NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  the Bancorp will make or receive payments based on  subsequent changes in the conversion rate of the Class B  shares into Class A shares. This total return swap is accounted  for as a free-standing derivative. See Note 28 for further  discussion of significant inputs and assumptions used in the  valuation of this instrument. The Bancorp enters into certain derivatives (forwards,  futures and options) related to its foreign exchange business.  These derivative contracts are not designated against specific  assets or liabilities or to forecasted transactions. Therefore,  these instruments do not qualify for hedge accounting. The  Bancorp economically hedges the exposures related to these  derivative contracts by entering into offsetting contracts with  approved, reputable, independent counterparties with substantially similar terms.  The net gains (losses) recorded in the Consolidated  Statements of Income relating to free-standing derivative  instruments used for risk management and other business  purposes are summarized in the following table:  The majority of the free-standing derivative instruments the  Bancorp enters into are for the benefit of its commercial  customers. These derivative contracts are not designated against  specific assets or liabilities on the Bancorp’s Consolidated Balance  Sheets or to forecasted transactions and, therefore, do not qualify  for hedge accounting. These instruments include foreign exchange derivative contracts entered into for the benefit of  commercial customers involved in international trade to hedge  their exposure to foreign currency fluctuations and commodity  contracts to hedge such items as natural gas and various other  derivative contracts. The Bancorp may economically hedge  significant exposures related to these derivative contracts entered  into for the benefit of customers by entering into offsetting  contracts with approved, reputable, independent counterparties  with substantially matching terms. The Bancorp hedges its  interest rate exposure on commercial customer transactions by  executing offsetting swap agreements with primary dealers.  Revaluation gains and losses on interest rate, foreign exchange,  commodity and other commercial customer derivative contracts  are recorded as a component of corporate banking revenue in the  Consolidated Statements of Income. The Bancorp enters into risk participation agreements, under  which the Bancorp assumes credit exposure relating to certain  underlying interest rate derivative contracts. The Bancorp only  enters into these risk participation agreements in instances in  which the Bancorp has participated in the loan that the  underlying interest rate derivative contract was designed to hedge.  The Bancorp will make payments under these agreements if a  customer defaults on its obligation to perform under the terms of  the underlying interest rate derivative contract. As of December  31, 2010 and 2009, the total notional amount of the risk  participation agreements was $851 million and $810 million,  respectively, and the fair value was a liability of $1 million and $2  million, respectively, at December 31, 2010 and 2009, which is  included in interest rate contracts for customers. The Bancorp’s  maximum exposure in the risk participation agreements is  contingent on the fair value of the underlying interest rate  derivative contracts in an asset position at the time of default. The  Bancorp monitors the credit risk associated with the underlying  customers in the risk participation agreements through the same  risk grading system currently utilized for establishing loss reserves  in its loan and lease portfolio. Under this risk rating system as of  December 31, 2010, $744 million in notional amount of the risk  participation agreements were classified pass; $37 million were  classified as special mention; $69 million were classified as  substandard; and $1 million were classified as doubtful. As of  December 31, 2010, the risk participation agreements had an  average life of 1.9 years. The Bancorp previously offered its customers an equity-linked  certificate of deposit that had a return linked to equity indices.  Under U.S. GAAP, a certificate of deposit that pays interest  based on changes on an equity index is a hybrid instrument that  requires separation into a host contract (the certificate of deposit)  and an embedded derivative contract (written equity call option).  The Bancorp entered into offsetting derivative contracts to  economically hedge the exposure taken through the issuance of  equity-linked certificates of deposit. Both the embedded derivative and the derivative contract entered into by the Bancorp  are recorded as free-standing derivatives and recorded at fair  value with offsetting gains and losses recognized within noninterest income in the Consolidated Statements of Income. Free-Standing Derivative Instruments – Customer Accommodation  For the year ended December 31, ($ in millions)  Consolidated Statements of Income Caption  2010  2009 2008 Interest rate contracts:  Interest rate contracts related to MSR portfolio  Mortgage banking net revenue  $109  41 89 Forward contracts related to commercial mortgage loans held for sale  Corporate banking revenue   -   -  (8)  Forward contracts related to residential mortgage loans held for sale  Mortgage banking net revenue  40  55 (17) Interest rate swaps related to long-term debt  Other noninterest income  2  3 1 Foreign exchange contracts:  Foreign exchange contracts for trading purposes  Other noninterest income  -  (10) 29 Equity contracts:  Warrants associated with Processing Business Sale  Other noninterest income  4  13 - Put options associated with Processing Business Sale  Other noninterest income  1  5 - Swap associated with sale of Visa, Inc. Class B shares  Other noninterest income  (19)  (2) - 96 Fifth ThirdBancorp