Ally Bank 2012 Annual Report Download - page 169

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securities classified as available-for-sale, any changes in fair value due to unhedged risks are recorded to accumulated other comprehensive
income.
Except for our net investment hedges and fair value foreign-currency hedges of available-for-sale securities, we generally have not
elected to treat any foreign-currency derivatives as hedges for accounting purposes principally because the changes in the fair values of the
foreign-currency swaps are substantially offset by the foreign-currency revaluation gains and losses of the underlying assets and liabilities.
Counterparty Credit Risk
Derivative financial instruments contain an element of credit risk if counterparties are unable to meet the terms of the agreements. Credit
risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties that owe us under the
contract completely fail to perform under the terms of those contracts, assuming no recoveries of underlying collateral as measured by the
market value of the derivative financial instrument.
To mitigate the risk of counterparty default, we maintain collateral agreements with certain counterparties. The agreements require both
parties to maintain collateral in the event the fair values of the derivative financial instruments meet established thresholds. In the event that
either party defaults on the obligation, the secured party may seize the collateral. Generally, our collateral arrangements are bilateral such that
we and the counterparty post collateral for the value of our total obligation to each other. Contractual terms provide for standard and
customary exchange of collateral based on changes in the market value of the outstanding derivatives. The securing party posts additional
collateral when their obligation rises or removes collateral when it falls. We also have unilateral collateral agreements whereby we are the
only entity required to post collateral.
Certain derivative instruments contain provisions that require us to either post additional collateral or immediately settle any outstanding
liability balances upon the occurrence of a specified credit risk-related event. If a credit risk-related event had been triggered the amount of
additional collateral required to be posted by us would have been insignificant.
We placed cash and securities collateral totaling $1.3 billion and $1.4 billion at December 31, 2012 and 2011, respectively, in accounts
maintained by counterparties. We received cash collateral from counterparties totaling $941 million and $1.4 billion at December 31, 2012
and 2011, respectively. The receivables for collateral placed and the payables for collateral received are included on our Consolidated Balance
Sheet in other assets and accrued expenses and other liabilities, respectively. In certain circumstances, we receive or post securities as
collateral with counterparties. We do not record such collateral received on our Consolidated Balance Sheet unless certain conditions are met.
At December 31, 2012 and 2011, we received noncash collateral of $0.3 million and $43 million, respectively.
Table of Contents
Notes to Consolidated Financial Statements
Ally Financial Inc. • Form 10-K