Citibank 2012 Annual Report Download - page 140

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Secured Financing Transactions—GIIPS and France
As part of its banking activities with its clients, Citi enters into secured
financing transactions, such as repurchase agreements and reverse
repurchase agreements. These transactions typically involve the lending of
cash, against which securities are taken as collateral. The amount of cash
loaned against the securities collateral is a function of the liquidity and
quality of the collateral as well as the credit quality of the counterparty. The
collateral is typically marked to market daily, and Citi has the ability to call
for additional collateral (usually in the form of cash) if the value of the
securities falls below a pre-defined threshold.
As shown in the table below, at December 31, 2012, Citi had loaned
$13.0 billion in cash through secured financing transactions with GIIPS
and French counterparties, usually through reverse repurchase agreements.
This compared to $12.6 billion as of September 30, 2012. Against those
loans, it held approximately $16.6 billion fair value of securities collateral.
In addition, Citi held $1.2 billion in variation margin, most of which was in
cash, against all secured financing transactions.
Consistent with Citi’s risk management systems, secured financing
transactions are included in the counterparty derivative mark-to-market
exposure at their net credit exposure value, which is typically small or zero
given the over-collateralized structure of these transactions.
In billions of dollars as of December 31, 2012 Cash financing out Securities collateral in (1)
Lending to GIIPS and French counterparties through secured financing transactions $13.0 $16.6
(1) Citi has also received approximately $1.2 billion in variation margin, predominantly cash, associated with secured financing transactions with these counterparties.
Collateral taken in against secured financing transactions is
generally high quality, marketable securities, consisting of government
debt, corporate debt, or asset-backed securities. The table below sets forth
the fair value of the securities collateral taken in by Citi against secured
financing transactions as of December 31, 2012.
In billions of dollars as of December 31, 2012 Total
Government
bonds
Municipal or Corporate
bonds
Asset-backed
bonds
Securities pledged by GIIPS and French counterparties in secured financing transaction lending (1) $16.6 $2.9 $2.7 $11.0
Investment grade $16.4 $2.7 $2.6 $11.0
Non-investment grade 0.2 0.1 0.1 0.0
(1) Total includes approximately $3.1 billion in correlated risk collateral, predominantly French and Spanish sovereign debt pledged by French counterparties.
Secured financing transactions can be short term or can extend beyond
one year. In most cases, Citi has the right to call for additional margin
daily, and can terminate the transaction and liquidate the collateral if
the counterparty fails to post the additional margin. The table below
sets forth the remaining transaction tenor for these transactions as of
December 31, 2012.
Remaining transaction tenor
In billions of dollars as of December 31, 2012 Total <1 year 1-3 years >3 years
Cash extended to GIIPS and French counterparties in secured financing transactions lending (1) $13.0 $8.8 $2.6 $1.6
(1) The longest remaining tenor trades mature November 2018.