Citibank 2012 Annual Report Download - page 79

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Citigroup Inc. and Citibank, N.A.—Potential Derivative Triggers
As of December 31, 2012, Citi estimates that a hypothetical one-notch
downgrade of the senior debt/long-term rating of Citigroup across all three
major rating agencies could impact Citigroup’s funding and liquidity due to
derivative triggers by approximately $1.7 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.
In addition, as of December 31, 2012, Citi estimates that a hypothetical one-
notch downgrade of the senior debt/long-term rating of Citibank, N.A. across all
three major rating agencies could impact Citibank, N.A.’s funding and liquidity
due to derivative triggers by approximately $3.4 billion.
In total, Citi estimates that a one-notch downgrade of Citigroup and
Citibank, N.A., across all three major rating agencies, could result in
aggregate cash obligations and collateral requirements of approximately
$5.1 billion (see also Note 23 to the Consolidated Financial Statements).
As set forth under “Aggregate Liquidity Resources” above, the aggregate
liquidity resources of Citi’s non-bank entities were approximately $65 billion,
and the aggregate liquidity resources of Citi’s significant Citibank entities and
other Citibank and Banamex entities were approximately $289 billion, for a
total of approximately $354 billion as of December 31, 2012. These liquidity
resources are available in part as a contingency for the potential events
described above.
In addition, a broad range of mitigating actions are currently included
in Citigroup’s and Citibank, N.A.’s detailed contingency funding plans.
For Citigroup, 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 Citi’s significant bank subsidiaries. Mitigating actions
available to Citibank, N.A. include, but are not limited to, selling or
financing highly liquid government securities, tailoring levels of secured
lending, adjusting the size of select trading books, reducing loan originations
and renewals, raising additional deposits, or borrowing from the FHLBs
or central banks. Citi believes these mitigating actions could substantially
reduce the funding and liquidity risk, if any, of the potential downgrades
described above.
Citibank, N.A.—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential one-
notch downgrade of Citibank, N.A.’s senior debt/long-term rating by S&P and
Fitch could also have an adverse impact on the commercial paper/short-term
rating of Citibank, N.A. As of December 31, 2012, Citibank, N.A. had liquidity
commitments of approximately $18.7 billion to asset-backed commercial
paper conduits. This included $11.1 billion of commitments to consolidated
conduits and $7.6 billion of commitments to unconsolidated conduits (each
as referenced in Note 22 to the Consolidated Financial Statements).
In addition to the above-referenced aggregate liquidity resources of Citi’s
significant Citibank entities and other Citibank and Banamex entities, as
well as the various mitigating actions previously noted, mitigating actions
available to Citibank, N.A. to reduce the funding and liquidity risk, if any,
of the potential downgrades described above, include repricing or reducing
certain commitments to commercial paper conduits.
In addition, in the event of the potential downgrades described above,
Citi believes that certain corporate customers could re-evaluate their deposit
relationships with Citibank, N.A. Among other things, this re-evaluation
could include adjusting their discretionary deposit levels or changing their
depository institution, each of which could potentially reduce certain deposit
levels at Citibank, N.A. As a potential mitigant, however, Citi could choose to
adjust pricing or offer alternative deposit products to its existing customers,
or seek to attract deposits from new customers, as well as utilize the other
mitigating actions referenced above.