Company: KEY-PI
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000091576-25-000038
Chunk: 111

Company: KEYCORP /NEW/
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 111
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 high dollar volume. We enter into bilateral collateral and master netting agreements with these counterparties. We clear certain types of derivative transactions with these counterparties, whereby central clearing organizations become the counterparties to our derivative contracts. In addition, we enter into derivative contracts through swap execution facilities. Swap clearing and swap execution facilities reduce our exposure to counterparty credit risk. At December 31, 2024, we had gross exposure of $247 million to broker-dealers and banks. We had net exposure of $42 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 against this net exposure.We enter into transactions using master netting agreements with clients to accommodate their business needs. In most 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”) in the amount of $4 million at December 31, 2024. The CVA is calculated from potential future exposures, expected recovery rates, and market-implied probabilities of default. At December 31, 2024, we had gross exposure of $239 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 $207 million on our derivatives with these counterparties after the application of master netting agreements, collateral, and the related reserve. Credit DerivativesWe are a buyer and, under limited circumstances, may be a seller of credit protection through the credit derivative market. We purchase credit derivatives to manage the credit risk associated with specific commercial lending and swap obligations as well as exposures to debt securities. Our credit derivative portfolio was in a nominal net liability position as of December 31, 2024, and $1 million as of December 31, 2023. Our credit derivative portfolio may consist of the following:•Single-name credit default swap: A bilateral contract whereby the seller agrees, for a premium, to provide protection against the credit risk of a specific entity (the “