PNC Bank 2015 Annual Report Download - page 226

At December 31, 2015 and December 31, 2014, the home
equity indemnification and repurchase liability for estimated
losses on indemnification and repurchase claims totaled $20
million and $29 million, respectively, and was included in
Other liabilities on the Consolidated Balance Sheet. The
unpaid principal balance of the sold loan portfolio associated
with this repurchase obligation totaled $2.1 billion and $2.5
billion at December 31, 2015 and December 31, 2014,
respectively. At December 31, 2015 the reasonably possible
loss above our accrual for our portfolio of home equity loans/
lines of credit sold was not material.
Resale and Repurchase Agreements
We enter into repurchase and resale agreements where we
transfer investment securities to/from a third party with the
agreement to repurchase/resell those investment securities at a
future date for a specified price. These agreements are entered
into primarily to provide short-term financing for securities
inventory positions, acquire securities to cover short positions
and accommodate customers’ investing and financing needs.
Repurchase and resale agreements are treated as collateralized
financing transactions for accounting purposes and are
generally carried at the amounts at which the securities will be
subsequently reacquired or resold, including accrued interest.
Our policy is to take possession of securities purchased under
agreements to resell. We monitor the market value of
securities to be repurchased and resold and additional
collateral may be obtained where considered appropriate to
protect against credit exposure.
Repurchase and resale agreements are typically entered into
with counterparties under industry standard master netting
agreements which provide for the right to offset amounts
owed to one another with respect to multiple repurchase and
resale agreements under such master netting agreement
(referred to as netting arrangements) and liquidate the
purchased or borrowed securities in the event of counterparty
default. In order for an arrangement to be eligible for netting
under GAAP, we must obtain the requisite assurance that the
offsetting rights included in the master netting agreement
would be legally enforceable in the event of bankruptcy,
insolvency, or a similar proceeding of such third party.
Enforceability is evidenced by obtaining a legal opinion that
supports, with sufficient confidence, the enforceability of the
master netting agreement in bankruptcy.
Table 133 shows the amounts owed under resale and repurchase agreements and the securities collateral associated with those
agreements where a legal opinion supporting the enforceability of the offsetting rights has been obtained. We do not present resale
and repurchase agreements entered into with the same counterparty under a legally enforceable master netting agreement on a net
basis on our Consolidated Balance Sheet or within Table 133.
Refer to Note 14 Financial Derivatives for additional information related to offsetting of financial derivatives.
Table 133: Resale and Repurchase Agreements Offsetting
In millions
Gross
Resale
Agreements
Amounts
Offset
on the
Consolidated
Balance Sheet
Net
Resale
Agreements (a)
Securities
Collateral
Held Under
Master Netting
Agreements (b)
Net
Amounts (c)
Resale Agreements
December 31, 2015 $1,082 $1,082 $1,008 $74
December 31, 2014 $1,646 $1,646 $1,569 $77
In millions
Gross
Repurchase
Agreements
Amounts
Offset
on the
Consolidated
Balance Sheet
Net
Repurchase
Agreements (a)
Securities
Collateral
Pledged Under
Master Netting
Agreements (b)
Net
Amounts (d)
Repurchase Agreements
December 31, 2015 $1,767(e) $1,767 $1,014 $753
December 31, 2014 $3,406 $3,406 $2,580 $826
(a) Resale agreements are included on the Consolidated Balance Sheet in Federal funds sold and resale agreements. Amounts in the table above exclude fair value adjustments of $4
million and $7 million at December 31, 2015 and December 31, 2014, respectively, related to structured resale agreements that we have elected to account for at fair value. See Note 7
Fair Value for additional information. Repurchase agreements are included on the Consolidated Balance Sheet in Federal funds purchased and repurchase agreements.
(b) Represents the fair value of securities collateral purchased or sold, up to the amount owed under the agreement, for agreements supported by a legally enforceable master netting
agreement.
(c) Represents certain long term resale agreements which are fully collateralized but do not have the benefits of a netting opinion and, therefore, might be subject to a stay in insolvency
proceedings and therefore are not eligible under ASC 210-20 for netting.
(d) Represents overnight repurchase agreements entered into with municipalities, pension plans, and certain trusts and insurance companies which are fully collateralized but do not have
the benefits of a netting opinion and, therefore, might be subject to a stay in insolvency proceedings and therefore are not eligible under ASC 210-20 for netting. There were no long
term repurchase agreements as of December 31, 2015 and December 31, 2014.
(e) Repurchase agreements have remaining contractual maturities that are classified as overnight or continuous. As of December 31, 2015, the collateral pledged under these agreements
consisted primarily of residential mortgage -backed agency securities.
208 The PNC Financial Services Group, Inc. – Form 10-K