Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

We conduct operations in many countries around the world. Our results of operations are subject to both currency transaction risk and currency translation risk. Certain foreign currency forward contracts outstanding during 2024 and 2023 served as a hedge of a portion of PPG’s exposure to foreign currency transaction risk. The fair value of these contracts was a net liability of $21 million and a net asset of $23 million as of September 30, 2024 and December 31, 2023, respectively. The potential reduction in PPG's Income before income taxes resulting from the impact of adverse changes in exchange rates on the fair value of its outstanding foreign currency hedge contracts of 10% for European and Canadian currencies and 20% for Asian and Latin American currencies was $446 million for the nine months ended September 30, 2024 and $402 million for the year ended December 31, 2023.

PPG had U.S. dollar to euro cross currency swap contracts with a total notional amount of $375 million and $475 million as of September 30, 2024 and December 31, 2023, respectively. The fair value of these contracts were net assets of $30 million and $33 million as of September 30, 2024 and December 31, 2023, respectively. A 10% increase in the value of the euro to the U.S. dollar would have had an unfavorable effect on the fair value of these swap contracts by reducing the value of these instruments by $38 million and $46 million at September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, PPG had non-U.S. dollar denominated borrowings outstanding of $3.6 billion and $3.3 billion, respectively. A weakening of the U.S. dollar by 10% against European currencies and by 20% against Asian and South American currencies would have resulted in unrealized translation losses on these borrowings of $396 million at September 30, 2024 and $363 million at December 31, 2023.

Interest Rate Risk

The Company manages its interest rate risk by balancing its exposure to fixed and variable rates while attempting to minimize its interest costs. PPG has interest rate swaps which converted $375 million of fixed rate debt to variable rate debt as of both September 30, 2024 and December 31, 2023. The fair values of these contracts were a liability of $8 million and $14 million as of September 30, 2024 and December 31, 2023, respectively. An increase in variable interest rates of 10% would have lowered the fair values of these swaps and increased annual interest expense by $4 million and $5 million for the periods ended September 30, 2024 and December 31, 2023, respectively. Considering the debt balance outstanding at September 30, 2024 and December 31, 2023, a 10% increase in interest rates in the U.S., Canada, Mexico and Europe and a 20% increase in interest rates in Asia and South America would have increased annual interest expense associated with PPG's variable rate debt obligations by $5 million and by $2 million, respectively. Further a 10% reduction in interest rates would have increased the fair value of the Company's fixed rate debt by approximately $79 million and $96 million at September 30, 2024 and December 31, 2023, respectively; however, such changes would not have had an effect on PPG's Income before income taxes or cash flows.

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There were no other material changes in the Company’s exposure to market risk from December 31, 2023 to September 30, 2024. Refer to Note 12, “Financial Instruments, Hedging Activities and Fair Value Measurements” in Part I, Item 1 of this Form 10-Q for a description of our instruments subject to market risk.