Charles Schwab 2015 Annual Report Download - page 103

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THE CHARLES SCHWAB CORPORATION
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
- 83 -
The following table presents information about the Company’s resale agreements and securities lending activity to enable the
users of the Company’s financial statements to evaluate the potential effect of rights of setoff between these recognized assets
and recognized liabilities.
Gross Amounts Not Offset in the
Gross Amounts Net Amounts Consolidated Balance Sheet
Gross Offset in the Presented in the
Assets/ Consolidated Consolidated Counterparty Net
Liabilities Balance Sheet Balance Sheet Offsetting Collateral Amount
December 31, 2015
Assets:
Resale agreements (1) $ 8,088 $ - $ 8,088 $ - $ (8,088) (2) $ -
Securities borrowed (3) 198 - 198 (70) (127) 1
Total $ 8,286 $ - $ 8,286 $ (70) $ (8,215) $ 1
Liabilities:
Securities loaned (4,5) $ 2,233 $ - $ 2,233 $ (70) $ (1,990) $ 173
Total $ 2,233 $ - $ 2,233 $ (70) $ (1,990) $ 173
December 31, 2014
Assets:
Resale agreements (1) $ 10,186 $ - $ 10,186 $ - $ (10,186) (2) $ -
Securities borrowed (3) 187 - 187 (69) (117) 1
Total $ 10,373 $ - $ 10,373 $ (69) $ (10,303) $ 1
Liabilities:
Securities loaned (4,5) $ 1,477 $ - $ 1,477 $ (69) $ (1,293) $ 115
Total $ 1,477 $ - $ 1,477 $ (69) $ (1,293) $ 115
(1) Included in cash and investments segregated and on deposit for regulatory purposes in the Company’s consolidated
balance sheets.
(2) Actual collateral was greater than or equal to 102% of the related assets.
(3) Included in receivables from brokers, dealers, and clearing organizations in the Company’s consolidated balance sheets.
(4) Included in payables to brokers, dealers, and clearing organizations in the Company’s consolidated balance sheets.
(5) Securities loaned are predominantly comprised of equity securities with overnight and continuous remaining contractual
maturities.
Client trade settlement: The Company is obligated to settle transactions with brokers and other financial institutions even if
the Company’s clients fail to meet their obligations to the Company. Clients are required to complete their transactions on
settlement date, generally three business days after the trade date. If clients do not fulfill their contractual obligations, the
Company may incur losses. The Company has established procedures to reduce this risk by requiring deposits from clients in
excess of amounts prescribed by regulatory requirements for certain types of trades, and therefore the potential to make
payments under these client transactions is remote. Accordingly, no liability has been recognized for these transactions.
Margin lending: The Company provides margin loans to its clients which are collateralized by securities in their brokerage
accounts and may be liable for the margin requirement of its client margin securities transactions. As clients write options or
sell securities short, the Company may incur losses if the clients do not fulfill their obligations and the collateral in client
accounts is insufficient to fully cover losses which clients may incur from these strategies. To mitigate this risk, the Company
monitors required margin levels and requires clients to deposit additional collateral, or reduce positions to meet minimum
collateral requirements. The contractual value of margin loans to clients was $15.8 billion and $14.3 billion at December 31,
2015 and 2014, respectively.
Clients with margin loans have agreed to allow the Company to pledge collateralized securities in their brokerage accounts in
accordance with federal regulations. Under such regulations, the Company was allowed to pledge securities with a fair value
of $22.4 billion and $20.4 billion at December 31, 2015 and 2014, respectively. The fair value of client securities pledged to
fulfill the short sales of its clients was $1.3 billion and $1.5 billion at December 31, 2015 and 2014, respectively. The fair