Citibank 2009 Annual Report Download - page 57

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The following table presents the estimated sensitivity of Citigroup’s and
Citibank, N.A.’s capital ratios to changes of $100 million in Tier 1 Common,
Tier 1 Capital, or Total Capital (numerator), or changes of $1 billion in
risk-weighted assets or adjusted average total assets (denominator) based on
financial information as of December 31, 2009. This information is provided
for the purpose of analyzing the impact that a change in Citigroup’s and
Citibank, N.A.’s financial position or results of operations could have on these
ratios. These sensitivities only consider a single change to either a component
of capital, risk-weighted assets, or adjusted average total assets. Accordingly,
an event that affects more than one factor may have a larger basis point
impact than is reflected in this table.
Tier 1 Common ratio Tier 1 Capital ratio Total Capital ratio Leverage ratio
Impact of $100
million change in
Tier 1 Common
Impact of $1
billion change in
risk-weighted
assets
Impact of $100
million change
in Tier 1 Capital
Impact of $1
billion change in
risk-weighted
assets
Impact of $100
million change
in Total Capital
Impact of $1
billion change in
risk-weighted
assets
Impact of $100
million change
in Tier 1 Capital
Impact of $1
billion change
in adjusted
average total
assets
Citigroup 0.9 bps 0.9 bps 0.9 bps 1.1 bps 0.9 bps 1.4 bps 0.5 bps 0.4 bps
Citibank, N.A. — — 1.4 bps 1.8 bps 1.4 bps 2.0 bps 0.9 bps 0.7 bps
Broker-Dealer Subsidiaries
At December 31, 2009, Citigroup Global Markets Inc., a broker-dealer
registered with the SEC that is an indirect wholly owned subsidiary of
Citigroup Global Markets Holdings Inc., had net capital, computed in
accordance with the SEC’s net capital rule, of $10.9 billion, which exceeded
the minimum requirement by $10.2 billion.
In addition, certain of Citi’s broker-dealer subsidiaries are subject to
regulation in the other countries in which they do business, including
requirements to maintain specified levels of net capital or its equivalent.
Citigroup’s broker-dealer subsidiaries were in compliance with their capital
requirements at December 31, 2009. The requirements applicable to these
subsidiaries in the U.S. and other jurisdictions may be subject to political
uncertainty and potential change in light of the recent financial crisis and
regulatory reform proposals currently being considered at both the legislative
and regulatory levels.
Regulatory Capital Standards Developments
Citigroup supports the move to a new set of risk-based capital standards,
published on June 26, 2004 (and subsequently amended in November 2005)
by the Basel Committee on Banking Supervision, consisting of central banks
and bank supervisors from 13 countries. The international version of the
Basel II framework will allow Citigroup to leverage internal risk models used
to measure credit, operational, and market risk exposures to drive regulatory
capital calculations.
On December 7, 2007, the U.S. banking regulators published the rules for
large banks to comply with Basel II in the U.S. These rules require Citigroup,
as a large and internationally active bank, to comply with the most advanced
Basel II approaches for calculating credit and operational risk capital
requirements. The U.S. implementation timetable consists of a parallel
calculation period under the current regulatory capital regime (Basel I) and
Basel II, starting anytime between April 1, 2008 and April 1, 2010, followed
by a three-year transition period, typically starting 12 months after the
beginning of parallel reporting. U.S. regulators have reserved the right to
change how Basel II is applied in the U.S. following a review at the end of
the second year of the transitional period, and to retain the existing prompt
corrective action and leverage capital requirements applicable to banking
organizations in the U.S. Citigroup intends to implement Basel II within
the timeframe required by the final rules. The Basel II (or its successor)
requirements are the subject of political uncertainty and potential tightening
or other change in light of the recent financial crisis and regulatory reform
proposals currently being considered at both the legislative and regulatory
levels. See also “Risk Factors.”