Wells Fargo 2013 Annual Report Download - page 63

Table 22: Select Country Exposures
Lending (1) Securities (2) Derivatives and other (3) Total exposure
(in millions)
December 31, 2013
Sovereign
Non-
sovereign Sovereign
Non-
sovereign Sovereign
Non-
sovereign Sovereign
Non-
sovereign (4) Total
Top 20 country exposures:
United Kingdom $ 3,031 10,024 1 7,120 - 911 3,032 18,055 21,087
Canada - 6,636 - 4,778 - 575 - 11,989 11,989
China - 5,575 -55 3 1 3 5,631 5,634
Brazil - 2,751 -13 - - - 2,764 2,764
Germany 66 1,470 -788 -137 66 2,395 2,461
Netherlands - 1,784 - 401 - 40 - 2,225 2,225
Switzerland - 1,251 - 351 -440 - 2,042 2,042
Bermuda - 1,775 - 77 - 42 - 1,894 1,894
France -519 - 1,192 -152 - 1,863 1,863
Turkey - 1,653 - - - - - 1,653 1,653
Australia -913 -664 -11 - 1,588 1,588
South Korea - 1,381 - 51 12 - 12 1,432 1,444
India - 1,266 7 140 - - 7 1,406 1,413
Chile - 1,265 - 18 - 57 - 1,340 1,340
Luxembourg - 1,065 -105 - 6 - 1,176 1,176
Mexico - 1,131 - 38 5 1 5 1,170 1,175
Ireland 34 940 -154 2 25 36 1,119 1,155
Russia - 754 - 32 ---786 786
Spain - 714 -62 ---776 776
Taiwan - 754 - 1 - 2 -757 757
Total top 20 country exposures $ 3,131 43,621 8 16,040 22 2,400 3,161 62,061 65,222
Eurozone exposure:
Eurozone countries included in Top 20 above (5) $ 100 6,492 - 2,702 2 360 102 9,554 9,656
Austria 103 331 - 2 - 2 103 335 438
Italy - 242 - 86 - - - 328 328
Belgium - 115 - 50 - 8 - 173 173
Other Eurozone countries (6) - 55 - 25 26 2 26 82 108
Total Eurozone exposure $ 203 7,235 - 2,865 28 372 231 10,472 10,703
(1) Lending exposure includes funded loans and unfunded commitments, leveraged leases, and money market placements presented on a gross basis prior to the deduction of
impairment allowance and collateral received under the terms of the credit agreements. For the countries listed above, includes $472 million in PCI loans, predominantly to
customers in Germany and the United Kingdom, and $2.0 billion in defeased leases secured largely by U.S. Treasury and government agency securities, or government
guaranteed.
(2) Represents issuer exposure on cross-border debt and equity securities.
(3) Represents counterparty exposure on foreign exchange and derivative contracts, and securities resale and lending agreements. This exposure is presented net of
counterparty netting adjustments and reduced by the amount of cash collateral. It includes credit default swaps (CDS) predominantly used to manage our U.S. and London-
based cash credit trading businesses, which sometimes results in selling and purchasing protection on the identical reference entity. Generally, we do not use market
instruments such as CDS to hedge the credit risk of our investment or loan positions, although we do use them to manage risk in our trading businesses. At
December 31, 2013, the gross notional amount of our CDS sold that reference assets in the Top 20 or Eurozone countries was $5.4 billion, which was offset by the notional
amount of CDS purchased of $5.4 billion. We did not have any CDS purchased or sold that reference pools of assets that contain sovereign debt or where the reference asset
was solely the sovereign debt of a foreign country.
(4) For countries presented in the table, total non-sovereign exposure comprises $30.8 billion exposure to financial institutions and $32.2 billion to non-financial corporations at
December 31, 2013.
(5) Consists of exposure to Germany, Netherlands, France, Luxembourg, Ireland and Spain included in Top 20.
(6) Includes non-sovereign exposure to Greece, Cyprus and Portugal in the amount of $1 million, $7 million and $39 million, respectively. We had no sovereign debt exposure to
these countries at December 31, 2013.
REAL ESTATE 1-4 FAMILY FIRST AND JUNIOR LIEN
Our real estate 1-4 family first and junior
MORTGAGE LOANS
lien mortgage loans primarily include loans we have made to
customers and retained as part of our asset liability management
strategy. These loans include the Pick-a-Pay portfolio acquired
from Wachovia and the home equity portfolio, which are
discussed later in this Report. These loans also include other
purchased loans and loans included on our balance sheet due to
the adoption of consolidation accounting guidance related to
variable interest entities (VIEs).
Our underwriting and periodic review of loans secured by
residential real estate collateral includes appraisals or estimates
from automated valuation models (AVMs) to support property
values. AVMs are computer-based tools used to estimate the
market value of homes. AVMs are a lower-cost alternative to
appraisals and support valuations of large numbers of properties
in a short period of time using market comparables and price
trends for local market areas. The primary risk associated with
the use of AVMs is that the value of an individual property may
vary significantly from the average for the market area. We have
processes to periodically validate AVMs and specific risk
management guidelines addressing the circumstances when
AVMs may be used. AVMs are generally used in underwriting to
support property values on loan originations only where the loan
amount is under $250,000. We generally require property
visitation appraisals by a qualified independent appraiser for
larger residential property loans.
Some of our real estate 1-4 family first and junior lien
mortgage loans include an interest-only feature as part of the
loan terms. These interest-only loans were approximately 15% of
total loans at December 31, 2013, compared with 18% at
December 31, 2012.
We believe we have manageable adjustable-rate mortgage
(ARM) reset risk across our owned mortgage loan portfolios. We
do not offer option ARM products, nor do we offer variable-rate
mortgage products with fixed payment amounts, commonly
referred to within the financial services industry as negative
amortizing mortgage loans. Our liquidating option ARM loans
are included in the Pick-a-Pay portfolio which was acquired from
Wachovia. Since our acquisition of the Pick-a-Pay loan portfolio
at the end of 2008, we have reduced the option payment portion
of the portfolio, from 86% to 44% at December 31, 2013. For
more information, see the “Pick-a-Pay Portfolio” section in this
Report.
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