Citibank 2014 Annual Report Download - page 133

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COUNTRY AND CROSS-BORDER RISK
OVERVIEW
Generally, country risk is the risk that an event in a country (precipitated by
developments internal or external to a country) could directly or indirectly
impair the value of Citi’s franchise or adversely affect the ability of obligors
within that country to honor their obligations to Citi, any of which could
negatively impact Citi’s results of operations or financial condition. Country
risk events could include sovereign volatility or defaults, banking failures or
defaults and/or redenomination events (which could be accompanied by a
revaluation (either devaluation or appreciation) of the affected currency).
While there is some overlap, cross-border risk is generally the risk that
actions taken by a non-U.S. government may prevent the conversion of
local currency into non-local currency (i.e., exchange controls) and/or the
transfer of funds outside the country, among other risks, thereby impacting
the ability of Citigroup and its customers to transact business across borders.
Certain of the events described above could result in mandatory loan loss
and other reserve requirements imposed by U.S. regulators due to a particular
country’s economic situation. While Citi continues to work to mitigate its
exposures to potential country and cross-border risk events, the impact of any
such event is highly uncertain and will ultimately be based on the specific
facts and circumstances. As a result, there can be no assurance that the
various steps Citi has taken to mitigate its exposures and risks and/or protect
its businesses, results of operations and financial condition against these
events will be sufficient. In addition, there could be negative impacts to Citi’s
businesses, results of operations or financial condition that are currently
unknown to Citi and thus cannot be mitigated as part of its ongoing
contingency planning.
For additional information on country and cross-border risk at Citi,
including its risk management processes, see “Managing Global Risk” above.
See also “Risk Factors” above.
COUNTRY RISK
Emerging Markets Exposures
Citi generally defines emerging markets as countries in Latin America, Asia
(other than Japan, Australia and New Zealand), central and eastern Europe,
the Middle East and Africa.
The following table presents Citicorp’s principal emerging markets assets
as of December 31, 2014. For purposes of the table below, loan amounts
are generally based on the domicile of the borrower. For example, a loan
to a Chinese subsidiary of a Switzerland-based corporation will generally
be categorized as a loan in China. Trading account assets and investment
securities are generally categorized below based on the domicile of the issuer
of the security or the underlying reference entity.