Citibank 2015 Annual Report Download - page 114

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In total, Citi estimates that a one-notch downgrade of Citigroup and
Citibank, across all three major rating agencies, could result in aggregate
cash obligations and collateral requirements of approximately $1.9 billion,
compared to $2.2 billion as of September 30, 2015 (see also Note 23 to
the Consolidated Financial Statements). As set forth under “High-Quality
Liquid Assets” above, the liquidity resources of Citibank were approximately
$312 billion and the liquidity resources of Citi’s non-bank and other entities
were approximately $66 billion, for a total of approximately $379 billion as
of December 31, 2015. 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’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 certain Citibank subsidiaries. Mitigating actions available to Citibank
include, but are not limited to, selling or financing highly liquid government
securities, tailoring levels of secured lending, adjusting the size of select
trading assets, 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—Additional Potential Impacts
In addition to the above derivative triggers, Citi believes that a potential one-
notch downgrade of Citibank’s senior debt/long-term rating by S&P could
also have an adverse impact on the commercial paper/short-term rating of
Citibank. As of December 31, 2015, Citibank had liquidity commitments of
approximately $10.0 billion to consolidated asset-backed commercial paper
conduits, compared to $9.4 billion as of September 30, 2015 (as referenced in
Note 22 to the Consolidated Financial Statements).
In addition to the above-referenced liquidity resources of certain Citibank
and Banamex entities, Citibank 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. 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.
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.