Citibank 2008 Annual Report Download - page 162

13. FEDERAL FUNDS, SECURITIES BORROWED,
LOANED, AND SUBJECT TO REPURCHASE
AGREEMENTS
Federal funds sold and securities borrowed or purchased under agreements
to resell, at their respective fair values, consisted of the following at
December 31:
In millions of dollars at year end 2008 2007
Federal funds sold $—$ 196
Securities purchased under agreements to resell 78,701 98,258
Deposits paid for securities borrowed 105,432 175,612
Total $184,133 $274,066
Federal funds purchased and securities loaned or sold under agreements
to repurchase, at their respective fair values, consisted of the following at
December 31:
In millions of dollars at year end 2008 2007
Federal funds purchased $ 5,755 $ 6,279
Securities sold under agreements to repurchase 177,585 230,880
Deposits received for securities loaned 21,953 67,084
Total $205,293 $304,243
The resale and repurchase agreements represent collateralized financing
transactions used to generate net interest income and facilitate trading
activity. These instruments are collateralized principally by government and
government agency securities and generally have terms ranging from
overnight to up to a year.
It is the Company’s policy to take possession of the underlying collateral,
monitor its market value relative to the amounts due under the agreements
and, when necessary, require prompt transfer of additional collateral or
reduction in the balance in order to maintain contractual margin
protection. In the event of counterparty default, the financing agreement
provides the Company with the right to liquidate the collateral held. As
disclosed in Note 27 on page 202, effective January 1, 2007, the Company
elected fair value option accounting in accordance with SFAS 159 for the
majority of the resale and repurchase agreements. The remaining portion is
carried at the amount of cash initially advanced or received, plus accrued
interest, as specified in the respective agreements. Resale agreements and
repurchase agreements are reported net by counterparty, when applicable,
pursuant to FIN 41. Excluding the impact of FIN 41, resale agreements
totaled $114.0 billion and $151.0 billion at December 31, 2008 and 2007,
respectively.
A majority of the deposits paid for securities borrowed and deposits
received for securities loaned are recorded at the amount of cash advanced or
received and are collateralized principally by government and government
agency securities and corporate debt and equity securities. The remaining
portion is recorded at fair value as the Company elected fair value option for
certain securities borrowed and loaned portfolios in accordance with SFAS
159. This election was made effective in the second quarter of 2007.
Securities borrowed transactions require the Company to deposit cash with
the lender. With respect to securities loaned, the Company receives cash
collateral in an amount generally in excess of the market value of securities
loaned. The Company monitors the market value of securities borrowed and
securities loaned daily, and additional collateral is obtained as necessary.
Securities borrowed and securities loaned are reported net by counterparty,
when applicable, pursuant to FIN 39.
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