Citigroup Inc.

Secured financing is primarily conducted through Citi’s broker-dealersubsidiaries to facilitate customer matched-book activity and to efficientlyfund a portion of the trading inventory. Secured financing appears as aliability on Citi’s Consolidated Balance Sheet (“Securities Loaned or SoldUnder Agreements to Repurchase”). As of December 31, 2010, securedfinancing was $189.6 billion and averaged approximately $207 billionduring the quarter ended December 31, 2010. Secured financing atDecember 31, 2010 increased by $35 billion from $154.3 billion atDecember 31, 2009. During the same period, reverse repos and securitiesborrowing increased by $25 billion.The majority of secured financing is collateralized by highly liquidgovernment, government-backed and government agency securities. Thiscollateral comes primarily from Citi’s trading assets and its secured lending,and is part of Citi’s client matched-book activity given that Citi both borrowsand lends similar asset types on a secured basis.The minority of secured financing is collateralized by less liquidcollateral, and supports both Citi’s trading assets as well as the business ofsecured lending to customers, which is also part of Citi’s client matched-bookactivity. The less liquid secured borrowing is carefully calibrated by assetquality, tenor and counterparty exposure, including those that might besensitive to ratings stresses, in order to increase the reliability of the funding.Citi believes there are several potential mitigants available to it in theevent of stress on the secured financing markets for less liquid collateral.Citi’s significant liquidity resources in its non-bank entities as of December31, 2010, supplemented by collateralized liquidity transfers between entities,provide a cushion. Within the matched-book activity, the secured lendingpositions, which are carefully managed in terms of collateral and tenor,could be unwound to provide additional liquidity under stress. Citi also hasexcess funding capacity for less liquid collateral with existing counterpartiesthat can be accessed during potential dislocation. In addition, Citi has theability to adjust the size of select trading books to provide further mitigation.At December 31, 2010, commercial paper outstanding for Citigroup’s nonbankentities and bank subsidiaries, respectively, was as follows:Other short-term borrowings of approximately $54 billion (as set forthin the Secured Financing and Short-Term Borrowings table above) include$42.4 billion of borrowings from banks and other market participants, whichincludes borrowings from the Federal Home Loan Banks. This representeda decrease of approximately $11 billion as compared to year-end 2009. Theaverage balance of borrowings from banks and other market participantsfor the quarter ended December 31, 2010 was approximately $43 billion.Other short-term borrowings also include $11.7 billion of broker borrowingsat December 31, 2010, which averaged approximately $13 billion for thequarter ended December 31, 2010.See Notes 12 and 19 to the Consolidated Financial Statements for furtherinformation on Citigroup’s and its affiliates’ outstanding long-term debt andshort-term borrowings.Liquidity Transfer Between EntitiesLiquidity is generally transferable within the non-bank, subject to regulatoryrestrictions (if any) and standard legal terms. Similarly, the non-bankcan generally transfer excess liquidity into Citi’s bank subsidiaries, such asCitibank, N.A. In addition, Citigroup’s bank subsidiaries, including Citibank,N.A., can lend to the Citigroup parent and broker-dealer in accordance withSection 23A of the Federal Reserve Act. As of December 31, 2010, the amountavailable for lending under Section 23A was approximately $26.6 billion,provided the funds are collateralized appropriately.In billions of dollars Non-bank Bank (1) CitigroupTotalCommercial paper $9.7 $15.0 $24.7(1) Includes $15 billion of commercial paper related to VIEs consolidated effective January 1, 2010 withthe adoption of SFAS 166/167.67