Citibank 2013 Annual Report Download - page 124

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Citigroup Inc. and Citibank, N.A.—Potential Derivative Triggers
As of December 31, 2013, 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 $1.0 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.
As of December 31, 2013, 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 by approximately $1.5 billion, due to derivative triggers.
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
$2.6 billion (see also Note 23 to the Consolidated Financial Statements).
As set forth under “High-Quality Liquid Assets” above, the liquidity
resources of Citi’s parent entities were approximately $67 billion, and
the liquidity resources of Citi’s significant Citibank entities and other
Citibank and Banamex entities were approximately $357 billion, for a total
of approximately $424 billion as of December 31, 2013. 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 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,
and 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 FHLB 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, 2013, Citibank, N.A. had liquidity
commitments of approximately $17.7 billion to consolidated asset-backed
commercial paper conduits (as referenced in Note 22 to the Consolidated
Financial Statements).
In addition to the above-referenced liquidity resources of Citi’s significant
Citibank entities and other Citibank and Banamex entities, Citibank,
N.A. could reduce the funding and liquidity risk, if any, of the potential
downgrades described above through mitigating actions, including repricing
or reducing certain commitments to commercial paper conduits. 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. This re-evaluation could result in clients adjusting their
discretionary deposit levels or changing their depository institution, which
could potentially reduce certain deposit levels at Citibank, N.A. However,
Citi could choose to adjust pricing, offer alternative deposit products to its
existing customers or seek to attract deposits from new customers, in addition
to the mitigating actions referenced above.