Company: KEY-PI
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001628280-25-048757
Chunk: 267

Company: KEYCORP /NEW/
Filing Date: 2025-11-04
Form: 10-Q
Item: Item 8
Chunk 267
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 different methods for managing counterparty credit exposure and credit risk.We enter into transactions with broker-dealers and banks for various risk management purposes. These types oftransactions are primarily high dollar volume. We enter into bilateral collateral and master netting agreements withthese counterparties. We clear certain types of derivative transactions with these counterparties, whereby centralclearing organizations become the counterparties to our derivative contracts. In addition, we enter into derivativecontracts through swap execution facilities. Swap clearing and swap execution facilities reduce our exposure tocounterparty credit risk. At September 30, 2025, we had gross exposure of $235 million to broker-dealers and banks and a net exposure of $44 million after the application of master netting agreements and cash collateral, where such qualifying agreements exist. We held no additional collateral in the form of securities. At December 31, 2024, we had gross exposure of $247 million to broker-dealers and banks, a net exposure of $42 million after the application 

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of master netting agreements and cash collateral, where such qualifying agreements exist, and held no additional collateral in the form of securities against this net exposure. We enter into transactions using master netting agreements with clients to accommodate their business needs. Inmost cases, we mitigate our credit exposure by cross-collateralizing these transactions to the underlying loan collateral. For transactions that are not clearable, we mitigate our market risk by buying and selling U.S. Treasuries and SOFR futures or entering into offsetting positions. Due to the cross-collateralization to the underlying loan, we typically do not exchange cash or marketable securities collateral in connection with these transactions. To address the risk of default associated with these contracts, we have established a CVA reserve (included in “accrued income and other assets”). At September 30, 2025, and December 31, 2024, our CVA reserve was $6 million and $4 million, respectively. The CVA is calculated from potential future exposures, expected recovery rates, and market-implied probabilities of default. At September 30, 2025, we had gross exposure of $206 million to client counterparties and other entities that are not broker-dealers or banks for derivatives that have associated master netting agreements. We had net exposure of $186 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. At December 31, 2024, we