KeyBank 2015 Annual Report Download - page 194

The following table provides information on the types of credit derivatives sold by us and held on the balance
sheet at December 31, 2015, and December 31, 2014. The notional amount represents the maximum amount that
the seller could be required to pay. The payment/performance risk assessment is based on the default
probabilities for the underlying reference entities’ debt obligations using a Moody’s credit ratings matrix known
as Moody’s “Idealized” Cumulative Default Rates. The payment/performance risk shown in the table represents a
weighted-average of the default probabilities for all reference entities in the respective portfolios. These default
probabilities are directly correlated to the probability that we will have to make a payment under the credit
derivative contracts.
2015 2014
December 31,
dollars in millions
Notional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Notional
Amount
Average
Term
(Years)
Payment /
Performance
Risk
Single-name credit default swaps —— — $ 5 .72 .87%
Other $ 5 2.67 14.46 % 6 2.89 9.58
Total credit derivatives sold $5 — — $11 — —
Credit Risk Contingent Features
We have entered into certain derivative contracts that require us to post collateral to the counterparties when
these contracts are in a net liability position. The amount of collateral to be posted is based on the amount of the
net liability and thresholds generally related to our long-term senior unsecured credit ratings with Moody’s and
S&P. Collateral requirements also are based on minimum transfer amounts, which are specific to each Credit
Support Annex (a component of the ISDA Master Agreement) that we have signed with the counterparties. In a
limited number of instances, counterparties have the right to terminate their ISDA Master Agreements with us if
our ratings fall below a certain level, usually investment-grade level (i.e., “Baa3” for Moody’s and “BBB-” for
S&P). At December 31, 2015, KeyBank’s rating was “A3” with Moody’s and “A-” with S&P, and KeyCorp’s
rating was “Baa1” with Moody’s and “BBB+” with S&P. As of December 31, 2015, the aggregate fair value of
all derivative contracts with credit risk contingent features (i.e., those containing collateral posting or termination
provisions based on our ratings) held by KeyBank that were in a net liability position totaled $211 million, which
includes $199 million in derivative assets and $410 million in derivative liabilities. We had $208 million in cash
and securities collateral posted to cover those positions as of December 31, 2015. The aggregate fair value of all
derivative contracts with credit risk contingent features held by KeyCorp as of December 31, 2015, that were in a
net liability position totaled $7 million, which consists solely of derivative liabilities. We had $7 million in
collateral posted to cover those positions as of December 31, 2015.
The following table summarizes the additional cash and securities collateral that KeyBank would have been
required to deliver under the ISDA Master Agreements had the credit risk contingent features been triggered for the
derivative contracts in a net liability position as of December 31, 2015, and December 31, 2014. The additional
collateral amounts were calculated based on scenarios under which KeyBank’s ratings are downgraded one, two, or
three ratings as of December 31, 2015, and December 31, 2014, and take into account all collateral already posted.
A similar calculation was performed for KeyCorp, and no additional collateral would have been required as of
December 31, 2015, while additional collateral of less than $1 million as of December 31, 2014, would have been
required. For more information about the credit ratings for KeyBank and KeyCorp, see the discussion under the
heading “Factors affecting liquidity” in the section entitled “Liquidity risk management” in Item 7 of this report.
December 31,
in millions
2015 2014
Moody’s S&P Moody’s S&P
KeyBank’s long-term senior
unsecured credit ratings A3 A- A3 A-
One rating downgrade $2$2$1$1
Two rating downgrades 2211
Three rating downgrades 4433
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