derivative contracts, net
344

 
—

 
—

 
344

 
269

 
—

 
—

 
269

Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities - non-agency MBSs
—

 
(6
)
 
—

 
(6
)
 
—

 
(25
)
 
—

 
(25
)
Total investment securities available-for-sale
—

 
(6
)
 
—

 
(6
)
 
—

 
(25
)
 
—

 
(25
)
Investment securities non-qualifying
—

 
122

 
—

 
122

 
—

 
92

 
—

 
92

Total investment securities
—

 
116

 
—

 
116

 
—

 
67

 
—

 
67

Loans, notes and mortgages
—

 
17

 
—

 
17

 
—

 
185

 
—

 
185

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading liabilities, excluding derivative contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
(1
)
 
—

 
—

 
(1
)
 
(1
)
 
—

 
—

 
(1
)
Total trading liabilities, excluding derivative contracts
(1
)
 
—

 
—

 
(1
)
 
(1
)
 
—

 
—

 
(1
)
Other payables — interest and other
—

 
(20
)
 
—

 
(20
)
 
—

 
2

 
—

 
2

Long-term borrowings
(10
)
 
8

 
—

 
(2
)
 
(102
)
 
(27
)
 
—

 
(129
)


Fair Value Inputs, Assets and Liabilities, Quantitative Information
The following tables present information about significant unobservable inputs related to material components of Merrill Lynch's Level 3 financial assets and liabilities as of June 30, 2012:
Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)
 
Inputs
Financial Instrument
Fair Value
Valuation Techniques
Unobservable Inputs
Ranges of Inputs
Loans and Securities

 


Instruments backed by residential real estate assets
$
1,585

Discounted Cash Flow
Yield
1% to 25%
Loans, notes and mortgages
958

Prepayment Speeds
3% to 10% CPR
Trading assets - Mortgages, mortgage-backed and asset-backed
627

Default Rates
1% to 3% CDR
 


Loss Severities
35% to 45%
Instruments backed by commercial real estate assets
$
1,930

Discounted Cash Flow
Yield
1% to 10%
Loans, notes and mortgages
368

Loss Severities
33% to 97%
Other assets
1,263



Trading assets - Mortgages, mortgage-backed and asset-backed
299



Commercial loans, debt securities and other
$
6,208

Discounted Cash Flow, Market Comparables
Yield
0% to 20%
Loans, notes and mortgages
450

Enterprise Value/EBITDA multiple
3x to 7x
Trading assets - Mortgages, mortgage-backed and asset-backed
3,652

Prepayment Speed
5% to 25%
Trading assets - Corporate debt
2,106

Default Rates
1% to 5%
 


Loss Severity
25% to 40%
Auction Rate Securities


Discounted Cash Flow, Market Comparables
Projected tender price / re-financing level
50% to 100%
Trading assets - Municipals and money markets
$
1,730



Long-term borrowings (structured notes)
 
 
 
 
Long-term borrowings
$
1,469

Industry Standard Derivative Pricing (1)
Equity Correlation
30% to 97%
 


Long-Dated Volatilities
20% to 70%

(1)
Includes models such as Monte Carlo simulation and Black-Scholes.

CPR = Constant Prepayment Rate
CDR = Constant Default Rate






Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)
 
Inputs
Financial Instrument
Fair Value
Valuation Techniques
Unobservable Inputs
Ranges of Inputs
Net Derivative Contracts

 


   Credit derivatives
$
3,116

Discounted Cash Flow, Hazard Rate Model (1), Stochastic Recovery Correlation Model
Yield
0% to 25%
 


Credit spreads
100bps to 500bps
 


Upfront points
53 to 99
 


Spread to index
-2,000bps to 2,000bps
 


Credit correlation
30% to 80%
 


Prepayment speed
0% to 25% CPR
 


Default rates
0% to 5% CDR
 


Loss severity
0% to 70%
   Equity derivatives
$
(351
)
Industry Standard Derivative Pricing (2)
Equity Correlation
30% to 97%
 


Long-Dated Volatilities
20% to 70%
   Commodity derivatives
$
(1
)
Discounted Cash Flow
Long term Natural Gas basis curve
 -$0.530 to $0.302
   Interest rate derivatives
$
650

Industry Standard Derivative Pricing (2)
Correlation (IR/IR)
15% to 100%
 


Correlation (FX/IR)
-65% to 50%
 


Long Dated Inflation Rates
1.5% to 2.6%
 


Long Dated Inflation Volatilities
0.3% to 0.9%
 


Long Dated Volatilities (FX)
7% to 38%
 


Long Dated Swap Rates
9.5% to 10.3%
Total net derivative contracts
$
3,414

 
 
 

(1) 
The hazard rate model is an industry standard model for valuing CDS for single names or indices.
(2) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
IR = Interest Rate
FX = Foreign Exchange
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis
The following tables show the fair value hierarchy for those assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2012 and December 31, 2011, and related gains (losses) for the three and six month periods ended June 30, 2012 and June 30, 2011.
(dollars in millions)
 
 
 
 
 
 
 
Non-Recurring Basis
 
Gains/(Losses)
 
Gains/(Losses)
 
Gains/(Losses)
 
Gains/(Losses)
 
as of June 30, 2012
 
Three Months Ended
 
Six Months Ended
 
Three Months Ended
 
Six Months Ended
 
 
Level 2
 
Level 3
 
Total
 
June 30, 2012
 
June 30, 2012
 
June 30, 2011
 
June 30, 2011
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities non-qualifying
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
(1
)
 
$
(5
)
Loans, notes and mortgages
 
60

 
286

 
346

 
(53
)
 
(40
)
 
9

 
44

Other assets
 
1

 
1

 
2

 
—

 
—

 
(7
)
 
(7
)
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other payables — interest and other
 
$
—

 
$
1

 
$
1

 
$
4

 
$
3

 
$
—

 
$
(1
)

(dollars in millions)
 
Non-Recurring Basis
 
as of December 31, 2011
 
 
Level 2
 
Level 3
 
Total
Assets:
 
 

 
 

 
 

Investment securities non-qualifying
 
$
—

 
$
5

 
$
5

Loans, notes and mortgages
 
298

 
245

 
543

Other assets
 
—

 
19

 
19

 
 
 
 
 
 
 
Fair Value Option
The following tables provide information about the line items in the Consolidated Statements of Earnings (Loss) where changes in fair values of assets and liabilities, for which the fair value option election has been made, are included for the three and six months ended June 30, 2012 and June 30, 2011.

(dollars in millions)
 
Changes in Fair Value For the Three Months Ended June 30, 2012, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
 
Changes in Fair Value For the Six Months Ended June 30, 2012, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
 
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
Assets:
 
 
 
 
 
 
 
 

 
 

 
 

Receivables under resale agreements
$
5

 
$
—

 
$
5

 
 
$
(29
)
 
$
—

 
$
(29
)
Investment securities
—

 
(3
)
 
(3
)
 
 
—

 
2

 
2

Loans
3

 
(15
)
 
(12
)
 
 
29

 
77

 
106

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
9

 
—

 
9

 
 
(25
)
 
—

 
(25
)
Short-term borrowings
12

 
—

 
12

 
 
19

 
—

 
19

Other payables — interest and other
—

 
(18
)
 
(18
)
 
 
—

 
31

 
31

Long-term borrowings
592

 
(21
)
 
571

 
 
(1,841
)
 
(21
)
 
(1,862
)


(dollars in millions)
 
Changes in Fair Value For the Three Months Ended June 30, 2011, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
 
Changes in Fair Value For the Six Months Ended June 30, 2011, for Items Measured at Fair Value Pursuant to the Fair Value Option Election
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
 
 
Gains
(Losses)
Principal
Transactions
 
Gains
(Losses)
Other
Revenues
 
Total
Changes
in Fair
Value
Assets:
 
 
 
 
 
 
 
 

 
 

 
 

Receivables under resale agreements
$
87

 
$
—

 
$
87

 
 
$
28

 
$
—

 
$
28

Investment securities
—

 
1

 
1

 
 
—

 
30

 
30

Loans
—

 
1

 
1

 
 
—

 
139

 
139

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Payables under repurchase agreements
(8
)
 
—

 
(8
)
 
 
3

 
—

 
3

Short-term borrowings
37

 
—

 
37

 
 
93

 
—

 
93

Other payables — interest and other
—

 
3

 
3

 
 
—

 
16

 
16

Long-term borrowings
(145
)
 
—

 
(145
)
 
 
(506
)
 
—

 
(506
)
Schedule Of Fair Value Option Elections
The following tables present the difference between fair values and the aggregate contractual principal amounts of receivables under resale agreements, receivables under securities borrowed transactions, loans and long-term borrowings for which the fair value option election has been made as of June 30, 2012 and December 31, 2011.

(dollars in millions)
 
 
 
 
 
 
Fair Value at
 
Principal
Amount
Due Upon
Maturity
 
 
 
June 30, 2012
 
 
Difference
Assets:
 

 
 

 
 

Receivables under resale agreements
$
90,533

 
$
90,107

 
$
426

Receivables under securities borrowed transactions
500

 
514

 
(14
)
Loans (1)
3,223

 
3,995

 
(772
)
Liabilities:
 
 
 
 
 
Long-term borrowings (2)
30,803

 
33,133

 
(2,330
)
(1)
Includes trading loans with a fair value of $401 million.
(2)
The majority of the difference between the fair value and principal amount due upon maturity at June 30, 2012 relates to the impact of changes in Merrill Lynch's credit spreads, as well as the fair value of the embedded derivative, where applicable.
(dollars in millions)
 
 
 
 
 
 
Fair Value at
 
Principal
Amount
Due Upon
Maturity
 
 
 
December 31, 2011
 
 
Difference
Assets:
 

 
 

 
 

Receivables under resale agreements
$
85,652

 
$
85,197

 
$
455

Receivables under securities borrowed transactions
259

 
287

 
(28
)
Loans (1)
2,742

 
4,023

 
(1,281
)
Liabilities:
 
 
 
 
 
Long-term borrowings(2)
30,325

 
36,537

 
(6,212
)
(1)
Includes loans held for sale with a fair value of $420 million, accounted for under the fair value option, which were reclassified to trading assets because they are risk managed on that basis.
(2)
The majority of the difference between the fair value and principal amount due upon maturity at December 31, 2011 relates to the impact of changes in Merrill Lynch's credit spreads, as well as the fair value of the embedded derivative, where applicable.