Citibank 2008 Annual Report Download - page 102

Mandatorily Redeemable Securities of Subsidiary Trusts
Total mandatorily redeemable securities of subsidiary trusts (trust preferred
securities), which qualify as Tier 1 Capital, were $23.899 billion at
December 31, 2008, as compared to $23.594 billion at December 31, 2007. In
2008, Citigroup did not issue any new enhanced trust preferred securities.
The FRB issued a final rule, with an effective date of April 11, 2005, which
retains trust preferred securities in Tier 1 Capital of bank holding companies,
but with stricter quantitative limits and clearer qualitative standards. Under
the rule, after a five-year transition period, the aggregate amount of trust
preferred securities and certain other restricted core capital elements
included in Tier 1 Capital of internationally active banking organizations,
such as Citigroup, would be limited to 15% of total core capital elements, net
of goodwill, less any associated deferred tax liability. The amount of trust
preferred securities and certain other elements in excess of the limit could be
included in Tier 2 Capital, subject to restrictions. At December 31, 2008,
Citigroup had approximately 11.8% against the limit. The Company expects
to be within restricted core capital limits prior to the implementation date of
March 31, 2009.
The FRB permits additional securities, such as the equity units sold to
ADIA, to be included in Tier 1 Capital up to 25% (including the restricted
core capital elements in the 15% limit) of total core capital elements, net of
goodwill less any associated deferred tax liability. At December 31, 2008,
Citigroup had approximately 16.1% against the limit.
The FRB granted interim capital relief for the impact of adopting SFAS
158 at December 31, 2008 and December 31, 2007.
The FRB and the FFIEC may propose amendments to, and issue
interpretations of, risk-based capital guidelines and reporting instructions.
These may affect reported capital ratios and net risk-weighted assets.
Capital Resources of Citigroup’s Depository Institutions
Citigroup’s subsidiary depository institutions in the United States are subject
to risk-based capital guidelines issued by their respective primary federal
bank regulatory agencies, which are similar to the FRB’s guidelines. To be
“well capitalized” under federal bank regulatory agency definitions,
Citigroup’s depository institutions must have a Tier 1 Capital Ratio of at least
6%, a Total Capital (Tier 1 + Tier 2 Capital) Ratio of at least 10% and a
Leverage Ratio of at least 5%, and not be subject to a regulatory directive to
meet and maintain higher capital levels.
At December 31, 2008, all of Citigroup’s subsidiary depository institutions
were “well capitalized” under the federal regulatory agencies’ definitions,
including Citigroup’s primary depository institution, Citibank, N.A., as noted
in the following table:
Citibank, N.A. Components of Capital and Ratios Under
Regulatory Guidelines
In billions of dollars at year end 2008 2007
Tier 1 Capital $ 71.0 $ 82.0
Total Capital (Tier 1 and Tier 2) 108.4 121.6
Tier 1 Capital Ratio 9.94% 8.98%
Total Capital Ratio (Tier 1 and Tier 2) 15.18 13.33
Leverage Ratio (1) 5.82 6.65
(1) Tier 1 Capital divided by adjusted average assets.
Citibank, N.A. had a net loss for 2008 amounting to $6.2 billion.
During 2008, Citibank, N.A. received contributions from its parent
company of $6.1 billion. Citibank, N.A. did not issue any additional
subordinated notes in 2008. Total subordinated notes issued to Citicorp
Holdings Inc. that were outstanding at December 31, 2008 and December 31,
2007 and included in Citibank, N.A.’s Tier 2 Capital, amounted to $28.2
billion. Citibank, N.A. received an additional $14.3 billion in capital
contribution from its parent company in January 2009. The impact of this
contribution is not reflected in the table above. The substantial events in
2008 impacting the capital of Citigroup, and the potential future events
discussed on page 94 under “Citigroup Regulatory Capital Ratios,” also
affected, or could affect, Citibank, N.A.
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