Capital One 2013 Annual Report Download - page 228

CAPITAL ONE FINANCIAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Cash Flow Hedges and Net Investment Hedges
The table below shows the net gains (losses) related to derivatives designated as cash flow hedges and net
investment hedges for the years ended December 31, 2013, 2012 and 2011:`
Table 10.4: Gains and Losses on Derivatives Designated as Cash Flow Hedges
Year Ended December 31,
(Dollars in millions) 2013 2012 2011
Gains (losses) recorded in AOCI:
Cash flow hedges:
Interest rate contracts ................................................... $(103) $116 $ 32
Foreign exchange contracts .............................................. (21) (23) (20)
Total ............................................................ (124) 93 12
Net Investment Hedges:
Foreign exchange contracts .................................................. 00 (2)
Net derivative gains (losses) recognized in AOCI ................................. $(124) $ 93 $ 10
Gains (losses) recorded in earnings:
Cash flow hedges:
Gains (losses) reclassified from AOCI into earnings:
Interest rate contracts(1) .................................................. $ 53 $ 42 $ 3
Foreign exchange contracts(2) ............................................. (22) (22) (21)
Total ............................................................ 31 20 (18)
Gains (losses) recognized in earnings due to ineffectiveness:
Interest rate contracts(2) .................................................. (1) 00
Net derivative gains (losses) recognized in earnings ............................... $ 30 $ 20 $(18)
(1) Amounts reclassified are recorded in our consolidated statements of income in interest income or interest expense.
(2) Amounts reclassified are recorded in our consolidated statements of income in other non-interest income.
We expect to reclassify net after-tax losses of $71 million recorded in AOCI as of December 31, 2013, related to
derivatives designated as cash flow hedges to earnings over the next 12 months, which we expect to offset
against the cash flows associated with the hedged forecasted transactions. The maximum length of time over
which forecasted transactions were hedged was five years as of December 31, 2013. The amount we expect to
reclassify into earnings may change as a result of changes in market conditions and ongoing actions taken as part
of our overall risk management strategy.
Credit Risk-Related Contingency Features and Collateral
Certain of our derivative contracts include provisions requiring that our debt maintain a credit rating of
investment grade or above by each of the major credit rating agencies. In the event of a downgrade of our debt
credit rating below investment grade, some of our derivative counterparties would have the right to terminate the
derivative contract and close out the existing positions, or demand immediate and ongoing full overnight
collateralization on derivative instruments in a net liability position. Certain of our derivative contracts may also
allow, in the event of a downgrade of our debt credit rating of any kind, our derivative counterparties to demand
additional collateralization on such derivative instruments in a net liability position. We have posted $371 million
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