Company: WFC-PC
Filing Date: 2025-10-31
Form Type: 10-Q
Source: 0000072971-25-000253
Chunk: 178

Company: WELLS FARGO & COMPANY/MN
Filing Date: 2025-10-31
Form: 10-Q
Item: Item 11
Chunk 178
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 in managing their risks, to manage our counterparty credit risk, and to hedge certain loan exposures. We act as both a purchaser and seller of credit protection. We may purchase and sell credit protection on corporate debt obligations through the use of credit default swaps, risk participation swaps or other credit derivatives. As a seller of credit protection, we would be required to perform under the sold credit derivatives in the event of default by the referenced obligors, such as bankruptcy, capital restructuring or lack of principal and/or interest payment.Table 11.9 provides details of sold credit derivatives.Table 11.9:  Sold Credit DerivativesCredit protection sold - Notional amount(in millions)TotalNon-investment gradeSeptember 30, 2025Credit default swaps$12,470 1,766 Risk participation swaps5,816 3,868 Total credit derivatives$18,286 5,634 December 31, 2024 Credit default swaps$10,516 684 Risk participation swaps6,007 3,779 Total credit derivatives$16,523 4,463 Total credit protection sold represents the estimated maximum exposure to loss that would be incurred if, upon an event of default, the value of our interests and any associated collateral declined to zero. Maximum exposure does not take into consideration any recovery value from the referenced obligation or offset from collateral held or any economic hedges. Non-investment grade amounts represent those credit derivatives with a higher risk of us being required to perform under the terms of the credit derivative based on the risk of the underlying assets. We consider the credit risk to be low if the underlying assets referenced by the credit derivative have an external rating that is investment grade. If an external rating is not available, we classify the credit derivative as non-investment grade. We manage our maximum exposure to sold credit derivatives by requiring collateral from our counterparties, which may include cash and non-cash collateral, and entering into purchased credit derivatives with identical or similar reference positions in order to achieve our desired credit risk profile. Our credit risk management approach is designed to provide the ability to recover amounts that would be paid under sold credit derivatives.Credit-Risk Contingent FeaturesCertain of our derivative contracts contain provisions whereby if the credit rating of our debt were to be downgraded by certain major credit rating agencies, the counterparty could demand additional collateral or require termination or replacement of derivative instruments in a net liability position. Table 11.10 illustrates our exposure to OTC bilateral derivative contracts with credit-risk contingent features, collateral we