Morgan Stanley 2014 Annual Report Download - page 216

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
cases, the Company is permitted to sell or repledge these securities held as collateral and use the securities to
secure repurchase agreements, to enter into securities lending and derivative transactions or for delivery to
counterparties to cover short positions. The Company additionally receives securities as collateral in connection
with certain securities-for-securities transactions in which the Company is the lender. In instances where the
Company is permitted to sell or repledge these securities, the Company reports the fair value of the collateral
received and the related obligation to return the collateral in its consolidated statements of financial condition. At
December 31, 2014 and December 31, 2013, the total fair value of financial instruments received as collateral
where the Company is permitted to sell or repledge the securities was $546 billion and $533 billion, respectively,
and the fair value of the portion that had been sold or repledged was $403 billion and $381 billion, respectively.
The Company is subject to concentration risk by holding large positions in certain types of securities, loans or
commitments to purchase securities of a single issuer, including sovereign governments and other entities, issuers
located in a particular country or geographic area, public and private issuers involving developing countries or
issuers engaged in a particular industry. Trading assets owned by the Company include U.S. government and
agency securities and securities issued by other sovereign governments (principally the U.K., Japan, Brazil and
Hong Kong), which, in the aggregate, represented approximately 7% and 10% of the Company’s total assets at
December 31, 2014 and December 31, 2013, respectively. In addition, substantially all of the collateral held by
the Company for resale agreements or bonds borrowed, which together represented approximately 17% and 20%
of the Company’s total assets at December 31, 2014 and December 31, 2013, respectively, consists of securities
issued by the U.S. government, federal agencies or other sovereign government obligations. Positions taken and
commitments made by the Company, including positions taken and underwriting and financing commitments
made in connection with its private equity, principal investment and lending activities, often involve substantial
amounts and significant exposure to individual issuers and businesses, including non-investment grade issuers. In
addition, the Company may originate or purchase certain residential and commercial mortgage loans that could
contain certain terms and features that may result in additional credit risk as compared with more traditional
types of mortgages. Such terms and features may include loans made to borrowers subject to payment increases
or loans with high loan-to-value ratios.
At December 31, 2014 and December 31, 2013, cash and securities deposited with clearing organizations or
segregated under federal and other regulations or requirements were as follows:
At
December 31,
2014
At
December 31,
2013
(dollars in millions)
Cash deposited with clearing organizations or segregated under federal
and other regulations or requirements .......................... $40,607 $39,203
Securities(1) ................................................ 14,630 15,586
Total .................................................. $55,237 $54,789
(1) Securities deposited with clearing organizations or segregated under federal and other regulations or requirements are sourced from
Securities purchased under agreements to resell and Trading assets in the Company’s consolidated statements of financial condition.
7. Variable Interest Entities and Securitization Activities.
The Company is involved with various special purpose entities (“SPE”) in the normal course of business. In most
cases, these entities are deemed to be VIEs.
The Company applies accounting guidance for consolidation of VIEs to certain entities in which equity investors
do not have the characteristics of a controlling financial interest. Except for certain asset management entities,
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