Citibank 2011 Annual Report Download - page 74

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Because of the current credit ratings of Citigroup, a one-notch
downgrade of its senior debt/long-term rating may or may not impact
Citigroup’s commercial paper/short-term rating by one notch. As of
December 31, 2011, Citi estimates that a one-notch downgrade of the senior
debt/long-term rating of Citigroup could result in loss of funding due to
derivative triggers and additional margin requirements of $1.3 billion and a
one-notch downgrade by Fitch of Citigroup’s commercial paper/short-term
rating could result in the assumed loss of unsecured commercial paper of
$6.4 billion. Other funding sources, such as secured financing transactions
and other margin requirements, for which there are no explicit triggers,
could also be adversely affected.
Citi currently believes that a more severe ratings downgrade scenario,
such as a two-notch downgrade of the senior debt/long-term rating of
Citigroup, could result in an additional $0.9 billion in funding requirements
in the form of cash obligations and collateral as of December 31, 2011.
Other funding sources, such as secured financing transactions and other
margin requirements, for which there are no explicit triggers, could also be
adversely affected.
As set forth under “Aggregate Liquidity Resources” above, the aggregate
liquidity resources of Citigroup’s non-bank entities stood at approximately
$98.4 billion as of December 31, 2011, in part as a contingency for such an
event, and a broad range of mitigating actions are currently included in
Citigroup’s detailed contingency funding plans. These mitigating factors
include, but are not limited to, accessing surplus funding capacity from existing
clients, tailoring levels of secured lending, adjusting the size of select trading
books, and collateralized borrowings from significant bank subsidiaries.
Further, as of December 31, 2011, a one-notch downgrade of the senior
debt/long-term ratings of Citibank, N.A. could result in an approximate
$2.4 billion funding requirement in the form of collateral and cash
obligations. Because of the current credit ratings of Citibank, N.A., a
one-notch downgrade of its senior debt/long-term rating is unlikely to
have any impact on its commercial paper/short-term rating. However,
a two-notch downgrade by Moody’s could have an adverse impact on
Citibank, N.A.’s commercial paper/short-term rating. A two-notch
downgrade by Moody’s could result in additional funding requirements in
the form of cash obligations and collateral estimated at $0.8 billion as of
December 31, 2011. As of December 31, 2011, Citibank, N.A. had liquidity
commitments of $27.9 billion to asset-backed commercial paper conduits,
which could also be impacted by a two-notch downgrade by Moody’s,
including $14.9 billion of commitments to consolidated conduits, and
$13.0 billion of commitments to unconsolidated conduits as referenced in
Note 22 to the Consolidated Financial Statements. Additionally, Citibank,
N.A. had $11.2 billion of funding programs related to the municipals
markets that could be impacted by such a downgrade, of which $10.8
billion is principally reflected as commitments within Note 28 to the
Consolidated Financial Statements.
Citi’s significant bank entities and other entities, including Citibank,
N.A., had aggregate liquidity resources of approximately $307.1 billion at
December 31, 2011, in part as a contingency for such an event and also
have detailed contingency funding plans that encompass a broad range of
mitigating actions. These mitigating actions include, but are not limited
to, selling or financing highly liquid government securities, tailoring
levels of secured lending, repricing or reducing certain commitments to
commercial paper conduits, exercising reimbursement agreements for the
municipal programs mentioned above, adjusting the size of select trading
books, reducing loan originations and renewals, raising additional deposits,
or borrowing from the FHLB or other central banks. Citi believes these
mitigating actions could substantially reduce the funding and liquidity risk
of such a downgrade.