CAPITAL RESOURCES AND LIQUIDITYCAPITAL RESOURCESOverviewCiti generates capital through earnings from its operating businesses.However, Citi may augment, and during the financial crisis did augment,its capital through issuances of common stock, convertible preferred stock,preferred stock and equity issued through awards under employee benefit plans.Citi also augmented its regulatory capital through the issuance of subordinateddebt underlying trust preferred securities, although the treatment of suchinstruments as regulatory capital will be phased out under Basel III and theFinancial Reform Act (see “Regulatory Capital Standards Developments”and “Risk Factors” below). Further, the impact of future events on Citi’sbusiness results, such as corporate and asset dispositions, as well as changes inregulatory and accounting standards, also affects Citi’s capital levels.Capital is used primarily to support assets in Citi’s businesses and toabsorb market, credit or operational losses. While capital may be used forother purposes, such as to pay dividends or repurchase common stock, Citi’sability to utilize its capital for these purposes is currently restricted due to,among other things, its agreements with certain U.S. government entities,generally for so long as the U.S. government continues to hold any Cititrust preferred securities acquired in connection with the exchange offersconsummated in 2009. See “Risk Factors” below.<strong>Citigroup</strong>’s capital management framework is designed to ensure that<strong>Citigroup</strong> and its principal subsidiaries maintain sufficient capital consistentwith Citi’s risk profile and all applicable regulatory standards and guidelines,as well as external rating agency considerations. Senior management isresponsible for the capital management process mainly through <strong>Citigroup</strong>’sFinance and Asset and Liability Committee (FinALCO), with oversight fromthe Risk Management and Finance Committee of <strong>Citigroup</strong>’s Board ofDirectors. FinALCO is composed of the senior-most management of <strong>Citigroup</strong>for the purpose of engaging management in decision-making and relateddiscussions on capital and liquidity matters. Among other things, FinALCO’sresponsibilities include: determining the financial structure of <strong>Citigroup</strong> andits principal subsidiaries; ensuring that <strong>Citigroup</strong> and its regulated entitiesare adequately capitalized in consultation with its regulators; determiningappropriate asset levels and return hurdles for <strong>Citigroup</strong> and individualbusinesses; reviewing the funding and capital markets plan for <strong>Citigroup</strong>;and setting and monitoring corporate and bank liquidity levels, and theimpact of currency translation on non-U.S. capital.Capital Ratios<strong>Citigroup</strong> is subject to the risk-based capital guidelines issued by the FederalReserve Board. Historically, capital adequacy has been measured, in part,based on two risk-based capital ratios, the Tier 1 Capital and Total Capital(Tier 1 Capital + Tier 2 Capital) ratios. Tier 1 Capital consists of the sum of“core capital elements,” such as qualifying common stockholders’ equity,as adjusted, qualifying noncontrolling interests, and qualifying mandatorilyredeemable securities of subsidiary trusts, principally reduced by goodwill,other disallowed intangible assets, and disallowed deferred tax assets. TotalCapital also includes “supplementary” Tier 2 Capital elements, such asqualifying subordinated debt and a limited portion of the allowance for creditlosses. Both measures of capital adequacy are stated as a percentage of riskweightedassets.In 2009, the U.S. banking regulators developed a new measure of capitaltermed “Tier 1 Common,” which is defined as Tier 1 Capital less noncommonelements, including qualifying perpetual preferred stock, qualifyingnoncontrolling interests, and qualifying mandatorily redeemable securitiesof subsidiary trusts. For more detail on all of these capital metrics, see“Components of Capital Under Regulatory Guidelines” below.<strong>Citigroup</strong>’s risk-weighted assets are principally derived from applicationof the risk-based capital guidelines related to the measurement of creditrisk. Pursuant to these guidelines, on-balance-sheet assets and the creditequivalent amount of certain off-balance-sheet exposures (such asfinancial guarantees, unfunded lending commitments, letters of credit, andderivatives) are assigned to one of several prescribed risk-weight categoriesbased upon the perceived credit risk associated with the obligor, or if relevant,the guarantor, the nature of the collateral, or external credit ratings.Risk-weighted assets also incorporate a measure for market risk on coveredtrading account positions and all foreign exchange and commodity positionswhether or not carried in the trading account. Excluded from risk-weightedassets are any assets, such as goodwill and deferred tax assets, to the extentrequired to be deducted from regulatory capital. See “Components of CapitalUnder Regulatory Guidelines” below.<strong>Citigroup</strong> is also subject to a Leverage ratio requirement, a non-riskbasedmeasure of capital adequacy, which is defined as Tier 1 Capital as apercentage of quarterly adjusted average total assets.To be “well capitalized” under current federal bank regulatory agencydefinitions, a bank holding company must have a Tier 1 Capital ratio ofat least 6%, a Total Capital ratio of at least 10%, and a Leverage ratio of atleast 3%, and not be subject to a Federal Reserve Board directive to maintainhigher capital levels. The following table sets forth <strong>Citigroup</strong>’s regulatorycapital ratios as of December 31, 2010 and December 31, 2009.58
<strong>Citigroup</strong> Regulatory Capital RatiosAt year end 2010 2009Tier 1 Common 10.75% 9.60%Tier 1 Capital 12.91 11.67Total Capital (Tier 1 Capital + Tier 2 Capital) 16.59 15.25Leverage ratio 6.60 6.87As noted in the table above, <strong>Citigroup</strong> was “well capitalized” under thecurrent federal bank regulatory agency definitions as of December 31, 2010and December 31, 2009.Components of Capital Under Regulatory GuidelinesIn millions of dollars at year end 2010 2009Tier 1 Common<strong>Citigroup</strong> common stockholders’ equity $163,156 $ 152,388Less: Net unrealized losses on securities available-for-sale, net of tax (1) (2,395) (4,347)Less: Accumulated net losses on cash flow hedges, net of tax (2,650) (3,182)Less: Pension liability adjustment, net of tax (2) (4,105) (3,461)Less: Cumulative effect included in fair value of financial liabilities attributable to the change in own credit worthiness, net of tax (3) 164 760Less: Disallowed deferred tax assets (4) 34,946 26,044Less: Intangible assets:Goodwill 26,152 25,392Other disallowed intangible assets 5,211 5,899Other (698) (788)Total Tier 1 Common $105,135 $ 104,495Qualifying perpetual preferred stock $ 312 $ 312Qualifying mandatorily redeemable securities of subsidiary trusts 18,003 19,217Qualifying noncontrolling interests 868 1,135Other 1,875 1,875Total Tier 1 Capital $126,193 $ 127,034Tier 2 CapitalAllowance for credit losses (5) $ 12,627 $ 13,934Qualifying subordinated debt (6) 22,423 24,242Net unrealized pretax gains on available-for-sale equity securities (1) 976 773Total Tier 2 Capital $ 36,026 $ 38,949Total Capital (Tier 1 Capital and Tier 2 Capital) $162,219 $ 165,983Risk-weighted assets (RWA) (7) $977,629 $1,088,526(1) Tier 1 Capital excludes net unrealized gains (losses) on available-for-sale debt securities and net unrealized gains on available-for-sale equity securities with readily determinable fair values, in accordance with riskbasedcapital guidelines. In arriving at Tier 1 Capital, banking organizations are required to deduct net unrealized losses on available-for-sale equity securities with readily determinable fair values, net of tax. Bankingorganizations are permitted to include in Tier 2 Capital up to 45% of net unrealized pretax gains on available-for-sale equity securities with readily determinable fair values.(2) The Federal Reserve Board granted interim capital relief for the impact of ASC 715-20, Compensation—Retirement Benefits—Defined Benefits Plans (formerly SFAS 158).(3) The impact of including <strong>Citigroup</strong>’s own credit rating in valuing financial liabilities for which the fair value option has been elected is excluded from Tier 1 Capital, in accordance with risk-based capital guidelines.(4) Of Citi’s approximately $52 billion of net deferred tax assets at December 31, 2010, approximately $13 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capitalguidelines, while approximately $35 billion of such assets exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets,” were deducted in arriving at Tier 1 Capital. <strong>Citigroup</strong>’sapproximately $4 billion of other net deferred tax assets primarily represented approximately $2 billion of deferred tax effects of unrealized gains and losses on available-for-sale debt securities and approximately$2 billion of deferred tax effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines.(5) <strong>Inc</strong>ludable up to 1.25% of risk-weighted assets. Any excess allowance for credit losses is deducted in arriving at risk-weighted assets.(6) <strong>Inc</strong>ludes qualifying subordinated debt in an amount not exceeding 50% of Tier 1 Capital.(7) <strong>Inc</strong>ludes risk-weighted credit equivalent amounts, net of applicable bilateral netting agreements, of $62.1 billion for interest rate, commodity and equity derivative contracts, foreign exchange contracts, and creditderivatives as of December 31, 2010, compared with $64.5 billion as of December 31, 2009. Market risk equivalent assets included in risk-weighted assets amounted to $51.4 billion at December 31, 2010 and$80.8 billion at December 31, 2009. Risk-weighted assets also include the effect of certain other off-balance-sheet exposures, such as unused lending commitments and letters of credit, and reflect deductions suchas certain intangible assets and any excess allowance for credit losses.59
- Page 1 and 2: UNITED STATESSECURITIES AND EXCHANG
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Payment deferrals that do not conti
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Repurchase ReserveCiti has recorded
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Securities and Banking-Sponsored Pr
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INTEREST REVENUE/EXPENSE AND YIELDS
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AVERAGE BALANCES AND INTEREST RATES
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ANALYSIS OF CHANGES IN INTEREST EXP
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As required by SEC rules, the table
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Key Controls over Fair Value Measur
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MANAGEMENT’S ANNUAL REPORT ON INT
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REPORT OF INDEPENDENT REGISTERED PU
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FINANCIAL STATEMENTS AND NOTES TABL
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CONSOLIDATED FINANCIAL STATEMENTSCO
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CONSOLIDATED STATEMENT OF CHANGES I
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CITIBANK CONSOLIDATED BALANCE SHEET
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NOTES TO CONSOLIDATED FINANCIAL STA
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ecoveries are added. Securities rec
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ACCOUNTING CHANGESChange in Account
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Measuring Liabilities at Fair Value
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FUTURE APPLICATION OF ACCOUNTING ST
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CitiCapitalOn July 31, 2008, Citigr
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Stock Award ProgramsCitigroup issue
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In January 2009, members of the Man
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Information with respect to stock o
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9. RETIREMENT BENEFITSThe Company h
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The following table shows the chang
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A one-percentage-point change in th
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Level 3 Roll ForwardThe reconciliat
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10. INCOME TAXESIn millions of doll
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The Company is currently under audi
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11. EARNINGS PER SHAREThe following
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13. BROKERAGE RECEIVABLES AND BROKE
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The table below shows the fair valu
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Debt Securities Held-to-MaturityThe
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Evaluating Investments for Other-Th
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The following is a 12-month roll-fo
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16. LOANSCitigroup loans are report
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Residential Mortgage Loan to Values
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The following table presents Corpor
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Included in the Corporate and Consu
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CGMHI has committed long-term finan
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20. Regulatory CapitalCitigroup is
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22. SECURITIZATIONS AND VARIABLE IN
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In millions of dollars As of Decemb
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Funding Commitments for Significant
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Credit Card SecuritizationsThe Comp
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Managed Loans—Citi HoldingsThe fo
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Key assumptions used in measuring t
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Mortgage Servicing RightsIn connect
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The Company administers one conduit
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Key Assumptions and Retained Intere
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Municipal InvestmentsMunicipal inve
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In millions of dollarsDecember 31,2
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26. FAIR VALUE ELECTIONSThe Company
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CollateralCash collateral available
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pursuant to which Citigroup agreed
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court filings under docket number 0
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30. CITIBANK, N.A. STOCKHOLDER’S
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Condensed Consolidating Statements
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Condensed Consolidating Balance She
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33. SELECTED QUARTERLY FINANCIAL DA
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SUPERVISION AND REGULATIONCitigroup
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Citigroup continues to evaluate its
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CORPORATE INFORMATIONCITIGROUP EXEC
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SignaturesPursuant to the requireme