11. Borrowings and Other Secured Financings.
Commercial Paper and Other Short-Term Borrowings.
The table below summarizes certain information regarding commercial paper and other short-term borrowings:
| December 31, | December 31, | |||
| 2013 | 2012 | |||
| (dollars in millions) | ||||
| Commercial Paper: | ||||
| Balance at period-end | $ | 8 | $ | 306 |
| Average balance(1) | $ | 155 | $ | 479 |
| Weighted average interest rate on period-end balance(2) | 10.4% | 10.1% | ||
| Other Short-Term Borrowings(3)(4): | ||||
| Balance at period-end | $ | 2,134 | $ | 1,832 |
| Average balance(1) | $ | 1,872 | $ | 1,461 |
(1) Average balances are calculated based upon weekly balances.
(2) The weighted average interest rates at December 31, 2013 and 2012 were driven primarily by commercial paper issued in a foreign country in which typical funding rates are significantly higher than in the U.S.
(3) These borrowings included bank loans, bank notes and structured notes with original maturities of 12 months or less.
(4) Certain structured short-term borrowings are carried at fair value under the fair value option. See Note 4 for additional information.
Long-Term Borrowings.
Maturities and Terms. Long-term borrowings consisted of the following (dollars in millions):
| Parent Company | Subsidiaries | At | At | ||||||||||
| Fixed | Variable | Fixed | Variable | December 31, | December 31, | ||||||||
| Rate | Rate(1)(2) | Rate | Rate(1)(2) | 2013(3)(4) | 2012 | ||||||||
| Due in 2013 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 25,303 | |
| Due in 2014 | 11,665 | 10,830 | 18 | 1,680 | 24,193 | 21,751 | |||||||
| Due in 2015 | 13,962 | 5,760 | 17 | 1,351 | 21,090 | 24,653 | |||||||
| Due in 2016 | 11,521 | 9,621 | 43 | 1,959 | 23,144 | 19,984 | |||||||
| Due in 2017 | 16,227 | 8,231 | 18 | 1,819 | 26,295 | 28,137 | |||||||
| Due in 2018 | 10,689 | 2,886 | 18 | 1,715 | 15,308 | 7,733 | |||||||
| Thereafter | 34,748 | 7,165 | 440 | 1,192 | 43,545 | 42,010 | |||||||
| Total | $ | 98,812 | $ | 44,493 | $ | 554 | $ | 9,716 | $ | 153,575 | $ | 169,571 | |
| Weighted average coupon at period-end(5) | 5.1% | 1.0% | 6.5% | 0.7% | 4.4% | 4.4% | |||||||
(1) Variable rate borrowings bear interest based on a variety of money market indices, including LIBOR and Federal Funds rates.
(2) Amounts include borrowings that are equity-linked, credit-linked, commodity-linked or linked to some other index.
(3) Amounts include an increase of approximately $2.2 billion at December 31, 2013, to the carrying amount of certain of the Company's long-term borrowings associated with fair value hedges. The increase to the carrying value associated with fair value hedges by year due was approximately less than $0.1 billion due in 2014, $0.4 billion due in 2015, $0.5 billion due in 2016, $1.0 billion due in 2017, $0.3 billion due in 2018 and $(0.1) billion due thereafter.
(4) Amounts include an increase of approximately $2.4 billion at December 31, 2013 to the carrying amounts of certain of the Company's long-term borrowings for which the fair value option was elected (see Note 4).
(5) Weighted average coupon was calculated utilizing U.S. and non-U.S. dollar interest rates and excludes financial instruments for which the fair value option was elected.
The Company's long-term borrowings included the following components:
| At | At | |||
| December 31, 2013 | December 31, 2012 | |||
| (dollars in millions) | ||||
| Senior debt | $ | 139,451 | $ | 158,899 |
| Subordinated debt | 9,275 | 5,845 | ||
| Junior subordinated debentures | 4,849 | 4,827 | ||
| Total | $ | 153,575 | $ | 169,571 |
During 2013, the Company issued and reissued notes with a principal amount of approximately $28 billion. This amount included the Company's issuances of $2.0 billion in subordinated debt on November 22, 2013, $2.0 billion in subordinated debt on May 21, 2013, $3.7 billion in senior unsecured debt on April 25, 2013 and $4.5 billion in senior unsecured debt on February 25, 2013. During 2013, approximately $39 billion of notes matured or were retired.
During 2012, the Company issued and reissued notes with a principal amount of approximately $24 billion. During 2012, approximately $43 billion of notes matured or were retired.
Senior debt securities often are denominated in various non-U.S. dollar currencies and may be structured to provide a return that is equity-linked, credit-linked, commodity-linked or linked to some other index (e.g., the consumer price index). Senior debt also may be structured to be callable by the Company or extendible at the option of holders of the senior debt securities. Debt containing provisions that effectively allow the holders to put or extend the notes aggregated $1,175 million at December 31, 2013 and $1,131 million at December 31, 2012. In addition, separate agreements are entered into by the Company's subsidiaries that effectively allow the holders to put the notes aggregated $353 million at December 31, 2013 and $1,895 million at December 31, 2012. Subordinated debt and junior subordinated debentures generally are issued to meet the capital requirements of the Company or its regulated subsidiaries and primarily are U.S. dollar denominated.
Senior Debt—Structured Borrowings. The Company's index-linked, equity-linked or credit-linked borrowings include various structured instruments whose payments and redemption values are linked to the performance of a specific index (e.g., Standard & Poor's 500), a basket of stocks, a specific equity security, a credit exposure or basket of credit exposures. To minimize the exposure resulting from movements in the underlying index, equity, credit or other position, the Company has entered into various swap contracts and purchased options that effectively convert the borrowing costs into floating rates based upon LIBOR. These instruments are included in the preceding table at their redemption values based on the performance of the underlying indices, baskets of stocks, or specific equity securities, credit or other position or index. The Company carries either the entire structured borrowing at fair value or bifurcates the embedded derivative and carries it at fair value. The swaps and purchased options used to economically hedge the embedded features are derivatives and also are carried at fair value. Changes in fair value related to the notes and economic hedges are reported in Trading revenues. See Note 4 for further information on structured borrowings.
Subordinated Debt and Junior Subordinated Debentures. Included in the Company's long-term borrowings are subordinated notes of $9,275 million having a contractual weighted average coupon of 4.69% at December 31, 2013 and $5,845 million having a weighted average coupon of 4.81% at December 31, 2012. Junior subordinated debentures outstanding by the Company were $4,849 million at December 31, 2013 and $4,827 million at December 31, 2012 having a contractual weighted average coupon of 6.37% at both December 31, 2013 and December 31, 2012. Maturities of the subordinated and junior subordinated notes range from 2014 to 2067. Maturities of certain junior subordinated debentures can be extended to 2052 at the Company's option.
Asset and Liability Management. In general, securities inventories that are not financed by secured funding sources and the majority of the Company's assets are financed with a combination of deposits short-term funding, floating rate long-term debt or fixed rate long-term debt swapped to a floating rate. Fixed assets are generally financed with fixed rate long-term debt. The Company uses interest rate swaps to more closely match these borrowings to the duration, holding period and interest rate characteristics of the assets being funded and to manage interest rate risk. These swaps effectively convert certain of the Company's fixed rate borrowings into floating rate obligations. In addition, for non-U.S. dollar currency borrowings that are not used to fund assets in the same currency, the Company has entered into currency swaps that effectively convert the borrowings into U.S. dollar obligations. The Company's use of swaps for asset and liability management affected its effective average borrowing rate as follows:
| 2013 | 2012 | 2011 | ||||
| Weighted average coupon of long-term borrowings at period-end(1) | 4.4% | 4.4% | 4.0% | |||
| Effective average borrowing rate for long-term borrowings after swaps | ||||||
| at period-end(1) | 2.2% | 2.3% | 1.9% | |||
(1) Included in the weighted average and effective average calculations are non-U.S. dollar interest rates.
Other. The Company, through several of its subsidiaries, maintains funded and unfunded committed credit facilities to support various businesses, including the collateralized commercial and residential mortgage whole loan, derivative contracts, warehouse lending, emerging market loan, structured product, corporate loan, investment banking and prime brokerage businesses.
Other Secured Financings.
Other secured financings include the liabilities related to transfers of financial assets that are accounted for as financings rather than sales, consolidated VIEs where the Company is deemed to be the primary beneficiary, pledged commodities, certain equity-linked notes and other secured borrowings. See Note 7 for further information on other secured financings related to VIEs and securitization activities.
The Company's other secured financings consisted of the following:
| At December 31, 2013 | At December 31, 2012 | |||||
| (dollars in millions) | ||||||
| Secured financings with original maturities greater than one year | $ | 9,750 | $ | 14,431 | ||
| Secured financings with original maturities one year or less(1) | 4,233 | 641 | ||||
| Failed sales(2) | 232 | 655 | ||||
| Total(3) | $ | 14,215 | $ | 15,727 | ||
___________
(1) At December 31, 2013, amount includes approximately $3,899 million of variable rate financings and approximately $334 million in fixed rate financings.
(2) For more information on failed sales, see Note 7.
(3) Amounts include $5,206 million and $9,466 million at fair value at December 31, 2013 and December 31, 2012, respectively.
Maturities and Terms: Secured financings with original maturities greater than one year consisted of the following:
| At | At | ||||||||
| Fixed | Variable | December 31, | December 31, | ||||||
| Rate | Rate(1)(2) | 2013 | 2012 | ||||||
| (dollars in millions) | |||||||||
| Due in 2013 | $ | — | $ | — | $ | — | $ | 8,528 | |
| Due in 2014 | 466 | 3,034 | 3,500 | 2,868 | |||||
| Due in 2015 | 29 | 1,877 | 1,906 | 960 | |||||
| Due in 2016 | 216 | 2,726 | 2,942 | 429 | |||||
| Due in 2017 | — | 160 | 160 | 181 | |||||
| Due in 2018 | — | 675 | 675 | 667 | |||||
| Thereafter | 229 | 338 | 567 | 798 | |||||
| Total | $ | 940 | $ | 8,810 | $ | 9,750 | $ | 14,431 | |
| Weighted average coupon rate at period-end(3) | 2.4% | 1.3% | 1.4% | 1.4% | |||||
___________
(1) Variable rate borrowings bear interest based on a variety of indices, including LIBOR.
(2) Amounts include borrowings that are equity-linked, credit-linked, commodity-linked or linked to some other index.
(3) Weighted average coupon was calculated utilizing U.S. and non-U.S. dollar interest rates and excludes secured financings that are linked to non-interest indices.
Maturities and Terms: Failed sales consisted of the following:
| At | At | |||||
| December 31, | December 31, | |||||
| 2013 | 2012 | |||||
| (dollars in millions) | ||||||
| Due in 2013 | $ | — | $ | 479 | ||
| Due in 2014 | 100 | 17 | ||||
| Due in 2015 | 57 | 7 | ||||
| Due in 2016 | 36 | 136 | ||||
| Due in 2017 | 24 | 14 | ||||
| Due in 2018 | — | — | ||||
| Thereafter | 15 | 2 | ||||
| Total | $ | 232 | $ | 655 | ||
For more information on failed sales, see Note 7.