CITIGROUP GLOBAL MARKETS HOLDINGS INC. ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2015
CITIGROUP GLOBAL MARKETS HOLDINGS INC.
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 2015
April 29, 2016
Responsibility Statement
The below named authorized officers of Citigroup Global Markets Holdings Inc., a New York
corporation (the “Company”), confirm that to the best of their knowledge: (i) the accompanying
financial statements (a) were prepared in accordance with Generally Accepted Accounting
Principles in the United States of America and (b) give a true and fair view of the assets,
liabilities, financial position and income or loss of the Company and the undertakings included in
the consolidation taken as a whole; and (ii) the accompanying Management Report includes (a) a
fair review of the development and performance of the business and position of the Company and
the undertakings included in the consolidation taken as a whole and (b) a description of the
principal risks and uncertainties that they face.
CITIGROUP GLOBAL MARKETS HOLDINGS INC.
By: /s/ James A. Forese By: /s/ Cliff Verron
James A. Forese Cliff Verron
Chairman and Chief Financial Officer
Chief Executive Officer
CITIGROUP GLOBAL MARKETS HOLDINGS INC.
MANAGEMENT REPORT
1
CITIGROUP GLOBAL MARKETS HOLDINGS INC.
Citigroup Global Markets Holdings Inc. (CGMHI), operating through its subsidiaries, engages in full-service
investment banking and securities brokerage business. As used in this description, CGMHI, Citigroup Global
Markets, and the Company refer to CGMHI and its consolidated subsidiaries. Citigroup Global Markets
operates in the Institutional Clients Group business segment.
CGMHI's parent, Citigroup Inc. (Citigroup, or Citi), is a global diversified financial services holding
company, whose businesses provide consumers, corporations, governments and institutions with a broad range
of financial products and services, including consumer banking and credit, corporate and investment banking,
securities brokerage, trade and securities services and wealth management. Citi has approximately 200 million
customer accounts and does business in more than 160 countries and jurisdictions.
Citigroup currently operates, for management reporting purposes, via two primary business segments: Citicorp,
consisting of Citi’s Global Consumer Banking (GCB) businesses and Institutional Clients Group; and Citi
Holdings, consisting of businesses and portfolios of assets that Citigroup has determined are not central to its
core Citicorp businesses.
The principal offices of CGMHI are located at 388 Greenwich Street, New York, New York 10013, telephone
number (212) 816-6000. CGMHI was incorporated in New York on 23 February 1977 and is the successor to
Salomon Smith Barney Holdings Inc., a Delaware corporation, following a statutory merger effective on 1 July
1999, for the purpose of changing its state of incorporation. On 7 April 2003, CGMHI filed a Restated
Certificate of Incorporation in the State of New York changing its name from Salomon Smith Barney Holdings
Inc. to Citigroup Global Markets Holdings Inc.
Institutional Clients Group
Institutional Clients Group (ICG) provides corporate, institutional, public sector and high-net-worth clients
around the world with a full range of wholesale banking products and services, including fixed income and
equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income
research, corporate lending, investment banking and advisory services, private banking, cash management,
trade finance and securities services. ICG transacts with clients in both cash instruments and derivatives,
including fixed income, foreign currency, equity and commodity products.
ICG revenue is generated primarily from fees and spreads associated with these activities. ICG earns fee
income for assisting clients in clearing transactions, providing brokerage and investment banking services and
other such activities. Revenue generated from these activities is recorded in Commissions and fees and
Investment banking. In addition, as a market maker, ICG facilitates transactions, including holding product
inventory to meet client demand, and earns the differential between the price at which it buys and sells the
products. These price differentials and the unrealized gains and losses on the inventory are recorded in
Principal transactions. Revenue is also generated from transaction processing and assets under custody and
administration.
ICG’s international presence is supported by trading floors in approximately 80 countries and a proprietary
network in over 95 countries and jurisdictions. At December 31, 2015, ICG had approximately $1.2 trillion of
assets and $587 billion of deposits, while two of its businesses, securities services and issuer services, managed
approximately $15.1 trillion of assets under custody compared to $16.1 trillion at the end of 2014. The decline
in assets under custody from 2014 was primarily due to the impact of FX translation and a decline in market
volumes.
2
INFORMATION RELATING TO DERIVATIVE INSTRUMENTS AND RISK MANAGEMENT
DERIVATIVES ACTIVITIES
In the ordinary course of business, the Company enters into various types of derivative transactions. These
derivative transactions include:
Futures and forward contracts, which are commitments to buy or sell at a future date a financial
instrument, commodity or currency at a contracted price and may be settled in cash or through
delivery.
Swap contracts, which are commitments to settle in cash at a future date or dates that may range
from a few days to a number of years, based on differentials between specified indices or financial
instruments, as applied to a notional principal amount.
Option contracts, which give the purchaser, for a premium, the right, but not the obligation, to buy
or sell within a specified time a financial instrument, commodity or currency at a contracted price
that may also be settled in cash, based on differentials between specified indices or prices.
Swaps and forwards and some option contracts are over-the-counter (OTC) derivatives that are bilaterally
negotiated with counterparties and settled with those counterparties, except for swap contracts that are
novated and "cleared" through central counterparties (CCPs). Futures contracts and other option contracts
are standardized contracts that are traded on an exchange with a CCP as the counterparty from the inception
of the transaction. The Company enters into these derivative contracts relating to interest rate, foreign
currency, commodity and other market/credit risks for the following reasons:
Trading Purposes: The Company trades derivatives as an active market maker. The Company
offers its customers derivatives in connection with their risk management actions to transfer,
modify or reduce their interest rate, foreign exchange and other market/credit risks or for their own
trading purposes. The Company also manages its derivative risk positions through offsetting trade
activities, controls focused on price verification, and daily reporting of positions to senior
managers.
Hedging: The Company uses derivatives in connection with its risk management activities to hedge
certain risks or reposition the risk profile of the Company. For example, the Company issues fixed -
rate long-term debt and then enters into a receive-fixed, pay-variable-rate interest rate swap with
the same tenor and notional amount to convert the interest payments to a net variable -rate basis.
This strategy is the most common form of an interest rate hedge, as it minimizes net interest cost in
certain yield curve environments. In addition, foreign-exchange contracts are used to hedge net
investment exposures.
Derivatives may expose the Company to market, credit or liquidity risks in excess of the amounts recorded
on the Consolidated Statement of Financial Condition. Market risk on a derivative product is the exposure
created by potential fluctuations in interest rates, foreign-exchange rates and other factors and is a function
of the type of product, the volume of transactions, the tenor and terms of the agreement and the underlying
volatility. Credit risk is the exposure to loss in the event of nonperformance by the other party to the
transaction where the value of any collateral held is not adequate to cover such losses. The recognition in
earnings of unrealized gains on these transactions is subject to management’s assessment of the probability
of counterparty default. Liquidity risk is the potential exposure that arises when the size of a derivative
position may not be able to be monetized in a reasonable period of time and at a reasonable cost in periods
of high volatility and financial stress.
Derivative transactions are customarily documented under industry standard master agreements that provide
that, following an uncured payment default or other event of default, the non-defaulting party may promptly
terminate all transactions between the parties and determine the net amount due to be paid to, or by, the
defaulting party. Events of default include: (i) failure to make a payment on a derivatives transaction that
remains uncured following applicable notice and grace periods, (ii) breach of agreement that remains
uncured after applicable notice and grace periods, (iii) breach of a representation, (iv) cross default, either
3
to third-party debt or to other derivative transactions entered into between the parties, or, in some cases,
their affiliates, (v) the occurrence of a merger or consolidation which results in a party’s becoming a
materially weaker credit, and (vi) the cessation or repudiation of any applicable guarantee or other credit
support document. Obligations under master netting agreements are often secured by collateral posted under
an industry standard credit support annex to the master netting agreement. An event of default may also
occur under a credit support annex if a party fails to make a collateral delivery that remains uncured
following applicable notice and grace periods.
The netting and collateral rights incorporated in the master netting agreements are considered to be legally
enforceable if a supportive legal opinion has been obtained from counsel of recognized standing that
provides the requisite level of certainty regarding enforceability and that the exercise of rights by the non-
defaulting party to terminate and close-out transactions on a net basis under these agreements will not be
stayed or avoided under applicable law upon an event of default including bankruptcy, insolvency or similar
proceeding.
A legal opinion may not be sought for certain jurisdictions where local law is silent or unclear as to the
enforceability of such rights or where adverse case law or conflicting regulation may cast doubt on the
enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law may
not provide the requisite level of certainty. For example, this may be the case for certain sovereigns,
municipalities, central banks and U.S. pension plans.
Exposure to credit risk on derivatives is affected by market volatility, which may impair the ability of
counterparties to satisfy their obligations to the Company. Credit limits are established and closely
monitored for customers engaged in derivatives transactions. CGMHI considers the level of legal certainty
regarding enforceability of its offsetting rights under master netting agreements and credit support annexes
to be an important factor in its risk management process. Specifically, CGMHI generally transacts much
lower volumes of derivatives under master netting agreements where CGMHI does not have the requisite
level of legal certainty regarding enforceability, because such derivatives consume greater amounts of
single counterparty credit limits than those executed under enforceable master netting agreements.
Cash collateral and security collateral in the form of G10 government debt securities is often posted by a
party to a master netting agreement to secure the net open exposure of the other party; the receiving party is
free to commingle/rehypothecate such collateral in the ordinary course of its business. Nonstandard
collateral such as corporate bonds, municipal bonds, U.S. agency securities and/or MBS may also be
pledged as collateral for derivative transactions. Security collateral posted to open and maintain a master
netting agreement with a counterparty, in the form of cash and/or securities, may from time to time be
segregated in an account at a third-party custodian pursuant to a tri-party account control agreement.
MANAGING GLOBAL RISK
OVERVIEW
For Citi, effective risk management is of primary importance to its overall operations. Accordingly, Citi’s risk
management process has been designed to monitor, evaluate and manage the principal risks it assumes in
conducting its activities. Specifically, the activities that Citi engages in, and the risks those activities generate,
must be consistent with Citi’s mission and value proposition, the key principles that guide it, and Citi's risk
appetite.
MARKET RISK
Market risk is the potential for losses arising from changes in the value of CGMHI’s assets and liabilities
resulting from changes in market variables such as interest rates, foreign exchange rates, equity prices,
commodity prices and credit spreads, as well as their implied volatilities.
4
Each business is required to establish, with approval from Citi’s market risk management, a market risk limit
framework for identified risk factors that clearly defines approved risk profiles and is within the parameters of
Citi’s overall risk appetite. These limits are monitored by the Risk organization, Citi’s country and business
Asset and Liability Committees and the Citigroup Asset and Liability Committee. In all cases, the businesses
are ultimately responsible for the market risks taken and for remaining within their defined limits.
LIQUIDITY RISK
Adequate and diverse sources of funding and liquidity are essential to CGMHI’s businesses. Funding and
liquidity risks arise from several factors, many of which are mostly or entirely outside CGMHI’s control, such
as disruptions in the financial markets, changes in key funding sources, credit spreads, changes in CGMHI’s
credit ratings and political and economic conditions in certain countries.
Valuation Process for Fair Value Measurements
Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and
Price Verification Policy and Standards, which is jointly owned by Finance and Risk Management.
For fair value measurements of substantially all assets and liabilities held by the Company, individual
business units are responsible for valuing the trading account assets and liabilities, and Product Control within
Finance performs independent price verification procedures to evaluate those fair value measurements. Product
Control is independent of the individual business units and reports to the Global Head of Product Control. It
has authority over the valuation of financial assets and liabilities. Fair value measurements of assets and
liabilities are determined using various techniques, including, but not limited to, discounted cash flows and
internal models, such as option and correlation models.
In addition, the pricing models used in measuring fair value are governed by an independent control
framework. Although the models are developed and tested by the individual business units, they are
independently validated by the Model Validation Group within Risk Management and reviewed by Finance
with respect to their impact on the price verification procedures. The purpose of this independent control
framework is to assess model risk arising from models’ theoretical soundness, calibration techniques where
needed, and the appropriateness of the model for a specific product in a defined market. To ensure their
continued applicability, models are independently reviewed annually. In addition, Risk Management approves
and maintains a list of products permitted to be valued under each approved model for a given business.
MARKET RISK OF TRADING PORTFOLIOS
Trading portfolios include positions resulting from market making activities, the CVA relating from
derivatives counterparties and all associated hedges, fair value option loans, hedges to the loan portfolio and
the leverage finance pipeline within capital markets origination within ICG.
The market risk of CGMHI’s trading portfolios is monitored using a combination of quantitative and
qualitative measures, including but not limited to:
• factor sensitivities; • value at risk (VAR); and • stress testing.
Each trading portfolio has its own market risk limit framework encompassing these measures and
other controls, including trading mandates, permitted product lists and a new product approval process for
complex products.
Factor Sensitivities
Factor sensitivities are expressed as the change in the value of a position for a defined change in a market risk
factor, such as a change in the value of a U.S. Treasury bill for a one basis point change in interest rates. Citi’s
Market Risk Management, within the Risk organization, works to ensure that factor sensitivities are calculated,
monitored and, in most cases, limited for all material risks taken in the trading portfolios.
5
Value at Risk
VAR estimates, at a 99% confidence level, the potential decline in the value of a position or a portfolio under
normal market conditions assuming a one-day holding period. VAR statistics, which are based on historical
data, can be materially different across firms due to differences in portfolio composition, differences in VAR
methodologies, and differences in model parameters. As a result, CGMHI believes VAR statistics can be used
more effectively as indicators of trends in risk-taking within a firm, rather than as a basis for inferring
differences in risk-taking across firms.
CGMHI uses a single, independently approved Monte Carlo simulation VAR model, which has been
designed to capture material risk sensitivities (such as first- and second-order sensitivities of positions to
changes in market prices) of various asset classes/risk types (such as interest rate, credit spread, foreign
exchange, equity and commodity risks). CGMHI’s VAR includes positions which are measured at fair value.
CGMHI believes its VAR model is conservatively calibrated to incorporate fat-tail scaling and the
greater of short-term (approximately the most recent month) and long-term (three years) market volatility. The
Monte Carlo simulation involves approximately 300,000 market factors, making use of approximately 180,000
time series, with sensitivities updated daily, volatility parameters updated daily to weekly and correlation
parameters updated monthly. The conservative features of the VAR calibration contribute an approximate 17%
add-on to what would be a VAR estimated under the assumption of stable and perfectly, normally distributed
markets.
As set forth in the table below, CGMHI’s average and year-end Trading VAR decreased from 2014 to 2015,
mainly due to changes in interest rate and credit spread exposures in the markets and securities services
businesses within ICG.
In millions of dollars
Interest rate $ 55 $ 71 $ 80 $ 74
Equity 27 22 23 30
Commodity 16 16 16 15
Foreign exchange 6 7 10 8
Covariance adjustment (1)
(44) (47) (47) (54)
Total Trading VAR—all market risk factors, including
general and specific risk (excluding credit portfolios) (2)
60 69 82 73
Specific risk-only component (3)
18 12 15 21
Total Trading VAR—general market risk factors
only (excluding credit portfolios) (2)
42 57 67 52
Incremental impact of the Credit Portfolio (4)
— 1 — —
Total Trading & Credit Portfolio VAR $ 60 $ 70 $ 82 $ 73
December December2015 2014
31, 2015 Average 31, 2014 Average
(1) Covariance adjustment (also known as diversification benefit) equals the difference between the total VAR and the sum of
the VARs tied to each individual risk type. The benefit reflects the fact that the risks within each and across risk types are
not perfectly correlated and, consequently, the total VAR on a given day will be lower than the sum of the VARs relating
to each individual risk type. The determination of the primary drivers of changes to the covariance adjustment is made by
an examination of the impact of both model parameter and position changes.
(2) The total Trading VAR includes mark-to-market and certain fair value option trading positions from CGMHI, with the
exception of hedges to the loan portfolio, fair value option loans, and all CVA exposures.
(3) The specific risk-only component represents the level of equity and fixed income issuer-specific risk embedded in VAR.
(4) The credit portfolio is composed of mark-to-market positions associated with non-trading business units including Citi
Treasury, the CVA relating to derivative counterparties and all associated CVA hedges. FVA and DVA are not included.
The credit portfolio also includes hedges to the loan portfolio, fair value option loans and hedges to the leveraged finance
pipeline within capital markets origination within CGMHI.
6
The table below provides the range of market factor VARs associated with CGMHI’s total trading VAR,
inclusive of specific risk:
In millions of dollars
Interest rate $ 54 $ 91 $ 60 $ 98
Equity 12 43 19 59
Commodity 11 24 9 23
Foreign exchange 4 20 4 14
Total Trading $ 54 $ 91 $ 62 $ 100
Total Trading & Credit Portfolio 54 94 62 $ 100
Low High Low High
2015 2014
Note: No covariance adjustment can be inferred from the above table as the high and low for each market factor will be from
different close of business dates.
VAR Model Review and Validation
Generally, Citi’s VAR review and model validation process entails reviewing the model framework, major
assumptions, and implementation of the mathematical algorithm. In addition, as part of the model validation
process, product specific back-testing on portfolios is periodically completed and reviewed with Citi’s U.S.
banking regulators.
Significant VAR model and assumption changes must be independently validated within Citi’s risk
management organization. This validation process includes a review by Citi’s model validation group and
further approval from its model validation review committee, which is composed of senior quantitative risk
management officers. In the event of significant model changes, parallel model runs are undertaken prior to
implementation. In addition, significant model and assumption changes are subject to the periodic reviews and
approval by Citi’s U.S. banking regulators.
VAR Back-testing
VAR back-testing is the process in which the daily one-day VAR, at a 99% confidence interval, is compared to
the buy-and-hold profit and loss (e.g., the profit and loss impact if the portfolio is held constant at the end of
the day and re-priced the following day). Buy-and-hold profit and loss represents the daily mark-to-market
profit and loss attributable to price movements in covered positions from the close of the previous business
day. Buy-and-hold profit and loss excludes realized trading revenue, net interest, fees and commissions, intra-
day trading profit and loss, and changes in reserves.
Based on a 99% confidence level, Citi would expect two to three days in any one year where buy-and-
hold losses exceed the VAR. Given the conservative calibration of Citi’s VAR model (as a result of taking the
greater of short- and long-term volatilities and fat-tail scaling of volatilities), Citi would expect fewer
exceptions under normal and stable market conditions. Periods of unstable market conditions could increase
the number of back-testing exceptions.
Stress Testing
Citi performs stress testing on a regular basis to estimate the impact of extreme market movements. It is
performed on individual positions and trading portfolios, as well as in aggregate inclusive of multiple trading
portfolios. Citi’s Market Risk management, after consultations with the businesses, develops both systemic and
specific stress scenarios, reviews the output of periodic stress testing exercises, and uses the information to
assess the ongoing appropriateness of exposure levels and limits. Citi uses two complementary approaches to
market risk stress testing across all major risk factors (i.e., equity, foreign exchange, commodity, interest rate
and credit spreads): top-down systemic stresses and bottom-up business specific stresses. Systemic stresses are
designed to quantify the potential impact of extreme market movements on an institution-wide basis, and are
constructed using both historical periods of market stress and projections of adverse economic scenarios.
7
Business specific stresses are designed to probe the risks of particular portfolios and market segments,
especially those risks that are not fully captured in VAR and systemic stresses.
CREDIT RISK
Credit risk is the potential for financial loss resulting from the failure of a borrower or counterparty to honor its
financial or contractual obligations. Credit risk arises in many of Citigroup’s business activities, including:
• wholesale and retail lending; • capital markets derivative transactions;
• structured finance; and
• repurchase and reverse repurchase transactions.
.
Credit risk also arises from settlement and clearing activities, when Citi transfers an asset in advance
of receiving its counter-value or advances funds to settle a transaction on behalf of a client. Concentration risk,
within credit risk, is the risk associated with having credit exposure concentrated within a specific client,
industry, region or other category.
Credit risk is one of the most significant risks Citi faces as an institution. As a result, Citi has a well
established framework in place for managing credit risk across all businesses. This includes a defined risk
appetite, credit limits and credit policies, both at the business level as well as at the company-wide level. Citi’s
credit risk management also includes processes and policies with respect to problem recognition, including
“watch lists,” portfolio review, updated risk ratings and classification triggers.
With respect to Citi’s settlement and clearing activities, intra-day client usage of lines is closely
monitored against limits, as well as against “normal” usage patterns. To the extent a problem develops, Citi
typically moves the client to a secured (collateralized) operating model. Generally, Citi’s intra-day settlement
and clearing lines are uncommitted and cancellable at any time.
To manage concentration of risk within credit risk, Citi has in place a concentration management
framework consisting of industry limits, obligor limits and single-name triggers. In addition, the independent
Risk organization reviews concentration of risk across Citi’s regions and businesses to assist in managing this
type of risk.
Credit exposure arising from capital markets activities is generally expressed as the current mark-to-
market, net of margin, reflecting the net value owed to Citi by a given counterparty.
The credit risk associated with these credit exposures is a function of the creditworthiness of the
obligor, as well as the terms and conditions of the specific obligation. Citi assesses the credit risk associated
with its credit exposures through regular stress testing at the company, business, geography and product levels.
These stress-testing processes typically estimate potential incremental credit costs that would occur as a result
of either downgrades in the credit quality or defaults of the obligors or counterparties.
OPERATIONAL RISK
Operational risk is the risk of loss resulting from inadequate or failed internal processes, systems or human
factors, or from external events. It includes the reputation and franchise risk associated with business practices
or market conduct in which Citi is involved. Operational risk is inherent in Citi’s global business activities, as
well as the internal processes that support those business activities, and can result in losses arising from events
related to the following, among others:
• fraud, theft and unauthorized activity; • employment practices and workplace environment; • clients, products and business practices;
• physical assets and infrastructure; and
• execution, delivery and process management.
The goal is to keep operational risk at appropriate levels relative to the characteristics of Citi’s
businesses, the markets in which it operates, its capital and liquidity, and the competitive, economic and
regulatory environment.
8
To anticipate, mitigate and control operational risk, Citi maintains a system of policies and has
established a consistent framework for monitoring, assessing and communicating operational risks and the
overall operating effectiveness of the internal control environment across Citigroup. As part of this framework,
Citi has established a manager’s control assessment process to help managers self-assess significant
operational risks and key controls and identify and address weaknesses in the design and/or operating
effectiveness of internal controls that mitigate significant operational risks.
Each major business segment must implement an operational risk process consistent with the
requirements of this framework. The process for operational risk management includes the following steps:
• identify and assess key operational risks; • design controls to mitigate identified risks; • establish key risk indicators;
• implement a process for early problem recognition and timely escalation;
• produce comprehensive operational risk reporting; and
• ensure that sufficient resources are available to actively improve the operational risk environment and
mitigate emerging risks.
As new products and business activities are developed, processes are designed, modified or sourced
through alternative means and operational risks are considered.
An Operational Risk Management Committee has been established to provide oversight for
operational risk across Citigroup and to provide a forum to assess Citi’s operational risk profile and ensure
actions are taken so that Citi’s operational risk exposure is actively managed consistent with Citi’s risk
appetite. The Committee seeks to ensure that these actions address the root causes that persistently lead to
operational risk losses and create lasting solutions to minimize these losses. Members include Citi’s Chief Risk
Officer and Citi’s Head of Operational Risk and senior members of their organizations. These members cover
multiple dimensions of risk management and include business and regional Chief Risk Officers and senior
operational risk managers.
In addition, Risk management, including Operational Risk Management, works proactively with the
businesses and other independent control functions to embed a strong operational risk management culture and
framework across Citi. Operational Risk Management engages with the businesses and the respective Chief
Risk Officers to ensure effective implementation of the Operational Risk Management framework by focusing
on (i) identification, analysis and assessment of operational risks; (ii) effective challenge of key control issues
and operational risks; and (iii) anticipation and mitigation of operational risk events.
Information about the businesses’ operational risk, historical operational risk losses and the control
environment is reported by each major business segment and functional area. The information is summarized
and reported to senior management, as well as to the Audit Committee of Citi’s Board of Directors.
Operational risk is measured and assessed through risk capital. Projected operational risk losses under
stress scenarios are also required as part of the Federal Reserve Board’s CCAR process.
9
RISK FACTORS
(Extracted from the Annual Report on Form 10-K for the fiscal year ended 31 December 2015, filed by
Citigroup Inc. with the U.S. Securities and Exchange Commission on 26 February 2016.)
The following discussion sets forth what management currently believes could be the most significant risks and
uncertainties that could impact Citi’s businesses, results of operations and financial condition. Other risks and
uncertainties, including those not currently known to Citi or its management, could also negatively impact
Citi’s businesses, results of operations and financial condition. Thus, the following should not be considered a
complete discussion of all of the risks and uncertainties Citi may face.
REGULATORY RISKS
Citi’s Inability to Enhance Its 2015 Resolution Plan Submission Could Subject It to More Stringent Capital,
Leverage or Liquidity Requirements, or Restrictions on Its Growth, Activities or Operations, and Could
Eventually Require Citi to Divest Assets or Operations.
Title I of the Dodd-Frank Act requires Citi to annually prepare and submit a plan to the Federal Reserve Board
and the FDIC for the orderly resolution of Citigroup (the bank holding company), and its significant legal
entities, under the U.S. Bankruptcy Code or other applicable insolvency law in the event of future material
financial distress or failure (Title I Resolution Plan). The Title I Resolution Plan requires significant effort,
time and cost across all of Citi’s businesses and geographies, and is subject to review by the Federal Reserve
Board and the FDIC.
Under Title I, if the Federal Reserve Board and the FDIC jointly determine that Citi’s 2015 Title I
Resolution Plan is not “credible” (which, although not defined, is generally believed to mean the regulators do
not believe the plan is feasible or would otherwise allow the regulators to resolve Citi in a way that protects
systemically important functions without severe systemic disruption), or would not facilitate an orderly
resolution of Citi under the U.S. Bankruptcy Code, and Citi fails to resubmit a resolution plan that remedies
any identified deficiencies, Citi could be subjected to more stringent capital, leverage or liquidity requirements,
or restrictions on its growth, activities or operations. If within two years from the imposition of any
requirements or restrictions Citi has still not remediated any identified deficiencies, then Citi could eventually
be required to divest certain assets or operations. Any such restrictions or actions would negatively impact
Citi’s reputation, market and investor perception, operations and strategy.
In August 2014, the Federal Reserve Board and the FDIC announced the completion of reviews of the
2013 Title I Resolution Plans submitted by Citi and 10 other financial institutions. The agencies identified
shortcomings with the firms’ 2013 Title I Resolution Plans, including Citi’s. These shortcomings generally
included (i) assumptions that the agencies regarded as unrealistic or inadequately supported, such as
assumptions about the likely behavior of customers, counterparties, investors, central clearing facilities and
regulators; and (ii) the failure to make, or identify, the kinds of changes in firm structure and practices that
would be necessary to enhance the prospects for orderly resolution. Significantly, the FDIC determined that the
2013 Title I Resolution Plans submitted by the 11 institutions, including Citi, were “not credible” and did not
facilitate an orderly resolution under the U.S. Bankruptcy Code. The Federal Reserve Board determined that
the plans of the 11 institutions were required to take immediate action to improve their resolvability and reflect
those improvements in their 2015 plans. At the same time, the Federal Reserve Board and FDIC indicated that
if the identified shortcomings were not addressed in the 2015 Title I Resolution Plan submissions, the agencies
expected to use their authority under Title I, as discussed above. Like other similarly-situated institutions, Citi
submitted its 2015 Title I Resolution Plan on July 1, 2015 and the industry has not yet received a formal
response from the regulators.
Citi’s Ability to Return Capital to Shareholders Substantially Depends on the CCAR Process and the Results
of Regulatory Stress Tests.
In addition to Board of Directors’ approval, any decision by Citi to return capital to shareholders, whether
through an increase in its common stock dividend or through a share repurchase program, substantially
depends on regulatory approval, including through the CCAR process required by the Federal Reserve Board
and the supervisory stress tests required under the Dodd-Frank Act. In March 2014, the Federal Reserve Board
announced that it objected to the capital plan submitted by Citi as part of the 2014 CCAR process, meaning
Citi was not able to increase its return of capital to shareholders as it had requested. Restrictions on Citi’s
10
ability to return capital to shareholders as a result of the 2014 CCAR process negatively impacted market and
investor perceptions of Citi, and continued restrictions could do so in the future.
Citi’s ability to accurately predict or explain to stakeholders the outcome of the CCAR process, and
thus address any such market or investor perceptions, is difficult as the Federal Reserve Board’s assessment of
Citi is conducted not only by using the Board’s proprietary stress test models, but also a number of qualitative
factors, including a detailed assessment of Citi’s “capital adequacy process,” as defined by the Federal Reserve
Board. These qualitative factors were cited by the Federal Reserve Board in its objection to Citi’s 2014 capital
plan, and the Board has stated that it expects leading capital adequacy practices will continue to evolve and
will likely be determined by the Board each year as a result of its cross-firm review of capital plan
submissions.
Similarly, the Federal Reserve Board has indicated that, as part of its stated goal to continually evolve
its annual stress testing requirements, several parameters of the annual stress testing process may be altered
from time to time, including the severity of the stress test scenario, Federal Reserve Board modeling of Citi’s
balance sheet and the addition of components deemed important by the Federal Reserve Board (e.g., a
counterparty failure). In addition, the Federal Reserve Board indicated that it may consider that some or all of
Citi’s GSIB surcharge be integrated into its post-stress test minimum capital requirements. These parameter
and other alterations could further increase the level of capital Citi must meet as part of the stress tests, thus
potentially impacting the level of capital returns to shareholders.
Further, because it is not clear how the Federal Reserve Board’s proprietary stress test models may
differ from the modeling techniques employed by Citi, it is possible that Citi’s stress test results (using its own
models, estimation methodologies and processes) may not be consistent with those disclosed by the Federal
Reserve Board, thus potentially leading to additional confusion and impacts to Citi’s perception in the market.
Citi, Its Management and Businesses Must Continually Review, Analyze and Successfully Adapt to Ongoing
Regulatory Changes and Uncertainties in the U.S. and Globally.
Despite the adoption of final regulations in numerous areas impacting Citi and its businesses over the past
several years, including final U.S. Basel III capital rules, certain derivatives reforms and restrictions on
proprietary trading under the Volcker Rule, Citi, its management and businesses continually face ongoing
regulatory changes and uncertainties, both in the U.S. and globally.
While the areas of ongoing regulatory changes and uncertainties facing Citi are too numerous to list
completely, various examples include, but are not limited to: (i) limits on the level of credit risk Citi may have
against certain counterparties; (ii) potential changes to various aspects of the regulatory capital framework
applicable to Citi; (iii) financial transaction taxes and/or other types of increased fees on financial institutions;
(iv) international versions of the Volcker Rule and bank structural reforms; (v) whether and to what extent the
European Union and CFTC will render any “equivalency” determinations or regulatory acknowledgment of the
equivalency of derivatives regimes; (vi) U.S. and international requirements relating to sanctions against
Russia, Iran and other countries; and (vii) the U.S. banking agencies’ rules relating to the net stable funding
ratio, or NSFR. There may also be regulatory changes not yet contemplated, or changes that have been
proposed which could take a dramatically different form upon finalization.
Moreover, certain recent regulatory changes, while final, remain in the implementation period, and it
remains uncertain what ultimate impact such changes will have on Citi’s businesses, results of operations or
financial condition. For example, in October and December 2015, the U.S. banking regulators and CFTC,
respectively, adopted final rules relating to margin requirements for uncleared swaps. The final rules, which
have a three-year phase-in period beginning on September 1, 2016, will require Citi to both collect and post
margin to counterparties, as well as collect and post margin to certain of its affiliates, in connection with any
uncleared swap, with the initial margin required to be held by unaffiliated third-party custodians. While Citi
continues to work through the implications of the final rules, it is likely these requirements will significantly
increase the cost to Citi and its counterparties of conducting uncleared swaps and impact its current inter-
affiliate swap practices (e.g., require clearing of more inter-affiliate swaps and/or enter into risk management
swaps with third parties).
Ongoing regulatory changes and uncertainties make Citi’s and its management’s long-term business,
balance sheet and budget planning difficult or subject to change, and can negatively impact Citi’s results of
operations, financial condition and, potentially, its strategy or organizational structure. In addition, in many
cases, business planning is required to be based on possible or proposed rules, requirements or outcomes and is
further complicated by management’s continual need to review and evaluate the impact on Citi’s businesses of
ongoing rule proposals, final rules and implementation guidance from numerous regulatory bodies worldwide,
11
which such guidance can change. Moreover, in many instances U.S. and international regulatory initiatives
have not been undertaken or implemented on a coordinated basis, and areas of divergence have developed with
respect to the scope, interpretation, timing, structure or approach, leading to inconsistent or even conflicting
regulations, including within a single jurisdiction. Regulatory changes have also significantly increased Citi’s
compliance risks and costs.
CREDIT AND MARKET RISKS
Citi’s Results of Operations Could Be Negatively Impacted as Its Revolving Home Equity Lines of Credit
Continue to “Reset.”
As of December 31, 2015, Citi’s home equity loan portfolio included approximately $12.3 billion of home
equity lines of credit that were still within their revolving period and had not commenced amortization, or
“reset” (Revolving HELOCs). Of these Revolving HELOCs, approximately 66% will commence amortization
during 2016 and 2017.
Before commencing amortization, Revolving HELOC borrowers are required to pay only interest on
their loans. Upon amortization, these borrowers are required to pay both interest, usually at a variable rate, and
principal that typically amortizes over 20 years, rather than the typical 30-year amortization. As a result, Citi’s
customers with Revolving HELOCs that reset could experience “payment shock” due to the higher required
payments on the loans. Increases in interest rates could further increase these payments, given the variable
nature of the interest rates on these loans post-reset.
Citi has experienced a higher 30+ days past due delinquency rate on its amortizing home equity loans
as compared to its total outstanding home equity loan portfolio (amortizing and non-amortizing). Moreover,
resets to date have generally occurred during a period of historically low interest rates, which Citi believes has
likely reduced the overall payment shock to borrowers. While Citi continues to monitor this reset risk closely
and will continue to consider any potential impact in determining its allowance for loan loss reserves, as well
as review and take additional actions to offset potential reset risk, increasing interest rates, stricter lending
criteria and high borrower loan-to-value positions could limit Citi’s ability to reduce or mitigate this reset risk
going forward. Accordingly, as these loans further reset during 2016 and 2017, Citi could continue to
experience higher delinquency rates as well as increased loan loss reserves and net credit losses in future
periods, which could negatively impact its results of operations.
Macroeconomic and Geopolitical Challenges Globally Could Have a Negative Impact on Citi’s Businesses
and Results of Operations.
Citi has experienced, and could experience in the future, negative impacts to its businesses and results of
operations as a result of macroeconomic and geopolitical challenges, uncertainties and volatility.
Energy and other commodity prices significantly deteriorated during the second half of 2015 and into
2016, which has impacted various financial markets, countries and industries. Global economic growth
remains uneven and uncertain. Various regions or countries, including certain emerging markets, have
experienced slower or no growth and volatility, whether due to macroeconomic conditions or geopolitical
tensions, governmental or regulatory policies or economic conditions within the particular region or country.
For example, the economic and fiscal situations of several European countries remain fragile, and geopolitical
tensions throughout the region, including in Russia and the Middle East, have added to the uncertainties. While
concerns relating to sovereign defaults or a partial or complete break-up of the European Monetary Union
(EMU), including potential accompanying redenomination risks and uncertainties, seemed to have abated
somewhat in recent years, concerns and uncertainties have surfaced in Europe over the potential exit of the
United Kingdom from the European Union in 2016. In addition, governmental fiscal and monetary actions, or
expected actions, have impacted the volatilities of global financial markets and foreign exchange rates.
These and other global macroeconomic and geopolitical challenges, uncertainties and volatilities have
impacted, and could continue to negatively impact, Citi’s businesses, results of operations and financial
condition, including its credit costs, revenues in its Markets and securities services and other businesses, and
AOCI (which can in turn negatively impact Citi’s book and tangible book value). Further, if the economic
situation in a non-U.S. jurisdiction where Citi operates were to deteriorate below a certain level, U.S.
regulators can and have imposed mandatory loan loss and other reserve requirements on Citi, which could
negatively impact its cost of credit and earnings, perhaps significantly.
12
Citi’s Significant Presence in the Emerging Markets Subjects It to Various Risks as well as Increased
Compliance and Regulatory Risks and Costs.
During 2015, emerging markets revenues accounted for approximately 41% of Citi’s total revenues. Citi’s
significant presence in the emerging markets subjects it to a number of risks, including sovereign volatility,
political events, foreign exchange controls, limitations on foreign investment, sociopolitical instability
(including from hyper-inflation), fraud, nationalization or loss of licenses, business restrictions, sanctions or
asset freezes, potential criminal charges, closure of branches or subsidiaries and confiscation of assets. For
example, Citi operates in several countries that have, or have had in the recent past, strict foreign exchange
controls, such as Argentina and Venezuela, that limit its ability to convert local currency into U.S. dollars
and/or transfer funds outside the country. Citi has also previously discovered fraud in certain emerging markets
in which it operates in prior years. Political turmoil and other instability have occurred in certain countries,
such as in Russia, Ukraine and the Middle East, which have required management time and attention (e.g.,
monitoring the impact of sanctions on the Russian economy as well as Citi’s businesses and results of
operations).
Citi’s emerging markets presence also increases its compliance and regulatory risks and costs. For
example, Citi’s operations in emerging markets, including facilitating cross-border transactions on behalf of its
clients, subject it to higher compliance risks under U.S. regulations primarily focused on various aspects of
global corporate activities, such as anti-money-laundering regulations and the Foreign Corrupt Practices Act.
These risks can be more acute in less developed markets and thus require substantial investment in compliance
infrastructure or could result in a reduction in certain of Citi’s business activities. Any failure by Citi to comply
with applicable U.S. regulations, as well as the regulations in the countries and markets in which it operates as
a result of its global footprint, could result in fines, penalties, injunctions or other similar restrictions, any of
which could negatively impact Citi’s results of operations and its reputation.
Concentrations of Risk Can Increase the Potential for Citi to Incur Significant Losses.
Concentrations of risk, particularly credit and market risk, can increase Citi’s risk of significant losses. As of
December 31, 2015, Citi’s most significant concentration of credit risk was with the U.S. government and its
agencies, which primarily results from trading assets and investments issued by the U.S. government and its
agencies. Citi also routinely executes a high volume of securities, trading, derivative and foreign exchange
transactions with counterparties in the financial services industry, including banks, insurance companies,
investment banks, government and central banks and other financial institutions. To the extent regulatory or
market developments lead to increased centralization of trading activity through particular clearing houses,
central agents or exchanges, this could also increase Citi’s concentration of risk in this industry. Concentrations
of risk can limit, and have limited, the effectiveness of Citi’s hedging strategies and have caused Citi to incur
significant losses, and they may do so again in the future.
LIQUIDITY RISKS
The Federal Reserve Board’s Total Loss-Absorbing Capacity Proposal Includes Uncertainties and Potential
Operational Difficulties That Could Have a Negative Impact on Citi’s Funding and Liquidity, Costs of
Funds and Results of Operations.
Title II of the Dodd-Frank Act grants the FDIC the authority, under certain circumstances, to resolve
systemically important financial institutions, including Citi. The FDIC has released a notice describing its
preferred “single point of entry strategy” for such resolution, pursuant to which, generally, a bank holding
company would be placed in receivership, the unsecured long-term debt of the holding company would bear
losses and the operating subsidiaries would be recapitalized.
Consistent with this strategy, in November 2015, the Federal Reserve Board issued a notice of
proposed rulemaking to require GSIBs, including Citi, to (i) issue and maintain minimum levels of external
“total loss-absorbing capacity” (TLAC) and long-term debt (LTD), and (ii) adhere to various “clean holding
company” requirements at the bank holding company level, including a prohibition on third-party short-term
borrowings, derivatives and other qualified financial contracts and certain guarantees, as well as a limit on
other non-TLAC eligible liabilities, such as structured notes and other operating liabilities. While not included
in its proposed requirements, the Federal Reserve Board also indicated it was considering additional domestic
internal TLAC requirements for U.S. GSIBs which could require, among other things, the “pre-positioning” of
specified amounts of TLAC to certain material subsidiaries of the bank holding company.
13
There are significant uncertainties and interpretive issues arising from the Federal Reserve Board’s
proposal. With respect to the minimum external LTD and TLAC requirements, the proposal would disqualify
from eligible LTD securities that permit acceleration for reasons other than insolvency or non-payment of
principal or interest as well as securities not governed by U.S. law. Consistent with industry standards, the vast
majority of Citi’s otherwise eligible outstanding LTD provides for acceleration in circumstances other than
those permitted by the proposal. Additionally, Citi has outstanding a significant amount of LTD not governed
by U.S. law but which would otherwise be eligible to count towards the minimum external LTD requirement.
Accordingly, if the requirements are adopted as proposed, and no “grandfathering” of existing outstanding
LTD is provided, Citi could be required to refinance or issue significant amounts of additional debt,
simultaneously with other GSIBs impacted by the requirements. Further, such ineligible debt securities would
count against the limit imposed on non-TLAC liabilities imposed under the clean holding company
requirements of the proposal, likely resulting in the need to repurchase significant amounts of Citi’s
outstanding debt in order not to be in breach of such limitations. Any of these actions could negatively and
significantly impact Citi’s funding and liquidity management and planning, operations and costs of funds.
The clean holding company requirements pose additional operational challenges and uncertainties.
Citi, like many bank holding companies, often guarantees the obligations of its subsidiaries, which guarantees
include a default right linked to the insolvency of Citi (i.e., downstream guarantees with cross-default
provisions). With no grandfathering of such guarantees contemplated by the proposal, restructuring, revising or
replacing the extensive number of guarantees outstanding in order to meet the clean holding company
requirements could be costly and expose Citi to legal risk. Further, the potential consequences of breaching the
proposed clean holding company requirements, as well as the consequences of not meeting many of the other
requirements in the Federal Reserve Board’s proposal, are not clear, including what would be required to cure
and the timeframe to do so.
In addition, any requirement to pre-position TLAC-eligible instruments with material subsidiaries
could result in additional funding inefficiencies, increase Citi’s overall minimum TLAC requirements by
reducing the fungibility of its funding sources and require certain of Citi’s subsidiaries to replace lower cost
funding with other higher cost funding, which would further impede Citi’s funding and liquidity management
and planning, costs of funds and results of operations.
The Maintenance of Adequate Liquidity and Funding Depends on Numerous Factors, Including Those
Outside of Citi’s Control, Such as Market Disruptions and Increases in Citi’s Credit Spreads.
As a global financial institution, adequate liquidity and sources of funding are essential to Citi’s businesses.
Citi’s liquidity and sources of funding can be significantly and negatively impacted by factors it cannot control,
such as general disruptions in the financial markets, governmental fiscal and monetary policies, regulatory
changes or negative investor perceptions of Citi’s creditworthiness.
In addition, Citi’s cost and ability to obtain deposits, secured funding and long-term unsecured
funding are directly related to its credit spreads. Changes in credit spreads constantly occur and are market
driven, including both external market factors and factors specific to Citi, and can be highly volatile. Citi’s
credit spreads may also be influenced by movements in the costs to purchasers of credit default swaps
referenced to Citi’s long-term debt, which are also impacted by these external and Citi-specific factors.
Moreover, Citi’s ability to obtain funding may be impaired if other market participants are seeking to access
the markets at the same time, or if market appetite is reduced, as is likely to occur in a liquidity or other market
crisis. In addition, clearing organizations, regulators, clients and financial institutions with which Citi interacts
may exercise the right to require additional collateral based on these market perceptions or market conditions,
which could further impair Citi’s access to and cost of funding.
As a holding company, Citi relies on dividends, distributions and other payments from its subsidiaries
to fund dividends as well as to satisfy its debt and other obligations. Several of Citi’s U.S. and non-U.S.
subsidiaries are or may be subject to capital adequacy or other regulatory or contractual restrictions on their
ability to provide such payments, including any local regulatory stress test requirements or potential domestic
internal TLAC requirements (as discussed above). Limitations on the payments that Citi receives from its
subsidiaries could also impact its liquidity.
14
The Credit Rating Agencies Continuously Review the Credit Ratings of Citi and Certain of Its Subsidiaries,
and Ratings Downgrades Could Have a Negative Impact on Citi’s Funding and Liquidity Due to Reduced
Funding Capacity and Increased Funding Costs, Including Derivatives Triggers That Could Require Cash
Obligations or Collateral Requirements.
The credit rating agencies, such as Fitch, Moody’s and S&P, continuously evaluate Citi and certain of its
subsidiaries, and their ratings of Citi and its more significant subsidiaries’ long-term/senior debt and short-
term/commercial paper, as applicable, are based on a number of factors, including standalone financial
strength, as well as factors not entirely within the control of Citi and its subsidiaries, such as the agencies’
proprietary rating agency methodologies and assumptions and conditions affecting the financial services
industry and markets generally.
Citi and its subsidiaries may not be able to maintain their current respective ratings. Ratings
downgrades could negatively impact Citi’s ability to access the capital markets and other sources of funds as
well as the costs of those funds, and its ability to maintain certain deposits. A ratings downgrade could also
have a negative impact on Citi’s funding and liquidity due to reduced funding capacity, including derivative
triggers, which could take the form of cash obligations and collateral requirements. In addition, a ratings
downgrade could also have a negative impact on other funding sources, such as secured financing and other
margined transactions for which there are no explicit triggers, as well as on contractual provisions, which
contain minimum ratings thresholds in order for Citi to hold third-party funds.
Moreover, credit ratings downgrades can have impacts, which may not be currently known to Citi or
which are not possible to quantify. For example, some entities may have ratings limitations as to their
permissible counterparties, of which Citi may or may not be aware. In addition, certain of Citi’s corporate
customers and trading counterparties, among other clients, could re-evaluate their business relationships with
Citi and limit the trading of certain contracts or market instruments with Citi in response to ratings
downgrades. Changes in customer and counterparty behavior could impact not only Citi’s funding and liquidity
but also the results of operations of certain Citi businesses.
OPERATIONAL RISKS
Citi Has Co-Branding and Private Label Credit Card Relationships with Various Retailers and Merchants
and the Failure to Maintain These Relationships or the Renewal of These Relationships on Less Favorable
Terms Could Have a Negative Impact on Citi’s Results of Operations or Financial Condition.
Through its Citi-branded cards and Citi retail services credit card businesses, Citi has co-branding and private
label relationships with various retailers and merchants globally in the ordinary course of business whereby
Citi issues credit cards to customers of the retailers or merchants. Citi’s cobranding and private label
agreements provide for shared economics between the parties and generally have a fixed term. The five largest
relationships constituted an aggregate of approximately 10% of Citi’s revenues for the year ended December
31, 2015.
Competition among card issuers, including Citi, for these relationships is significant. As a result, Citi
may not be able to renew these relationships, or the relationships may be renewed on terms substantially less
favorable to Citi’s credit card businesses. These relationships could also be negatively impacted due to, among
other things, operational difficulties of the retailer or merchant, termination due to a breach by Citi, the retailer
or merchant of its responsibilities, or external factors, including bankruptcies, liquidations, restructurings,
consolidations and other similar events. While various mitigating factors could be available to Citi if any of
these events were to occur - such as by replacing the retailer or merchant or offering new card products - such
events could negatively impact Citi’s results of operations or financial condition.
Citi’s Operational Systems and Networks Have Been, and Will Continue to Be, Subject to an Increasing
Risk of Continually Evolving Cybersecurity or Other Technological Risks Which Could Result in the Theft,
Loss, Misuse or Disclosure of Confidential Client or Customer Information, Damage to Citi’s Reputation,
Additional Costs to Citi, Regulatory Penalties, Legal Exposure and Financial Losses.
A significant portion of Citi’s operations relies heavily on the secure processing, storage and transmission of
confidential and other information as well as the monitoring of a large number of complex transactions on a
minute-by-minute basis. For example, through its Global Consumer Banking, credit card and securities
services businesses, Citi obtains and stores an extensive amount of personal and client-specific information for
its retail, corporate and governmental customers and clients and must accurately record and reflect their
extensive account transactions. With the evolving proliferation of new technologies and the increasing use of
15
the Internet and mobile devices to conduct financial transactions, large, global financial institutions such as Citi
have been, and will continue to be, subject to an increasing risk of cyber incidents from these activities.
Citi’s computer systems, software and networks are subject to ongoing cyber incidents such as
unauthorized access; loss or destruction of data (including confidential client information); account takeovers;
unavailability of service; computer viruses or other malicious code; cyber attacks; and other events. These
threats arise from numerous sources, not all of which are in Citi’s control, including among others human
error, fraud or malice on the part of employees or third parties, accidental technological failure, electrical or
telecommunication outages, failures of computer servers or other damage to Citi’s property or assets, natural
disasters or severe weather conditions, health emergencies or pandemics, or outbreaks of hostilities or terrorist
acts.
Additional challenges are posed by external parties, including extremist parties and certain foreign
state actors that engage in cyber activities as a means to promote political ends. As further evidence of the
increasing and potentially significant impact of cyber incidents, during 2015, the U.S. government as well as
several multinational companies reported cyber incidents affecting their computer systems that resulted in the
data of millions of customers and employees being compromised. In addition, in recent years several U.S.
retailers and financial institutions and other multinational companies reported cyber incidents that
compromised customer data.
While Citi has not been materially impacted by these reported or other cyber incidents, Citi has been
subject to other intentional cyber incidents from external sources over the last several years, including (i)
denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches,
which obtained unauthorized access to customer account data; and (iii) malicious software attacks on client
systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the
extraction of client data. While Citi’s monitoring and protection services were able to detect and respond to the
incidents targeting its systems before they became significant, they still resulted in limited losses in some
instances as well as increases in expenditures to monitor against the threat of similar future cyber incidents.
There can be no assurance that such cyber incidents will not occur again, and they could occur more frequently
and on a more significant scale.
Although Citi devotes significant resources to implement, maintain, monitor and regularly upgrade its
systems and networks with measures such as intrusion detection and prevention and firewalls to safeguard
critical business applications, there is no guarantee that these measures or any other measures can provide
absolute security. In addition, because the methods used to cause cyber attacks change frequently or, in some
cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or
proactively address these methods until they are discovered.
If Citi were to be subject to a cyber incident, it could result in the disclosure of personal, confidential
or proprietary client information, damage to Citi’s reputation with its clients and the market, customer
dissatisfaction, additional costs to Citi (such as repairing systems, replacing customer payment cards or adding
new personnel or protection technologies), regulatory penalties, exposure to litigation and other financial losses
to both Citi and its clients and customers. Such events could also cause interruptions or malfunctions in the
operations of Citi (such as the lack of availability of Citi’s online banking system or mobile banking platform),
as well as the operations of its clients, customers or other third parties. Given Citi’s global footprint and the
high volume of transactions processed by Citi, certain errors or actions may be repeated or compounded before
they are discovered and rectified, which would further increase these costs and consequences.
Third parties with which Citi does business, as well as retailers and other third parties with which
Citi’s customers do business, may also be sources of cybersecurity or other operational and technological risks,
particularly where activities of customers are beyond Citi’s security and control systems. Citi outsources
certain functions, such as processing customer credit card transactions, uploading content on customer-facing
websites, and developing software for new products and services. These relationships allow for the storage and
processing of customer information by third-party hosting of or access to Citi websites, which could result in
service disruptions or website defacements, a risk the confidentiality, privacy and security of data held by third
parties may be compromised and the potential to introduce vulnerable code, resulting in security breaches
impacting Citi customers. While Citi engages in certain actions to reduce the exposure resulting from
outsourcing, such as performing onsite security control assessments and limiting third-party access to the least
privileged level necessary to perform job functions, ongoing threats may result in unauthorized access, loss or
destruction of data or other cyber incidents with increased costs and consequences to Citi such as those
discussed above. Furthermore, because financial institutions are becoming increasingly interconnected with
16
central agents, exchanges and clearing houses, including as a result of the derivatives reforms over the last few
years, Citi has increased exposure to operational failure or cyber attacks through third parties.
While Citi maintains insurance coverage that may, subject to policy terms and conditions including
significant self-insured deductibles, cover certain aspects of cyber risks, such insurance coverage may be
insufficient to cover all losses.
Citi’s Ability to Utilize Its DTAs, and Thus Reduce the Negative Impact of the DTAs on Citi’s Regulatory
Capital, Will Be Driven by Its Ability to Generate U.S. Taxable Income.
At December 31, 2015, Citi’s net DTAs were approximately $47.8 billion, of which approximately $31.0
billion was excluded from Citi’s Common Equity Tier 1 Capital, on a fully implemented basis, under the U.S.
Basel III rules. In addition, of the net DTAs as of year-end 2015, approximately $15.9 billion related to foreign
tax credit carry-forwards (FTCs). The carry-forward utilization period for FTCs is 10 years and represents the
most time-sensitive component of Citi’s DTAs. Of the FTCs at year-end 2015, approximately $4.8 billion
expire in 2018 and the remaining $11.1 billion expire over the period of 2019-2025. Citi must utilize any FTCs
generated in the then-current year tax return prior to utilizing any carry-forward FTCs.
The accounting treatment for realization of DTAs, including FTCs, is complex and requires
significant judgment and estimates regarding future taxable earnings in the jurisdictions in which the DTAs
arise and available tax planning strategies. Citi’s ability to utilize its DTAs, including the FTC components,
and thus use the capital supporting the DTAs for more productive purposes, will be dependent upon Citi’s
ability to generate U.S. taxable income in the relevant tax carry-forward periods. Failure to realize any portion
of the DTAs would also have a corresponding negative impact on Citi’s net income.
In addition, with regard to FTCs, utilization will be influenced by actions to optimize U.S. taxable
earnings for the purpose of consuming the FTC carry-forward component of the DTAs prior to expiration.
These FTC actions, however, may serve to increase the DTAs for other less time sensitive components.
Moreover, tax return limitations on FTCs and general business credits that cause Citi to incur current tax
expense, notwithstanding its tax carry-forward position, could impact the rate of overall DTA utilization. DTA
utilization will also continue to be driven by movements in Citi’s AOCI, which can be impacted by changes in
interest rates and foreign exchange rates.
Citi’s Interpretation or Application of the Extensive Tax Laws to Which It Is Subject Could Differ from
Those of the Relevant Governmental Authorities, Which Could Result in the Payment of Additional Taxes,
Penalties or Interest.
Citi is subject to the various tax laws of the U.S. and its states and municipalities, as well as the numerous
foreign jurisdictions in which it operates. These tax laws are inherently complex and Citi must make judgments
and interpretations about the application of these laws to its entities, operations and businesses. Citi’s
interpretations and application of the tax laws, including with respect to withholding tax obligations and stamp
and other transactional taxes, could differ from that of the relevant governmental taxing authority, which could
result in the potential for the payment of additional taxes, penalties or interest, which could be material.
The Value of Citi’s DTAs Could Be Significantly Reduced if Corporate Tax Rates in the U.S. or Certain
State, Local or Foreign Jurisdictions Decline or as a Result of Other Changes in the U.S. Corporate Tax
System.
There have been discussions regarding decreasing the U.S. federal corporate tax rate. Similar discussions have
taken place in certain local, state and foreign jurisdictions. While Citi may benefit in some respects from any
decrease in corporate tax rates, a reduction in the U.S. federal, or state, local or foreign corporate tax rates
could result in a decrease, perhaps significant, in the value of Citi’s DTAs, which would result in a reduction to
Citi’s net income during the period in which the change is enacted. There have also been recent discussions of
more sweeping changes to the U.S. tax system. It is uncertain whether or when any such tax reform proposals
will be enacted into law, and whether or how they will affect Citi’s DTAs.
If Citi’s Risk Models Are Ineffective or Require Modification or Enhancement, Citi Could Incur Significant
Losses or Its Regulatory Capital and Capital Ratios Could Be Negatively Impacted.
Citi utilizes models extensively as part of its risk management and mitigation strategies, including in analysing
and monitoring the various risks Citi assumes in conducting its activities. For example, Citi uses models as part
of its various stress testing initiatives across the firm. Management of these risks is made even more
17
challenging within a global financial institution such as Citi, particularly given the complex, diverse and
rapidly changing financial markets and conditions in which Citi operates.
These models and strategies are inherently limited because they involve techniques, including the use
of historical data in many circumstances, and judgments that cannot anticipate every economic and financial
outcome in the markets in which Citi operates, nor can they anticipate the specifics and timing of such
outcomes. Citi could incur significant losses if its risk management models or strategies are ineffective in
properly anticipating or managing these risks.
Moreover, Citi’s Basel III regulatory capital models, including its credit, market and operational risk
models, continue to be subject to ongoing regulatory review and approval, which may result in refinements,
modifications or enhancements (required or otherwise) to these models. Modifications or requirements
resulting from these ongoing reviews, as well as any future changes or guidance provided by the U.S. banking
agencies regarding the regulatory capital framework applicable to Citi, have resulted in, and could continue to
result in, significant changes to Citi’s risk-weighted assets, total leverage exposure or other components of
Citi’s capital ratios. These changes can negatively impact Citi’s capital ratios and its ability to achieve its
regulatory capital requirements as it projects or as required.
Citi Must Continually Pursue Expense Management and Its Investments in Its Businesses May Not Be as
Successful as Citi Projects or Expects.
Citi continues to pursue its disciplined expense management strategy, including ongoing repositioning and
efficiency targets. However, there is no guarantee that Citi will be able to maintain or reduce its level of
expenses as a result of its repositioning actions, efficiency initiatives or otherwise. Moreover, Citi’s ability to
maintain or reduce its expenses in part depends on factors which it cannot control, such as ongoing regulatory
changes, continued higher regulatory and compliance costs, legal and regulatory proceedings and inquiries and
macroeconomic conditions, among others. In addition, investments Citi has made, or may make, in its
businesses or operations, such as those in technology systems or in its U.S. credit card businesses, may not be
as productive or effective as Citi expects or at all.
Citi’s Ability to Continue to Wind-Down Citi Holdings Largely Depends on Factors Outside Its Control.
While Citi made significant progress in continuing to wind-down Citi Holdings in 2015, and Citi expects to
maintain Citi Holdings at or above “break even” in 2016, as of December 31, 2015, the remaining assets in Citi
Holdings largely consisted of North America legacy consumer mortgages, of which approximately 50%
consisted of home equity loans for which a market for sales has not yet developed. Accordingly, sales of the
remaining mortgage assets will largely continue to be subject to ongoing run-off, market appetite and/or
opportunistic sales. As a result, the remaining assets in Citi Holdings will not likely decrease as significantly as
in prior years and could continue to have a negative impact on Citi’s risk-weighted assets.
Citi’s Performance and the Performance of Its Individual Businesses Could Be Negatively Impacted if Citi
Is Not Able to Hire and Retain Highly Qualified Employees for Any Reason.
Citi’s performance and the performance of its individual businesses is largely dependent on the talents and
efforts of highly skilled employees. Specifically, Citi’s continued ability to compete in its businesses, to
manage its businesses effectively and to continue to execute its overall global strategy depends on its ability to
attract new employees and to retain and motivate its existing employees. If Citi is unable to continue to attract
and retain the most highly qualified employees for any reason, Citi’s performance, including its competitive
position, the successful execution of its overall strategy and its results of operations could be negatively
impacted.
Citi’s ability to attract and retain employees depends on numerous factors, some of which are outside
of its control. For example, given the heightened regulatory and political environment in which Citi operates
relative to competitors for talent both within and outside of the financial services area, it may be more difficult
for Citi to hire or retain highly qualified employees in the future. Other factors that impact Citi’s ability to
attract and retain employees include its culture, compensation, the management and leadership of the company
as well as its individual businesses, Citi’s presence in the particular market or region at issue and the
professional opportunities it offers. Generally, the banking industry is subject to more stringent regulation of
executive and employee compensation than other industries, including deferral and clawback requirements for
incentive compensation and other limitations. Citi often competes in the market for talent with entities that are
not subject to such significant regulatory restrictions on the structure of incentive compensation.
18
Incorrect Assumptions or Estimates in Citi’s Financial Statements Could Cause Significant Unexpected
Losses in the Future, and Changes to Financial Accounting and Reporting Standards or Interpretations
Could Have a Material Impact on How Citi Records and Reports Its Financial Condition and Results of
Operations.
Citi is required to use certain assumptions and estimates in preparing its financial statements under U.S.
GAAP, including determining credit loss reserves, reserves related to litigation and regulatory exposures,
valuation of DTAs and the fair values of certain assets and liabilities, among other items. If Citi’s assumptions
or estimates underlying its financial statements are incorrect or differ from actual future events, Citi could
experience unexpected losses, some of which could be significant.
Moreover, the Financial Accounting Standards Board (FASB) is currently reviewing, or has proposed
or issued, changes to several financial accounting and reporting standards that govern key aspects of Citi’s
financial statements or interpretations thereof, including those areas where Citi is required to make
assumptions or estimates. For example, the FASB has proposed a new accounting model intended to require
earlier recognition of credit losses on financial instruments. The proposed accounting model would require that
lifetime “expected credit losses” on financial assets not recorded at fair value through net income, such as
loans and held-to-maturity securities, be recorded at inception of the financial asset, replacing the multiple
existing impairment models under U.S. GAAP which generally require that a loss be “incurred” before it is
recognized.
Changes to financial accounting or reporting standards or interpretations, whether promulgated or
required by the FASB or other regulators, could present operational challenges and could require Citi to change
certain of the assumptions or estimates it previously used in preparing its financial statements, which could
negatively impact how it records and reports its financial condition and results of operations generally and/or
with respect to particular businesses.
COMPLIANCE, CONDUCT AND LEGAL RISKS
Ongoing Implementation and Interpretation of Regulatory Changes and Requirements in the U.S. and
Globally Have Increased Citi’s Compliance Risks and Costs.
As referenced above, over the past several years, Citi has been required to implement a significant number of
regulatory changes across all of its businesses and functions, and these changes continue. In some cases, Citi’s
implementation of a regulatory requirement is occurring simultaneously with changing or conflicting
regulatory guidance, legal challenges or legislative action to modify or repeal final rules. Moreover, in many
cases, these are entirely new regulatory requirements or regimes, resulting in much uncertainty regarding
regulatory expectations as to what is definitely required in order to be in compliance with the requirements.
Accompanying this compliance uncertainty is heightened regulatory scrutiny and expectations in the U.S. and
globally for the financial services industry with respect to governance and risk management practices,
including its compliance and regulatory risks. All of these factors have resulted in increased compliance risks
and costs for Citi.
Examples of regulatory changes that have resulted in increased compliance risks and costs include:
• The Volcker Rule required Citi to develop an extensive global compliance regime, including developing
and maintaining detailed trading and permitted activity mandates for businesses, submitting extensive
trading information to regulatory agencies, conducting independent testing and audit, training,
recordkeeping and similar requirements and governance, including an annual CEO attestation, beginning on
March 31, 2016, with respect to the global processes Citi has in place to achieve compliance with the rules. • Numerous aspects of the U.S. derivatives reform regime require extensive compliance systems and
processes to be maintained by Citi on a global basis, including electronic recordkeeping, real-time public
transaction reporting and external business conduct requirements (e.g., required swap counterparty
disclosures). • A proliferation of data protection and “onshoring” requirements adopted by various non-U.S. jurisdictions,
such as in Russia, South Korea, Vietnam and Indonesia, require Citi to take measures to ensure client data is
stored or processed within national borders. These requirements could conflict with anti-money laundering
and other requirements in other jurisdictions.
19
Extensive compliance requirements can result in increased reputational and legal risks, as failure to
comply with regulations and requirements, or failure to comply as expected, can result in enforcement and/or
regulatory proceedings. In addition, increased and ongoing compliance requirements and uncertainties have
resulted in higher costs for Citi. For example, Citi employed approximately 30,000 regulatory and compliance
staff as of year-end 2015, out of a total employee population of 231,000, compared to approximately 14,000 as
of year-end 2008 with a total employee population of 323,000. These higher regulatory and compliance costs
also offset Citi’s ongoing cost reduction initiatives. For example, data protection and “onshoring” requirements
often require redundant investments in local data storage and security and thus impede or potentially reverse
Citi’s centralization or standardization efforts, which provide expense efficiencies. Higher compliance costs
may also require management to reallocate resources, including potentially away from ongoing business
investment initiatives.
Citi Is Subject to Extensive Legal and Regulatory Proceedings, Investigations and Inquiries That Could
Result in Significant Penalties and Other Negative Impacts on Citi, Its Businesses and Results of
Operations.
At any given time, Citi is defending a significant number of legal and regulatory proceedings and is subject to
numerous governmental and regulatory examinations, investigations and other inquiries. The frequency with
which such proceedings, investigations and inquiries are initiated have increased substantially over the last few
years, and the global judicial, regulatory and political environment generally remains hostile to large financial
institutions. For example, under recent guidance by the U.S. Department of Justice (DOJ), a corporation (such
as Citi) is required to identify all individuals involved in or responsible for perceived misconduct at issue and
provide all related facts and circumstances in order to qualify for any cooperation credit in civil and criminal
investigations of corporate wrongdoing. The complexity of the federal and state regulatory and enforcement
regimes in the U.S., coupled with the global scope of Citi’s operations, also means that a single event or issue
may give rise to a large number of overlapping investigations and regulatory proceedings, either by multiple
federal and state agencies in the U.S. or by multiple regulators and other governmental entities in different
jurisdictions.
Moreover, U.S. and non-U.S. regulators have been increasingly focused on “conduct risk,” a term that
is used to describe the risks associated with behavior by employees and agents, including third-party vendors
utilized by Citi, that could harm consumers, investors or the markets, such as failures to safeguard consumers’
and investors’ personal information, failures to identify and manage conflicts of interest and improperly
creating, selling and marketing products and services. In addition to increasing Citi’s compliance risks, this
focus on conduct risk could lead to more regulatory or other enforcement proceedings and litigation, including
for practices which historically were acceptable but are now receiving greater scrutiny. Further, while Citi
takes numerous steps to prevent and detect conduct by employees and agents that could potentially harm
customers, investors or the markets, such behavior may not always be deterred or prevented. Banking
regulators have also focused on the overall culture of financial services firms, including Citi. In addition to
regulatory restrictions or structural changes that could result from perceived deficiencies in Citi’s culture, such
focus could also lead to additional regulatory proceedings.
Further, the severity of the remedies sought in legal and regulatory proceedings to which Citi is
subject has increased substantially in recent years. U.S. and certain international governmental entities have
increasingly brought criminal actions against, or have sought criminal convictions from, financial institutions,
and criminal prosecutors in the U.S. have increasingly sought and obtained criminal guilty pleas or deferred
prosecution agreements against corporate entities and other criminal sanctions from those institutions. As
previously disclosed, in May 2015 an affiliate of Citi entered into a settlement with the DOJ whereby the
affiliate pleaded guilty to an antitrust violation and paid a substantial fine to resolve the DOJ’s investigations
into Citi’s foreign exchange business practices. These types of actions by U.S. and international governmental
entities may, in the future, have significant collateral consequences for a financial institution, including loss of
customers and business, and the inability to offer certain products or services and/or operate certain businesses.
Citi may be required to accept or be subject to similar types of criminal remedies, consent orders, substantial
fines and penalties or other requirements in the future, including for matters or practices not yet known to Citi,
any of which could materially and negatively affect Citi’s businesses, business practices, financial condition or
results of operations, require material changes in Citi’s operations or cause Citi reputational harm.
Further, many large claims asserted against Citi are highly complex, slow to develop and may involve
novel or untested legal theories. The outcome of such proceedings is difficult to predict or estimate until late in
the proceedings. Although Citi establishes accruals for its legal and regulatory matters according to accounting
20
requirements, Citi’s estimates of, and changes to, these accruals, involve significant judgment and may be
subject to significant uncertainty and the amount of loss ultimately incurred in relation to those matters may be
substantially higher than the amounts accrued. In addition, certain settlements are subject to court approval and
may not be approved. LEGAL PROCEEDINGS
For a discussion of Citigroup’s material legal and regulatory matters, of which the matters discussed in Note 28
to the Issuer’s Consolidated Financial Statements are a part, see Citigroup’s Annual Report on Form 10-K for
the fiscal year ended 31 December 2015, filed with the U.S. Securities and Exchange Commission on 26
February 2016.
UNREGISTERED SALES OF EQUITY, PURCHASES OF EQUITY SECURITIES, DIVIDENDS
(Extracted from the (i) Citigroup’s Quarterly Report on Form 10-Q for the fiscal quarter ended 31 March 2015,
filed with the U.S. Securities and Exchange Commission on 11 May 2015, (ii) Citigroup’s Quarterly Report on
Form 10-Q for the fiscal quarter ended 30 June 2015, filed with the U.S. Securities and Exchange Commission
on 3 August 2015, (iii) Citigroup’s Quarterly Report on Form 10-Q for the fiscal quarter ended 30 September
2015, filed with the U.S. Securities and Exchange Commission on 30 October, 2015, and (iv) Citigroup’s
Annual Report on Form 10-K for the fiscal year ended 31 December 2015, filed by Citigroup Inc. with the U.S.
Securities and Exchange Commission on 26 February 2016.)
Unregistered Sales of Equity Securities
None
Equity Security Repurchases
The following table summarizes Citi’s equity security repurchases, which consisted entirely of common stock
repurchases, during the three months ended March 31, 2015:
Approximate dollar
value of shares that
Average may yet be purchased
Total shares price paid under the plan or
In millions, except per share amounts purchased per share programs
January 2015
Open market repurchases (1)
3.0 $49.24 $149
Employee transactions (2)
— — N/A
February 2015
Open market repurchases (1)
0.7 50.27 113
Employee transactions (2)
0.4 51.19 N/A
March 2015
Open market repurchases (1)
2.2 52.65 —
Employee transactions (2)
— — N/A
Amounts as of March 31, 2015 6.3 $50.67 $ —
(1) Represents repurchases under the $1.2 billion 2014 common stock repurchase program (2014 Repurchase Program) that
was approved by Citigroup’s Board of Directors and announced on April 23, 2014, which was part of the planned capital
actions included by Citi in its 2014 Comprehensive Capital Analysis and Review (CCAR). Shares repurchased under the
2014 Repurchase Program are treasury stock. The 2014 Repurchase Program expired on March 31, 2015. In addition, on
March 11, 2015, Citigroup announced a $7.8 billion common stock repurchase program during the five quarters starting in
the second quarter of 2015 (2015 Repurchase Program), which was part of the planned capital actions included by Citi as
part of its 2015 CCAR. The 2015 Repurchase Program expires on June 30, 2016. Shares repurchased under the 2015
Repurchase Program will be treasury stock. There were no open market repurchases during the first quarter of 2015 under
the 2015 Repurchase Program.
(2) Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises
where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or
deferred stock programs where shares are withheld to satisfy tax requirements.
N/A Not applicable
21
Equity Security Repurchases
The following table summarizes Citi’s equity security repurchases, which consisted entirely of common stock
repurchases, during the three months ended June 30, 2015:
Approximate dollar
value of shares that
Average may yet be purchased
Total shares price paid under the plan or
In millions, except per share amounts purchased per share programs
April 2015
Open market repurchases (1)
7.2 $52.42 $7,409
Employee transactions (2)
— — N/A
May 2015
Open market repurchases (1)
6.7 54.43 7,042
Employee transactions (2)
— — N/A
June 2015
Open market repurchases (1)
14.4 56.27 6,235
Employee transactions (2)
— — N/A
Amounts as of June 30, 2015 28.3 $54.85 $6,235
(1) Represents repurchases under the $7.8 billion 2015 common stock repurchase program (2015 Repurchase Program) that
was approved by Citigroup’s Board of Directors and announced on March 11, 2015, which was part of the planned capital
actions included by Citi in its 2015 Comprehensive Capital Analysis and Review (CCAR). The 2015 Repurchase Program
extends through the second quarter of 2016. Shares repurchased under the 2015 Repurchase Program are treasury stock.
(2) Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises
where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or
deferred stock programs where shares are withheld to satisfy tax requirements.
N/A Not applicable
Equity Security Repurchases
The following table summarizes Citi’s equity security repurchases, which consisted entirely of common stock
repurchases, during the three months ended September 30, 2015:
Approximate dollar
value of shares that
Average may yet be purchased
Total shares price paid under the plan or
In millions, except per share amounts purchased per share programs
July 2015
Open market repurchases (1)
11.1 $56.01 $5,612
Employee transactions (2)
— — N/A
August 2015
Open market repurchases (1)
19.0 54.74 4,574
Employee transactions (2)
— — N/A
September 2015
Open market repurchases (1)
5.7 50.70 4,283
Employee transactions (2)
— — N/A
Amounts as of September 30, 2015 35.8 $54.49 $4,283
(1) Represents repurchases under the $7.8 billion 2015 common stock repurchase program (2015 Repurchase Program) that
was approved by Citigroup’s Board of Directors and announced on March 11, 2015, which was part of the planned capital
actions included by Citi in its 2015 Comprehensive Capital Analysis and Review (CCAR). The 2015 Repurchase Program
extends through the second quarter of 2016. Shares repurchased under the 2015 Repurchase Program are treasury stock.
(2) Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises
where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or
deferred stock programs where shares are withheld to satisfy tax requirements.
N/A Not applicable
22
Equity Security Repurchases
The following table summarizes Citi’s equity security repurchases, which consisted entirely of common stock
repurchases, during the three months ended December 31, 2015:
Approximate dollar
value of shares that
Average may yet be purchased
Total shares price paid under the plan or
In millions, except per share amounts purchased per share programs
October 2015
Open market repurchases (1)
8.7 $51.35 $3,836
Employee transactions (2)
— — N/A
November 2015
Open market repurchases (1)
8.1 53.84 3,399
Employee transactions (2)
— — N/A
December 2015
Open market repurchases (1)
14.6 52.48 2,634
Employee transactions (2)
— — N/A
Amounts as of December 31, 2015 31.4 $52.52 $2,634
(1) Represents repurchases under the $7.8 billion 2015 common stock repurchase program (2015 Repurchase Program) that
was approved by Citigroup’s Board of Directors and announced on March 11, 2015, which was part of the planned capital
actions included by Citi in its 2015 Comprehensive Capital Analysis and Review (CCAR). The 2015 Repurchase Program
extends through the second quarter of 2016. Shares repurchased under the 2015 Repurchase Program are treasury stock.
(2) Consisted of shares added to treasury stock related to (i) certain activity on employee stock option program exercises
where the employee delivers existing shares to cover the option exercise, or (ii) under Citi’s employee restricted or
deferred stock programs where shares are withheld to satisfy tax requirements.
N/A Not applicable
Dividends
In addition to Board of Directors’ approval, Citi’s ability to pay common stock dividends substantially depends
on regulatory approval, including an annual regulatory review of the results of the CCAR process required by
the Federal Reserve Board and the supervisory stress tests required under the Dodd-Frank Act. See “Risk
Factors—Regulatory Risks” above. Any dividend on Citi’s outstanding common stock would also need to be
made in compliance with Citi’s obligations to its outstanding preferred stock.
CITIGROUP GLOBAL MARKETS HOLDINGS INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015 AND 2014
AND FOR EACH OF THE YEARS
IN THE THREE YEAR PERIOD ENDED
DECEMBER 31, 2015
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors’ Report
Consolidated Financial Statements
Consolidated Statements of Operations—
For the Years Ended December 31, 2015, 2014 and 2013 1
Consolidated Statements of Comprehensive Income (Loss)—
For the Years Ended December 31, 2015, 2014 and 2013 2
Consolidated Statements of Financial Condition—
December 31, 2015 and 2014 3 - 4
Consolidated Statements of Changes in Stockholder’s Equity—
For the Years Ended December 31, 2015, 2014 and 2013 5
Consolidated Statements of Cash Flows—
For the Years Ended December 31, 2015, 2014 and 2013 6
Notes to Consolidated Financial Statements 7 - 73
1
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
In millions of dollars 2015 2014 2013
Revenues:
Investment banking 3,583$ 3,721$ 3,311$
Principal transactions 1,656 2,707 1,880
Commissions 1,486 1,559 1,577
Asset management and administration fees 175 201 186
Other 1,780 1,486 1,265
Total non-interest revenues 8,680 9,674 8,219
Interest and dividend income 4,661 4,354 4,633
Interest expense 2,292 2,268 2,489
Net interest and dividends 2,369 2,086 2,144
Revenues, net of interest expense 11,049 11,760 10,363
Non-interest expenses:
Compensation and benefits 5,003 5,156 5,169
Legal and related expenses 25 4,016 1,378
Communications 952 956 970
Brokerage, clearing and exchange fees 648 692 655
Occupancy and equipment 305 350 228
Professional services 257 258 259
Advertising and market development 213 213 201
Prepayment penalty on long-term debt 58 113 1,227
Other operating and administrative expenses 1,107 1,058 1,494
Total non-interest expenses 8,568 12,812 11,581
Income (loss) before income taxes 2,481 (1,052) (1,218)
Provision (benefit) for income taxes 450 658 (333)
Net income (loss) before attribution of noncontrolling interests 2,031 (1,710) (885)
Net income attributable to noncontrolling interests 9 8 25
CGMHI's net income (loss) 2,022$ (1,718)$ (910)$
Years ended December 31,
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
2
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
In millions of dollars 2015 2014 2013
Net income (loss) before attribution of noncontrolling interests 2,031$ (1,710)$ (885)$
CGMHI's other comprehensive income (loss)
Benefit plans liability adjustment, net of taxes (36) 184 (85)
Foreign currency translation adjustment, net of taxes and hedges (89) 17 (123)
CGMHI's total other comprehensive income (loss) (125) 201 (208)
Total comprehensive income (loss) before attribution of noncontrolling interests 1,906 (1,509) (1,093)
Total comprehensive income attributable to noncontrolling interests 9 8 25
Comprehensive income (loss) attributable to CGMHI 1,897$ (1,517)$ (1,118)$
Years ended December 31,
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
3
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, December 31,
In millions of dollars 2015 2014
Assets
Cash and cash equivalents 13,808$ 3,884$
Cash segregated under federal and other regulations 4,969 6,239
Securities borrowed or purchased under agreements to resell
(including $135,749 and $143,020 as of December 31,
2015 and 2014, respectively, at fair value) 193,212 201,250
Trading account assets (including $78,568 and
$94,898 pledged to creditors at December 31,
2015 and 2014, respectively):
Mortgage-backed securities 28,278 30,303
Equity securities 25,121 28,188
Foreign government securities 24,373 24,209
Corporate 11,657 18,816
Derivatives 11,120 15,860
U.S. Treasury and federal agency securities 10,783 14,775
Asset-backed securities 3,905 4,435
State and municipal securities 598 672
Other trading assets 1,413 1,726
117,248 138,984
Securities received as collateral, at fair value (all
pledged to counterparties) 9,261 7,580
Receivables:
Loans to affiliates 15,027 16,071
Brokers, dealers and clearing organizations 11,805 11,323
Customers 10,026 10,344
Other 1,816 2,655
38,674 40,393
Property, equipment and leasehold improvements, net of
accumulated depreciation and amortization of $2,100
and $2,246 at December 31, 2015 and 2014, respectively 674 762
Goodwill 2,275 2,281
Other assets 10,696 10,891
Total assets 390,817$ 412,264$
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
4
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, December 31,
In millions of dollars, except shares 2015 2014
Liabilities
Short-term borrowings (including $62 and $532 as of
December 31, 2015 and 2014, respectively, at fair value) 35,104$ 32,480$
Securities loaned or sold under agreements to repurchase
(including $36,776 and $36,575 as of December 31,
2015 and 2014, respectively, at fair value) 144,501 171,943
Trading account liabilities:
Foreign government securities 21,890 22,899
Derivatives 16,401 24,320
U.S. Treasury and federal agency securities 13,254 19,662
Equity securities 7,188 8,331
Corporate and other debt securities 5,694 6,606
64,427 81,818
Payables and accrued liabilities:
Customers 44,852 41,024
Obligations to return securities received
as collateral, at fair value 9,261 7,580
Brokers, dealers and clearing organizations 5,720 3,931
Other 6,552 6,242
66,385 58,777
Long-term debt (including $1,604 and $1,775 as of
December 31, 2015 and 2014, respectively, at fair value) 53,702 42,207
Total liabilities 364,119 387,225
CGMHI stockholder’s equity
Common stock (par value $.01 per share, 1,000 shares
authorized; 1,000 shares issued and outstanding) — —
Additional paid-in capital 25,495 25,649
Retained earnings (accumulated deficit) 1,434 (565)
Accumulated other comprehensive loss (326) (201)
Total CGMHI stockholder’s equity 26,603 24,883
Noncontrolling interest 95 156
Total equity 26,698 25,039 Total liabilities and equity 390,817$ 412,264$
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
5
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
In millions of dollars 2015 2014 2013
Common stock and additional paid-in capital
Balance, beginning of year 25,649$ 17,098$ 4,754$
Capital contributions from Citigroup — 8,500 12,340
Capital distributions to Citigroup (38) — —
Employee benefit plans (116) 51 4
Balance, end of year 25,495 25,649 17,098
Retained earnings (accumulated deficit)
Balance, beginning of year (565) 1,205 2,129
Net income (loss) 2,022 (1,718) (910)
Dividends (23) (52) (14)
Balance, end of year 1,434 (565) 1,205
Accumulated other comprehensive income (loss)
Balance, beginning of year (201) (402) (194)
Benefit plans liability adjustment, net of taxes (36) 184 (85)
Foreign currency translation adjustment, net of taxes and hedges (89) 17 (123)
Net change in Accumulated other comprehensive income (loss) (125) 201 (208)
Balance, end of year (326) (201) (402)
Total CGMHI stockholder's equity 26,603 24,883 17,901
Noncontrolling interest
Balance, beginning of year 156 247 344
Net income attributable to noncontrolling-interest shareholders 9 8 25
Distributions to noncontrolling-interest shareholders (61) (91) (127)
All other (9) (8) 5
Net change in noncontrolling interests (61) (91) (97)
Balance, end of year 95 156 247
Total equity 26,698$ 25,039$ 18,148$
Years ended December 31,
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
6
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions of dollars 2015 2014 2013
Cash flows from operating activities:
Net income (loss) before attribution of noncontrolling interests 2,031$ (1,710)$ (885)$
Net income attributable to noncontrolling interests 9 8 25
CGMHI's net income (loss) 2,022 (1,718) (910)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Deferred tax provision (benefit) 442 (292) (516)
Depreciation and amortization 189 209 229
Net change in:
Cash segregated under federal and other regulations 1,270 (113) 6,036
Trading account assets 21,736 (12,371) 6,578
Securities received as collateral, at fair value (1,681) 4,186 (2,650)
Receivables 675 (1,400) (12)
Other assets (1,327) (57) (987)
Trading account liabilities (17,391) 13,090 (7,114)
Payables and accrued liabilities 7,547 (5,003) (252)
Net cash provided by (used in) operating activities 13,482 (3,469) 402
Cash flows from investing activities:
Securities borrowed or purchased under agreements to resell 8,038 8,832 (2,838)
Loans to affiliates 1,044 (4,038) (2,118)
Property, equipment, leasehold improvements, and sales of subsidiaries (101) (72) (171)
Net cash provided by (used in) investing activities 8,981 4,722 (5,127)
Cash flows from financing activities:
Dividends paid (23) (52) (14)
Securities loaned or sold under agreements to repurchase (27,442) (15,268) 2,768
Capital contributions from Citigroup — 8,500 12,330
Employee benefit plans (116) 51 4
Proceeds from issuance of long-term debt 17,123 23,728 14,575
Repayment of long-term debt (4,705) (23,231) (14,723)
Short-term borrowings, net 2,624 1,238 (12,102)
Net cash (used in) provided by financing activities (12,539) (5,034) 2,838
Net increase (decrease) in cash and cash equivalents 9,924 (3,781) (1,887)
Cash and cash equivalents at beginning of year 3,884 7,665 9,552
Cash and cash equivalents at end of year 13,808$ 3,884$ 7,665$
Cash paid during the year for interest 2,315$ 2,297$ 2,575$
Years ended December 31,
The Notes to the Consolidated Financial Statements are an integral part of these Consolidated Financial
Statements.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Citigroup Global Markets Holdings Inc. (CGMHI) and its
subsidiaries prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP). The Company is a
direct wholly-owned subsidiary of Citigroup Inc. (Citigroup or Citi). The Company consolidates subsidiaries in which it
holds, directly or indirectly, more than 50% of the voting rights or where it exercises control. Entities where the
Company holds 20% to 50% of the voting rights and/or has the ability to exercise significant influence, other than
investments of designated venture capital subsidiaries or investments accounted for at fair value under the fair value
option, are accounted for under the equity method, and the pro rata share of their income (loss) is included in Other
revenue. Income from investments in less than 20% owned companies is recognized when dividends are received. As
discussed in more detail in Note 8 to the Consolidated Financial Statements, CGMHI also consolidates entities deemed to
be variable interest entities when CGMHI is determined to be the primary beneficiary.
Throughout these Notes, “CGMHI” and the “Company” refer to Citigroup Global Markets Holdings Inc. and its
consolidated subsidiaries.
The Company is a New York Corporation and provides corporate, institutional, public sector and high-net-worth clients
around the world with a full range of wholesale banking products and services, including fixed income and equity sales
and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, investment
banking and advisory services, private banking, cash management, trade finance and securities services.
Certain reclassifications have been made to the prior periods’ financial statements and notes to conform to the current
period’s presentation.
Use of Estimates Management must make estimates and assumptions that affect the Consolidated Financial Statements and the related
Notes to the Consolidated Financial Statements. Such estimates are used in connection with certain fair value
measurements. See Note 11 to the Consolidated Financial Statements for further discussions on estimates used in the
determination of fair value. Moreover, estimates are significant in determining the amounts of other-than-temporary
impairments, impairments of goodwill and other intangible assets, provisions for probable losses that may arise from
credit-related exposures and probable and estimable losses related to litigation and regulatory proceedings, and tax
reserves. While management makes its best judgment, actual amounts or results could differ from those estimates.
Current market conditions increase the risk and complexity of the judgments in these estimates.
Variable Interest Entities An entity is referred to as a variable interest entity (VIE) if it meets the criteria outlined in Accounting Standards
Codification (ASC) Topic 810, Consolidation, which are: (i) the entity has equity that is insufficient to permit the entity
to finance its activities without additional subordinated financial support from other parties; or (ii) the enti ty has equity
investors that cannot make significant decisions about the entity’s operations or that do not absorb their proportionate
share of the entity’s expected losses or expected returns.
The Company consolidates a VIE when it has both the power to direct the activities that most significantly impact the
VIE’s economic performance and a right to receive benefits or the obligation to absorb losses of the entity that could be
potentially significant to the VIE (that is, CGMHI is the primary beneficiary).
In addition to variable interests held in consolidated VIEs, the Company has variable interests in other VIEs that are not
consolidated because the Company is not the primary beneficiary. These include certain collateralized loan obligations
(CLOs) and many structured finance transactions. However, these VIEs and all other unconsolidated VIEs are monitored
by the Company to assess whether any events have occurred to cause its primary beneficiary status to change. These
events include:
purchases or sales of variable interests by the Company or an unrelated third party, which cause the Company’s
overall variable interest ownership to change;
changes in contractual arrangements that reallocate expected losses and residual returns among the variable
interest holders;
changes in the party that has power to direct the activities of a VIE that most significantly impact the entity’s
economic performance; and
providing financial support to an entity that results in an implicit variable interest.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
All other entities not deemed to be VIEs with which the Company has involvement are evaluated for consolidation under
other subtopics of ASC 810.
Foreign Currency Translation Assets and liabilities of CGMHI’s foreign operations are translated from their respective functional currencies into U.S.
dollars using period-end spot foreign-exchange rates. The effects of those translation adjustments are reported in
Accumulated other comprehensive income (loss), a component of stockholder’s equity, along with any related hedge and
tax effects, until realized upon sale or substantial liquidation of the foreign operation. Revenues and expenses of
CGMHI’s foreign operations are translated monthly from their respective func tional currencies into U.S. dollars at
amounts that approximate weighted average exchange rates.
For transactions whose terms are denominated in a currency other than the functional currency, including transactions
denominated in the local currencies of foreign operations with the U.S. dollar as their functional currency, the effects of
changes in exchange rates are primarily included in Principal transactions, along with the related effects of any
economic hedges. Foreign currency forward contracts are used to hedge foreign currency exposures. Foreign operations
in countries with highly inflationary economies designate the U.S. dollar as their functional currency, with the effects of
changes in exchange rates primarily included in Other revenue.
Cash and Cash Equivalents The Company defines cash and cash equivalents as highly liquid investments with original maturities of three months or
less at the time of purchase, other than those held for sale in the ordinary course of business .
Cash Segregated under Federal and Other Regulations Certain U.S. and non-U.S. broker-dealer subsidiaries are subject to various securities and commodities regulations
promulgated by the regulatory and exchange authorities of the countries in which they operate. CGMHI’s broker-dealer
subsidiaries are required by its primary regulators, including the Securities and Exchange Commission, the Commodities
Future Trading Commission and the United Kingdom's Prudential Regulation Authority, to segregate cash to satisfy rules
regarding the protection of customer assets.
Trading Account Assets and Liabilities
Trading account assets include debt and marketable equity securities, derivatives in a net receivable position and residual
interests in securitizations. Trading account liabilities include securities sold, not yet purchased (short positions) and
derivatives in a net payable position, as well as certain liabilities that the Company has elected to carry at fair value (as
described in Note 12 to the Consolidated Financial Statements).
All trading account assets and liabilities are carried at fair value. Revenues generated from trading assets and trading
liabilities are generally reported in Principal transactions and include realized gains and losses as well as unrealized
gains and losses resulting from changes in the fair value of such instruments. Interest income on trading assets is
recorded in Interest revenue reduced by interest expense on trading liabilities. Certain dividends paid on short positions
for equity securities are recorded in Principal transactions.
Derivatives used for trading purposes include interest rate, currency, equity, credit, and commodity swap agreements,
options, caps and floors, warrants, and financial and commodity futures and forward contracts. Derivative asset and
liability positions are presented net by counterparty on the Consolidated Statement of Financial Condition when a valid
master netting agreement exists and the other conditions set out in ASC 210-20, Balance Sheet—Offsetting, are met. See
Note 9 to the Consolidated Financial Statements.
The Company uses a number of techniques to determine the fair value of trading assets and liabilities, which are
described in Note 11 to the Consolidated Financial Statements.
Securities Borrowed and Securities Loaned
Securities borrowing and lending transactions do not constitute a sale of the underlying securities for accounting
purposes and are treated as collateralized financing transactions. Such transactions are recorded at the amount of
proceeds advanced or received plus accrued interest. As described in Note 12 to the Consolidated Financial Statements,
the Company has elected to apply fair value accounting to a number of securities borrowing and lending transactions.
Fees paid or received for all securities lending and borrowing transactions are recorded in Interest expense or Interest
revenue at the contractually specified rate.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
The Company monitors the fair value of securities borrowed or loaned on a daily basis and obtains or posts additional
collateral in order to maintain contractual margin protection.
As described in Note 11 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to
determine the fair value of securities lending and borrowing transactions.
Repurchase and Resale Agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell (reverse
repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are treated as
collateralized financing transactions. As described in Note 12 to the Consolidated Financial Statements, the Company has
elected to apply fair value accounting to a number of repo and reverse repo transactions, with changes in fair value
reported in earnings. Any transactions for which fair value accounting has not been elected, including all repo and
reverse repo transactions with related parties, are recorded at the amount of cash advanced or received plus accrued
interest. Irrespective of whether the Company has elected fair value accounting, interest paid or received on all repo and
reverse repo transactions is recorded in Interest expense or Interest revenue at the contractually specified rate.
Where the conditions of ASC 210-20-45-11, Balance Sheet-Offsetting: Repurchase and Reverse Repurchase Agreements,
are met, repos and reverse repos are presented net on the Consolidated Statement of Financial Condition.
The Company’s policy is to take possession of securities purchased under reverse repurchase agreements. The Company
monitors the fair value of securities subject to repurchase or resale on a daily basis and obtains or posts additional
collateral in order to maintain contractual margin protection.
As described in Note 11 to the Consolidated Financial Statements, the Company uses a discounted cash flow technique to
determine the fair value of repo and reverse repo transactions.
Securities Received as Collateral and Obligations to Return Securities Received as Collateral
In transactions where the Company acts as a lender in securities lending agreements and receives securities that can be
pledged or sold as collateral, it recognizes an asset on the Consolidated Statement of Financial Condition representing the
securities received and a liability for the same amount representing the obligation to return those securities.
Receivables and Payables – Customers, Brokers, Dealers and Clearing Organizations
The Company has receivables and payables for financial instruments sold to and purchased from brokers, dealers and
customers, which arise in the ordinary course of business. The Company is exposed to risk of loss from the inability of
brokers, dealers or customers to pay for purchases or to deliver the financial instruments sold, in which case the
Company would have to sell or purchase the financial instruments at prevailing market prices. Credit risk is reduced to
the extent that an exchange or clearing organization acts as a counterparty to the transaction and replaces the broker,
dealer or customer in question.
The Company seeks to protect itself from the risks associated with customer activities by requiring customers to maintain
margin collateral in compliance with regulatory and internal guidelines. Margin levels are monitored daily, and
customers deposit additional collateral as required. Where customers cannot meet collateral requirements, the Company
may liquidate sufficient underlying financial instruments to bring the customer into compliance with the required margin
level.
Exposure to credit risk is impacted by market volatility, which may impair the ability of clients to satisfy their
obligations to the Company. Credit limits are established and closely monitored for customers and for brokers and
dealers engaged in forwards, futures and other transactions deemed to be credit sensitive. Brokerage receivables and
payables are accounted for in accordance with the AICPA Audit and Accounting Guide for Brokers and Dealers in
Securities as codified in ASC 940-320.
Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are carried at cost less accumulated depreciation and amortization.
Depreciation and amortization are recorded on a straight-line basis over the lesser of the estimated useful lives of the
related assets or noncancelable lease terms, as appropriate. Maintenance and repairs are charged to Occupancy and
equipment expense as incurred. Certain internal use software costs are capitalized and amortized on a straight-line basis
over the estimated useful lives of the related assets.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10
Goodwill Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acqu ired.
Goodwill is subject to annual impairment testing, whereby impairment is deemed to exist if the carrying value of the
single reporting unit of the Company exceeds its estimated fair value. The Company performed its annual goodwill
impairment test as of July 1, 2015, resulting in no impairment of the Company’s reporting unit.
Securitizations
The Company primarily securitizes mortgages and corporate debt instruments (in cash and synthetic form). There are two
key accounting determinations that must be made relating to securitizations. The Company first makes a determination as
to whether the securitization entity must be consolidated. Second, it determines whether the transfer of financial assets to
the entity is considered a sale under GAAP. If the securitization entity is a VIE, the Company consolidates the VIE if it is
the primary beneficiary (as discussed in “Variable Interest Entities” above). For all other securitization entities
determined not to be VIEs in which the Company participates, consolidation is based on which party has voting control
of the entity, giving consideration to removal and liquidation rights in certain partnership structures. Only securitization
entities controlled by the Company are consolidated.
Interests in the securitized and sold assets may be retained in the form of subordinated or senior interest -only strips,
subordinated tranches and residuals. In the case of consolidated securitization entities, these retained interests are not
reported on the Company’s Consolidated Statement of Financial Condition . The securitized loans remain on the balance
sheet. Retained interests in non-consolidated mortgage securitization trusts are classified as Trading account assets.
Debt
Short-term borrowings and Long-term debt are accounted for at amortized cost, except where the Company has elected to
report the debt instruments, including certain structured notes, at fair value.
Transfers of Financial Assets
For a transfer of financial assets to be considered a sale: (i) the assets must have been legally isolated from the Company,
even in bankruptcy or other receivership; (ii) the purchaser must have the right to pledge or sell the assets transferred or,
if the purchaser is an entity whose sole purpose is to engage in securitization and asset-backed financing activities
through the issuance of beneficial interests and that entity is constrained from pledging the assets it receives, each
beneficial interest holder must have the right to sell or pledge their beneficial interests; and (iii) the Company may not
have an option or obligation to reacquire the assets.
If these sale requirements are met, the assets are removed from the Company’s Consolidated Statement of Financial
Condition. If the conditions for sale are not met, the transfer is considered to be a secured borrowing, the assets remain
on the Consolidated Statement of Financial Condition and the sale proceeds are recognized as the Company’s liability. A
legal opinion on a sale generally is obtained for complex transactions or where the Company has continuing involvement
with assets transferred or with the securitization entity. For a transfer to be eligible for sale accounting, those opinions
must state that the asset transfer would be considered a sale and that the assets transferred would not be consolidated with
the Company’s other assets in the event of the Company’s insolvency.
For a transfer of a portion of a financial asset to be considered a sale, the portion transferred must meet the definition of a
participating interest. A participating interest must represent a pro rata ownership in an entire financial asset; all cash
flows must be divided proportionately, with the same priority of payment; no participating interest in the transferred asset
may be subordinated to the interest of another participating interest holder; and no party may have the right to pledge or
exchange the entire financial asset unless all participating interest holders agree. Otherwise, the transfer is accounted for
as a secured borrowing.
See Note 8 to the Consolidated Financial Statements for further discussion.
Risk Management Activities—Derivatives Used for Hedging Purposes
The Company manages its exposures to market rate movements outside its trading activities through the use of derivative
financial products, including interest-rate swaps and foreign-exchange contracts. These end-user derivatives are carried at
fair value in Trading account assets and Trading account liabilities.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
To qualify as an accounting hedge under the hedge accounting rules, a derivative must be highly effective in offsetting
the risk designated as being hedged. The hedge relationship must be formally documented at inception, detailing the
particular risk management objective and strategy for the hedge. This includes the item and risk being hedged, the
derivative being used and how effectiveness will be assessed and ineffectiveness measured. The effectiveness of these
hedging relationships is evaluated both on a retrospective and prospective basis, typically using quantitative measures of
correlation with hedge ineffectiveness measured and recorded in current earnings.
If a hedge relationship is not highly effective, it no longer qualifies as an accounting hedge and hedge accounting may
not be applied. Any gains or losses attributable to the derivatives, as well as subsequent changes in fair value, are
recognized in Other revenue or Principal transactions with no offset to the hedged item, similar to trading derivatives.
The foregoing criteria are applied on a decentralized basis, consistent with the level at which market risk is managed, but
are subject to various limits and controls.
For fair value hedges, in which derivatives hedge the fair value of assets or liabilities, changes in the fair value of
derivatives are reflected in Other revenue, together with changes in the fair value of the hedged item related to the
hedged risk. These amounts are expected to, and generally do, offset each other. Any net amount, representing hedge
ineffectiveness, is reflected in current earnings. The Company’s fair value hedges are primarily hedges of fixed-rate long-
term debt.
For net investment hedges in which derivatives hedge the foreign currency exposure of a net investment in a foreign
operation, the accounting treatment will similarly depend on the effectiveness of the hedge. The effective portion of the
change in fair value of the derivative, including any forward premium or discount, is reflected in Accumulated other
comprehensive income (loss) as part of the foreign currency translation adjustment.
For those accounting hedge relationships that are terminated or when hedge designations are removed, the hedge
accounting treatment described in the paragraphs above is no longer applied. Instead, the end-user derivative is
terminated or transferred to the trading account. For fair value hedges, any changes in the fair value of the hedged item
remain as part of the basis of the asset or liability and are ultimately reflected as an element of the yield.
Employee Benefits Expense
Employee benefits expense includes current service costs of pension and other postretirement benefit plans (which are
accrued on a current basis), contributions and unrestricted awards under other employee plans, the amortization of
restricted stock awards and costs of other employee benefits. See Note 3 to the Consolidated Financial Statements.
Stock-Based Compensation
The Company recognizes compensation expense related to Citigroup stock and option awards over the requisite service
period, generally based on the instruments’ grant-date fair value, reduced by expected forfeitures. Compensation cost
related to awards granted to employees who meet certain age plus years-of-service requirements (retirement-eligible
employees) is accrued in the year prior to the grant date, in the same manner as the accrual for cash incentive
compensation. Certain stock awards with performance conditions or certain clawback provisions are subject to variable
accounting, pursuant to which the associated compensation expense fluctuates with changes in Citigroup’ s stock price.
See Note 3 to the Consolidated Financial Statements.
Income Taxes
The Company is subject to the income tax laws of the U.S. and its states and municipalities , and the foreign jurisdictions
in which it operates. These tax laws are complex and subject to different interpretations by the taxpayer and the relevant
governmental taxing authorities. In establishing a provision for income tax expense, the Company must make judgments
and interpretations about the application of these inherently complex tax laws. The Company must also make estimates
about when in the future certain items will affect taxable income in the various tax jurisdictions, both domestic and
foreign.
Disputes over interpretations of the tax laws may be subject to review and adjudication by the court systems of the
various tax jurisdictions or may be settled with the taxing authority upon examination or audit. The Company treats
interest and penalties on income taxes as a component of Income tax expense.
Deferred taxes are recorded for the future consequences of events that have been recognized for financial statements or
tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment
that realization is more-likely-than-not. ASC 740, Income Taxes, sets out a consistent framework to determine the
appropriate level of tax reserves to maintain for uncertain tax positions. This interpretation uses a two-step approach
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12
wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then
measured to be the highest tax benefit that is greater than 50% likely to be realized. ASC 740 also sets out disclosure
requirements to enhance transparency of an entity’s tax reserves.
See Note 4 to the Consolidated Financial Statements for a further description of the Company’s tax provision and related
income tax assets and liabilities.
Investment Banking, Principal Transactions and Commissions and Fees
Investment banking fees are substantially composed of underwriting and advisory revenues and are recognized when the
Company’s performance under the terms of a contractual arrangement is completed, which is typically at the closing of
the transaction. Underwriting revenue is recorded net of both reimbursable and non-reimbursable expenses, consistent
with the AICPA Audit and Accounting Guide for Brokers and Dealers in Securities (codified in ASC 940-605-05-1).
Expenses associated with advisory transactions are recorded in Other operating and administrative expenses, net of client
reimbursements. Out-of-pocket expenses are deferred and recognized at the time the related revenue is recognized. In
general, expenses incurred related to investment banking transactions that fail to close (are not consummated) are
recorded gross in Other operating and administrative expenses.
Trading-related fees primarily include commissions and fees from the following: executing transactions for clients on
exchanges and over-the-counter markets; sale of mutual funds, insurance and other annuity products; and assisting clients
in clearing transactions, providing brokerage services and other such activities. Trading-related fees are recognized when
earned in Commissions and fees. Gains or losses, if any, on these transactions are included in Principal transactions (see
Note 2 to the Consolidated Financial Statements). Principal transactions revenues are recognized in income on a trade-
date basis.
Related Party Transactions
The Company has related party transactions with certain of its subsidiaries and affiliates. These transactions, which are
primarily short-term in nature, include cash accounts, collateralized financing transactions, margin accounts, derivative
transactions, charges for operational support and the borrowing and lending of funds, and are entered into in the ordinary
course of business. See Note 14 to the Consolidated Financial Statements.
ACCOUNTING CHANGES
Debt Issuance Costs
In April 2015, the FASB issued Accounting Standards Update (ASU) 2015-03, Interest—Imputation of Interest (Subtopic
835-30): Simplifying the Presentation of Debt Issuance Costs, to conform the presentation of debt issuance costs to that
of debt discounts and premiums. Thus, the ASU requires that debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The guidance is
effective beginning on January 1, 2016; however, the Company elected to early adopt the ASU on July 1, 2015. Adoption
of the ASU did not have a material effect on the Company’s financial statements.
Accounting for Repurchase-to-Maturity Transactions
In June 2014, the FASB issued ASU No. 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity
Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for repurchase-to-maturity
transactions and linked repurchase financings to secured borrowing accounting, which is consistent with the accounting
for other repurchase agreements. The ASU also requires disclosures about transfers accounted for as sales in transactions
that are economically similar to repurchase agreements (see Note 9 to the Consolidated Financial Statements) and about
the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings
(see Note 5 to the Consolidated Financial Statements). The ASU’s provisions became effective for CGMHI in the first
six months of 2015. The effect of adopting the ASU is required to be reflected as a cumulative effect adjustment to
retained earnings as of the beginning of the period of adoption. Adoption of the ASU did not have a material effect on the
Company’s financial statements.
Disclosures for Investments in Certain Entities That Calculate Net Asset Value (NAV) per Share
In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in
Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) , which is intended to reduce diversity in
practice related to the categorization of investments measured at NAV within the fair value hierarchy. The ASU removes
the current requirement to categorize investments for which fair value is measured using the NAV per share practical
expedient within the fair value hierarchy. CGMHI elected to early adopt the ASU in the second quarter of 2015. The
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13
adoption of the ASU was applied retrospectively and reduced Level 3 assets by $64 million and $94 million as of
December 31, 2015 and December 31, 2014, respectively.
FUTURE APPLICATION OF ACCOUNTING STANDARDS
Recognition and Measurement of Financial Assets and Financial Liabilities
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition
and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition,
measurement, presentation, and disclosure of financial instruments.
This ASU will require entities to present separately in OCI the portion of the total change in the fair value of a liability
resulting from a change in the instrument-specific credit risk (DVA) when the entity has elected to measure the liability
at fair value in accordance with the fair value option for financial instruments. It will also require equity investments
(except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to
be measured at fair value with changes in fair value recognized in net income. However, exchange seats will continue to
be presented at cost. As a practical expedient, an entity may choose to measure equity investments that do not have
readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price
changes in orderly transactions for the identical or a similar investment of the same issuer.
The guidance is effective beginning on January 1, 2018; however, early adoption is permitted only for the amendment in
the ASU related to presentation of DVA for financial liabilities measured under the fair value option. CGMHI expects to
early adopt this amendment as of January 1, 2016. The impact of adopting this amendment is not expected to be material
to CGMHI’s balance sheet at January 1, 2016; however, in subsequent periods the changes in DVA are dependent on
changes in Citi’s credit spreads and could be material in any given period.
Consolidation
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation
Analysis, which intended to improve certain areas of consolidation guidance for legal entities such as limited
partnerships, limited liability companies, and securitization structures. The ASU reduced the number of consolidation
models and became effective on January 1, 2016. Adoption of ASU 2015-02 did not have a material impact on the
Company’s Consolidated Financial Statements.
Revenue Recognition
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to
customers. The ASU will replace most existing revenue recognition guidance in GAAP when it becomes effective on
January 1, 2018. Early application is permitted for annual periods beginning after December 15, 2016; however, the
Company does not expect to early adopt. The ASU is not applicable to financial instruments and, therefore, is not
expected to impact a majority of the Company’s revenue, including net interest income. The Company is evaluating the
effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures.
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase transparency
and comparability of accounting for lease transactions. The ASU will require lessees to recognize all leases on the
balance sheet as lease assets and lease liabilities and will require both quantitative and qualitative disclosures regarding
key information about leasing arrangements. Lessor accounting is largely unchanged. The guidance is effective beginning
January 1, 2019 with an option to early adopt. The Company is evaluating whether to early adopt and the effect that ASU
2016-02 will have on its consolidated financial statements and related disclosures.
2. PRINCIPAL TRANSACTIONS
Principal transactions revenue consists of realized and unrealized gains and losses from trading activities. Trading
activities include revenues from fixed income, equities, credit and commodities products and foreign exchange
transactions which are managed on a portfolio basis characterized by primary risk. Not included in the table below is the
impact of net interest revenue related to trading activities, which is an integral part of trading activities’ profitability.
Principal transactions include CVA (credit valuation adjustments on derivatives), FVA (funding valuation adjustments)
on over-the-counter derivatives and DVA (debt valuation adjustments on issued liabilities for which the fair value option
has been elected). These adjustments are discussed further in Note 11 to the Consolidated Financial Statements.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14
The following table presents principal transactions revenue:
In millions of dollars 2015 2014 2013
Interest rate risks (1)
543$ 1,621$ 459$
Credit products and risks (2)
437 810 583
Commodity and other risks (3)
390 414 182
Equity risks (4)
249 (172) 601
Foreign exchange risks (5)
37 34 55
Total principal transactions revenue 1,656$ 2,707$ 1,880$
(1) Includes revenues from government securities and corporate debt, municipal securities, mortgage securities and other debt ins truments.
Also includes spot and forward trading of currencies and exchange-traded and over-the-counter (OTC) currency options, options on fixed
income securities, interest rate swaps, currency swaps, swap options, caps and floors, financial futures, OTC options and forward
contracts on fixed income securities.
(2) Includes revenues from structured credit products.
(3) Primarily includes revenues from crude oil, refined oil products, natural gas and other commodities trades.
(4) Includes revenues from common, preferred and convertible preferred stock, convertible corporate debt, equity-linked notes and
exchange-traded and OTC equity options and warrants.
(5) Includes revenues from foreign exchange spot, forward, option and swap contracts, as well as FX translation gains and losses.
3. INCENTIVE PLANS AND EMPLOYEE BENEFITS
Discretionary Annual Incentive Awards
The Company participates in various Citigroup stock-based and other deferred incentive programs. Citigroup grants
immediate cash bonus payments, deferred cash awards, stock payments and restricted and deferred stock awards as part
of its discretionary annual incentive award program involving a large segment of Citigroup’s employees worldwide,
including employees of the Company.
Discretionary annual incentive awards are generally awarded in the first quarter of the year based upon the previous
year’s performance. Awards valued at less than U.S. $100,000 (or the local currency equivalent) are generally paid
entirely in the form of an immediate cash bonus. Pursuant to Citigroup policy and/or regulatory requirements, certain
employees and officers are subject to mandatory deferrals of incentive pay and generally receive 25% to 60% of their
awards in a combination of restricted or deferred stock and deferred cash. Discretionary annual incentive awards to many
employees in the EU are subject to deferral requirements regardless of the total award value, with 50% of the immediate
incentive delivered in the form of a stock payment or stock unit award subject to a restriction on sale or transfer or hold
back (generally, for six months).
Deferred annual incentive awards are generally delivered as two awards—a restricted or deferred stock award under
Citigroup’s Capital Accumulation Program (CAP) and a deferred cash award. The applicable mix of CAP and deferred
cash awards may vary based on the employee’s minimum deferral requirement and the country of employment. In some
cases, the entire deferral will be in the form of either a CAP or deferred cash award.
Subject to certain exceptions (principally, for retirement-eligible employees), continuous employment within Citigroup
is required to vest in CAP and deferred cash awards. Post-employment vesting by retirement-eligible employees and
participants who meet other conditions is generally conditioned upon their refraining from competition with Citigroup
during the remaining vesting period, unless the employment relationship has been terminated by Citigroup under certain
conditions.
Generally, the CAP and deferred cash awards vest in equal annual installments over three- or four-year periods. Vested
CAP awards are delivered in shares of Citigroup common stock. Deferred cash awards are payable in cash and earn a
fixed notional rate of interest that is paid only if and when the underlying principal award amount vests. Generally, in the
EU, vested CAP shares are subject to a restriction on sale or transfer after vesting, and vested deferred cash awards are
subject to hold back (generally, for six months in each case).
Unvested CAP and deferred cash awards made in January 2011 or later are subject to one or more clawback provisions
that apply in certain circumstances, including in the case of employee risk-limit violations or other misconduct, or where
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15
the awards were based on earnings that were misstated. CAP awards made to certain employees in February 2013 and
later, and deferred cash awards made to certain employees in January 2012, are subject to a formulaic performance-based
vesting condition pursuant to which amounts otherwise scheduled to vest will be reduced based on the amount of any
pretax loss in the participant’s business in the calendar year preceding the scheduled vesting date. For CAP awards made
in February 2013 and later, a minimum reduction of 20% applies for the first dollar of loss.
In addition, deferred cash awards made to certain employees in February 2013 and later are subject to a discretionary
performance-based vesting condition under which an amount otherwise scheduled to vest may be reduced in the event of
a “material adverse outcome” for which a participant has “significant responsibility.” Deferred cash awards made to
these employees in February 2014 and later are subject to an additional clawback provision pursuant to which unvested
awards may be canceled if the employee engaged in misconduct or exercised materially imprudent judgment, or failed to
supervise or escalate the behavior of other employees who did.
Certain CAP and other stock-based awards, including those to participants in the EU that are subject to certain
discretionary clawback provisions, are subject to variable accounting, pursuant to which the associated value of the
award fluctuates with changes in Citigroup’s common stock price until the date that the award is settled, either in cash or
shares. For these awards, the total amount that will be recognized as expense cannot be determined in full until the
settlement date.
Sign-On and Long-Term Retention Awards
Stock awards and deferred cash awards may be made at various times during the year as sign-on awards to induce new
hires to join the Company or to high-potential employees as long-term retention awards.
Vesting periods and other terms and conditions pertaining to these awards tend to vary by grant. Generally, recipients
must remain employed through the vesting dates to vest in the awards, except in cases of death, disability or involuntary
termination other than for “gross misconduct.” These awards do not usually provide for post-employment vesting by
retirement-eligible participants.
Performance Share Units
Certain executive officers were awarded a target number of performance share units (PSUs) on February 19, 2013, for
performance in 2012, and to a broader group of executives on February 18, 2014 and February 18, 2015, for performance
in 2013 and 2014, respectively. PSUs will be earned only to the extent that Citigroup attains specified performance goals
relating to Citigroup’s return on assets and relative total shareholder return against peers over the three-year period
beginning with the year of award. The actual dollar amounts ultimately earned could vary from zero, if performance
goals are not met, to as much as 150% of target, if performance goals are meaningfully exceeded. The value of each PSU
is equal to the value of one share of Citigroup common stock.
PSUs were granted on February 16, 2016, for performance in 2015. The 2016 PSUs are earned over a three-year
performance period based on Citigroup's relative total shareholder return as compared to peers. The actual dollar
amounts ultimately earned could vary from zero, if performance goals are not met, to as much as 150% of target, if
performance goals are meaningfully exceeded. The value of each PSU is equal to the value of one share of Citigroup
common stock.
PSUs are subject to variable accounting, pursuant to which the associated value of the award will fluctuate with changes
in Citigroup's stock price and the attainment of the specified performance goals for each award, until the award is settled
solely in cash after the end of the performance period.
Stock Option Programs
Stock options have not been granted to CGMHI’s employees as part of the annual incentive award programs since 2009.
All outstanding stock options are fully vested with the related expense recognized as a charge to income in prior periods.
Generally, the stock options outstanding have a six-year term, with some stock options subject to various transfer
restrictions.
Other Variable Incentive Compensation
Employees of CGMHI participate in various incentive plans globally that are used to motivate and reward performance
primarily in the areas of sales, operational excellence and customer satisfaction. Participation in these plans is generally
limited to employees who are not eligible for discretionary annual incentive awards.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16
Summary
Except for awards subject to variable accounting, the total expense recognized for stock awards represents the grant date
fair value of such awards, which is generally recognized as a charge to income ratably over the vesting period, other than
for awards to retirement-eligible employees and immediately vested awards. Whenever awards are made or are expected
to be made to retirement-eligible employees, the charge to income is accelerated based on when the applicable
conditions to retirement eligibility were or will be met. If the employee is retirement eligible on the grant date, or the
award is vested at grant date, the entire expense is recognized in the year prior to grant.
Recipients of Citigroup stock awards generally do not have any stockholder rights until shares are delivered upon vesting
or exercise, or after the expiration of applicable required holding periods. Recipients of restricted or deferred stock
awards and stock unit awards, however, may be entitled to receive dividends or dividend-equivalent payments during the
vesting period. Recipients of restricted stock awards generally are entitled to vote the shares in their award during the
vesting period. Once a stock award vests, the shares are freely transferable, unless they are subject to a restriction on sale
or transfer for a specified period.
The Company recognized compensation expense of $605 million, $648 million, and $669 million in 2015, 2014 and
2013, respectively, including CAP awards of $605 million, $639 million, and $654 million in 2015, 2014 and 2013,
respectively, relating to its stock-based and deferred compensation programs.
Pension, Postretirement, Postemployment and Defined Contribution Plans
The Company participates in several non-contributory defined benefit pension plans sponsored by Citigroup Inc.
covering certain U.S. employees and has various defined benefit pension and termination indemnity plans covering
employees outside the United States.
Citigroup’s U.S. qualified defined benefit plan was frozen effective January 1, 2008 for most employees. Accordingly,
no additional compensation-based contributions have been credited to the cash balance portion of the plan for existing
plan participants after 2007. However, certain employees covered under the prior final pay plan formula continue to
accrue benefits.
The Company also participates in a number of non-contributory, nonqualified pension plans. These plans, which are
unfunded, provide supplemental defined pension benefits to certain U.S. employees. With the exception of certain
employees covered under the prior final pay formula, the benefits under these plans were frozen in prior years.
The Company also participates in postretirement health care and life insurance benefits offered by Citigroup to certain
eligible U.S. retired employees, as well as to certain eligible employees outside the United States.
The Company participates in postemployment plans sponsored by Citigroup that provide income continuation and health
and welfare benefits to certain eligible U.S. employees on long-term disability. Effective January 1, 2014, Citigroup
made changes to its postemployment plans that limit the period for which future disabled employees are eligible for
continued Company-subsidized medical benefits.
The Company participates in several defined contribution plans in the U.S. and certain non-U.S. locations, all of which
are administered in accordance with local laws. The most significant defined contribution plan is the Citigroup
Retirement Savings Plan (formerly known as the Citigroup 401(k) Plan) sponsored by Citigroup Inc. in the U.S.
Under the Citigroup Retirement Savings Plan, eligible U.S. employees receive matching contributions of up to 6% of
their eligible compensation for 2015 and 2014, subject to statutory limits. Additionally, for eligible employees whose
eligible compensation is $100,000 or less, a fixed contribution of up to 2% of compensation is provided. All
contributions made by the plan sponsor are invested according to each participant’s individual elections.
The Company’s allocated pretax expense associated with the Citigroup pension, postretirement, postemployment and
defined contribution plans amounted to approximately $144 million, $143 million, and $153 million for the years ended
December 31, 2015, 2014 and 2013, respectively.
Health Care and Life Insurance Plans
The Company, through Citigroup, offers certain health care and life insurance benefits to its employees. The Company’s
allocated share of the related pretax expense associated with Citigroup health care and life insurance benefits amounted
to approximately $83 million, $84 million, and $91 million for the years ended December 31, 2015, 2014 and 2013,
respectively.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
4. INCOME TAXES
The operations of the Company are subject to U.S. federal income tax. Under income tax allocation agreements with
Citigroup Inc., the Company's U.S. federal, state and local income taxes are provided on a separate return basis and are
subject to the utilization of tax attributes in Citigroup's consolidated income tax return. Under the tax sharing agreement
with Citigroup, the Company settles its current tax liability with Citigroup throughout the year except for any tax
liabilities expected to be payable as a separate taxpayer. The Company is included in the consolidated U.S. federal
income tax return and unitary and combined state returns of Citigroup and combined subsidiaries.
The components of the Company’s income tax provision for the years ended December 31 are presented in the table
below:
In millions of dollars
Year Ended December 31, 2015 2014 2013
Current tax provision (benefit):
Federal (517)$ 871$ 117$
Foreign 219 70 75
State 306 9 (9)
Total current tax provision 8 950 183
Deferred tax provision (benefit):
Federal 1,253 (68) (474)
Foreign 14 (8) (21)
State (825) (216) (21)
Total deferred tax provision (benefit) 442 (292) (516)
Provision (benefit) for income taxes before noncontrolling interests 450 658 (333)
Income tax expense (benefit) reported in stockholder's equity related to:
Foreign currency translation (26) (98) 52
Benefit plans (20) 108 (52)
Income taxes before noncontrolling interests 404$ 668$ (333)$
The Company paid taxes (received tax refunds) of $(6) million, $280 million and $(20) million in 2015, 2014 and 2013,
respectively.
The reconciliation of the federal statutory income tax rate to the Company's effective income tax rate applicable to
income (before noncontrolling interests) for the years ended December 31 was as follows:
2015 2014 2013
Federal statutory rate 35% 35% 35%
State income taxes, net of federal benefit (13) 15 1
Tax advantaged investments (2) 5 3
Legal expense (3) (115) (10)
Foreign income tax rate differential (1) 1 —
Effect of tax law change (1) (2) —
Other, net 3 (2) (2)
Effective income tax rate 18% (63)% 27%
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
Deferred income taxes at December 31 related to the following:
In millions of dollars 2015 2014
Deferred tax assets
Litigation and other reserves 133$ 140$
Deferred compensation and employee benefits 1,106 1,103
Unremitted foreign earnings 276 297
Tax credit and net operating loss carry-forwards 2,187 2,409
Investments 348 504
Fixed assets and leases 97 265
Other deferred tax assets 163 4
Gross deferred tax assets 4,310 4,722
Valuation allowance (12) —
Deferred tax assets after valuation allowance 4,298 4,722
Deferred tax liabilities
Intangibles (310) (291)
Debt valuation adjustment on Company liabilities (5) (4)
Intercompany debt underwriting fees (92) (127)
Other deferred tax liabilities — (48)
Gross deferred tax liabilities (407) (470)
Net deferred tax assets 3,891$ 4,252$
The following is a roll-forward of the Company’s unrecognized tax benefits.
In millions of dollars 2015 2014 2013
Total unrecognized tax benefits at January 1 13$ 174$ 179$
Net amount of increases for current year's tax positions 3 3 —
Gross amount of increases for prior years' tax positions 40 2 3
Gross amount of decreases for prior years' tax positions (1) (10) (4)
Amounts of decreases relating to settlements — (156) (4)
Total unrecognized tax benefits at December 31 55$ 13$ 174$
The total amounts of unrecognized tax benefits at December 31, 2015, 2014 and 2013 that, if recognized, would affect
CGMHI’s effective tax rate, are $54 million, $11 million and $118 million, respectively. The remaining uncertain tax
positions have offsetting amounts in other jurisdictions or are temporary differences.
Interest and penalties (not included in the “unrecognized tax benefits” above) are a component of the Provision (benefit)
for income taxes.
In millions of dollars Pretax Net of tax Pretax Net of tax Pretax Net of tax
Total interest and penalties in the balance sheet at January 1 $2 $1 $43 $27 $61 $38
Total interest and penalties in the statement of operations — — (50) (31) 6 3
Total interest and penalties in the balance sheet at December 31 3 2 2 1 43 27
2015 2014 2013
As of December 31, 2015, the Company is under audit by the Internal Revenue Service and other major taxing
jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of
unrecognized tax benefits may occur within the next 12 months, although the Company does not expect such audits to
result in amounts that would cause a significant change to its effective tax rate.
The Company may resolve certain issues with IRS Appeals for the 2012–2013 cycles within the next 12 months. The
gross uncertain tax positions at December 31, 2015 for the items that may be resolved are as much as $6 million.
Because of the number and nature of the issues remaining to be resolved, the potential tax benefit to continuing
operations could be anywhere in a range between $0 and $6 million.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19
The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year
subject to examination:
Jurisdiction Tax year
United States 2012
New York State 2009
New York City 2012
United Kingdom 2014
Foreign pretax earnings (losses) approximated $0.7 billion in 2015, $0.1 billion in 2014, and $(0.4) billion in 2013. As a
U.S. corporation, the Company and its U.S. subsidiaries are subject to U.S. taxation on all foreign pretax earnings earned
by a foreign branch. Pretax earnings of a foreign subsidiary or affiliate are subject to U.S. taxation when effectively
repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the
extent that such earnings are indefinitely invested outside the United States.
At December 31, 2015, $2.9 billion of accumulated undistributed earnings of non-U.S. subsidiaries was indefinitely
invested. At the existing U.S. federal income tax rate, additional taxes (net of U.S. foreign tax credits) of $0.8 billion
would have to be provided if such earnings were remitted currently. The current year’s effect on income tax expense is
included in the “Foreign income tax rate differential” line in the reconciliation of the federal statutory rate to the
Company’s effective income tax rate in the table above.
The following tables summarize the amounts of tax carry-forwards and their expiration dates as of December 31, 2015:
In millions of dollars
Year of expiration Amount
U.S. consolidated tax attributes carry-forwards
2018 254$
2021 52
2022 125
2023 59
2025 23
2033 18
2034 8
2035 1
Total U.S. consolidated tax attributes carry-forwards 540$
U.S. separate tax returns federal net operating loss (NOL) carry-forwards
2028 147$
2029 94
2030 6
2031 337
2032 23
2033 1
Total U.S. separate tax returns federal NOL carry-forwards (1)
608$
(1) Pretax.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
In millions of dollars
Year of expiration Amount
New York State NOL carry-forwards
2034 11,310$
Total New York State NOL carry-forwards (1)
11,310$
New York City NOL carry-forwards
2034 11,115$
Total New York City NOL carry-forwards (1) 11,115$
(1) Pretax.
As of December 31, 2015 and 2014, the Company had no valuation allowance on its deferred tax assets (DTAs) other than
$12 million related to state NOL carryforwards at December 31, 2015. Although realization is not assured, the Company
believes that the realization of the recognized net DTAs of the remaining $3.9 billion at December 31, 2015 is more-likely-
than-not based upon expectations as to future taxable income in the jurisdictions in which the DTAs arise and available tax
planning strategies (as defined in ASC 740, Income Taxes) that would be implemented, if necessary, to prevent a carry-
forward from expiring. The Company’s net DTA of $3.9 billion consists of approximately $1.6 billion of net U.S. federal
DTAs, $2.1 billion of net state DTAs and $0.2 billion of net foreign DTAs. Included in the net federal DTA of $1.6 billion
are deferred tax liabilities of $0.4 billion that will reverse in the relevant carry-forward period and may be used to support
the DTA. The major components of the U.S. federal DTA are $0.8 billion in federal tax attributes carryforwards, and $1.2
billion of future deductions that have not yet been recognized on a tax return.
5. SECURITIES BORROWED, LOANED AND SUBJECT TO REPURCHASE AGREEMENTS
Securities borrowed or purchased under agreements to resell, at their respective carrying values, consisted of the following
at December 31:
In millions of dollars 2015 2014
Securities purchased under agreements to resell (including $88,107 and
$74,884 as of December 31, 2015 and 2014, respectively, at fair value) 101,396$ 88,189$
Deposits paid for securities borrowed (including $47,642 and $68,136
as of December 31, 2015 and 2014, respectively, at fair value) 91,816 113,061
Total 193,212$ 201,250$
Securities loaned or sold under agreements to repurchase, at their respective carrying values, consisted of the following at
December 31:
In millions of dollars 2015 2014
Securities sold under agreements to repurchase (including $35,758 and
$34,103 as of December 31, 2015 and 2014, respectively, at fair value) 130,175$ 146,499$
Deposits received for securities loaned (including $1,018 and $2,472
as of December 31, 2015 and 2014, respectively, at fair value) 14,326 25,444
Total 144,501$ 171,943$
The resale and repurchase agreements represent collateralized financing transactions. The Company executes these
transactions primarily through its broker-dealer subsidiaries to facilitate customer matched-book activity and to
efficiently fund a portion of the Company’s trading inventory.
To maintain reliable funding under a wide range of market conditions, including under periods of stress, CGMHI
manages these activities by taking into consideration the quality of the underlying collateral, and stipulating financing
tenor. CGMHI manages the risks in its collateralized financing transactions by conducting daily stress tests to account
for changes in capacity, tenors, haircut, collateral profile and client actions. Additionally, CGMHI maintains
counterparty diversification by establishing concentration triggers and assessing counterparty reliability and stability
under stress.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21
It is the Company’s policy to take possession of the underlying collateral, monitor its market value relative to the
amounts due under the agreements and, when necessary, require prompt transfer of additional collateral in order to
maintain contractual margin protection. For resale and repurchase agreements, when necessary, the Company posts
additional collateral in order to maintain contractual margin protection.
Collateral typically consists of government and government-agency securities, corporate and municipal bonds, equities,
and mortgage-backed and other asset-backed securities.
The resale and repurchase agreements are generally documented under industry standard agreements that allow the
prompt close-out of all transactions (including the liquidation of securities held) and the offsetting of obligations to
return cash or securities by the non-defaulting party, following a payment or other type of default under the relevant
master agreement. Events of default generally include (i) failure to deliver cash or securities as required under the
transaction, (ii) failure to provide or return cash or securities as used for margining purposes, (iii) breach of
representation, (iv) cross-default to another transaction entered into among the parties, or, in some cases, their affiliates,
and (v) a repudiation of obligations under the agreement. The counterparty that receives the securities in these
transactions is generally unrestricted in its use of the securities, with the exception of transactions executed on a tri-party
basis, where the collateral is maintained by a custodian and operational limitations may restrict its use of the securities.
A substantial portion of the resale and repurchase agreements is carried at the amount of cash initially advanced or
received, plus accrued interest, as specified in the respective agreements. The remaining portion of the resale and
repurchase agreements is recorded at fair value, as described in Notes 11 and 12 to the Consolidated Financial
Statements.
The securities borrowing and lending agreements also represent collateralized financing transactions similar to the resale
and repurchase agreements. Collateral typically consists of government and government-agency securities and corporate
debt and equity securities.
Similar to the resale and repurchase agreements, securities borrowing and lending agreements are generally documented
under industry standard agreements that allow the prompt close-out of all transactions (including the liquidation of
securities held) and the offsetting of obligations to return cash or securities by the non-defaulting party, following a
payment default or other default by the other party under the relevant master agreement. Events of default and rights to
use securities under the securities borrowing and lending agreements are similar to the resale and repurchase agreements
referenced above.
A substantial portion of securities borrowing and lending agreements is recorded at the amount of cash advanced or
received. The remaining portion is recorded at fair value as the Company elected the fair value option for certain
securities borrowed and loaned portfolios, as described in Note 12 to the Consolidated Financial Statements. With
respect to securities loaned, the Company receives cash collateral in an amount generally in excess of the market value
of the securities loaned. The Company monitors the market value of securities borrowed and securities loaned on a daily
basis and obtains or posts additional collateral in order to maintain contractual margin protection.
The enforceability of offsetting rights incorporated in the master netting agreements for resale and repurchase
agreements and securities borrowing and lending agreements is evidenced to the extent that a supportive legal opinion
has been obtained from counsel of recognized standing that provides the requisite level of certainty regarding the
enforceability of these agreements, and that the exercise of rights by the non-defaulting party to terminate and close-out
transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of
default including bankruptcy, insolvency or similar proceeding.
A legal opinion may not have been sought or obtained for certain jurisdictions where local law is silent or sufficiently
ambiguous to determine the enforceability of offsetting rights or where adverse case law or conflicting regulation may
cast doubt on the enforceability of such rights. In some jurisdictions and for some counterparty types, the insolvency law
for a particular counterparty type may be nonexistent or unclear as overlapping regimes may exist. For example, this
may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.
The following tables present the gross and net resale and repurchase agreements and securities borrowing and lending
agreements and the related offsetting amount permitted under ASC 210-20-45. The tables also include amounts related to
financial instruments that are not permitted to be offset under ASC 210-20-45 but would be eligible for offsetting to the
extent that an event of default occurred and a legal opinion supporting enforceability of the offsetting rights has been
obtained. Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or
been able to obtain a legal opinion evidencing enforceability of the offsetting right.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22
Amounts not offset on the
Gross amounts Net amounts of Consolidated Balance
Gross amounts offset on the assets included on Sheet but eligible for
of recognized Consolidated the Consolidated offsetting upon Net
In millions of dollars assets Balance Sheet (1) Balance Sheet counterparty default
(2)amounts
(3)
Securities purchased under agreements
to resell $157,391 $55,995 $101,396 $84,487 $16,909
Deposits paid for securities borrowed 91,816 — 91,816 9,339 82,477
Total $249,207 $55,995 $193,212 $93,826 $99,386
As of December 31, 2015
Net amounts of Amounts not offset on
Gross amounts liabilities the Consolidated Balance
Gross amounts offset on the included on Sheet but eligible for
of recognized Consolidated the Consolidated offsetting upon Net
In millions of dollars liabilities Balance Sheet (1) Balance Sheet counterparty default
(2)amounts
(3)
Securities sold under agreements
to repurchase $186,170 $55,995 $130,175 $77,537 $52,638
Deposits received for securities loaned 14,326 — 14,326 2,895 11,431
Total $200,496 $55,995 $144,501 $80,432 $64,069
Amounts not offset on the
Gross amounts Net amounts of Consolidated Balance
Gross amounts offset on the assets included on Sheet but eligible for
of recognized Consolidated the Consolidated offsetting upon Net
In millions of dollars assets Balance Sheet (1) Balance Sheet counterparty default
(2)amounts
(3)
Securities purchased under agreements
to resell $146,519 $58,330 $88,189 $69,763 $18,426
Deposits paid for securities borrowed 113,061 — 113,061 12,737 100,324
Total $259,580 $58,330 $201,250 $82,500 $118,750
As of December 31, 2014
Net amounts of Amounts not offset on
Gross amounts liabilities the Consolidated Balance
Gross amounts offset on the included on Sheet but eligible for
of recognized Consolidated the Consolidated offsetting upon Net
In millions of dollars liabilities Balance Sheet (1) Balance Sheet counterparty default
(2)amounts
(3)
Securities sold under agreements
to repurchase $204,829 $58,330 $146,499 $89,185 $57,314
Deposits received for securities loaned 25,444 — 25,444 4,735 20,709
Total $230,273 $58,330 $171,943 $93,920 $78,023
(1) Includes financial instruments subject to enforceable master netting agreements that are permitted to be offset under ASC 210 -20-45.
(2) Includes financial instruments subject to enforceable master netting agreements that are not permitted to be offset under ASC 210-20-45
but would be eligible for offsetting to the extent that an event of default has occurred and a legal opinion supporting enforceability of the
offsetting right has been obtained.
(3) Remaining exposures continue to be secured by financial collateral, but the Company may not have sought or been able to obtai n a legal
opinion evidencing enforceability of the offsetting right.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23
The following table presents the gross amount of liabilities associated with repurchase agreements and securities lending
agreements, by remaining contractual maturity as of December 31, 2015:
Open and Greater than
In millions of dollars Overnight Up to 30 Days 31-90 Days 90 Days Total
Securities sold under agreements to repurchase $90,097 $45,829 $30,683 $19,561 $186,170
Deposits received for securities loaned 8,069 4,351 1,242 664 14,326
Total $98,166 $50,180 $31,925 $20,225 $200,496
The following table presents the gross amount of liabilities associated with repurchase agreements and securities lending
agreements, by class of underlying collateral as of December 31, 2015:
Securities
Repurchase Lending
In millions of dollars Agreements Agreements Total
U.S Treasury and federal agency $80,754 — $80,754
State and municipal 403 — 403
Foreign government 51,758 437 52,195
Corporate bonds 15,223 1,378 16,601
Equity securities 10,299 12,503 22,802
Mortgage-backed securities 19,909 — 19,909
Asset-backed securities 4,573 — 4,573
Other 3,251 8 3,259
Total $186,170 $14,326 $200,496
6. DEBT
Short-Term Borrowings
Short-term borrowings consist primarily of borrowings with affiliates, banks and other borrowings. Short-term
borrowings with affiliates totaled $34.9 billion and $30.9 billion at December 31, 2015 and 2014, respectively. The
following table presents the weighted average interest rates on short-term borrowings at December 31:
Weighted Weighted
In millions of dollars Balance average Balance averageShort-term borrowings 35,104$ 1.3% 32,480$ 0.8%
2015 2014
Borrowings under bank lines of credit may be at interest rates based on LIBOR, CD rates, the prime rate or bids
submitted by the banks. CGMHI pays commitment fees for its lines of credit. CGMHI has borrowing agreements
consisting of facilities that CGMHI has been advised are available, but where no contractual lending obligation exists.
These arrangements are reviewed on an ongoing basis to ensure flexibility in meeting CGMHI’s short -term
requirements.
Long-Term Debt
Weighted
average
In millions of dollars coupon Maturities 2015 2014
Senior notes 2.0% 2016-2043 $50,555 $38,546
Subordinated notes 1.8% 2017-2018 3,147 3,661
Total $53,702 $42,207
Balances at December 31,
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24
Included in term debt at December 31, 2015 was $51.2 billion of variable rate debt with affiliates, including Citigroup.
This debt bears interest at rates ranging from 0.1% to 3.9% and matures on various dates from 2016 to 2043.
The Company issues both fixed and variable rate debt in a range of currencies. It uses derivative contracts, primarily
interest rate swaps, to effectively convert a portion of its fixed rate debt to variable rate debt and variable rate debt to
fixed rate debt. The maturity structure of the derivatives generally corresponds to the maturity structure of the debt being
hedged. At December 31, 2015, the Company’s overall weighted average interest rate for long-term debt was 2.0% on a
contractual basis.
Aggregate annual maturities of long-term debt obligations (based on final maturity dates) are as follows:
2016 7,649$
2017 4,794
2018 11,607
2019 10,721
2020 3,731
Thereafter 15,200
Total 53,702$
In millions of dollars
7. CAPITAL REQUIREMENTS
Certain U.S. and non-U.S. broker/dealer subsidiaries are subject to various securities and commodities regulations and
capital adequacy requirements promulgated by the regulatory and exchange authorities of the countries in which they
operate. These regulatory restrictions may impose regulatory capital requirements and limit the amounts that these
subsidiaries can pay in dividends or advance to the Company.
Capital requirements related to the Company’s principal regulated subsidiaries at December 31, 2015 are as follows:
In millions of dollars
Subsidiary Jurisdiction
Net capital or
equivalent
Excess over
minimum
requirement
Citigroup Global Markets Inc. U.S. Securities and Exchange Commission
Uniform Net Capital Rule (Rule 15c3-1) $7,446 $6,106
Citigroup Global Markets Limited United Kingdom's Prudential Regulation
Authority $9,169 $3,550
Citigroup Global Markets Inc. (CGMI) has elected to compute net capital in accordance with the provisions of Appendix
E of SEC Rule 15c3-1 (Net Capital Rule). This methodology allows CGMI to compute market risk capital charges using
internal value-at-risk models. Under Appendix E of the Net Capital Rule, CGMI is required to hold tentative net capital
in excess of $1 billion and net capital in excess of $500 million. CGMI is also required to notify the SEC in the event that
its tentative net capital is less than $5 billion. As of December 31, 2015, CGMI had tentative net capital in excess of both
the minimum and the notification requirements.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25
8. SECURITIZATIONS AND VARIABLE INTEREST ENTITIES
Uses of Special Purpose Entities
A special purpose entity (SPE) is an entity designed to fulfill a specific limited need of the company that organized it.
The principal uses of SPEs by the Company are to obtain liquidity and favorable capital treatment by securitizing certain
financial assets, to assist clients in securitizing their financial assets and to create investment products for clients. SPEs
may be organized in various legal forms, including trusts, partnerships or corporations. In a securitization, the company
transferring assets to an SPE converts all (or a portion) of those assets into cash before they would have been realized in
the normal course of business through the SPE’s issuance of debt and equity instruments, certificates, commercial paper
or other notes of indebtedness. These issuances are recorded on the balance sheet of the SPE, which may or may not be
consolidated onto the balance sheet of the company that organized the SPE.
Investors usually have recourse only to the assets in the SPE, but may also benefit from other credit enhancements, such
as a collateral account, a line of credit or a liquidity facility, such as a liquidity put option or asset purchase agreement.
Because of these enhancements, the SPE issuances typically obtain a more favorable credit rating than the transferor
could obtain for its own debt issuances. This results in less expensive financing costs than unsecured debt. The SPE may
also enter into derivative contracts in order to convert the yield or currency of the underlying assets to match the needs
of the SPE investors or to limit or change the credit risk of the SPE. The Company may be the provider of certain credit
enhancements as well as the counterparty to any related derivative contracts.
Most of the Company’s SPEs are variable interest entities (VIEs), as described below.
Variable Interest Entities VIEs are entities that have either a total equity investment that is insufficient to permit the entity to finance its activities
without additional subordinated financial support, or whose equity investors lack the characteristics of a controlling
financial interest (i.e., ability to make significant decisions through voting rights and a right to receive the expected
residual returns of the entity or an obligation to absorb the expected losses of the entity). Investors that finance the VIE
through debt or equity interests or other counterparties providing other forms of support, such as guarantees,
subordinated fee arrangements or certain types of derivative contracts are variable interest holders in the entity.
The variable interest holder, if any, that has a controlling financial interest in a VIE is deemed to be the primary
beneficiary and must consolidate the VIE. The Company would be deemed to have a controlling financial interest and be
the primary beneficiary if it has both of the following characteristics:
power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and
an obligation to absorb losses of the entity that could potentially be significant to the VIE , or a right to receive
benefits from the entity that could potentially be significant to the VIE.
The Company must evaluate each VIE to understand the purpose and design of the entity, the role the Company had in
the entity’s design and its involvement in the VIE’s ongoing activities. The Company then must evaluate which activities
most significantly impact the economic performance of the VIE and who has the power to direct such activities.
For those VIEs where the Company determines that it has the power to direct the activities that most signific antly impact
the VIE’s economic performance, the Company must then evaluate its economic interests, if any, and determine whether
it could absorb losses or receive benefits that could potentially be significant to the VIE. When evaluating whether the
Company has an obligation to absorb losses that could potentially be significant, it considers the maximum exposure to
such loss without consideration of probability. Such obligations could be in various forms, including, but not limited to,
debt and equity investments, guarantees, liquidity agreements and certain derivative contracts.
In various other transactions, the Company may: (i) act as a derivative counterparty (for example, interest rate swap,
cross-currency swap, or purchaser of credit protection under a credit default swap or total return swap where the
Company pays the total return on certain assets to the SPE); (ii) act as underwriter or placement agent; (iii) provide
administrative, trustee or other services; or (iv) make a market in debt securities or other instruments issued by VIEs.
The Company generally considers such involvement, by itself, not to be variable interests and thus not an indicator of
power or potentially significant benefits or losses.
See Note 1 to the Consolidated Financial Statements for a discussion of impending changes to targeted areas of
consolidation guidance.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26
The Company’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant
variable interests is presented below:
In millions of dollars
Total
involvement Consolidated Significant
with SPE VIE / SPE unconsolidated Debt Equity Funding
assets assets VIE assets (3)
investments investments commitments Derivatives Total
Mortgage securitizations (4)
U.S. agency-sponsored $65,017 $ — $65,017 $1,798 $ — $ — $ — 1,798$
Non-agency-sponsored 5,378 — 5,378 511 — — — 511
Collateralized loan obligations 15,345 — 15,345 222 — — 34 256
Other 3,769 2,459 1,310 25 2 — 52 79
Total $89,509 $2,459 $87,050 $2,556 $2 $ — $86 $2,644
Funded exposures (2)
As of December 31, 2015
Maximum exposure to loss in significant unconsolidated VIEs(1)
Unfunded exposures
In millions of dollars
Total
involvement Consolidated Significant
with SPE VIE / SPE unconsolidated Debt Equity Funding
assets assets VIE assets (3)
investments investments commitments Derivatives Total
Mortgage securitizations (4)
U.S. agency-sponsored $73,000 $ — $73,000 $1,803 $ — $ — $ — 1,803$
Non-agency-sponsored 7,427 — 7,427 558 — — — 558
Collateralized loan obligations 15,685 — 15,685 278 — — 34 312
Other 4,613 2,656 1,957 98 690 — 73 861
Total $100,725 $2,656 $98,069 $2,737 $690 $ — $107 $3,534
Funded exposures (2)
As of December 31, 2014
Maximum exposure to loss in significant unconsolidated VIEs(1)
Unfunded exposures
(1) The definition of maximum exposure to loss is included in the text that follows this table.
(2) Included on the Company’s December 31, 2015 and 2014 Consolidated Statement of Financial Condition.
(3) A significant unconsolidated VIE is an entity where the Company has any variable interest considered to be significant, regardless of the
likelihood of loss or the notional amount of exposure.
(4) CGMHI mortgage securitizations also include agency and non-agency (private-label) re-securitization activities. These SPEs are not
consolidated. See “Re-securitizations” below for further discussion.
The previous tables do not include:
certain investment funds for which the Company provides investment management services and personal estate
trusts for which the Company provides administrative, trustee and/or investment management services;
VIEs structured by third parties where the Company holds securities in inventory, as these investments are made
on arm’s-length terms;
certain positions in mortgage-backed and asset-backed securities held by the Company, which are classified as
Trading account assets, where the Company has no other involvement with the related securitization entity
deemed to be significant; and
certain representations and warranties exposures in CGMHI-sponsored mortgage-backed and asset-backed
securitizations, where the Company has no variable interest or continuing involvement as servicer. The
outstanding balance of mortgage loans securitized during 2005 to 2008 where the Company has no variable
interest or continuing involvement as servicer was approximately $12 billion and $14 billion at December 31,
2015 and 2014, respectively.
The asset balances for consolidated VIEs represent the carrying amounts of the assets consolidated by the Company. The
carrying amount may represent the amortized cost or the current fair value of the assets depending on the legal form of
the asset (e.g., security or loan) and the Company’s standard accounting policies for the asset type and line of business.
The asset balances for unconsolidated VIEs where the Company has significant involvement represent the most current
information available to the Company. In most cases, the asset balances represent an amortized cost basis without regard
to impairments in fair value, unless fair value information is readily available to the Company. For VIEs that obtain asset
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
exposures synthetically through derivative instruments, the tables generally include the full original notion al amount of
the derivative as an asset balance.
The maximum funded exposure represents the balance sheet carrying amount of the Company’s investment in the VIE. It
reflects the initial amount of cash invested in the VIE adjusted for any accrued interest and cash principal payments
received. The carrying amount may also be adjusted for increases or declines in fair value or any impairment in value
recognized in earnings. The maximum exposure of unfunded positions represents the remaining undrawn committed
amount, including liquidity and credit facilities provided by the Company, or the notional amount of a derivative
instrument considered to be a variable interest. In certain transactions, the Company has entered into derivative
instruments or other arrangements that are not considered variable interests in the VIE (e.g., interest rate swaps, cross-
currency swaps, or where the Company is the purchaser of credit protection under a credit default swap or total return
swap where the Company pays the total return on certain assets to the SPE). Receivables under such arrangements are
not included in the maximum exposure amounts.
Consolidated VIEs—Balance Sheet Classification The Company engages in on-balance sheet securitizations, which are securitizations that do not qualify for sales
treatment; thus, the assets remain on the Company’s Consolidated Statement of Financial Condition, and any proceeds
received are recognized as secured liabilities. The consolidated VIEs included in the tables below represent a number of
separate entities with which the Company is involved. In general, the third-party investors in the obligations of
consolidated VIEs have legal recourse only to the assets of the respective VIEs and do not have such recourse to the
Company, except where the Company has provided a guarantee to the investors or is the counterparty to certain
derivative transactions involving the VIE. Thus, the Company’s maximum legal exposure to loss related to consolidated
VIEs is significantly less than the carrying value of the consolidated VIE assets due to outstanding third -party financing.
Intercompany assets and liabilities are excluded from the table. All assets are restricted from being sold or pledged as
collateral. The cash flows from these assets are the only source used to pay down the associated liabilities, which are
non-recourse to the Company’s general assets.
The following table presents the carrying amounts and classifications of consolidated assets that are collateral for
consolidated VIE obligations:
In millions of dollars
Cash 52$ 60$
Trading account assets 79 222
Loans receivable, net 2,226 2,196
Other 102 178
Total assets 2,459$ 2,656$
Short-term borrowings 82$ 83$
Long-term debt — 1,651
Other liabilities 15 160
Total liabilities 97$ 1,894$
December 31, December 31,
2015 2014
Significant Interests in Unconsolidated VIEs—Balance Sheet Classification
The following table presents the carrying amounts and classification of significant variable interests in unconsolidated
VIEs:
In millions of dollars
Cash 4$ 3$
Trading account assets 2,554 3,424
Investments — —
Total assets 2,558$ 3,427$
December 31, December 31,
2015 2014
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
28
Mortgage Securitizations
The Company provides a wide range of mortgage loan products to a diverse customer base. The Company’s mortgage
loan securitizations are primarily non-recourse, thereby effectively transferring the risk of future credit losses to the
purchasers of the securities issued by the trust.
The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations because CGMHI
does not have the power to direct the activities of the VIE that most significantly impact the entity’s economic
performance. Therefore, CGMHI does not consolidate these U.S. agency-sponsored mortgage securitizations.
The Company does not consolidate certain non-agency-sponsored mortgage securitizations because CGMHI is not the
servicer with the power to direct the significant activities of the entity. In certain instances, the Company has (i) the
power to direct the activities and (ii) the obligation to either absorb losses or the right to receive benefits that could be
potentially significant to its non-agency-sponsored mortgage securitizations and, therefore, is the primary beneficiary
and thus consolidates the VIE.
The following table summarizes selected cash flow information related to the Company’s mortgage securitizations:
In millions of dollars 2015 2014 2013
Proceeds from new securitizations (1) $22,072 $17,561 $16,491
Cash flows received on residual interests (2)
20 10 25
(1) The proceeds from new securitizations in 2015 include $0.7 billion related to personal loan securitizations.
(2) Cash flows received on residual interests represents cash received on mortgage-backed security residual positions from only the
most subordinated tranche retained in securitization transactions; it does not include cash flows received on other retained
tranches from securitization transactions held in trading inventory which may turnover on a regular basis due to market-making
activity.
Gains (losses) recognized on the securitization of mortgages for the years ended December 31, 2015, 2014 and 2013
were $(0.2) million, $49.2 million, and $49.6 million, respectively.
The key assumptions used to value retained interests, and the sensitivity of the fair value to adverse changes of 10% and
20% in each of the key assumptions, are set forth in the tables below. The negative effect of each change is calculated
independently, holding all other assumptions constant. Because the key assumptions may not be independent, the net
effect of simultaneous adverse changes in the key assumptions may be less than the sum of the individual effects shown
below.
2015 2014
Discount rate 0.0% to 27.0% 0.0% to 19.6%
Constant prepayment rate 1.7% to 100.0% 2.0% to 100.0%
Anticipated net credit losses 3.8% to 92.0% 13.7% to 92.4%
In millions of dollars
Carrying value of retained interests 2,402$ 1,257$
Discount rates
Adverse change of 10% (55)$ (37)$
Adverse change of 20% (107) (72)
Constant prepayment rate
Adverse change of 10% (30)$ (14)$
Adverse change of 20% (60) (28)
Anticipated net credit losses
Adverse change of 10% (8)$ (10)$
Adverse change of 20% (15) (18)
The range in the key assumptions is due to the different characteristics of the interests retained by the Company. The
interests retained range from highly rated and/or senior in the capital structure to unrated and/or residual interests.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
29
Re-securitizations
The Company engages in re-securitization transactions in which debt securities are transferred to a VIE in exchange for
new beneficial interests. During the years ended December 31, 2015 and 2014, CGMHI transferred non-agency (private-
label) securities with an original par value of approximately $885 million and $1.2 billion, respectively, to re-
securitization entities. These securities are backed by either residential or commercial mortgages and are often structured
on behalf of clients.
As of December 31, 2015, the fair value of CGMHI-retained interests in private-label re-securitization transactions
structured by CGMHI totaled approximately $428 million (including $132 million related to re-securitization
transactions executed in 2015), which has been recorded in Trading account assets. Of this amount, approximately $18
million was related to senior beneficial interests, and approximately $410 million was related to subordinated beneficial
interests. As of December 31, 2014, the fair value of CGMHI-retained interests in private-label re-securitization
transactions structured by CGMHI totaled approximately $545 million (including $194 million related to re-
securitization transactions executed in 2014), which has been recorded in Trading account assets. Of this amount,
approximately $133 million was related to senior beneficial interests, and approximately $412 million was related to
subordinated beneficial interests. The original par value of private-label re-securitization transactions in which CGMHI
holds a retained interest as of December 31, 2015 and 2014 was approximately $3.7 billion and $5.1 billion,
respectively.
The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the
years ended December 31, 2015 and 2014, CGMHI transferred agency securities with a fair value of approximately
$17.8 billion and $22.5 billion, respectively, to re-securitization entities.
As of December 31, 2015, the fair value of CGMHI-retained interests in agency re-securitization transactions structured
by CGMHI totaled approximately $1.8 billion (including $1.5 billion related to re-securitization transactions executed in
2015) compared to $1.8 billion as of December 31, 2014 (including $1.5 billion related to re-securitization transactions
executed in 2014), which is recorded in Trading account assets. The original fair value of agency re-securitization
transactions in which CGMHI holds a retained interest as of December 31, 2015 and 2014 was approximately $65.0
billion and $73.0 billion, respectively.
As of December 31, 2015 and 2014, the Company did not consolidate any private-label or agency re-securitization
entities.
Collateralized Loan Obligations
A collateralized loan obligation (CLO) is a VIE that purchases a portfolio of assets consisting primarily of non-
investment grade corporate loans. The CLO issues multiple tranches of debt and equity to investors to fund the asset
purchases and pay upfront expenses associated with forming the CLO. A third-party asset manager is contracted by the
CLO to purchase the underlying assets from the open market and monitor the credit risk associated with those assets.
Over the term of the CLO, the asset manager directs purchases and sales of assets in a manner consistent with the CLO’s
asset management agreement and indenture. In general, the CLO asset manager will have the power to direct the
activities of the entity that most significantly impact the economic performance of the CLO. Investors in the CLO,
through their ownership of debt and/or equity in the CLO, can also direct certain activities of the CLO, including
removing the CLO asset manager under limited circumstances, optionally redeeming the notes, voting on amendments to
the CLO’s operating documents and other activities. The CLO has a finite life, typically 12 years.
The Company serves as a structuring and placement agent with respect to the CLO. Typically, the debt and equity of the
CLO are sold to third-party investors. On occasion, certain CGMHI entities may purchase some portion of the CLO’s
liabilities for investment purposes. In addition, CGMHI may purchase, typically in the secondary market, certain
securities issued by the CLO to support its market making activities.
The Company does not generally have the power to direct the activities of the entity that most significantly impact the
economic performance of the CLOs, as this power is generally held by a third-party asset manager of the CLO. As such,
those CLOs are not consolidated.
Client Intermediation
Client intermediation transactions represent a range of transactions designed to provide investors with specified returns
based on the returns of an underlying security, referenced asset or index. These transactions include credit-linked notes
and equity-linked notes. In these transactions, the VIE typically obtains exposure to the underlying security, referenced
asset or index through a derivative instrument, such as a total-return swap or a credit-default swap. In turn the VIE issues
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
30
notes to investors that pay a return based on the specified underlying security, referenced asset or index. The VIE invests
the proceeds in a financial asset or a guaranteed insurance contract that serves as collateral for the derivative contract
over the term of the transaction. The Company’s involvement in these transactions includes being the counterparty to the
VIE’s derivative instruments and investing in a portion of the notes issued by the VIE. In certain transactions, the
investor’s maximum risk of loss is limited, and the Company absorbs risk of loss above a specified level. The Company
does not have the power to direct the activities of the VIEs that most significantly impact their economic performance,
and thus it does not consolidate them.
The Company’s maximum risk of loss in these transactions is defined as the amount invested in notes issued by the VIE
and the notional amount of any risk of loss absorbed by the Company through a separate instrument issued by the VIE.
The derivative instrument held by the Company may generate a receivable from the VIE (for example, where the
Company purchases credit protection from the VIE in connection with the VIE’s issuance of a credit-linked note), which
is collateralized by the assets owned by the VIE. These derivative instruments are not considered variable interests, and
any associated receivables are not included in the calculation of maximum exposure to the VIE.
The proceeds from new securitizations related to the Company’s client intermediation transactions for the years ended
December 31, 2015 and 2014 totaled approximately $1.7 billion and $1.3 billion, respectively.
9. DERIVATIVES ACTIVITIES
In the ordinary course of business, the Company enters into various types of derivative transactions. These derivative
transactions include:
Futures and forward contracts, which are commitments to buy or sell at a future date a financial instrument,
commodity or currency at a contracted price and may be settled in cash or through delivery.
Swap contracts, which are commitments to settle in cash at a future date or dates that may range from a few
days to a number of years, based on differentials between specified indices or financial instruments, as applied
to a notional principal amount.
Option contracts, which give the purchaser, for a premium, the right, but not the obligation, to buy or sell within
a specified time a financial instrument, commodity or currency at a contracted price that may also be settled in
cash, based on differentials between specified indices or prices.
Swaps and forwards and some option contracts are over-the-counter (OTC) derivatives that are bilaterally negotiated
with counterparties and settled with those counterparties, except for swap contracts that are novated and "cleared"
through central counterparties (CCPs). Futures contracts and other option contracts are standardized contracts that are
traded on an exchange with a CCP as the counterparty from the inception of the transaction. The Company enters into
these derivative contracts relating to interest rate, foreign currency, commodity and other market/credit risks for the
following reasons:
Trading Purposes: The Company trades derivatives as an active market maker. The Company offers its
customers derivatives in connection with their risk management actions to transfer, modify or reduce their
interest rate, foreign exchange and other market/credit risks or for their own trading purposes. The Company
also manages its derivative risk positions through offsetting trade activities, controls focused on price
verification, and daily reporting of positions to senior managers.
Hedging: The Company uses derivatives in connection with its risk management activities to hedge certain
risks. For example, the Company issues fixed-rate long-term debt and then enters into a receive-fixed, pay-
variable-rate interest rate swap with the same tenor and notional amount to convert the interest payments to a
net variable-rate basis. This strategy is the most common form of an interest rate hedge, as it minimizes net
interest cost in certain yield curve environments. In addition, futures contracts are used to hedge commodity
price risk exposures and foreign-exchange contracts are used to hedge net investment exposures.
Derivatives may expose the Company to market, credit or liquidity risks in excess of the amounts recorded on the
Consolidated Statement of Financial Condition. Market risk on a derivative product is the exposure created by potential
fluctuations in interest rates, market prices, foreign-exchange rates and other factors and is a function of the type of
product, the volume of transactions, the tenor and terms of the agreement and the underlying volatility.
Credit risk is the exposure to loss in the event of nonperformance by the other party to satisfy a derivative liability where
the value of any collateral held by CGMHI is not adequate to cover such losses. The recognition in earnings of
unrealized gains on these transactions is subject to management’s assessment of the probability of counterparty default.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
31
Liquidity risk is the potential exposure that arises when the size of a derivative position may not be able to be monetized
in a reasonable period of time and at a reasonable cost in periods of high volatility and financia l stress.
Derivative transactions are customarily documented under industry standard master netting agreements that provide that,
following an uncured payment default or other event of default, the non-defaulting party may promptly terminate all
transactions between the parties and determine the net amount due to be paid to, or by, the defaulting party. Events of
default include: (i) failure to make a payment on a derivatives transaction that remains uncured following applicable
notice and grace periods, (ii) breach of agreement that remains uncured after applicable notice and grace periods, (iii)
breach of a representation, (iv) cross default, either to third-party debt or to other derivative transactions entered into
between the parties, or, in some cases, their affiliates, (v) the occurrence of a merger or consolidation which results in a
party’s becoming a materially weaker credit, and (vi) the cessation or repudiation of any applicable guarantee or other
credit support document. Obligations under master netting agreements are often secured by collateral posted under an
industry standard credit support annex to the master netting agreement. An event of default may also occur under a credit
support annex if a party fails to make a collateral delivery that remains uncured following applicable notice and grace
periods.
The netting and collateral rights incorporated in the master netting agreements are considered to be legally enforceable if
a supportive legal opinion has been obtained from counsel of recognized standing that provides the requisite level of
certainty regarding enforceability and that the exercise of rights by the non-defaulting party to terminate and close-out
transactions on a net basis under these agreements will not be stayed or avoided under applicable law upon an event of
default including bankruptcy, insolvency or similar proceeding.
A legal opinion may not be sought for certain jurisdictions where local law is silent or unclear as to the enforceability of
such rights or where adverse case law or conflicting regulation may cast doubt on the enforceability of such rights. In
some jurisdictions and for some counterparty types, the insolvency law may not provide the requisite level of certainty.
For example, this may be the case for certain sovereigns, municipalities, central banks and U.S. pension plans.
Exposure to credit risk on derivatives is affected by market volatility, which may impair the ability of counterparties to
satisfy their obligations to the Company. Credit limits are established and closely monitored for customers engaged in
derivatives transactions. CGMHI considers the level of legal certainty regarding enforceability of its offsetting rights
under master netting agreements and credit support annexes to be an important factor in its risk management process.
Specifically, CGMHI generally transacts much lower volumes of derivatives under master netting agreements where
CGMHI does not have the requisite level of legal certainty regarding enforceability, because such derivatives consume
greater amounts of single counterparty credit limits than those executed under enforceable master netting agreements.
Cash collateral and security collateral in the form of G10 government debt securities is often posted by a party to a
master netting agreement to secure the net open exposure of the other party; the receiving party is free to
commingle/rehypothecate such collateral in the ordinary course of its business. Nonstandard collateral such as corporate
bonds, municipal bonds, U.S. agency securities and/or MBS may also be pledged as collateral for derivative transactions.
Security collateral posted to open and maintain a master netting agreement with a counterparty, in the form of cash
and/or securities, may from time to time be segregated in an account at a third-party custodian pursuant to a tri-party
account control agreement.
Information pertaining to the Company’s derivative activity, based on notional amounts is presented in the table below.
Derivative notional amounts are reference amounts from which contractual payments are derived and do not represent a
complete and accurate measure of CGMHI’s exposure to derivative transactions. Rather, as discussed above, CGMHI’s
derivative exposure arises primarily from market fluctuations (i.e., market risk), counterparty failure (i.e., credit risk)
and/or periods of high volatility or financial stress (i.e., liquidity risk), as well as any market valuation adjustments that
may be required on the transactions. Moreover, notional amounts do not reflect the netting of offsetting trades (also as
discussed above). For example, if CGMHI enters into an interest rate swap with $100 million notional, and offsets this
risk with an identical but opposite position with a different counterparty, $200 million in derivative notionals is reported,
although these offsetting positions may result in de minimis overall market risk. Aggregate derivative notional amounts
can fluctuate from period to period in the normal course of business based on CGMHI’s market share, levels of client
activity and other factors.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32
Derivative Notionals
December 31, December 31, December 31, December 31,
In millions of dollars 2015 2014 2015 2014
Interest rate contracts
Swaps $365 $621 $14,378,484 $22,791,601
Futures and forwards — — 3,303,609 4,020,144
Written options — — 1,084,221 984,482
Purchased options — — 1,129,079 897,568
Total interest rate contract notionals 365 621 19,895,393 28,693,795
Foreign exchange contracts
Swaps — — 693,138 879,201
Futures and forwards 1,459 2,239 606,378 431,147
Written options — — 522,198 810,429
Purchased options — — 522,579 810,642
Total foreign exchange contract notionals 1,459 2,239 2,344,293 2,931,419
Equity contracts
Swaps — — 124,015 86,050
Futures and forwards — — 30,562 26,289
Written options — — 270,547 438,832
Purchased options — — 256,990 301,370
Total equity contract notionals — — 682,114 852,541
Commodity and other contracts
Swaps — — 54,268 73,063
Futures and forwards 789 1,089 50,680 55,414
Written options — — 18,322 25,607
Purchased options — — 17,568 23,853
Total commodity and other contract notionals 789 1,089 140,838 177,937
Credit derivatives (2)
Protection sold — — 502,384 709,847
Protection purchased — — 514,349 721,720
Total credit derivatives — — 1,016,733 1,431,567
Total derivative notionals $2,613 $3,949 $24,079,371 $34,087,259
Trading Derivatives
Hedging instruments
under ASC 815 (1)
(1) Derivatives in hedge accounting relationships accounted for under ASC 815 are recorded in Trading account assets/Trading account
liabilities on the Consolidated Statement of Financial Condition.
(2) Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “referenc e asset” to
another party (protection seller). These arrangements allow a protection seller to assume the credit risk associated with the reference asset
without directly purchasing that asset. The Company enters into credit derivative positions for purposes such as risk management, yield
enhancement, reduction of credit concentrations and diversification of overall risk.
The following table presents the gross and net fair values of the Company’s derivative transactions, and the related
offsetting amounts permitted under ASC 210-20-45 and ASC 815-10-45. Under ASC 210-20-45, gross positive fair
values are offset against gross negative fair values by counterparty pursuant to enforceable master netting agreements.
Under ASC 815-10-45, payables and receivables in respect of cash collateral received from or paid to a given
counterparty pursuant to a credit support annex are included in the offsetting amount if a legal opinion supporting
enforceability of netting and collateral rights has been obtained. GAAP does not permit similar offsetting for security
collateral. The table also includes amounts that are not permitted to be offset under ASC 210-20-45 and ASC 815-10-45,
such as security collateral posted or cash collateral posted at third-party custodians, but which would be eligible for
offsetting to the extent an event of default occurred and a legal opinion supporting enforceability of the netting and
collateral rights has been obtained.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
33
Derivative Mark-to-Market (MTM) Receivables/Payables
In millions of dollars Assets Assets
Derivative instruments designated as ASC 815 hedges
Over-the-counter interest rate contracts 75$ $ — 79$ 1$
Over-the-counter foreign exchange contracts 40 — 51 —
Total derivatives instruments designated as ASC 815 hedges 115 — 130 1
Derivatives instruments not designated as ASC 815 hedges
Over-the-counter 131,643 125,100 160,415 156,411
Cleared 23,325 22,902 53,249 52,676
Exchange traded 50 33 19 20
Interest rate contracts 155,018 148,035 213,683 209,107
Over-the-counter 31,392 30,835 38,207 36,784
Foreign exchange contracts 31,392 30,835 38,207 36,784
Over-the-counter 10,810 17,771 12,701 21,645
Cleared 28 3 16 35
Exchange traded 7,258 6,369 4,299 3,878
Equity contracts 18,096 24,143 17,016 25,558
Over-the-counter 11,800 13,267 13,151 13,669
Exchange traded 353 428 232 206
Commodity and other contracts 12,153 13,695 13,383 13,875
Over-the-counter 15,321 15,734 24,529 25,018
Cleared 217 141 1,057 1,020
Credit derivatives 15,538 15,875 25,586 26,038
Total derivatives instruments not designated as
ASC 815 hedges 232,197 232,583 307,875 311,362
Total derivatives 232,312 232,583 308,005 311,363
Cash collateral paid/received (3)
2,633 2,295 1,851 6,028
Less: Netting agreements (4)
(206,360) (206,360) (280,280) (280,280)
Less: Netting cash collateral received/paid (5)
(17,465) (12,117) (13,716) (12,791)
Net receivables / payables included on the
Consolidated Statement of Financial Condition 11,120$ 16,401$ 15,860$ 24,320$
Additional amounts subject to an enforceable master netting agreement but not offset
on the Consolidated Statement of Financial Condition
Less: Cash collateral received/paid (12) — (3) (2)
Less: Non-cash collateral received/paid (2,636) (1,197) (1,984) (1,382)
Total net receivables/payables 8,472$ 15,204$ 13,873$ 22,936$
December 31, 2015 December 31, 2014
Liabilities Liabilities
Derivatives classified in
Trading account assets / liabilities (1) (2)
(1) All derivatives are reported on the balance sheet at fair value in Trading account assets/Trading account liabilities.
(2) Over-the-counter (OTC) derivatives are derivatives executed and settled bilaterally with counterparties without the use of an organized
exchange or central clearing house. Cleared derivatives include derivatives executed bilaterally with a counterparty in the OTC market
but then novated to a central clearing house, whereby the central clearing house becomes the counterparty to both of the orig inal
counterparties. Exchange traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price
transparency.
(3) At December 31, 2015, reflects the net amount of the $14,750 million and $19,760 million of gross cash collateral paid and received,
respectively. Of the gross cash collateral paid, $12,117 million was used to offset trading derivative liabilities and, of the gross cash
collateral received, $17,465 million was used to offset trading derivative assets. At December 31, 2014, reflects the net amount of the
$14,642 million and $19,744 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $12,791
million was used to offset trading derivative liabilities and, of the gross cash collateral received, $13,716 million was used to offset
trading derivative assets.
(4) Represents the netting of derivative receivable and payable balances with the same counterparty under enforceable netting agreements.
(5) Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements.
For the years ended December 31, 2015, 2014 and 2013, the amounts recognized in Principal transactions in the
Consolidated Statement of Operations related to derivatives not designated in a qualifying hedging relationship, as well
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
34
as the underlying non-derivative instruments, are presented in Note 2 to the Consolidated Financial Statements. The
Company presents this disclosure by business classification, showing derivative gains and losses related to its trading
activities together with gains and losses related to non-derivative instruments within the same trading portfolios, as this
represents the way these portfolios are risk managed.
Accounting for Derivative Hedging
The Company accounts for its hedging activities in accordance with ASC 815, Derivatives and Hedging. As a general
rule, hedge accounting is permitted where the Company is exposed to a particular risk, such as interes t-rate, price risk or
foreign-exchange risk, that causes changes in the fair value of an asset or liability that may affect earnings.
Derivative contracts hedging the risks associated with changes in fair value are referred to as fair value hedges. Hedges
that utilize derivatives to manage the foreign exchange risk associated with equity investments in non-U.S.-dollar-
functional-currency foreign subsidiaries (net investment in a foreign operation) are net investment hedges.
If certain hedging criteria specified in ASC 815 are met, including documentation requirements and assessing hedge
effectiveness, hedge accounting may be applied. Hedge effectiveness assessment methodologies are performed in a
similar manner for similar hedges and are used consistently throughout the hedging relationships. For fair value hedges,
changes in the value of the hedging derivative, as well as changes in the value of the related hedged item for the risk
being hedged, are reflected in current earnings. For net investment hedges, changes in the value of the hedging derivative
are reflected in Accumulated other comprehensive income (loss) in the Company’s stockholder’s equity to the extent the
hedge is highly effective. Hedge ineffectiveness, in either case, is reflected in current earnings.
The key requirements to achieve ASC 815 hedge accounting are documentation of a hedging strategy and specific hedge
relationships at hedge inception and substantiating hedge effectiveness on an ongoing basis. A derivative must be highly
effective in accomplishing the hedge objective of offsetting changes in the fair value of the hedged item for the risk
being hedged. Any ineffectiveness in the hedge relationship is recognized in current earnings. The assessment of
effectiveness may exclude changes in the value of the hedged item that are unrelated to the risks being hedged.
Similarly, the assessment of effectiveness may exclude changes in the fair value of a derivative related to time value that,
if excluded, are recognized in current earnings.
Fair Value Hedges
Hedging of Benchmark Interest Rate Risk
The Company hedges exposure to changes in the fair value of outstanding fixed-rate issued debt. These hedges are
designated as fair value hedges of the benchmark interest rate risk associated with the currency of the hedged liability.
The fixed cash flows of the hedged items are converted to benchmark variable-rate cash flows by entering into receive-
fixed, pay-variable interest rate swaps.
Hedging of Commodities Price Risk
The Company hedges exposure to changes in fair value attributable to price movements in physical commodities
inventory. The hedging instrument employed is a futures contract to sell the underlying commodity. In this hedge, the
change in value of the hedged commodities inventory is recorded in earnings, which serves to offset the change in fair
value of the futures contract that is also reflected in earnings. CGMHI excludes the differential between spot and the
contractual forward rates under the futures contract from the assessment of effectiveness, but records the full change in
the fair value of the futures contract to earnings. Since the assessment of effectiveness is based on changes in fair value
attributable to changes in spot prices on both the physical commodity and the futures contract, ineffectiveness is not
significant.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
35
The following table summarizes the gains (losses) on the Company’s fair value hedges for the years ended December 31,
2015 and 2014 and 2013:
In millions of dollars 2015 2014 2013
Gain (loss) on the derivatives in designated and qualifying fair value hedges:
Interest rate contracts $ (6) $ (1) $ (38)
Commodity contracts 48 (232) —
Total gain (loss) on the derivatives in designated and qualifying fair value hedges $ 42 $ (233) $ (38)
Gain (loss) on the hedged item in designated and qualifying fair value hedges:
Interest rate hedges $ 6 $ 1 $ 40
Commodity hedges (42) 254 —
Total gain (loss) on the derivatives in designated and qualifying fair value hedges $ (36) $ 255 $ 40
Hedge ineffectiveness recognized in earnings on designated
and qualifying fair value hedges:
Interest rate hedges $ — $ — $ 2
Total hedge ineffectiveness recognized in earnings on designated
and qualifying fair value hedges $ — $ — $ 2
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges:
Commodity hedges (2)
$ 6 $ 22 $ —
Total net gain (loss) excluded from assessment of the effectiveness
of fair value hedges $ 6 $ 22 $ —
Year ended December 31,
Gains / (losses) on fair value hedges (1)
(1) Amounts are included in Other revenue on the Consolidated Statement of Operations. The accrued interest income on fair value hedges is
recorded in Net interest revenue and is excluded from this table.
(2) Amounts relate to the premium associated with forward contracts (differential between spot and contractual forward rates). These
amounts are excluded from the assessment of hedge effectiveness and are reflected directly in earnings.
Net Investment Hedges
Consistent with ASC 830-20, Foreign Currency Matters—Foreign Currency Transactions, ASC 815 allows hedging of
the foreign currency risk of a net investment in a foreign operation. The Company uses foreign currency forwards to
manage the foreign exchange risk associated with the Company’s equity investments in several non-U.S.-dollar-
functional-currency foreign subsidiaries. The Company records the change in the carrying amount of these investments in
the Foreign currency translation adjustment account within Accumulated other comprehensive income (loss).
Simultaneously, the effective portion of the hedge of this exposure is also recorded in the Foreign currency translation
adjustment account and the ineffective portion, if any, is immediately recorded in earnings.
For derivatives designated as net investment hedges, the Company follows the forward-rate method outlined in ASC
815-35-35-16 through 35-26. According to that method, all changes in fair value, including changes related to the
forward-rate component of the foreign currency forward contracts, are recorded in the Foreign currency translation
adjustment account within Accumulated other comprehensive income (loss).
The pretax gain recorded in the Foreign currency translation adjustment account within Accumulated other
comprehensive income (loss), related to the effective portion of the net investment hedges, is $93 million, $32 million
and $71 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Credit Derivatives
The Company is a market maker and trades a range of credit derivatives. Through these contracts, CGMHI either
purchases or writes protection on either a single name or a portfolio of reference credits. CGMHI also uses credit
derivatives to help mitigate credit risk in its cash positions, and to facilitate client transactions.
CGMHI monitors its counterparty credit risk in credit derivative contracts. As of December 31, 2015 and 2014,
approximately 98% of the gross receivables are from counterparties with which CGMHI maintains collateral agreements.
A majority of CGMHI’s top 15 counterparties (by receivable balance owed to CGMHI) are banks, financial institutions
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
36
or other dealers. Contracts with these counterparties do not include ratings-based termination events. However,
counterparty ratings downgrades may have an incremental effect by lowering the threshold at which CGMHI may call
for additional collateral.
The range of credit derivatives entered into includes credit default swaps, total return swaps, credit options and credit-
linked notes.
A credit default swap is a contract in which, for a fee, a protection seller agrees to reimburse a protection buyer for any
losses that occur due to a predefined credit event on a reference entity. These credit events are defined by the terms of
the derivative contract and the reference credit and are generally limited to the market standard of failure to pay on
indebtedness and bankruptcy of the reference credit and, in a more limited range of transactions, debt restructuring.
Credit derivative transactions that reference emerging market entities will also typically include additional credit events
to cover the acceleration of indebtedness and the risk of repudiation or a payment moratorium. In certain transactions,
protection may be provided on a portfolio of reference entities or asset-backed securities. If there is no credit event, as
defined by the specific derivative contract, then the protection seller makes no payments to the protection buyer and
receives only the contractually specified fee. However, if a credit event occurs as defined in the specific derivative
contract sold, the protection seller will be required to make a payment to the protection buyer. Under certain contracts,
the seller of protection may not be required to make payment until a specified amount of losses has occurred with respect
to the portfolio and/or may only be required to pay for losses up to a specified amount.
A total return swap typically transfers the total economic performance of a reference asset, which includes all associated
cash flows, as well as capital appreciation or depreciation. The protection buyer receives a floating rate of interest and
any depreciation on the reference asset from the protection seller and, in return, the protection seller receives the cash
flows associated with the reference asset plus any appreciation. Thus, according to the total return swap agreement, the
protection seller will be obligated to make a payment any time the floating interest rate payment plus any depreciation of
the reference asset exceeds the cash flows associated with the underlying asset. A total return swap may terminate upon a
default of the reference asset or a credit event with respect to the reference entity subject to the provisions of the related
total return swap agreement between the protection seller and the protection buyer.
A credit option is a credit derivative that allows investors to trade or hedge changes in the credit quality of a reference
entity. For example, in a credit spread option, the option writer assumes the obligation to purchase or sell credit
protection on the reference entity at a specified “strike” spread level. The option purchaser buys the right to sell credit
default protection on the reference entity to, or purchase it from, the option writer at the strike spread level. The
payments on credit spread options depend either on a particular credit spread or the price of the underlying credit-
sensitive asset or other reference. The options usually terminate if a credit event occurs with respect to the underlying
reference entity.
A credit-linked note is a form of credit derivative structured as a debt security with an embedded credit default swap.
The purchaser of the note effectively provides credit protection to the issuer by agreeing to receive a return that could be
negatively affected by credit events on the underlying reference credit. If the reference entity defaults, the note may be
cash settled or physically settled by delivery of a debt security of the reference entity. Thus, the maximum amount of the
note purchaser’s exposure is the amount paid for the credit-linked note. As of December 31, 2015 and December 31,
2014, the amount of credit-linked notes held by the Company in trading inventory was immaterial.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
37
The following tables summarize the key characteristics of the Company’s credit derivatives portfolio by counterparty and
derivative form as of December 31, 2015 and December 31, 2014:
Fair values Notionals
Protection Protection
In millions of dollars at December 31, 2015 Receivable Payable purchased sold
By industry/counterparty:
Bank $12,446 $12,372 $413,402 $395,367
Broker-dealers 1,095 1,203 37,370 38,784
Non-financial 27 23 298 115
Insurance and other financial institutions 2,093 2,170 63,279 68,118
Total by industry/counterparty 15,661 15,768 514,349 502,384
By instrument:
Credit default swaps and options 15,092 15,159 502,588 489,106
Total return swaps and other 569 609 11,761 13,278
Total by instrument 15,661 15,768 514,349 502,384
By rating:
Investment grade 6,551 6,604 398,717 388,732
Non-investment grade 9,110 9,164 115,632 113,652
Total by rating 15,661 15,768 514,349 502,384
By maturity:
Within 1 year 1,491 1,292 123,917 122,874
From 1 to 5 years 12,811 13,016 358,637 353,121
After 5 years 1,359 1,460 31,795 26,389
Total by maturity 15,661 15,768 514,349 502,384
Fair values Notionals
Protection Protection
In millions of dollars at December 31, 2014 Receivable Payable purchased sold
By industry/counterparty:
Bank $20,809 $20,567 $587,339 $572,328
Broker-dealer 1,852 1,871 47,800 48,100
Non-financial 44 24 1,060 114
Insurance and other financial institutions 3,018 3,584 85,521 89,305
Total by industry/counterparty 25,723 26,046 721,720 709,847
By instrument:
Credit default swaps and options 24,619 24,462 709,686 697,412
Total return swaps and other 1,104 1,584 12,034 12,435
Total by instrument 25,723 26,046 721,720 709,847
By rating:
Investment grade 12,938 12,711 564,375 555,430
Non-investment grade 12,785 13,335 157,345 154,417
Total by rating 25,723 26,046 721,720 709,847
By maturity:
Within 1 year 1,908 1,880 115,848 116,746
From 1 to 5 years 22,092 22,325 570,489 563,249
After 5 years 1,723 1,841 35,383 29,852
Total by maturity 25,723 26,046 721,720 709,847
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
38
Fair values included in the above tables are prior to application of any netting agreements and cash collateral. For
notional amounts, CGMHI generally has a mismatch between the total notional amounts of protection purchased and
sold, and it may hold the reference assets directly, rather than entering into offsetting credit derivative contracts as and
when desired. The open risk exposures from credit derivative contracts are largely matched after certain cash positions in
reference assets are considered and after notional amounts are adjusted, either to a duration-based equivalent basis or to
reflect the level of subordination in tranched structures. The ratings of the credit derivatives portfolio presented in the
tables and used to evaluate payment/performance risk are based on the assigned internal or external ratings of the
referenced asset or entity. Where external ratings are used, investment-grade ratings are considered to be ‘Baa/BBB’ and
above, while anything below is considered non-investment grade. CGMHI’s internal ratings are in line with the related
external rating system.
The Company evaluates the payment/performance risk of the credit derivatives for which it stands as a protection seller
based on the credit rating assigned to the underlying referenced credit. Credit derivatives written on an underlying non-
investment grade reference credit represent greater payment risk to the Company. The non-investment grade category in
the table above also includes credit derivatives where the underlying referenced entity has been downgraded subsequent
to the inception of the derivative.
The maximum potential amount of future payments under credit derivative contracts presented in the table above is
based on the notional value of the derivatives. The Company believes that the notional amount for credit protection sold
is not representative of the actual loss exposure based on historical experience. This amount has not been reduced by the
value of the reference assets and the related cash flows. In accordance with most credit derivative contracts, should a
credit event occur, the Company usually is liable for the difference between the protection sold and the value of the
reference assets. Furthermore, the notional amount for credit protection sold has not been reduced for any cash collateral
paid to a given counterparty, as such payments would be calculated after netting all derivative exposures, including any
credit derivatives with that counterparty in accordance with a related master netting agreement. Due to such netting
processes, determining the amount of collateral that corresponds to credit derivative exposures alone is not possible. The
Company actively monitors open credit-risk exposures and manages this exposure by using a variety of strategies,
including purchased credit derivatives, cash collateral or direct holdings of the referenced assets. This risk mitigation
activity is not captured in the table above.
Credit-Risk-Related Contingent Features in Derivatives
Certain derivative instruments contain provisions that require the Company to either post additional collateral or
immediately settle any outstanding liability balances upon the occurrence of a specified event related to the credit risk of
the Company. These events, which are defined by the existing derivative contracts, are primarily downgrades in the
credit ratings of the Company and its affiliates. The fair value (excluding CVA) of all derivative instruments with credit-
risk-related contingent features that were in a net liability position at both December 31, 2015 and December 31, 2014
was $4.1 billion and $5.2 billion, respectively. The Company had posted $3.0 billion and $4.6 billion as collateral for this
exposure in the normal course of business as of December 31, 2015 and December 31, 2014, respectively.
A downgrade could trigger additional collateral or cash settlement requirements for the Company and certain affiliates.
In the event that each legal entity were downgraded a single notch by all three major rating agencies as of December 31,
2015, the Company could be required to post an additional $498 million as either collateral or settlement of the
derivative transactions. Additionally, the Company could be required to segregate with third-party custodians collateral
previously received from existing derivative counterparties in the amount of $66 million upon the single notch
downgrade, resulting in aggregate cash obligations and collateral requirements of approximately $564 million.
Derivatives Accompanied by Financial Asset Transfers
The Company executes total return swaps which provide it with synthetic exposure to substantially all of the economic
return of the securities or other financial assets referenced in the contract. In certain cases, the derivative transaction is
accompanied by the Company’s transfer of the referenced financial asset to the derivative counterparty, most typically in
response to the derivative counterparty’s desire to hedge, in whole or in part, its synthetic exposure under the derivative
contract by holding the referenced asset in funded form. In certain jurisdictions these transactions qualify as sales,
resulting in derecognition of the securities transferred (see Note 1 to the Consolidated Financial Statements for further
discussion of the related sale conditions for transfers of financial assets). For a significant portion of the transactions, the
Company has also executed another total return swap where the Company passes on substantially all of the economic
return of the referenced securities to a different third party seeking the exposure. In those cases, the Company is not
exposed, on a net basis, to changes in the economic return of the referenced securities.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
39
These transactions generally involve the transfer of the Company’s liquid government bonds, convertible bonds, or
publicly traded corporate equity securities from the trading portfolio and are executed with third-party financial
institutions. The accompanying derivatives are typically total return swaps. The derivatives are cash settled and subject
to ongoing margin requirements.
When the conditions for sale accounting are met, the Company reports the transfer of the referenced financial asset as a
sale and separately reports the accompanying derivative transaction. These transactions generally do not result in a gain
or loss on the sale of the security, because the transferred security was held at fair value in the Company’s trading
portfolio. For transfers of financial assets accounted for by the Company as a sale, where the Company has retained
substantially all of the economic exposure to the transferred asset through a total return swap executed in contemplation
of the initial sale with the same counterparty and still outstanding as of December 31, 2015, both the asset carrying
amounts derecognized and gross cash proceeds received as of the date of derecognition were $1.0 billion. At December
31, 2015, the fair value of these previously derecognized assets was $1.0 billion and the fair value of the total return
swaps was $7 million recorded as gross derivative assets and $35 million recorded as gross derivative liabilities. The
balances for the total return swaps are on a gross basis, before the application of counterparty and cash collateral netting,
and are included primarily as equity derivatives in the tabular disclosures in this Note.
10. CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic, industry or geographic factors similarly affect groups of
counterparties whose aggregate credit exposure is material in relation to the Company’s total credit exposure. Although
the Company’s portfolio of financial instruments is broadly diversified along product and geographic lines, material
transactions are completed with other financial institutions, particularly in the securities trading, derivatives and foreign
exchange businesses.
In connection with the Company’s efforts to maintain a diversified portfolio, the Company limits its exposure to any one
geographic region, country or individual creditor and monitors this exposure on a continuous basis. At December 31,
2015, the Company’s most significant concentration of credit risk was with the U.S. government and its agencies. The
Company’s exposure, which primarily results from trading assets issued by the U.S. government and its agencies,
amounted to $35.2 billion and $39.6 billion at December 31, 2015 and 2014, respectively. With the addition of U.S.
government and U.S. government agency securities pledged as collateral by counterparties in connection with
collateralized financing activity, the Company’s total holdings of U.S. government securities were approximately $161
billion or 36% of the Company’s total assets before netting at December 31, 2015, and approximately $174 billion or
37% of the Company’s total assets before netting at December 31, 2014. Concentrations with foreign governments
totaled approximately $85 billion and $87 billion at December 31, 2015 and 2014, respectively. These consist
predominantly of securities issued by the governments of major industrialized nations.
11. FAIR VALUE MEASUREMENT
ASC 820-10 Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair value and
requires disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Among
other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value.
Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative and other
positions as well as the impact of the Company’s own credit risk on derivatives and other liabilities measured at fair
value.
Fair Value Hierarchy
ASC 820-10 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable
inputs are developed using market data and reflect market participant assumptions, while unobservable inputs reflect the
Company’s market assumptions. These two types of inputs have created the following fair value hierarchy:
Level 1: Quoted prices for identical instruments in active markets.
Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
40
Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant
value drivers are unobservable.
As required under the fair value hierarchy, the Company considers relevant and observable market inputs in its
valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment
necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance
of observed prices in those markets.
The Company’s policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into
and out of each level as of the end of the reporting period.
Determination of Fair Value
For assets and liabilities carried at fair value, the Company measures fair value using the procedures set out below,
irrespective of whether the assets and liabilities are measured at fair value as a result of an election or whether they are
required to be measured at fair value.
When available, the Company uses quoted market prices to determine fair value and classifies such items as Level 1. In
some cases where a market price is available, the Company will make use of acceptable practical expedients (such as
matrix pricing) to calculate fair value, in which case the items are classified as Level 2.
The Company may also apply a price-based methodology, which utilizes, where available, quoted prices or other market
information obtained from recent trading activity in positions with the same or similar characteristics to the position
being valued. The market activity and the amount of the bid-ask spread are among the factors considered in determining
the liquidity of markets and the observability of prices from those markets. If relevant and observable prices are
available, those valuations may be classified as Level 2. When less liquidity exists for a security or loan, a quoted price
is stale, a significant adjustment to the price of a similar security is necessary to reflect differences in the terms of the
actual security or loan being valued, or prices from independent sources are insufficient to corroborate the valuation, the
“price” inputs are considered unobservable and the fair value measurements are classified as Level 3.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use,
where possible, current market-based parameters, such as interest rates, currency rates and option volatilities. Items
valued using such internally generated valuation techniques are classified according to the lowest level input or value
driver that is significant to the valuation. Thus, an item may be classified as Level 3 even though there may be some
significant inputs that are readily observable.
Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent
vendors or brokers. Vendors’ and brokers’ valuations may be based on a variety of inputs ranging from observed prices
to proprietary valuation models.
The following section describes the valuation methodologies used by the Company to measure various financial
instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is
generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those
models and any significant assumptions.
Market Valuation Adjustments
Generally, the unit of account for a financial instrument is the individual financial instrument. The Company applies
market valuation adjustments that are consistent with the unit of account, which does not include adjustment due to the
size of the Company’s position, except as follows. ASC 820-10 permits an exception, through an accounting policy
election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open
risk position when certain criteria are met. CGMHI has elected to measure certain portfolios of financial instruments,
such as derivatives, that meet those criteria on the basis of the net open risk position. The Company applies market
valuation adjustments, including adjustments to account for the size of the net open risk position, consistent with market
participant assumptions and in accordance with the unit of account.
Liquidity adjustments are applied to items in Level 2 or Level 3 of the fair-value hierarchy in an effort to ensure that the
fair value reflects the price at which the net open risk position could be liquidated. The liquidity adjustment is based on
the bid/offer spread for an instrument. When CGMHI has elected to measure certain portfolios of financial investments,
such as derivatives, on the basis of the net open risk position, the liquidity adjustment may be adjusted to take into
account the size of the position.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
41
Credit valuation adjustments (CVA) and, effective in the third quarter of 2014, funding valuation adjustments (FVA), are
applied to over-the-counter (OTC) derivative instruments in which the base valuation generally discounts expected cash
flows using the relevant base interest rate curve for the currency of the derivative (e.g., LIBOR for uncollateralized U.S.-
dollar derivatives). As not all counterparties have the same credit risk as that implied by the relevant base curve, a CVA
is necessary to incorporate the market view of both counterparty credit risk and CGMHI’s own credit risk in the
valuation. FVA reflects a market funding risk premium inherent in the uncollateralized portion of derivative portfolios,
and in collateralized derivatives where the terms of the agreement do not permit the reuse of the collateral received.
CGMHI’s CVA and FVA methodology is composed of two steps.
First, the exposure profile for each counterparty is determined using the terms of all individual derivative positions
and a Monte Carlo simulation or other quantitative analysis to generate a series of expected cash flows at future
points in time. The calculation of this exposure profile considers the effect of credit risk mitigants and sources of
funding, including pledged cash or other collateral and any legal right of offset that exists with a counterparty
through arrangements such as netting agreements. Individual derivative contracts that are subject to an enforceable
master netting agreement with a counterparty are aggregated as a netting set for this purpose, since it is those
aggregate net cash flows that are subject to nonperformance risk. This process identifies specific, point-in-time
future cash flows that are subject to nonperformance risk and unsecured funding, rather than using the current
recognized net asset or liability as a basis to measure the CVA and FVA.
Second, for CVA, market-based views of default probabilities derived from observed credit spreads in the credit
default swap (CDS) market are applied to the expected future cash flows determined in step one. CGMHI’s own-
credit CVA is determined using Citi-specific CDS spreads for the relevant tenor. Generally, counterparty CVA is
determined using CDS spread indices for each credit rating and tenor. For certain identified netting sets where
individual analysis is practicable (e.g., exposures to counterparties with liquid CDSs), counterparty-specific CDS
spreads are used. For FVA, a term structure of future liquidity spreads is applied to the expected future funding
requirement.
The CVA and FVA are designed to incorporate a market view of the credit and funding risk, respectively, inherent in the
derivative portfolio. However, most unsecured derivative instruments are negotiated bilateral contracts and are not
commonly transferred to third parties. Derivative instruments are normally settled contractually or, if terminated early,
are terminated at a value negotiated bilaterally between the counterparties. Thus, the CVA and FVA may not be realized
upon a settlement or termination in the normal course of business. In addition, all or a portion of these adjustments may
be reversed or otherwise adjusted in future periods in the event of changes in the credit or funding risk associated with
the derivative instruments.
The table below summarizes the CVA and FVA applied to the fair value of derivative instruments at December 31, 2015
and 2014:
Credit and funding valuation
adjustments
In millions of dollars
Counterparty CVA $ (151) $ (100)
Asset FVA (45) (32)
CGMHI (own-credit) CVA (1)
195 297
Liability FVA 30 1
Total CVA—derivative instruments (2)
29 166
contra-liability (contra-asset)
December 31, December 31,
2015 2014
(1) Determined using Citi-specific CDS spreads.
(2) FVA is included with CVA for presentation purposes.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
42
The table below summarizes pretax gains (losses) related to changes in CVA on derivative instruments, net of hedges,
FVA on derivatives and debt valuation adjustments (DVA) on the Company’s own fair value option (FVO) liabilities for
the years indicated:
In millions of dollars 2015 2014 2013
Counterparty CVA $ (92) $ (83) $ (16)
Asset FVA (14) (32) —
Own-credit CVA (1)
(8) 67 (101)
Liability FVA 40 1 —
Total CVA—derivative instruments (74) (47) (117)
DVA related to own FVO liabilities 79 41 (141)
Total CVA and DVA (2)
$ 5 $ (6) $ (258)
Credit/funding/debt valuation
adjustments gain (loss)
(1) Determined using Citi-specific CDS spreads.
(2) FVA is included with CVA for presentation purposes.
Valuation Process for Fair Value Measurements
Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and Price
Verification Policy and Standards, which is jointly owned by Finance and Risk Management.
For fair value measurements of substantially all assets and liabilities held by the Company, individual business units are
responsible for valuing the trading account assets and liabilities, and Product Control within Finance performs
independent price verification procedures to evaluate those fair value measurements. Product Control is independent of
the individual business units and reports to the Global Head of Product Control. It has authority over the valuation of
financial assets and liabilities. Fair value measurements of assets and liabilities are determined using various techniques,
including, but not limited to, discounted cash flows and internal models, such as option and correlation models.
Based on the observability of inputs used, the Company classifies the inventory as Level 1, Level 2 or Level 3 of the fair
value hierarchy. When a position involves one or more significant inputs that are not directly observable, price
verification procedures are performed that may include reviewing relevant historical data, analyzing profit and loss,
valuing each component of a structured trade individually, and benchmarking, among others.
Reports of inventory that is classified within Level 3 of the fair value hierarchy are distributed to senior ma nagement in
Finance, Risk and the business. This inventory is also discussed in Risk Committees and in monthly meetings with
senior trading management. As deemed necessary, reports may go to the Audit Committee of the Citigroup Board of
Directors or to the full Board of Directors. Whenever an adjustment is needed to bring the price of an asset or liability to
its exit price, such adjustment is reported to senior management along with other price verification results .
In addition, the pricing models used in measuring fair value are governed by an independent control framework.
Although the models are developed and tested by the individual business units, they are independently validated by the
Model Validation Group within Risk Management and reviewed by Finance with respect to their impact on the price
verification procedures. The purpose of this independent control framework is to assess model risk arising from models’
theoretical soundness, calibration techniques where needed, and the appropriateness of the model for a specific product
in a defined market. To ensure their continued applicability, models are independently reviewed annually. In addition,
Risk Management approves and maintains a list of products permitted to be valued under each approved model for a
given business.
Securities Borrowed or Purchased Under Agreements to Resell and Securities Loaned or Sold Under Agreements to
Repurchase
No quoted prices exist for such instruments, so fair value is determined using a discounted cash-flow technique. Cash
flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features.
These cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of
the underlying collateral. Generally, when such instruments are held at fair value, they are classified within Level 2 of the
fair value hierarchy, as the inputs used in the valuation are readily observable. However, certain long-dated positions are
classified within Level 3 of the fair value hierarchy.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
43
Trading Account Assets and Liabilities—Trading Securities and Trading Loans
When available, the Company uses quoted market prices in active markets to determine the fair value of trading
securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities
and exchange-traded equity securities.
For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing
valuation techniques, including discounted cash flows, price-based and internal models, such as Black-Scholes and
Monte Carlo simulation. Fair value estimates from these internal valuation techniques are verified, where possible, to
prices obtained from independent sources, including third-party vendors. Vendors compile prices from various sources
and may apply matrix pricing for similar bonds or loans where no price is observable. A price-based methodology
utilizes, where available, quoted prices or other market information obtained from recent trading activity of assets with
similar characteristics to the bond or loan being valued. The yields used in discounted cash flow models are derived from
the same price information. Trading securities and loans priced using such methods are generally classified as Level 2.
However, when less liquidity exists for a security or loan, a quoted price is stale, a significant adjustment to the price of
a similar security or loan is necessary to reflect differences in the terms of the actual security or loan being valued, or
prices from independent sources are insufficient to corroborate valuation, a loan or security is generally classified as
Level 3. The price input used in a price-based methodology may be zero for a security, such as a subprime CDO, that is
not receiving any principal or interest and is currently written down to zero.
Where the Company’s principal market for a portfolio of loans is the securitization market, the Company uses the
securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed
proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other
than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe
reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization
prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of
loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such
as commercial real estate loans, price verification of the hypothetical securitizations has been possible, since these
markets have remained active. Accordingly, this loan portfolio is classified as Level 2 of the fair value hierarchy.
For most of the lending and structured direct subprime exposures, fair value is determined utilizing observable
transactions where available, other market data for similar assets in markets that are not active and other internal
valuation techniques. The valuation of certain asset-backed security (ABS) CDO positions utilizes prices based on the
underlying assets of the ABS CDO.
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives, measured at fair value using quoted (i.e., exchange) prices in active markets, where
available, are classified as Level 1 of the fair value hierarchy.
Derivatives without a quoted price in an active market and derivatives executed over the counter are valued using
internal valuation techniques. These derivative instruments are classified as either Level 2 or Level 3 depending upon the
observability of the significant inputs to the model.
The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The
principal techniques used to value these instruments are discounted cash flows and internal models, including Black-
Scholes and Monte Carlo simulation.
The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate
yield curves, foreign-exchange rates, volatilities and correlation. The Company uses overnight indexed swap (OIS)
curves as fair value measurement inputs for the valuation of certain collateralized derivatives. CGMHI uses the relevant
benchmark curve for the currency of the derivative (e.g., the London Interbank Offered Rate for U.S. dollar derivatives)
as the discount rate for uncollateralized derivatives.
As referenced above, during the third quarter of 2014, CGMHI incorporated FVA into the fair value measurements due
to what it believes to be an industry migration toward incorporating the market’s view of funding risk premium in OTC
derivatives. The charge incurred in connection with the implementation of FVA was reflected in Principal transactions
as a change in accounting estimate. CGMHI’s FVA methodology leverages the existing CVA methodology to estimate a
funding exposure profile. The calculation of this exposure profile considers collateral agreements where the terms do not
permit the firm to reuse the collateral received, including where counterparties post collateral to third-party custodians.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
44
Investments
The investments category includes nonpublic investments in private equity and real estate entities. Determining the fair
value of nonpublic securities involves a significant degree of management judgment, as no quoted prices exist and such
securities are generally thinly traded. In addition, there may be transfer restrictions on private equity securities. The
Company’s process for determining the fair value of such securities utilizes commonly accepted valuation techniques,
including comparables analysis. In determining the fair value of nonpublic securities, the Company also considers events
such as a proposed sale of the investee company, initial public offerings, equity issuances or other observable
transactions.
Private equity securities are generally classified as Level 3 of the fair value hierarchy.
Short-Term Borrowings and Long-Term Debt
Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by utilizing
internal models using the appropriate discount rate for the applicable maturity. Such instruments are generally classified
as Level 2 of the fair value hierarchy when all significant inputs are readily observable.
The Company determines the fair value of hybrid financial instruments, including structured liabilities, using the
appropriate derivative valuation methodology (described above in “Trading account assets and liabilities—derivatives”)
given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the
observability of significant inputs to the model.
Alt-A Mortgage Securities
The Company classifies its Alt-A mortgage securities as trading investments. The securities are recorded at fair value
with changes in fair value reported in current earnings. For these purposes, the Company defines Alt-A mortgage
securities as non-agency residential mortgage-backed securities (RMBS) where (i) the underlying collateral has weighted
average FICO scores between 680 and 720 or (ii) for instances where FICO scores are greater than 720, RMBS have 30%
or less of the underlying collateral composed of full documentation loans.
Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally
determines the fair values of Alt-A mortgage securities utilizing internal valuation techniques. Fair value estimates from
internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Consensus data
providers compile prices from various sources. Where available, the Company may also make use of quoted prices for
recent trading activity in securities with the same or similar characteristics to the security being valued.
The valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, are price-based and
yield analysis. The primary market-derived input is yield. Cash flows are based on current collateral performance with
prepayment rates and loss projections reflective of current economic conditions of housing price change, unemployment
rates, interest rates, borrower attributes and other market indicators.
Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A
mortgage securities backed by Alt-A mortgages of lower quality or subordinated tranches in the capital structure are
mostly classified as Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of
prices available from independent sources.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
45
Items Measured at Fair Value on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are
measured at fair value on a recurring basis at December 31, 2015 and December 31, 2014. The Company’s hedging of
positions that have been classified in the Level 3 category is not limited to other financial instruments (hedging
instruments) that have been classified as Level 3, but also instruments classified as Level 1 or Level 2 of the fair value
hierarchy. The effects of these hedges are presented gross in the following tables:
Fair Value Levels
Gross Net
In millions of dollars at December 31, 2015 inventory balance
Assets
Securities borrowed or purchased under
agreements to resell $ — 176,292$ 367$ 176,659$ ($40,910) 135,749$
Trading non-derivative assets
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed — 23,700 735 24,435 — 24,435
Residential — 1,012 652 1,664 — 1,664
Commercial — 1,736 443 2,179 — 2,179
Total trading mortgage-backed securities — 26,448 1,830 28,278 — 28,278
U.S. Treasury and federal agency securities 7,176 3,606 1 10,783 — 10,783
State and municipal securities — 436 162 598 — 598
Foreign government securities 22,109 2,123 141 24,373 — 24,373
Corporate 87 11,202 368 11,657 — 11,657
Equity securities 22,717 2,308 96 25,121 — 25,121
Asset-backed securities — 1,172 2,733 3,905 — 3,905
Other trading assets — 1,194 219 1,413 — 1,413
Total trading non-derivative assets 52,089 48,489 5,550 106,128 — 106,128
Trading derivatives
Interest rate contracts 5 154,057 1,031 155,093
Foreign exchange contracts 5 31,256 171 31,432
Equity contracts 2,410 14,671 1,015 18,096
Commodity contracts 204 11,476 473 12,153
Credit derivatives — 14,477 1,061 15,538
Total trading derivatives 2,624 225,937 3,751 232,312
Cash collateral paid (3)
2,633
Netting agreements (206,360)
Netting of cash collateral received (17,465)
Total trading derivatives 2,624 225,937 3,751 234,945 (223,825) 11,120
Securities received as collateral 9,236 25 — 9,261 — 9,261
Investments
Foreign government — 1 — 1 — 1
Non-marketable equity securities (4) — 59 182 241 — 241
Total investments — 60 182 242 — 242
Loans (5) — 961 102 1,063 — 1,063
Total assets 63,949$ 451,764$ 9,952$ 528,298$ (264,735)$ 263,563$
Total as a percentage of gross assets (6)
12.2% 85.9% 1.9%
Level 1 (1)
Level 2 (1)
Level 3 Netting (2)
See footnotes on the next page.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
46
Items Measured at Fair Value on a Recurring Basis (continued) Gross Net
In millions of dollars at December 31, 2015 inventory balance
Liabilities
Securities loaned or sold under
agreements to repurchase $ — 76,439$ 1,247$ 77,686$ ($40,910) 36,776$
Trading account liabilities
Securities sold, not yet purchased 39,824 8,104 98 48,026 — 48,026
Trading derivatives
Interest rate contracts 5 147,258 772 148,035
Foreign exchange contracts 5 30,657 173 30,835
Equity contracts 2,225 20,168 1,750 24,143
Commodity contracts 263 11,037 2,395 13,695
Credit derivatives — 14,673 1,202 15,875
Total trading derivatives 2,498 223,793 6,292 232,583
Cash collateral received (7)
2,295
Netting agreements (206,360)
Netting of cash collateral paid (12,117)
Total trading derivatives 2,498 223,793 6,292 234,878 (218,477) 16,401
Obligations to return securities
received as collateral 9,236 25 — 9,261 — 9,261
Short-term borrowings — 57 5 62 — 62
Long-term debt — 813 791 1,604 — 1,604
Total liabilities 51,558$ 309,231$ 8,433$ 371,517$ (259,387)$ 112,130$
Total as a percentage of gross liabilities (6)
14.0% 83.7% 2.3%
Level 1 (1)
Level 2 (1)
Level 3 Netting (2)
(1) In 2015, the Company transferred assets of approximately $1.0 billion from Level 1 to Level 2, respectively, primarily related to
equity securities and foreign government securities not traded in active markets. In 2015, the Company transferred assets of
approximately $2.0 billion from Level 2 to Level 1, respectively, primarily related to equity securities traded with sufficient
frequency to constitute a liquid market. In 2015, the Company transferred liabilities of approximately $0.4 billion from Level 2 to
Level 1. In 2015, the Company transferred liabilities of approximately $0.3 billion from Level 1 to Level 2.
(2) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amou nts owed under
securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreemen t
and cash collateral offsetting.
(3) Reflects the net amount of $14,750 million of gross cash collateral paid, of which $12,117 million was used to offset derivative
liabilities.
(4) Amounts exclude $64 million investments measured at Net Asset Value (NAV) in accordance with ASU No. 2015-07, Fair Value
Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent). See Note 1 to the Consolidated Financial Statements.
(5) There is no allowance for loan losses recorded for loans reported at fair value.
(6) Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these percentages
are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collater al
paid/received on derivatives.
(7) Reflects the net amount of $19,760 million of gross cash collateral received, of which $17,465 million was used to offset
derivative assets.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
47
Items Measured at Fair Value on a Recurring Basis (continued)
Fair Value Levels
Gross Net
In millions of dollars at December 31, 2014 inventory balance
Assets
Securities borrowed or purchased under
agreements to resell $ — 186,988$ 3,161$ 190,149$ ($47,129) 143,020$
Trading non-derivative assets
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed — 23,992 870 24,862 — 24,862
Residential — 2,133 907 3,040 — 3,040
Commercial — 2,144 257 2,401 — 2,401
Total trading mortgage-backed securities — 28,269 2,034 30,303 — 30,303
U.S. Treasury and federal agency securities 10,291 4,484 — 14,775 — 14,775
State and municipal securities — 570 102 672 — 672
Foreign government securities 20,571 3,623 15 24,209 — 24,209
Corporate — 18,143 673 18,816 — 18,816
Equity securities 24,592 3,307 289 28,188 — 28,188
Asset-backed securities — 1,179 3,256 4,435 — 4,435
Other trading assets — 1,639 87 1,726 — 1,726
Total trading non-derivative assets 55,454 61,214 6,456 123,124 — 123,124
Trading derivatives
Interest rate contracts 74 212,422 1,266 213,762
Foreign exchange contracts — 38,016 242 38,258
Equity contracts 2,747 13,176 1,093 17,016
Commodity contracts 644 12,398 341 13,383
Credit derivatives — 25,086 500 25,586
Total trading derivatives 3,465 301,098 3,442 308,005
Cash collateral paid (3)
1,851
Netting agreements (280,280)
Netting of cash collateral received (13,716)
Total trading derivatives 3,465 301,098 3,442 309,856 (293,996) 15,860
Securities received as collateral 7,577 3 — 7,580 — 7,580
Investments
Foreign government — 1 — 1 — 1
Non-marketable equity securities (4) — 57 309 366 — 366
Total investments — 58 309 367 — 367
Loans (5) — 1,280 164 1,444 — 1,444
Total assets 66,496$ 550,641$ 13,532$ 632,520$ (341,125)$ 291,395$
Total as a percentage of gross assets (6)
10.5% 87.3% 2.2%
Level 1 (1)
Level 2 (1)
Level 3 Netting (2)
See footnotes on the next page.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
48
Items Measured at Fair Value on a Recurring Basis (continued)
Gross Net
In millions of dollars at December 31, 2014 inventory balance
Liabilities
Securities loaned or sold under
agreements to repurchase $ — 82,661$ 1,043$ 83,704$ (47,129)$ 36,575$
Trading account liabilities
Securities sold, not yet purchased 47,313 10,090 95 57,498 — 57,498
Trading derivatives
Interest rate contracts 24 207,915 1,169 209,108
Foreign exchange contracts — 36,678 106 36,784
Equity contracts 2,952 20,478 2,128 25,558
Commodity contracts 753 11,130 1,992 13,875
Credit derivatives — 25,434 604 26,038
Total trading derivatives 3,729 301,635 5,999 311,363
Cash collateral received (7)
6,028
Netting agreements (280,280)
Netting of cash collateral paid (12,791)
Total trading derivatives 3,729 301,635 5,999 317,391 (293,071) 24,320
Obligations to return securities
received as collateral 7,577 3 — 7,580 — 7,580
Short-term borrowings — 435 97 532 — 532
Long-term debt — 690 1,085 1,775 — 1,775
Total liabilities 58,619$ 395,514$ 8,319$ 468,480$ (340,200)$ 128,280$
Total as a percentage of gross liabilities (6)
12.7% 85.5% 1.8%
Level 1 (1)
Level 2 (1)
Level 3 Netting (2)
(1) In 2014, the Company transferred assets of approximately $0.9 billion and liabilities of approximately $1.0 billion from Leve l 1 to
Level 2 primarily due to CGMHI refining its methodology for certain equity contracts to reflect the prevalence of off-exchange
trading.
(2) Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under
securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreement
and cash collateral offsetting.
(3) Reflects the net amount of $14,642 million of gross cash collateral paid, of which $12,791 million was used to offset derivative
liabilities.
(4) Amounts exclude $94 million investments measured at Net Asset Value (NAV) in accordance with ASU No. 2015-07, Fair Value
Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its
Equivalent). See Note 1 to the Consolidated Financial Statements.
(5) There is no allowance for loan losses recorded for loans reported at fair value.
(6) Because the amount of the cash collateral paid/received has not been allocated to the Level 1, 2 and 3 subtotals, these perce ntages
are calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding the cash collateral
paid/received on derivatives.
(7) Reflects the net amount of $19,744 million of gross cash collateral received, of which $13,716 million was used to offset
derivative assets.
Changes in Level 3 Fair Value Category
The following tables present the changes in the Level 3 fair value category for the years ended December 31, 2015 and
2014. As discussed above, the Company classifies financial instruments as Level 3 of the fair value hierarchy when there is
reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the
valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable
either directly or indirectly. The gains and losses presented below include changes in the fair value related to both
observable and unobservable inputs.
The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains
and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting
losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In
addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair
value hierarchy. The effects of these hedges are presented gross in the following tables:
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
49
Unrealized
gains
Dec. 31, Principal into out of Dec. 31, (losses)
In millions of dollars 2014 transactions Other Level 3 Level 3 Purchases Issuances Sales Settlements 2015 still held (1)
Assets
Securities borrowed or purchased
under agreements to resell 3,161$ ($120) $ — $279 ($2,857) $12 $ — $ — ($108) 367$ ($5)
Trading non-derivative assets
Trading mortgage-backed securities
U.S. government-sponsored
agency guaranteed 870 24 — 864 (1,137) 766 — (689) 37 735 (4)
Residential 907 161 — 368 (481) 307 — (610) — 652 45
Commercial 257 11 — 253 (157) 423 — (344) — 443 (7)
Total trading mortgage-backed
securities 2,034 196 — 1,485 (1,775) 1,496 — (1,643) 37 1,830 34
U.S. Treasury and federal
agency securities — — — 2 (1) 2 — (2) — 1 —
State and municipal 102 7 — 19 (7) 115 — (74) — 162 (7)
Foreign government 15 (1) — 8 (9) 153 — (25) — 141 —
Corporate debt 673 164 — 206 (343) 627 — (968) 9 368 (29)
Equity securities 289 (69) — 308 (325) 198 — (305) — 96 (4)
Asset-backed securities 3,256 129 — 663 (274) 4,495 — (5,536) — 2,733 (174)
Other trading assets 87 86 — 3 (16) 120 — (61) — 219 (8)
Total trading non-derivative
assets 6,456 512 — 2,694 (2,750) 7,206 — (8,614) 46 5,550 (188)
Investments in non-marketable
equity securities 309 — (63) 26 — 4 — (53) (41) 182 45
Loans 164 — 10 691 (720) 90 — — (133) 102 —
Liabilities
Securities loaned or sold under
agreements to repurchase $1,043 ($23) $ — $ — $ — $ — $ — $302 ($121) $1,247 $134
Trading account liabilities
Securities sold, not
yet purchased 95 86 — 178 (159) — — 204 (134) 98 (7)
Derivatives, net (2)
Interest rate contracts (97) (40) — 3 (74) (1) — 4 (134) (259) 39
Foreign exchange contracts (136) 174 — (11) 15 (2) — 8 302 2 (89)
Equity contracts 1,035 (108) — (207) (252) (328) — 142 237 735 (340)
Commodity contracts 1,651 (450) — (50) 22 — — — (151) 1,922 (243)
Credit derivatives 104 (137) — 62 17 — — — (179) 141 (96)
Total derivatives, net (2)
2,557 (561) — (203) (272) (331) — 154 75 2,541 (729)
Short-term borrowings 97 13 — 2 (76) — 46 — (51) 5 —
Long-term debt 1,085 234 — (30) (148) — 191 — (73) 791 (115)
gains (losses) incl. in
Net realized/unrealized
Transfers
(1) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in fair value relating to assets and
liabilities classified as Level 3 that are still held at December 31, 2015.
(2) Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
50
Unrealized
gains
Dec. 31, Principal into out of Dec. 31, (losses)
In millions of dollars 2013 transactions Other Level 3 Level 3 Purchases Issuances Sales Settlements 2014 still held (1)
Assets
Securities borrowed or purchased
under agreements to resell 3,299$ ($30) $ — $84 ($8) $74 $ — $ — ($258) 3,161$ $133
Trading non-derivative assets
Trading mortgage-backed securities
U.S. government-sponsored
agency guaranteed 809 87 — 745 (865) 713 — (649) 30 870 (17)
Residential 979 286 — 347 (484) 769 — (990) — 907 86
Commercial 237 6 — 187 (171) 301 — (303) — 257 (5)
Total trading mortgage-backed
securities 2,025 379 — 1,279 (1,520) 1,783 — (1,942) 30 2,034 64
U.S. Treasury and federal
agency securities — — — — — 7 — (7) — —
State and municipal 109 3 — 21 — 21 — (52) — 102 (2)
Foreign government 22 (1) — 29 (123) 311 — (223) — 15 (4)
Corporate 1,696 (208) — 407 (492) 1,561 — (2,325) 34 673 (117)
Equity securities 162 (32) — 146 (209) 503 — (281) — 289 115
Asset-backed securities 4,268 585 — 158 (331) 3,825 — (5,249) — 3,256 5
Other trading assets 8 39 — (10) (3) 158 — (105) — 87 —
Total trading non-derivative
assets 8,290 765 — 2,030 (2,678) 8,169 — (10,184) 64 6,456 61
Investments in non-marketable
equity securities 118 — 152 67 — 82 — (41) (69) 309 9
Loans 160 — 13 — — 117 — (58) (68) 164 3
Other financial assets measured
on a recurring basis 54 — (54) — — — — — — — —
Liabilities
Securities loaned or sold under
agreements to repurchase $902 ($6) $ — $54 $3 $78 $ — $217 ($217) $1,043 ($34)
Trading account liabilities
Securities sold, not
yet purchased 168 (69) — 87 (92) — — 198 (335) 95 (92)
Derivatives, net (2)
Interest rate contracts 235 64 — (100) 18 (95) — 159 (250) (97) 63
Foreign exchange contracts (252) (67) — (26) 28 (5) — 32 20 (136) 36
Equity contracts 485 (342) — 599 (22) (397) — 211 (183) 1,035 (304)
Commodity contracts 1,806 (434) — (25) (127) — — — (437) 1,651 (171)
Credit derivatives 278 130 — (2) (17) — — — (25) 104 3
Total derivatives, net (2)
2,552 (649) — 446 (120) (497) — 402 (875) 2,557 (373)
Short-term borrowings 22 (29) — 81 1 8 27 — (71) 97 (11)
Long-term debt 949 (93) — 151 (77) — 33 — (64) 1,085 (85)
Net realized/unrealized
gains (losses) incl. in Transfers
(1) Represents the amount of total gains or losses for the period, included in earnings, attributable to the change in fair value relating to assets and
liabilities classified as Level 3 that are still held at December 31, 2014.
(2) Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
51
Level 3 Fair Value Rollforward
The following were the significant Level 3 transfers for the period December 31, 2014 to December 31, 2015:
Transfers of Securities borrowed or purchased under agreements to resell of $2.9 billion from Level 3 to Level 2
related to shortening of the remaining tenor of certain reverse repos. There is more transparency and observability
for repo curves used in the valuation of structured reverse repos with tenors up to five years; thus, these positions
are generally classified as Level 2.
Transfers of U.S. government-sponsored agency guaranteed MBS in Trading account assets of $0.9 billion from
Level 2 to Level 3, and of $1.1 billion from Level 3 to Level 2 primarily related to changes in observability due to
market trading activity.
There were no significant Level 3 transfers for the period December 31, 2013 to December 31, 2014.
Valuation Techniques and Inputs for Level 3 Fair Value Measurements The Company’s Level 3 inventory consists of both cash securities and derivatives of varying complexities. The valuation
methodologies applied to measure the fair value of these positions include discounted cash flow analyses, internal models
and comparative analysis. A position is classified within Level 3 of the fair value hierarchy when at least one input is
unobservable and is considered significant to its valuation. The specific reason an input is deemed unobservable varies.
For example, at least one significant input to the pricing model is not observable in the market, at least one significant
input has been adjusted to make it more representative of the position being valued, or the price quote available does not
reflect sufficient trading activities.
The following tables present the valuation techniques covering the majority of Level 3 inventory and the most significant
unobservable inputs used in Level 3 fair value measurements. Differences between this table and amounts presented in
the Level 3 Fair Value Rollforward table represent individually immaterial items that have been measured using a variety
of valuation techniques other than those listed.
Valuation Techniques and Inputs for Level 3 Fair Value Measurements
Fair Value (1)
As of December 31, 2015 (in millions) Methodology Input Low (2) (3)
High (2) (3)
Assets
Securities borrowed or purchased
under agreements to resell $367 Model-based Interest rate — % 2.03%
Yield 3.00% 3.00%
Mortgage-backed securities $1,370 Yield analysis Yield 0.50% 14.07%
443 Price-based Price $1.52 $110.28
State and municipal, foreign
government, corporate and
other debt securities $635 Price-based Price $ — $16,550
137 Model-based Discount to price 14.00% 14.00%
Forward price 35.09% 194.83%
Equity securities (4)
$74 Price-based Price $ — $535.43
Asset-backed securities $2,474 Price-based Price $5.55 $100.21
Non-marketable equity $171 Price-based Price $ — $132.78
Discount to price — % 20.00%
Derivatives – Gross (5)
Interest rate contracts (gross) $1,778 Model-based IR log-normal volatility 10.43% 137.02%
Mean reversion (5.52)% 20.00%
Foreign exchange contracts (gross) $333 Model-based Credit spread 65 bps 910 bps
Foreign exchange (FX) volatility 0.38% 25.73%
IR-FX correlation 40.00% 60.00%
IR-IR correlation 40.00% 40.00%
IR log-normal volatility 29.02% 137.02%
Mean reversion (5.52)% 10.00%
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
52
Fair Value (1)
As of December 31, 2015 (in millions) Methodology Input Low (2) (3)
High (2) (3)
Equity contracts (gross) (6)
$2,746 Model-based Equity volatility 1.00% 59.34%
Equity forward 82.72% 100.53%
Equity-FX correlation (88.17)% 56.85%
Equity-equity correlation (80.54)% 100.00%
Forward price 85.71% 103.49%
Commodity contracts (gross) $2,868 Model-based Forward price 35.09% 299.32%
Credit derivatives (gross) $1,982 Model-based Recovery rate 7.00% 47.00%
278 Price-based Credit correlation 5.00% 95.00%
Upfront points 7.00% 92.50%
Credit spread 5 bps 597 bps
Price $ — $100.00
Loans $60 Cash flow Yield 1.50% 4.50%
42 Model-based Interest rate 7.75% 10.00%
Liabilities
Securities loaned or sold under
agreements to repurchase $1,245 Model-based Interest rate 1.27% 2.02%
Trading account liabilities
Securities sold, not yet purchased $74 Price-based Price $ — $217.00
Short-term borrowings
and long-term debt $796 Model-based Forward price 35.09% 299.32%
Equity volatility 11.14% 39.83%
Interest rate 1.90% 10.00%
Equity forward 82.72% 100.53%
Equity-equity correlation (80.54)% 100.00%
Equity-FX correlation (88.17)% 56.85%
(1) The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of asse ts or
liabilities.
(2) Some inputs are shown as zero due to rounding.
(3) When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology invo lving the
input applies to only one large position.
(4) For equity securities, the price inputs are expressed on an absolute basis, not as a percentage of the notional amount.
(5) Trading account derivatives—assets and liabilities—are presented on a gross absolute value basis.
(6) Includes hybrid products.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
53
Fair Value (1)
As of December 31, 2014 (in millions) Methodology Input Low (2) (3)
High (2) (3)
Assets
Securities borrowed or purchased
under agreements to resell $2,919 Model-based Interest rate 1.27% 1.97%
Mortgage-backed securities $1,108 Yield analysis Yield 0.01% 19.91%
912 Price-based Price $ — $127.87
State and municipal, foreign
government, corporate and
other debt securities $533 Price-based Price $ — $146.38
164 Model-based Forward price 35.34% 268.77%
Commodity correlation (57.00)% 91.00%
Commodity volatility 5.00% 83.00%
Equity securities (4)
$287 Price-based Price (4) $ — $141.00
Appraised value $3.81 $14,833,711
Asset-backed securities $3,090 Price-based Price $ — $105.50
Non-marketable equity $294 Price-based Appraised value $ — $58,777,723
Discount to price — % 20.00%
Price $100.00 $100.00
Derivatives – Gross (5)
Interest rate contracts (gross) $2,365 Model-based Interest rate (IR)
lognormal volatility 18.05% 90.65%
Interest rate — % 20.00%
Mean reversion 1.00% 20.00%
Foreign exchange contracts (gross) $346 Model-based Foreign exchange (FX) volatility 0.37% 58.40%
Credit spread 33 bps 337 bps
IR-FX correlation 40.00% 60.00%
IR-IR correlation 40.00% 40.00%
IR basis (0.69)% (0.16)%
Equity contracts (gross) (6)
$2,983 Model-based Equity volatility 9.56% 82.44%
Equity forward 89.50% 100.80%
Equity-equity correlation (66.30)% 94.80%
Equity-FX correlation (88.20)% 48.70%
Commodity contracts (gross) $2,332 Model-based Forward price 35.34% 268.77%
Commodity correlation (57.00)% 91.00%
Commodity volatility 5.00% 83.00%
Credit derivatives (gross) $614 Model-based Price $1.00 $103.03
485 Price-based Recovery rate 20.00% 60.00%
Credit correlation — % 95.00%
Credit spread 1 bps 7,816 bps
Upfront points 55.01 99.90
Loans $164 Model-based Interest rate 8.00% 9.02%
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
54
Fair Value (1)
As of December 31, 2014 (in millions) Methodology Input Low (2) (3)
High (2) (3)
Liabilities
Securities loaned or sold under
agreements to repurchase $1,043 Model-based Interest rate 0.74% 2.26%
Trading account liabilities
Securities sold, not yet purchased $59 Model-based Equity volatility 14.70% 33.00%
37 Price-based Equity forward 89.50% 100.80%
Equity-equity correlation (66.30)% 94.80%
Equity-FX correlation (88.20)% 48.70%
Price $ — $133.60
Forward price 35.34% 268.77%
Commodity correlation (57.00)% 91.00%
Short-term borrowings
and long-term debt $1,123 Model-based Forward price 35.34% 268.77%
59 Price-based Commodity correlation (57.00)% 91.00%
Commodity volatility 5.00% 83.00%
Equity volatility 6.10% 47.99%
Interest rate 2.16% 2.26%
Equity forward 89.50% 100.80%
(1) The fair value amounts presented in this table represent the primary valuation technique or techniques for each class of assets or
liabilities.
(2) Some inputs are shown as zero due to rounding.
(3) When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the
input applies to only one large position.
(4) For equity securities, the price inputs are expressed on an absolute basis, not as a percentage of the notional amount.
(5) Trading account derivatives—assets and liabilities—are presented on a gross absolute value basis.
(6) Includes hybrid products.
Sensitivity to Unobservable Inputs and Interrelationships between Unobservable Inputs
The impact of key unobservable inputs on the Level 3 fair value measurements may not be independent of one another.
In addition, the amount and direction of the impact on a fair value measurement for a given change in an unobservable
input depends on the nature of the instrument as well as whether the Company holds the instrument as an asset or a
liability. For certain instruments, the pricing, hedging and risk management are sensitive to the correlation between
various inputs rather than on the analysis and aggregation of the individual inputs.
The following section describes the sensitivities and interrelationships of the most significant unobservable inputs used
by the Company in Level 3 fair value measurements.
Correlation Correlation is a measure of the extent to which two or more variables change in relation to each other. A variety of
correlation-related assumptions are required for a wide range of instruments, including equity and credit baskets, foreign-
exchange options, CDOs backed by loans or bonds, mortgages, subprime mortgages and many other instruments. For almost
all of these instruments, correlations are not observable in the market and must be calculated using historical information.
Estimating correlation can be especially difficult where it may vary over time. Calculating correlation information from
market data requires significant assumptions regarding the informational efficiency of the market (for example, swaption
markets). Changes in correlation levels can have a major impact, favorable or unfavorable, on the value of an instrument,
depending on its nature. A change in the default correlation of the fair value of the underlying bonds comprising a CDO
structure would affect the fair value of the senior tranche. For example, an increase in the default correlation of the
underlying bonds would reduce the fair value of the senior tranche, because highly correlated instruments produce larger
losses in the event of default and a part of these losses would become attributable to the senior tranche. That same change in
default correlation would have a different impact on junior tranches of the same structure.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
55
Volatility
Volatility represents the speed and severity of market price changes and is a key factor in pricing options. Typically,
instruments can become more expensive if volatility increases. For example, as an index becomes more volatile, the cost
to CGMHI of maintaining a given level of exposure increases because more frequent rebalancing of the portfolio is
required. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in
the contract. Volatilities for certain combinations of tenor and strike are not observable. The general relationship between
changes in the value of a portfolio to changes in volatility also depends on changes in intere st rates and the level of the
underlying index. Generally, long option positions (assets) benefit from increases in volatility, whereas short option
positions (liabilities) will suffer losses. Some instruments are more sensitive to changes in volatility than others. For
example, an at-the-money option would experience a larger percentage change in its fair value than a deep-in-the-money
option. In addition, the fair value of an option with more than one underlying security (for example, an option on a baske t
of bonds) depends on the volatility of the individual underlying securities as well as their correlations.
Yield
Adjusted yield is generally used to discount the projected future principal and interest cash flows on instruments, such as
asset-backed securities. Adjusted yield is impacted by changes in the interest rate environment and relevant credit
spreads.
In some circumstances, the yield of an instrument is not observable in the market and must be estimated from historical
data or from yields of similar securities. This estimated yield may need to be adjusted to capture the characteristics of the
security being valued. In other situations, the estimated yield may not represent sufficient market liquidity and must be
adjusted as well. Whenever the amount of the adjustment is significant to the value of the security, the fair value
measurement is classified as Level 3.
Recovery
Recovery is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a
liquidation scenario. For many credit securities (such as asset-backed securities), there is no directly observable market
input for recovery, but indications of recovery levels are available from pricing services. The assumed recovery of a
security may differ from its actual recovery that will be observable in the future. The recovery rate impacts the valuation
of credit securities. Generally, an increase in the recovery rate assumption increases the fair value of the security. An
increase in loss severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and,
as a result, decreases the fair value of the security.
Credit Spread
Credit spread is a component of the security representing its credit quality. Credit spread reflects the market perception of
changes in prepayment, delinquency and recovery rates, therefore capturing the impact of other variables on the fair
value. Changes in credit spread affect the fair value of securities differently depending on the characteristics and maturity
profile of the security. For example, credit spread is a more significant driver of the fair value measurement of a high
yield bond as compared to an investment grade bond. Generally, the credit spread for an investment grade bond is also
more observable and less volatile than its high yield counterpart.
Mean Reversion
A number of financial instruments require an estimate of the rate at which the interest rate reverts to its long term
average. Changes in this estimate can significantly affect the fair value of these instruments. However, sometimes there is
insufficient external market data to calibrate this parameter, especially when pricing more complex instruments. The
level of mean reversion affects the correlation between short and long term interest rates. The fair values of more
complex instruments, such as Bermudan swaptions (options with multiple exercise dates) and constant maturity spread
options, are more sensitive to the changes in this correlation as compared to less complex instruments, such as caps and
floors.
Qualitative Discussion of the Ranges of Significant Unobservable Inputs
The following section describes the ranges of the most significant unobservable inputs used by the Company in Level 3
fair value measurements. The level of aggregation and the diversity of instruments held by the Company lead to a wide
range of unobservable inputs that may not be evenly distributed across the Level 3 inventory.
Correlation
There are many different types of correlation inputs, including credit correlation, cross-asset correlation (such as equity-
interest rate correlation), and same-asset correlation (such as interest rate-interest rate correlation). Correlation inputs are
generally used to value hybrid and exotic instruments. Generally, same-asset correlation inputs have a narrower range
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
56
than cross-asset correlation inputs. However, due to the complex and unique nature of these instruments, the ranges for
correlation inputs can vary widely across portfolios.
Volatility
Similar to correlation, asset-specific volatility inputs vary widely by asset type. For example, ranges for foreign exchange
volatility are generally lower and narrower than equity volatility. Equity volatilities are wider due to the nature of the
equities market and the terms of certain exotic instruments. For most instruments, the interest rate volatility input is on
the lower end of the range; however, for certain structured or exotic instruments (such as exotic interest rate derivatives),
the range is much wider.
Yield
Ranges for the yield inputs vary significantly depending upon the type of security. For example, securities that typically
have lower yields, such as municipal bonds, will fall on the lower end of the range, while more illiquid securities or
securities with lower credit quality, such as certain residual tranche asset-backed securities, will have much higher yield
inputs.
Credit Spread
Credit spread is relevant primarily for fixed income and credit instruments; however, the ranges for the credit spread
input can vary across instruments. For example, certain fixed income instruments, such as certificates of deposit,
typically have lower credit spreads, whereas certain derivative instruments with high-risk counterparties are typically
subject to higher credit spreads when they are uncollateralized or have a longer tenor. Other instruments, such as credit
default swaps, also have credit spreads that vary with the attributes of the underlying obligor. Stronger companies have
tighter credit spreads, and weaker companies have wider credit spreads.
Price
The price input is a significant unobservable input for certain fixed income instruments. For these instruments, the price
input is expressed as a percentage of the notional amount, with a price of $100 meaning that the inst rument is valued at
par. For most of these instruments, the price varies between zero to $100, or slightly above $100. Relatively illiquid
assets that have experienced significant losses since issuance, such as certain asset-backed securities, are at the lower end
of the range, whereas most investment grade corporate bonds will fall in the middle to the higher end of the range. For
certain structured debt instruments with embedded derivatives, the price input may be above $100 to reflect the
embedded features of the instrument (for example, a step-up coupon or a conversion option).
The price input is also a significant unobservable input for certain equity securities ; however, the range of price inputs
varies depending on the nature of the position, the number of shares outstanding and other factors.
Estimated Fair Value of Financial Instruments Not Carried at Fair Value
The table below presents the carrying value and fair value of the Company’s financial instruments that are not carried at
fair value. The table below therefore excludes items measured at fair value on a recurring basis presented in the tables
above.
The disclosure also excludes the effect of taxes, any premium or discount that could result from offering for sale at one
time the entire holdings of a particular instrument, and other expenses that would be incurred in a market transaction. In
addition, the table excludes the values of non-financial assets and liabilities, as well as intangible values, which are
integral to a full assessment of the Company’s financial position and the value of its net assets.
The fair value represents management’s best estimates based on a range of methodologies and assumptions. The carrying
value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the
ordinary course of business, approximates fair value because of the relatively short period of time between their
origination and expected realization.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
57
Estimated fair value
Carrying Estimated
In billions of dollars value fair value Level 1 Level 2 Level 3
Assets
Securities borrowed or purchased under
agreements to resell $57.5 $57.5 $ — $57.5 $ —
Receivables 38.7 38.7 — 18.1 20.6
Other financial assets (1)
22.2 22.2 — 18.8 3.4
Liabilities
Securities loaned or sold under
agreements to repurchase $107.7 $107.7 $ — $107.7 $ —
Long-term debt 52.1 52.1 — 49.0 3.1
Other financial liabilities (2)
86.9 86.9 — 34.9 52.0
December 31, 2015
Estimated fair value
Carrying Estimated
In billions of dollars value fair value Level 1 Level 2 Level 3
Assets
Securities borrowed or purchased under
agreements to resell $58.2 $58.2 $ — $58.2 $ —
Receivables 40.4 40.4 — 15.8 24.6
Other financial assets (1)
13.6 13.6 — 10.1 3.5
Liabilities
Securities loaned or sold under
agreements to repurchase $135.4 $135.4 $ — $135.4 $ —
Long-term debt 40.4 40.4 — 36.8 3.6
Other financial liabilities (2)
78.8 78.8 — 31.1 47.7
December 31, 2014
(1) Includes cash and cash equivalents, cash segregated under federal and other regulations and other financial instruments included in Other
assets on the Consolidated Statement of Financial Condition, for all of which the carrying value is a reasonable estimate of fair value.
(2) Includes short-term borrowings (carried at cost), payables to customers and brokers, dealers and clearing organizations, and other
financial instruments included in Other payables and accrued liabilities on the Consolidated Statement of Financial Condition, for all of
which the carrying value is a reasonable estimate of fair value.
Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality
and market perceptions of value, and as existing assets and liabilities run off and new transactions are entered into.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
58
12. FAIR VALUE ELECTIONS
The Company may elect to report most financial instruments at fair value on an instrument-by-instrument basis with
changes in fair value reported in earnings. The election is made upon the initial recognition of an eligible financial asset or
financial liability or when certain specified reconsideration events occur. The fair value election may not be revoked once an
election is made. The changes in fair value are recorded in current earnings. Additional discussion regarding the applicable
areas in which fair value elections were made is presented in Note 11 to the Consolidated Financial Statements.
The following table presents the changes in fair value gains and losses associated with those items for which the fair value
option was elected:
In millions of dollars 2015 2014
Assets
Selected portfolios of securities purchased under
agreements to resell and securities borrowed ($100) ($164)
Certain investments in private equity and real estate
ventures and certain equity method investments 5 17
Certain corporate loans (22) (12)
Total assets ($117) ($159)
Liabilities
Selected portfolios of securities sold under
agreements to repurchase and securities loaned $4 ($3)
Trading account liabilities 44 23
Short-term borrowings 6 2
Long-term debt 214 —
Total liabilities $268 $22
Changes in fair value gains (losses) for the
Years ended December 31,
Own Debt Valuation Adjustments
Own debt valuation adjustments are recognized on the Company’s liabilities for which the fair value option has been elected
using Citi’s credit spreads observed in the bond market. The fair value of liabilities for which the fair value option is elected
(other than non-recourse and similar liabilities) is impacted by the narrowing or widening of Citi’s credit spreads. The
estimated change in the fair value of these liabilities due to such changes in the Company’s own credit risk (or instrument-
specific credit risk) was a gain of $79 million and $41 million for the years ended December 31, 2015 and 2014,
respectively. Changes in fair value resulting from changes in instrument-specific credit risk were estimated by incorporating
Citi’s current credit spreads observable in the bond market into the relevant valuation technique used to value each liability
as described above.
The Fair Value Option for Financial Assets and Financial Liabilities
Selected Portfolios of Securities Purchased Under Agreements to Resell, Securities Borrowed, Securities Sold Under Agreements to Repurchase, Securities Loaned and Certain Non-Collateralized Short-Term Borrowings The Company elected the fair value option for certain portfolios of fixed-income securities purchased under agreements
to resell and fixed-income securities sold under agreements to repurchase, securities borrowed, securities loaned, and
certain non-collateralized short-term borrowings held primarily by broker-dealer entities in the United States and United
Kingdom. In each case, the election was made because the related interest-rate risk is managed on a portfolio basis,
primarily with derivative instruments that are accounted for at fair value through earnings.
Changes in fair value for transactions in these portfolios are recorded in Principal transactions. The related interest revenue
and interest expense are measured based on the contractual rates specified in the transactions and are reported as interest
revenue and expense in the Consolidated Statement of Operations.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
59
Certain Corporate Loans The Company has elected the fair value option for certain originated and purchased loans executed by the Company’s
trading business. None of these credit products are highly leveraged financing commitments. Significant groups of
transactions include loans that are expected to be either sold or securitized in the near term, or transactions where the
economic risks are hedged with derivative instruments, such as purchased credit default swaps or total return swaps
where the Company pays the total return on the underlying loans to a third party. The Company has elected the fair value
option to mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational
simplifications.
The following table provides information about certain corporate loans carried at fair value:
December 31, December 31,
In millions of dollars 2015 2014
Carrying amount reported on the Consolidated Statement of Financial Condition $1,063 $1,444
Aggregate unpaid principal balance in excess of (less than) fair value (86) 20
Changes in the fair value of funded and unfunded credit products are classified in Principal transactions in the
Company’s Consolidated Statement of Operations. Related interest revenue is measured based on the contractual interest
rates and reported as Interest revenue.
Certain Investments in Private Equity and Real Estate Ventures and Certain Equity Method and Other Investments The Company invests in private equity and real estate ventures for the purpose of earning investment returns and for
capital appreciation. The Company has elected the fair value option for certain of these ventures, because such
investments are considered similar to many private equity or hedge fund activities in the Company’s investment
companies, which are reported at fair value. The fair value option brings consistency in the accounting and evaluation of
these investments. All investments (debt and equity) in such private equity and real estate entities are accounted for at
fair value. These investments are classified as Other assets on the Company’s Consolidated Statement of Financial
Condition.
Changes in the fair values of these investments are classified in Other revenue in the Company’s Consolidated Statement of
Operations.
The Company also elects the fair value option for certain non-marketable equity securities whose risk is managed with
derivative instruments that are accounted for at fair value through earnings. These securities are classified as Trading
account assets on the Company’s Consolidated Statement of Financial Condition. Changes in the fair value of these
securities and the related derivative instruments are recorded in Principal transactions.
Certain Structured Liabilities The Company has elected the fair value option for certain structured liabilities whose performance is linked to structured
currency, equity, referenced credit or commodity risks. The Company elected the fair value option, because these
exposures are considered to be trading-related positions and, therefore, are managed on a fair value basis. These positions
are classified as Long-term debt on the Company’s Consolidated Statement of Financial Condition.
The following table provides information about the carrying value of structured notes, disaggregated by type of
embedded derivative instrument:
In millions of dollars December 31, 2015 December 31, 2014
Equity linked $456 $397
Credit linked 117 123
Commodity linked — 27
Total $573 $547
The change in the fair value of these structured liabilities is reported in Principal transactions in the Company’s
Consolidated Statement of Operations. Changes in fair value for these structured liabilities include an economic
component for accrued interest, which is included in the change in fair value reported in Principal transactions.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
60
Certain Non-Structured Liabilities The Company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates. The
Company has elected the fair value option where the interest-rate risk of such liabilities is economically hedged with
derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through
earnings. The election has been made to mitigate accounting mismatches and to achieve operational simplifications. These
positions are reported in Short-term borrowings and Long-term debt on the Company’s Consolidated Statement of Financial
Condition. The change in fair value of these non-structured liabilities is reported in Principal transactions in the Company’s
Consolidated Statement of Operations. Related interest expense on non-structured liabilities is measured based on the
contractual interest rates and reported as Interest expense in the Consolidated Statement of Operations.
The following table provides information about long-term debt carried at fair value:
December 31, December 31,
In millions of dollars 2015 2014
Carrying amount reported on the Consolidated Statement of Financial Condition $1,604 $1,775
Aggregate unpaid principal balance in excess of (less than) fair value 313 (185)
13. COLLATERAL, COMMITMENTS AND GUARANTEES
Collateral At December 31, 2015 and 2014, the approximate fair value of collateral received by the Company that may be resold or
repledged, excluding the impact of allowable netting, was $375.0 billion and $372.0 billion, respectively. This collateral
was received in connection with resale agreements, securities borrowings and loans, derivative transactions and margined
broker loans.
At December 31, 2015 and 2014, a substantial portion of the collateral received by the Company had been sold or
repledged in connection with repurchase agreements, securities sold, not yet purchased, securities borrowings and loans,
pledges to clearing organizations, segregation requirements under securities laws and regulations, derivative transactions
and bank loans.
In transactions where the Company acts as a lender in a securities lending agreement and receives securities that can be
pledged or sold as collateral, it recognizes an asset on the Consolidated Statement of Financial condition, representing the
securities received, and a liability for the same amount, representing the obligation to return those securities. These
transactions are included in Securities received as collateral and Obligations to return securities received as collateral on
the accompanying Consolidated Statement of Financial Condition. The fair value of these transactions was approximately
$9.3 billion and $7.6 billion at December 31, 2015 and 2014, respectively.
Lease Commitments
Rental expense (principally for offices and computer equipment) was $296 million, $234 million and $251 million for the
years ended December 31, 2015, 2014 and 2013, respectively. Future minimum annual rentals under noncancelable
leases, net of sublease income, are $11 million at December 31, 2015.
Guarantees
CGMHI provides a variety of guarantees and indemnifications to its customers to enhance their credit standing and
enable them to complete a wide variety of business transactions. For certain contracts meeting the definition of a
guarantee, the guarantor must recognize, at inception, a liability for the fair value of the obligation undertaken in issuing
the guarantee.
In addition, the guarantor must disclose the maximum potential amount of future payments that the guarantor could be
required to make under the guarantee, if there were a total default by the guaranteed parties. The determination of the
maximum potential future payments is based on the notional amount of the guarantees without consideration of possible
recoveries under recourse provisions or from collateral held or pledged. As such, CGMHI believes such amounts bear no
relationship to the anticipated losses, if any, on these guarantees.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
61
Derivative Instruments Considered to Be Guarantees Derivatives are financial instruments whose cash flows are based on a notional amount and an underlying instrument,
reference credit or index, where there is little or no initial investment, and whose terms require or permit net settlement.
For a discussion of CGMHI’s derivatives activities, see Note 9 to the Consolidated Financial Statements.
Derivative instruments considered to be guarantees include only those instruments that require CGMHI to make
payments to the counterparty based on changes in an underlying instrument that is related to an asset, a liability or an
equity security held by the guaranteed party. More specifically, derivative instruments considered to be guarantees
include certain over-the-counter written put options where the counterparty is not a bank, hedge fund or broker-dealer
(such counterparties are considered to be dealers in these markets and may, therefore, not hold the underlying
instruments). Credit derivatives sold by CGMHI are excluded from the guarantees disclosure as they are disclosed
separately in Note 9 to the Consolidated Financial Statements. In instances where CGMHI’s maximum potential future
payment is unlimited, the notional amount of the contract is disclosed.
As of December 31, 2015, the maximum potential amount of future payments on derivative instruments considered to be
guarantees was $2,712 million, including $1,191 million expiring within one year. As of December 31, 2014, the
maximum potential amount of future payments on derivative instruments considered to be guarantees was $2,095 million,
including $1,685 million expiring within one year. The carrying amount of the liabilities related to these derivative
instruments considered to be guarantees was $210 million and $463 million at December 31, 2015 and 2014, respectively,
and is recorded at fair value in Trading account liabilities.
Securities Lending Indemnifications
Owners of securities frequently lend those securities for a fee to other parties who may sell them short or deliver them to
another party to satisfy some other obligation. Broker-dealers may administer such securities lending programs for their
clients. Securities lending indemnifications are issued by the broker-dealer to guarantee that a securities lending customer
will be made whole in the event that the security borrower does not return the security subject to the lending agreement and
collateral held is insufficient to cover the market value of the security. CGMHI had issued $11.8 billion and $11.3 billion in
fully collateralized securities lending indemnifications at December 31, 2015 and December 31, 2014, respectively. The
carrying value of securities lending indemnifications was not material for either period, as the probability of potential
liabilities arising from these guarantees is minimal.
Other Guarantees and Indemnifications
Other Representation and Warranty Indemnifications
In the normal course of business, the Company provides standard representations and warranties to counterparties in
contracts in connection with numerous transactions and also provides indemnifications, including indemnifications that
protect the counterparties to the contracts in the event that additional taxes are owed, due either to a change in the tax law
or an adverse interpretation of the tax law. Counterparties to these transactions provide the Company with comparable
indemnifications. While such representations, warranties and indemnifications are essential components of many
contractual relationships, they do not represent the underlying business purpose for the transactions. The indemnification
clauses are often standard contractual terms related to the Company’s own performance under the terms of a contract and
are entered into in the normal course of business based on an assessment that the risk of loss is remote. Often these
clauses are intended to ensure that terms of a contract are met at inception. No compensation is received for these
standard representations and warranties, and it is not possible to determine their fair value because they rarely, if ever,
result in a payment. In many cases, there are no stated or notional amounts included in the indemnification clauses , and
the contingencies potentially triggering the obligation to indemnify have not occurred and are not expected to occur. As a
result, there are no amounts reflected on the Consolidated Statement of Financial Condition as of December 31, 2015 or
December 31, 2014 for potential obligations that could arise from these indemnifications provided by the Company.
Value-Transfer Networks
The Company is a member of, or shareholder in, a number of value-transfer networks (VTNs) (payment, clearing and
settlement systems as well as exchanges) around the world. As a condition of membership, many of these VTNs require
that members stand ready to pay a pro rata share of the losses incurred by the organization due to another member’s
default on its obligations. The Company’s potential obligations may be limited to its membership interests in the VTNs,
contributions to the VTN’s funds, or, in limited cases, the obligation may be unlimited. The maximum exposure cannot
be estimated as this would require an assessment of future claims that have not yet occurred. Management believes the
risk of loss is remote given historical experience with the VTNs. Accordingly, there are no amounts reflected on the
Consolidated Statement of Financial Condition as of December 31, 2015 or December 31, 2014 for potential obligations
that could arise from the Company’s involvement with VTN associations.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
62
Futures and Over-the-Counter Derivatives Clearing
CGMHI provides clearing services for clients executing exchange-traded futures and over-the-counter (OTC) derivatives
contracts with central counterparties (CCPs). Based on all relevant facts and circumstances, CGMHI has concluded that it
acts as an agent for accounting purposes in its role as clearing member for these client transactions. As such, CGMHI
does not reflect the underlying exchange-traded futures or OTC derivatives contracts in its Consolidated Financial
Statements. See Note 9 for a discussion of CGMHI’s derivatives activities that are reflected in its Consolidated Financial
Statements.
As a clearing member, CGMHI collects and remits cash and securities collateral (margin) between its clients and the
respective CCP. There are two types of margin: initial margin and variation margin. Where CGMHI obtains benefits from
or controls cash initial margin (e.g., retains an interest spread), cash initial margin collected from clients and remitted to
the CCP is reflected within Payables to customers and Receivables from brokers, dealers and clearing organizations,
respectively. However, for OTC derivatives contracts where CGMHI has contractually agreed with the client that (i)
CGMHI will pass through to the client all interest paid by the CCP on cash initial margin; (ii) CGMHI will not utilize its
right as clearing member to transform cash margin into other assets; and (iii) CGMHI does not guarantee and is not liable
to the client for the performance of the CCP, cash initial margin collected from clients and remitted to the CCP is not
reflected on the Company’s Consolidated Statement of Financial Condition. The total amount of cash initial margin
collected and remitted in this manner was approximately $4.0 billion and $3.2 billion as of December 31, 2015 and
December 31, 2014, respectively.
Variation margin due from clients to the respective CCP, or from the CCP to clients, reflects changes in the value of the
client’s derivative contracts for each trading day. As a clearing member, CGMHI is exposed to the risk of non-
performance by clients (e.g., failure of a client to post variation margin to the CCP for negative changes in the value of
the client’s derivative contracts). In the event of non-performance by a client, CGMHI would move to close out the
client’s positions. The CCP would typically utilize initial margin posted by the client and held by the CCP, with any
remaining shortfalls required to be paid by CGMHI as clearing member. CGMHI generally holds incremental cash or
securities margin posted by the client, which would typically be expected to be sufficient to mitigate CGMHI’s credit risk
in the event the client fails to perform.
As required by ASC 860-30-25-5, securities collateral posted by clients is not recognized on the Company’s Consolidated
Statement of Financial Condition.
Credit Commitments
Credit commitments include commercial commitments to make or purchase loans, to purchase third -party receivables, to
provide note issuance or revolving underwriting facilities and to invest in the form of equity. Total credit commitments
were $2.6 billion and $1.5 billion at December 31, 2015 and December 31, 2014, respectively.
In addition, included in these amounts are highly leveraged financing commitments, which are agreements t hat provide
funding to a borrower with higher levels of debt (measured by the ratio of debt capital to equity capital of the borrower)
than is generally considered normal for other companies. This type of financing is commonly employed in corporate
acquisitions, management buy-outs and similar transactions.
14. RELATED PARTY TRANSACTIONS
Pursuant to various intercompany agreements, a number of significant transactions are carried out between the Company
and Citigroup and/or their affiliates, including Citigroup parent company.
Detailed below is a summary of the Company’s transactions with other Citigroup affiliates which are included in the
accompanying Consolidated Statement of Operations and Consolidated Statement of Financial Condition at December
31, 2015 and 2014. These amounts exclude intra-Company balances that eliminate in consolidation.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
63
STATEMENT OF OPERATIONS ITEMS
In millions of dollars 2015 2014 2013
Revenues
Principal transactions (1)
(3,880)$ 3,822$ 1,491$
Investment banking 212 90 36
All other revenues (2)
1,532 1,268 863
Total non-interest revenues (2,136) 5,180 2,390
Interest revenue 272 144 159
Interest expense 1,295 1,258 1,425
Net interest revenue (expense) (1,023) (1,114) (1,266)
Total revenues, net of interest expense (3,159)$ 4,066$ 1,124$
Operating expenses
Communications 462$ 406$ 351$
Prepayment penalty on long-term debt 58 113 1,227
All other expenses (3)
1,102 1,054 1,356
Total non-interest expenses 1,622$ 1,573$ 2,934$
Years ended December 31
(1) Includes mark-to-market valuation adjustments for derivatives or hedges executed with non-consolidated Citigroup affiliates, but
does not include mark-to-market valuation adjustments related to any offsetting derivatives or hedges executed with third-parties
external to Citigroup.
(2) Includes trade management and intermediation fees charged to affiliates.
(3) Includes expenses from affiliates for shared services and charges.
STATEMENT OF FINANCIAL CONDITION ITEMS
December 31, December 31,
In millions of dollars 2015 2014
Assets
Cash and cash equivalents 12,679$ 3,152$
Cash segregated under federal and other regulations 3,551 3,403
Securities borrowed or purchased under agreements to resell 15,035 6,601
Derivatives 1,765 4,956
Receivables:
Loans to affiliates 15,027 16,071
Customers and Brokers, dealers and clearing organizations 271 642
Other assets 613 325
Total assets 48,941$ 35,150$
Liabilities
Short-term borrowings 34,916$ 30,862$
Securities loaned or sold under agreements to repurchase 22,042 22,170
Derivatives 2,043 4,853
Payables and accrued liabilities:
Customers and Brokers, dealers and clearing organizations 9,871 7,262
Other 1,063 1,123
Long-term debt 51,171 39,145
Total liabilities 121,106$ 105,415$
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
64
Stock-Based Compensation and Retirement Benefits
As discussed in Note 3 to the Consolidated Financial Statements, the Company participates in various Citigroup stock-
based compensation programs under which Citigroup stock or stock options are granted to certain of the Company’s
employees. The Company has no stock-based compensation programs in which its own stock is granted. The Company
pays Citigroup directly for participation in certain of its stock-based compensation programs, but receives a capital
contribution for those awards related to participation in the employee incentive stock option program.
As discussed in Note 3 to the Consolidated Financial Statements, the Company participates in several non-contributory
defined benefit pension plans and a defined contribution plan sponsored by Citigroup covering certain eligible
employees.
CGMHI Tax-Sharing Agreement
As discussed in Note 4 to the Consolidated Financial Statements, the Company is included in the Citigroup consolidated
federal tax return and is a party to a tax-sharing agreement with Citigroup. Under such agreement, the Company is
entitled to a tax benefit for its losses and credits that are recognized in Citigroup's Consolidated Financial Statements.
Settlements between the Company and Citigroup of current taxes occur throughout the year. The Company also files its
consolidated and combined state income tax returns with Citigroup and/or other of its subsidiaries.
Other Intercompany Agreements
Citigroup and its subsidiaries engage in other transactions and servicing activities with the Company, including cas h
management, data processing, telecommunications, payroll processing and administration, facilities procurement,
underwriting and others.
15. CONTINGENCIES
Accounting and Disclosure Framework
ASC 450 governs the disclosure and recognition of loss contingencies, including potential losses from litigation and
regulatory matters. ASC 450 defines a “loss contingency” as “an existing condition, situation, or set of circumstances
involving uncertainty as to possible loss to an entity that will ultimately be resolved when one or more future events
occur or fail to occur.” It imposes different requirements for the recognition and disclosure of loss contingencies based
on the likelihood of occurrence of the contingent future event or events. It distinguishes among degrees of likelihood
using the following three terms: “probable,” meaning that “the future event or events are likely to occur”; “remote,”
meaning that “the chance of the future event or events occurring is slight”; and “reasonably possible,” meani ng that “the
chance of the future event or events occurring is more than remote but less than likely.” These three terms are used below
as defined in ASC 450. In establishing appropriate disclosure and recognition for loss contingencies, management
assesses each matter including the role of the relevant Citigroup legal entity. Because specific loss contingency matters
may involve multiple Citigroup legal entities and are not solely related to one legal entity, this process requires
management to make certain estimates and judgments that affect the Company’s Consolidated Financial Statements.
Accruals. ASC 450 requires accrual for a loss contingency when it is “probable that one or more future events will occur
confirming the fact of loss” and “the amount of the loss can be reasonably estimated.” In accordance with ASC 450,
Citigroup establishes accruals for contingencies, including the litigation and regulatory matters disclosed herein, when
Citigroup believes it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.
When the reasonable estimate of the loss is within a range of amounts, the minimum amount of the range is accrued,
unless some higher amount within the range is a better estimate than any other amount within the range. Once
established, accruals are adjusted from time to time, as appropriate, in light of additional information. The amount of loss
ultimately incurred in relation to those matters may be substantially higher or lower than the amounts accrued for those
matters.
Disclosure. ASC 450 requires disclosure of a loss contingency if “there is at least a reasonable possibility that a loss or
an additional loss may have been incurred” and there is no accrual for the loss because the conditions described above
are not met or an exposure to loss exists in excess of the amount accrued. In accordance with ASC 450, if Citigroup has
not accrued for a matter because Citigroup believes that a loss is reasonably possible but not probable, or that a loss is
probable but not reasonably estimable, and the matter thus does not meet the criteria for accrual, and the reasonably
possible loss is material, it discloses the loss contingency. In addition, Citigroup discloses matters for which it has
accrued if it believes a reasonably possible exposure to material loss exists in excess of the amount accrued. In
accordance with ASC 450, Citigroup’s disclosure includes an estimate of the reasonably possible loss or range of loss for
those matters as to which an estimate can be made. ASC 450 does not require disclosure of an estimate of the reasonably
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
65
possible loss or range of loss where an estimate cannot be made. Neither accrual nor disclosure is required for losses that
are deemed remote.
Litigation and Regulatory Contingencies Overview. In addition to the matters described below, in the ordinary course of business, CGMHI, its parent entity
Citigroup, and its affiliates and subsidiaries, and current and former officers, directors and employees (for purposes of
this section, sometimes collectively referred to as Citigroup and Related Parties) routinely are named as defendants in, or
as parties to, various legal actions and proceedings. Certain of these actions and proceedings assert claims or seek relief
in connection with alleged violations of consumer protection, securities, banking, antifraud, antitrust, anti -money
laundering, employment and other statutory and common laws. Certain of these actual or threatened legal actions and
proceedings include claims for substantial or indeterminate compensatory or punitive damages, or for injunctive relief,
and in some instances seek recovery on a class-wide basis.
In the ordinary course of business, Citigroup and Related Parties also are subject to governmental and regulatory
examinations, information-gathering requests, investigations and proceedings (both formal and informal), certain of
which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief.
In addition, certain affiliates and subsidiaries of Citigroup are banks, registered broker-dealers, futures commission
merchants, investment advisers or other regulated entities and, in those capacities, are subject to regulation by various
U.S., state and foreign securities, banking, commodity futures, consumer protection and other regulators. In connection
with formal and informal inquiries by these regulators, Citigroup and such affiliates and subsidiaries receive numerous
requests, subpoenas and orders seeking documents, testimony and other information in connection with various aspects
of their regulated activities. From time to time Citigroup and Related Parties also receive grand jury subpoenas and other
requests for information or assistance, formal or informal, from federal or state law enforcement agencies including,
among others, various United States Attorneys’ Offices, the Asset Forfeiture and Money Laundering Section and other
divisions of the Department of Justice, the Financial Crimes Enforcement Network of the United States Department of
the Treasury, and the Federal Bureau of Investigation relating to Citigroup and its customers.
Because of the global scope of Citigroup’s operations, and its presence in countries around the world, Citigroup and
Related Parties are subject to litigation and governmental and regulatory examinations, information-gathering requests,
investigations and proceedings (both formal and informal) in multiple jurisdictions with legal and regulatory regimes that
may differ substantially, and present substantially different risks, from those Citigroup and Related Parties are subject to
in the United States. In some instances Citigroup and Related Parties may be involved in proceedings involving the same
subject matter in multiple jurisdictions, which may result in overlapping, cumulative or inconsistent outcomes.
Citigroup and CGMHI seek to resolve all litigation and regulatory matters in the manner management believes is in the
best interests of Citigroup and its shareholders, and contests liability, allegations of wrongdoing and, where applicable,
the amount of damages or scope of any penalties or other relief sought as appropriate in each pending matter.
Inherent Uncertainty of the Matters Disclosed. Certain of the matters disclosed below involve claims for substantial or
indeterminate damages. The claims asserted in these matters typically are broad, often spanning a multi -year period and
sometimes a wide range of business activities, and the plaintiffs’ or claimants’ alleged damages frequently are not
quantified or factually supported in the complaint or statement of claim. Other matters relate to regulatory investigations
or proceedings, as to which there may be no objective basis for quantifying the range of potential f ine, penalty, or other
remedy. As a result, Citigroup is often unable to estimate the loss in such matters, even if it believes that a loss is
probable or reasonably possible, until developments in the case or investigation have yielded additional information
sufficient to support a quantitative assessment of the range of reasonably possible loss. Such developments may include,
among other things, discovery from adverse parties or third parties, rulings by the court on key issues, analysis by
retained experts, and engagement in settlement negotiations. Depending on a range of factors, such as the complexity of
the facts, the novelty of the legal theories, the pace of discovery, the court’s scheduling order, the timing of court
decisions, and the adverse party’s willingness to negotiate in good faith toward a resolution, it may be months or years
after the filing of a case or commencement of an investigation before an estimate of the range of reasonably possible loss
can be made.
Matters as to Which an Estimate Can Be Made. For some of the matters disclosed below, Citigroup is currently able to
estimate a reasonably possible loss or range of loss in excess of amounts accrued (if any). For some of the matters
included within this estimation, an accrual has been made because a loss is believed to be both probable and reasonably
estimable, but an exposure to loss exists in excess of the amount accrued. In these cases, the estimate reflects the
reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
66
accrual has been made because a loss, although estimable, is believed to be reasonably possible, but not probable; in
these cases the estimate reflects the reasonably possible loss or range of loss.
These estimates are based on currently available information. As available information changes, the matters for which
Citigroup is able to estimate will change, and the estimates themselves will change. In addition, while many estimates
presented in financial statements and other financial disclosures involve significant judgment and may be subject to
significant uncertainty, estimates of the range of reasonably possible loss arising from litigation and regulatory
proceedings are subject to particular uncertainties. For example, at the time of making an estimate, (i) Citigroup may
have only preliminary, incomplete, or inaccurate information about the facts underlying the claim; (ii) its assumptions
about the future rulings of the court or other tribunal on significant issues, or the behavior and incentives of adverse
parties or regulators, may prove to be wrong; and (iii) the outcomes it is attempting to predict are often not amenable to
the use of statistical or other quantitative analytical tools. In addition, from time to time an outcome may occur that
Citigroup had not accounted for in its estimate because it had deemed such an outcome to be remote. For all these
reasons, the amount of loss in excess of accruals ultimately incurred for the matters as to which an estimate has been
made could be substantially higher or lower than the range of loss included in the estimate.
Matters as to Which an Estimate Cannot Be Made. For other matters disclosed below, Citigroup is not currently able to
estimate the reasonably possible loss or range of loss. Many of these matters remain in very preliminary stages (even in
some cases where a substantial period of time has passed since the commencement of the matter), with few or no
substantive legal decisions by the court or tribunal defining the scope of the c laims, the class (if any), or the potentially
available damages, and fact discovery is still in progress or has not yet begun. In many of these matters, Citigroup has not
yet answered the complaint or statement of claim or asserted its defenses, nor has it engaged in any negotiations with the
adverse party (whether a regulator or a private party). For all these reasons, Citigroup cannot at this time estimate the
reasonably possible loss or range of loss, if any, for these matters.
Opinion of Management as to Eventual Outcome. Subject to the foregoing, it is the opinion of Citigroup’s management,
based on current knowledge and after taking into account its current legal accruals, that the eventual outcome of all
matters described in this Note would not be likely to have a material adverse effect on the consolidated financial
condition of CGMHI. Nonetheless, given the substantial or indeterminate amounts sought in certain of these matters, and
the inherent unpredictability of such matters, an adverse outcome in certain of these matters could, from time to time,
have a material adverse effect on CGMHI’s consolidated results of operations or cash flows in particular quarterly or
annual periods.
Credit Crisis-Related Litigation and Other Matters
Citigroup and Related Parties have been named as defendants in numerous legal actions and other proceedings asserting
claims for damages and related relief for losses arising from the global financial credit crisis that began in 2007. Such
matters include, among other types of proceedings, claims asserted by: (i) individual investors and purported classes of
investors in Citigroup’s common and preferred stock and debt, alleging violations of the federal securities laws, foreign
laws, state securities and fraud law, and the Employee Retirement Income Security Act (ERISA); and (ii) individual
investors and purported classes of investors in securities and other investments underwritten, issued or marketed by
Citigroup, including securities issued by other public companies, collateralized debt obligations (CDOs), mortgage-
backed securities (MBS), auction rate securities, investment funds, and other structured or leveraged instruments, which
have suffered losses as a result of the credit crisis. These matters have been filed in state and federal courts across the
U.S. and in foreign tribunals, as well as in arbitrations before the Financial Industry Regulatory Authority (FINRA) and
other arbitration associations.
In addition to these litigations and arbitrations, Citigroup continues to cooperate fully in response to subpoenas and
requests for information from the Securities and Exchange Commission (SEC), FINRA, state attorneys general, the U.S.
Department of Justice and subdivisions thereof, the Office of the Special Inspector General for the Troubled Asset Relief
Program, bank regulators, and other government agencies and authorities, in connection with various formal and informal
(and, in many instances, industry-wide) inquiries concerning Citigroup’s mortgage-related conduct and business
activities, as well as other business activities affected by the credit crisis. These business activities include, but are not
limited to, Citigroup’s sponsorship, packaging, issuance, marketing, trading, servicing and underwriting of CDOs and
MBS, its origination, sale or other transfer, servicing, and foreclosure of residential mortgages, and its origination and
securitization of auto loans.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
67
Mortgage-Related Litigation and Other Matters
Securities Actions: Beginning in November 2007, Citigroup and Related Parties were named as defendants in a variety of
class and individual securities actions filed by investors in Citigroup’s equity and debt securities in state and federal
courts relating to Citigroup’s disclosures regarding its exposure to subprime-related assets.
Citigroup and Related Parties have been named as defendants in a variety of putative class actions and individual actions
arising out of Citigroup’s exposure to CDOs and other assets that declined in value during the financia l crisis. Many of
these matters have been dismissed or settled. These actions assert a wide range of claims, including claims under the
federal securities laws, foreign securities laws, ERISA, and state law. Additional information concerning certain of the se
actions is publicly available in court filings under the docket numbers 10 Civ. 9646 (S.D.N.Y.) (Stein, J.), 11 Civ. 7672
(S.D.N.Y.) (Koeltl, J.), 13-4488, 13-4504, and 15-2461 (2d Cir.).
Beginning in November 2007, certain Citigroup affiliates also have been named as defendants arising out of their
activities as underwriters of securities in actions brought by investors in securities issued by public companies adversely
affected by the credit crisis. Many of these matters have been dismissed or settled. As a general matter, issuers indemnify
underwriters in connection with such claims, but in certain of these matters Citigroup affiliates are not being indemnified
or may in the future cease to be indemnified because of the financial condition of the issuer.
Mortgage-Backed Securities and CDO Investor Actions: Beginning in July 2010, Citigroup and Related Parties have
been named as defendants in complaints filed by purchasers of MBS and CDOs sold or underwritten by Citigroup. The
complaints generally assert that defendants made material misrepresentations and omissions about the credit quality of
the assets underlying the securities or the manner in which those assets were selected, and typically assert claims under
Section 11 of the Securities Act of 1933, state blue sky laws, and/or common-law misrepresentation-based causes of
action.
The majority of these matters have been resolved through settlement or otherwise. As of December 31, 2015, the
aggregate original purchase amount of the purchases at issue in the pending litigations was approximately $1.2 billion,
and the aggregate original purchase amount of the purchases covered by tolling agreements with investors threatening
litigation was approximately $500 million. Additional information concerning certain of these actions is publicly
available in court filings under the docket numbers 13-1729-II (Tenn. Ch. Ct.) (McCoy, C.), 650212/2012 (N.Y. Sup. Ct.)
(Kornreich, J.), and 12 Civ. 3868 (S.D.N.Y.) (Forrest, J.).
Mortgage-Backed Security Repurchase Claims: Various parties to MBS securitizations and other interested parties have
asserted that certain Citigroup affiliates breached representations and warranties made in connection with mortgage loans
sold into securitization trusts (private-label securitizations). Typically, these claims are based on allegations that
securitized mortgages were not underwritten in accordance with the applicable underwriting standards. Citigroup also has
received numerous inquiries, demands for loan files, and requests to toll (extend) the applicable statutes of limitation for
representation and warranty claims relating to its private-label securitizations. These inquiries, demands and requests
have been made by trustees of securitization trusts and others.
On April 7, 2014, Citigroup entered into an agreement with 18 institutional investors represented by Gibbs & Bruns LLP
regarding the resolution of representation and warranty repurchase claims related to certain legacy securitizations.
Pursuant to the agreement, Citigroup made a binding offer to the trustees of 68 Citigroup-sponsored mortgage
securitization trusts to pay $1.125 billion to the trusts to resolve these claims, plus certain fees and expenses. The 68
trusts covered by the agreement represent all of the trusts established by Citigroup’s legacy Securities and Banking
business during 2005-2008 for which Citigroup affiliates made representations and warranties to the trusts. The trustees
accepted the settlement for 64 trusts in whole, and four in part. Pursuant to the terms of the settlement agreement, the
trustees’ acceptance was subject to a judicial approval proceeding. On December 18, 2015, the court filed a decision and
order approving the trustees’ entry into the settlement and finding that the trustees, in entering the settlement, had
exercised their authority reasonably and in good faith. Additional information concerning this proceeding is publicly
available in court filings under the docket number 653902/2014 (N.Y. Sup. Ct.) (Friedman, J.).
To date, trustees have filed six actions against Citigroup seeking to enforce certain of these contractual repurchase claims
that were excluded from the April 7, 2014 settlement in connection with four private-label securitizations. Citigroup has
reached an agreement with the trustees to resolve three of these actions, and those actions were dismissed with prejudice
on January 26, 2016. The remaining three actions are in various stages of discovery. In the aggregate, plaintiffs are
asserting repurchase claims in the remaining actions as to approximately 2,900 loans that were securitized into these
three securitizations, as well as any other loans that are later found to have breached representations and warranties.
Additional information concerning these actions is publicly available in court filings under the docket numbers 13 Civ.
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68
2843 (S.D.N.Y.) (Daniels, J.), 13 Civ. 6989 (S.D.N.Y.) (Daniels, J.), 653816/2013 (N.Y. Sup. Ct.) (Kornreich, J.),
653919/2014 (N.Y. Sup. Ct.), 653929/2014 (N.Y. Sup. Ct.), and 653930/2014 (N.Y. Sup. Ct.).
Mortgage-Backed Securities Trustee Actions: On June 18, 2014, a group of investors in 48 RMBS trusts for which
Citibank served or currently serves as trustee filed a complaint in New York State Supreme Court in BLACKROCK
ALLOCATION TARGET SHARES: SERIES S. PORTFOLIO, ET AL. V. CITIBANK, N.A. The complaint, like those
filed against other RMBS trustees, alleges that Citibank failed to pursue contractual remedies against securitization
sponsors and servicers. This action was withdrawn without prejudice, effective December 17, 2014. On November 24,
2014, largely the same group of investors filed an action in the United States District Court for the Southern District of
New York, captioned FIXED INCOME SHARES: SERIES M ET AL. V. CITIBANK N.A., alleging similar claims
relating to 27 MBS trusts for which Citibank allegedly served or currently serves as trustee. On September 8, 2015, the
United States District Court for the Southern District of New York dismissed all claims as to 24 of the 27 trusts and
allowed certain of the claims to proceed as to the other three trusts. Additional information concerning this action is
publicly available in court filings under the docket number 14-cv-9373 (S.D.N.Y.) (Furman, J.).
On November 24, 2015, largely the same group of investors filed another action in the New York State Supreme Court,
captioned FIXED INCOME SHARES: SERIES M, ET AL. V. CITIBANK N.A., related to the 24 trusts dismissed from
the federal court action and one additional trust, asserting claims similar to the original complaint filed in state court.
Additional information concerning this action is publicly available in court filings under the docket number 653891/2015
(N.Y. Sup. Ct.) (Ramos, J.).
On August 19, 2015, the Federal Deposit Insurance Corporation as receiver for a financial institution filed a civil action
against Citibank in the United States District Court for the Southern District of New York, captioned FEDERAL
DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR GUARANTY BANK V. CITIBANK N.A. The
complaint concerns one RMBS trust for which Citibank formerly served as trustee, and alleges that Citibank failed to
pursue contractual remedies against the sponsor and servicers of that trust. Additional information concerning this action
is publicly available in court filings under the docket number 15-cv-6574 (S.D.N.Y.) (Carter, J.).
Alternative Investment Fund-Related Litigation and Other Matters Citigroup and Related Parties have been named as defendants in a putative class action lawsuit filed in October 2012 on
behalf of investors in CSO Ltd., CSO US Ltd., and Corporate Special Opportunities Ltd., whose investments were
managed indirectly by a Citigroup affiliate. Plaintiffs asserted a variety of state common law claims, alleging that they
and other investors were misled into investing in the funds and, later, not redeeming their investments. The complaint
sought to recover more than $400 million on behalf of a putative class of investors. On August 10, 2015, the parties
entered into an agreement providing for a class action settlement of the litigation. The court held a final settlement
hearing on December 17, 2015 and entered an order approving the settlement on January 28, 2016. Additional
information concerning this action is publicly available in court filings under the docket number 12-cv-7717 (S.D.N.Y.)
(Woods, J.).
Auction Rate Securities-Related Litigation and Other Matters
Citigroup and Related Parties have been named as defendants in numerous actions and proceedings brought by Citigroup
shareholders and purchasers or issuers of auction rate securities (ARS) and an issuer of variable rate demand obligations,
asserting federal and state law claims arising from the collapse of the market in 2008, which plaintiffs contend Citigroup
and other ARS underwriters and broker-dealers foresaw or should have foreseen, but failed adequately to disclose. Many
of these matters have been dismissed or settled. Most of the remaining matters are in arbitrations pending before FINRA.
Terra Firma Litigation In December 2009, the general partners of two related private equity funds filed a complaint in New York state court,
subsequently removed to the United States District Court for the Southern District of New York, asserting multi-billion-
dollar claims against Citigroup and certain of its affiliates arising out of the May 2007 auction of the music company,
EMI, in which Citigroup affiliates acted as advisor to EMI and as a lender to plaintiffs’ acquisition vehicle. Following a
jury trial, a verdict was returned in favor of Citigroup on November 4, 2010. Plaintiffs appealed from the entry of the
judgment. On May 31, 2013, the United States Court of Appeals for the Second Circuit vacated the November 2010 jury
verdict in favor of the defendants and ordered that the case be retried. On March 7, 2014, the parties stipulated to the
dismissal of all remaining claims in the action, without prejudice to plaintiffs’ rights to re-file those claims in England.
Additional information concerning this action is publicly available in court filings under the docket numbers 09 Civ.
10459 (S.D.N.Y.) (Rakoff, J.) and 11-0126-cv (2d Cir.).
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
69
In August and September 2013, plaintiffs in the New York proceedings, together with their affiliates and principal, filed
claims against Citigroup Global Markets Limited (CGML), Citibank and Citigroup arising out of the EMI auction in the
High Court of Justice, Queen’s Bench Division and Manchester District Registry Mercantile Court in Manchester,
England. The cases have since been transferred to the High Court of Justice, Queen’s Bench Division, Commercial Court
in London. On March 7, 2014, the parties to the separate proceedings filed by Terra Firma in 2013 before the High Court
of Justice, Queen’s Bench Division, consented to the service by plaintiffs of an amended complaint incorporating the
claims that would have proceeded to trial in the United States District Court for the Southern District of New York in
July 2014, had the New York action not been dismissed. A trial (which is based on allegations of fraudulent
misrepresentations) is scheduled to begin in London on June 7, 2016. Additional information concerning this action is
publicly available in court filings under the claim reference Terra Firma Investments (GP) 2 Ltd. & Ors v Citigroup
Global Markets Ltd. & Ors (CL-2013-000293).
Tribune Company Bankruptcy Certain Citigroup affiliates have been named as defendants in adversary proceedings related to the Chapter 11 cases of
Tribune Company (Tribune) filed in the United States Bankruptcy Court for the District of Delaware, asserting claims
arising out of the approximately $11 billion leveraged buyout of Tribune in 2007. On August 2, 2013, the Litigation
Trustee, as successor plaintiff to the Official Committee of Unsecured Creditors, filed a fifth amend ed complaint in the
adversary proceeding KIRSCHNER v. FITZSIMONS, ET AL. The complaint seeks to avoid and recover as actual
fraudulent transfers the transfers of Tribune stock that occurred as a part of the leveraged buyout. Several Citigroup
affiliates are named as “Shareholder Defendants” and are alleged to have tendered Tribune stock to Tribune as a part of
the buyout.
Several Citigroup affiliates are named as defendants in certain actions brought by Tribune noteholders, also seeking to
recover the transfers of Tribune stock that occurred as a part of the leveraged buyout, as alleged state -law constructive
fraudulent conveyances. Finally, Citigroup Global Markets Inc. (CGMI) has been named in a separate action as a
defendant in connection with its role as advisor to Tribune. The noteholders’ claims were previously dismissed, and an
appeal to the United States Court of Appeals for the Second Circuit is pending. A motion to dismiss the action against
CGMI in its role as advisor to Tribune is pending.
In the FITZSIMONS action, claims against certain Citigroup affiliates have been dismissed or reduced in amount by
various orders. Additional information concerning these actions is publicly available in court filings under the docket
numbers 08-13141 (Bankr. D. Del.) (Carey, J.), 11 MD 02296 (S.D.N.Y.) (Sullivan, J.), 12 MC 2296 (S.D.N.Y.)
(Sullivan, J.), and 13-3992 (2d Cir.).
Credit Default Swaps Matters In April 2011, the European Commission (EC) opened an investigation (Case No COMP/39.745) into the credit default
swap (CDS) industry. The scope of the investigation initially concerned the question of “whether 16 investment banks
and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a
dominant position in order to control the financial information on CDS.”
On July 2, 2013, the EC issued to Citigroup, CGMI, CGML, Citicorp North America Inc. and Citibank, as well as
Markit, ISDA, and 12 other investment bank dealer groups, a statement of objections alleging that Citi and the other
dealers colluded to prevent exchanges from entering the credit derivatives business in breach of Article 101 of the Treaty
on the Functioning of the European Union. The statement of objections set forth the EC’s preliminary conclusions, did
not prejudge the final outcome of the case, and did not benefit from the review and consideration of Citi’s arguments and
defenses. Thereafter, Citi filed a reply and made oral submissions to the EC. On December 4, 2015, the EC informed Citi
that it had closed its proceeding against Citi and the other investment bank dealer groups, without further action.
In July 2009 and September 2011, the Antitrust Division of the U.S. Department of Justice served Civil Investigative
Demands (CIDs) on Citi concerning potential anticompetitive conduct in the CDS industry.
In addition, putative class action complaints were filed by various entities against Citigroup, CGMI and Citibank, among
other defendants, alleging anticompetitive conduct in the CDS industry and asserting various claims under Sections 1 and
2 of the Sherman Act as well as a state law claim for unjust enrichment. On October 16, 2013, the U.S. Judicial Panel on
Multidistrict Litigation centralized these putative class actions in the Southern District of New York for coordinated or
consolidated pretrial proceedings before Judge Denise Cote. On September 30, 2015, the defendants, including Citigroup
and Related Parties, entered into settlement agreements to settle all claims of the putative class, and on October 29, 2015,
the court granted plaintiffs’ motion for preliminary approval of the proposed settlements. Additional information relating
to this action is publicly available in court filings under the docket number 13 MD 2476 (S.D.N.Y.) (Cote, J.).
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70
Foreign Exchange Matters
Regulatory Actions: Government and regulatory agencies in the U.S. and in other jurisdictions are conducting
investigations or making inquiries regarding Citigroup’s foreign exchange business. Citigroup is fully cooperating with
these and related investigations and inquiries.
Antitrust and Other Litigation: Numerous foreign exchange dealers, including Citigroup and Citibank, are named as
defendants in putative class actions that are proceeding on a consolidated basis in the United States District Court for the
Southern District of New York under the caption IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST
LITIGATION. The plaintiffs in these actions allege that the defendants colluded to manipulate the WM/Reuters rate
(WMR), thereby causing the putative classes to suffer losses in connection with WMR-based financial instruments. The
plaintiffs assert federal and state antitrust claims and claims for unjust enrichment, and seek compensatory damages,
treble damages and declaratory and injunctive relief. On March 31, 2014, plaintiffs in the putative class actions filed a
consolidated amended complaint.
Citibank, Citigroup, and Citibank Korea Inc., as well as numerous other foreign exchange dealers, were named as
defendants in a putative class action captioned SIMMTECH CO. v. BARCLAYS BANK PLC, ET AL. (SIMMTECH)
that was proceeding before the same court. The plaintiff sought to represent a putative class of persons who traded
foreign currency with the defendants in Korea, alleging that the class suffered losses as a result of the defendants’ alleged
WMR manipulation. The plaintiff asserted federal and state antitrust claims, and sought compensatory damages, treble
damages and declaratory and injunctive relief.
Additionally, Citibank and Citigroup, as well as numerous other foreign exchange dealers, were named as defendants in a
putative class action captioned LARSEN v. BARCLAYS BANK PLC, ET AL. (LARSEN), that was proceeding before
the same court. The plaintiff sought to represent a putative class of persons or entities in Norway who traded foreign
currency with defendants, alleging that the class suffered losses as a result of defendants’ alleged WMR manipulation.
The plaintiff asserted federal antitrust and unjust enrichment claims, and sought compensatory damages, treble damages
and declaratory and injunctive relief.
Citigroup and Citibank, along with other defendants, moved to dismiss all of these actions. On January 28, 2015, the
court issued an opinion and order denying the motion as to the IN RE FOREIGN EXCHANGE BENCHMARK RATES
ANTITRUST LITIGATION plaintiffs, but dismissing the claims of the SIMMTECH and LARSEN plaintiffs in their
entirety on the grounds that their federal claims were barred by the Foreign Trade Antitrust Improvements Act and their
state claims had an insufficient nexus to New York. Additional information concerning these actions is publicly available
in court filings under the docket numbers 13 Civ. 7789, 13 Civ. 7953, and 14 Civ. 1364 (S.D.N.Y.) (Schofield, J.).
Additional actions have been consolidated in the IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST
LITIGATION proceeding, including lawsuits brought by, or on behalf of putative classes of, investors that transacted in
exchange-traded foreign exchange futures contracts and/or options on foreign exchange futures contracts on certain
exchanges. The plaintiffs allege that they suffered losses as a result of the defendants’ alleged manipulation of, and
collusion with respect to, the foreign exchange market. The plaintiffs allege violations of the Commodity Exchange Act,
the Sherman Act, and/or the Clayton Act, and seek compensatory damages, treble damages and declaratory and
injunctive relief.
On December 15, 2015, the court entered an order preliminarily approving a proposed settlement between the Citi
defendants and classes of plaintiffs who traded foreign exchange instruments in the spot market and on exchanges. The
proposed settlement provides for the Citi defendants to receive a release in exchange for a payment of $394 million
(which was made on December 18, 2015) plus a separate payment of $8 million (which is due upon final approval of the
settlement by the court).
Additional information concerning these actions is publicly available in court filings under the following docket
numbers: 15 Civ. 1350; 15 Civ. 2705; 15 Civ. 4230; 15 Civ. 4436; and 15 Civ. 4926 (S.D.N.Y.) (Schofield, J.).
On May 21, 2015, an action captioned NYPL v. JPMORGAN CHASE & CO., ET. AL was brought in the United States
District Court for the Northern District of California against Citigroup, as well as numerous other foreign exchange
dealers. The plaintiff seeks to represent a putative class of “consumers and businesses in the United States who directly
purchased supracompetitive foreign currency exchange rates” from defendants for their end use. The plaintiff filed an
amended complaint on June 11, 2015, alleging violations of the Sherman Act, and seeking compensatory damages, treble
damages and declaratory and injunctive relief. On November 9, 2015, the court granted the defendants’ motion to transfer
the action to the United States District Court for the Southern District of New York for possible consolidation with IN
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
71
RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION. Additional information concerning
this action is publicly available in court filings under the docket numbers 15 Civ. 2290 (N.D. Cal.) (Chhabria, J.) and 15
Civ. 9300 (S.D.N.Y.) (Schofield, J.).
On June 3, 2015, an action captioned ALLEN v. BANK OF AMERICA CORPORATION, ET AL. was brought in the
United States District Court for the Southern District of New York against Citigroup, as well as numerous other foreign
exchange dealers. The plaintiff seeks to represent a putative class of participants, beneficiaries, and named fiduciaries of
qualified Employee Retirement Income Security Act (ERISA) plans for whom a defendant provided foreign exchange
transactional services or authorized or permitted foreign exchange transactional services involving a plan’s assets in
connection with its exercise of authority or control regarding an ERISA plan. The plaintiff alleges violations of ERISA,
and seeks compensatory damages, restitution, disgorgement and declaratory and injunctive relief. On June 29, 2015,
ALLEN was consolidated with IN RE FOREIGN EXCHANGE BENCHMARK RATES ANTITRUST LITIGATION for
discovery purposes only. Additional information concerning this action is publicly available in court filings under the
docket number 15 Civ. 4285 (S.D.N.Y.) (Schofield, J.).
In September 2015, putative class actions captioned BÉLAND v. ROYAL BANK OF CANADA, ET AL. and STAINES
v. ROYAL BANK OF CANADA, ET AL. were filed in the Quebec Superior Court of Justice and the Ontario Superior
Court of Justice, respectively, against Citigroup and Related Parties, as well as numerous other foreign exchange dealers.
Plaintiffs allege that defendants conspired to fix the prices and supply of currency purchased in the foreign exchange
market, and that this manipulation caused investors to pay inflated rates for currency and/or to receive deflated rates for
currency. Plaintiffs assert claims under the Canadian Competition Act and the Quebec Civil Code and/or for civil
conspiracy, unjust enrichment and waiver of tort. Plaintiffs seek compensatory and punitive damages, or disgorgement,
on behalf of putative classes of all persons in Quebec or in Canada who entered into a foreign exchange instrument or
participated in a fund or investment vehicle that entered into a foreign exchange instrument between January 1, 2003 and
December 31, 2013. Additional information concerning these actions is publicly available in court filings under the
docket numbers 200-06-000189-152 (C.S.Q. Quebec) and CV-15-536174 (Ont. S.C.J.).
On September 16, 2015, an action captioned NEGRETE v. CITIBANK, N.A. was filed in the United States District Court
for the Southern District of New York. Plaintiffs allege that Citibank, N.A. engaged in conduct in connection with
plaintiffs’ foreign exchange trading that caused them losses. Plaintiffs assert claims for fraud, breach of contract, and
negligence, and seek compensatory damages, punitive damages and injunctive relief. On November 17, 2015, Citi filed a
motion to dismiss and a motion to stay discovery pending resolution of the motion to dismiss. On December 7, 2015, the
court granted Citi’s motion for a stay of discovery. Additional information concerning this action is publicly available in
court filings under the docket number 15 Civ. 7250 (S.D.N.Y.) (Sweet, J.).
Derivative Actions and Related Proceedings: In June 2015, Citigroup was named as a defendant in IRA FOR THE
BENEFIT OF VICTORIA SHAEV V. CITIGROUP INC. The complaint was filed by a putative stockholder in New
York Supreme Court seeking to inspect Citigroup’s books and records pursuant to Section 220 of Chapter 8 of the
Delaware Corporations Law with regard to various matters, including Citigroup’s participation and activity in foreign
exchange markets. On January 26, 2016, the court granted Citigroup’s motion to dismiss the complaint. Additional
information concerning this action is publicly available in court filings under the docket number 652339/2015 (N.Y. Sup.
Ct.).
Interbank Offered Rates-Related Litigation and Other Matters Regulatory Actions: The CFTC and a consortium of state attorneys general, as well as government and regulatory
agencies in other jurisdictions, are conducting investigations or making inquiries regarding submissions made by panel
banks to bodies that publish various interbank offered rates and other benchmark rates. As members of a number of such
panels, Citigroup subsidiaries have received requests for information and documents. Citigroup is cooperating with the
investigations and inquiries and is responding to the requests.
Antitrust and Other Litigation: Citigroup and Citibank, along with other U.S. Dollar (USD) LIBOR panel banks, are
defendants in a multi-district litigation (MDL) proceeding before the United States District Court for the Southern
District of New York captioned IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION (the
LIBOR MDL). Consolidated amended complaints were filed on behalf of two separate putative classes of plaintiffs: (i)
over-the-counter (OTC) purchasers of derivative instruments tied to USD LIBOR; and (ii) purchasers of exchange-traded
derivative instruments tied to USD LIBOR. Each of these putative classes alleges that the panel bank defendants
conspired to suppress USD LIBOR: (i) OTC purchasers assert claims under the Sherman Act and for unjust enrichment
and breach of the implied covenant of good faith and fair dealing; and (ii) purchasers of exchange-traded derivative
instruments assert claims under the Commodity Exchange Act and the Sherman Act and for unjust enrichment. Individual
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
72
actions commenced by various Charles Schwab entities also were consolidated into the LIBOR MDL. The plaintiffs seek
compensatory damages and restitution for losses caused by the alleged violations, as well as treble damages under the
Sherman Act. The Schwab and OTC plaintiffs also seek injunctive relief.
Additional actions have been consolidated in the LIBOR MDL proceeding, including (i) lawsuits filed by, or on behalf of
putative classes of, community and other banks, savings and loans institutions, credit unions, municipalities and
purchasers and holders of LIBOR-linked financial products; and (ii) lawsuits filed by putative classes of lenders and
adjustable rate mortgage borrowers. The plaintiffs allege that defendant panel banks artificially suppressed USD LIBOR
in violation of applicable law and seek compensatory and other damages.
Additional information relating to these actions is publicly available in court filings under the following docket numbers:
12 Civ. 4205; 12 Civ. 5723; 12 Civ. 5822; 12 Civ. 6056; 12 Civ. 6693; 12 Civ. 7461; 13 Civ. 346; 13 Civ. 407; 13 Civ.
1016, 13 Civ. 1456, 13 Civ. 1700, 13 Civ. 2262, 13 Civ. 2297; 13 Civ. 4018; 13 Civ. 7720; 14 Civ. 146 (S.D.N.Y.)
(Buchwald, J.); 12 Civ. 6294 (E.D.N.Y.) (Seybert, J.); 12 Civ. 6571 (N.D. Cal.) (Conti, J.); 12 Civ. 10903 (C.D. Cal.)
(Snyder, J.); 13 Civ. 48 (S.D. Cal.) (Sammartino, J.); 13 Civ. 62 (C.D. Cal.) (Phillips, J.); 13 Civ. 106 (N.D. Cal.) (Beller,
J.); 13 Civ. 108 (N.D. Cal.) (Ryu, J.); 13 Civ. 109 (N.D. Cal.) (Laporte, J.); 13 Civ. 122 (C.D. Cal.) (Bernal, J.); 13 Civ.
334, 13 Civ. 335 (S.D. Iowa) (Pratt, J.); 13 Civ. 342 (E.D. Va.) (Brinkema, J.); 13 Civ. 1466 (S.D. Cal.) (Lorenz, J.); 13
Civ. 1476 (E.D. Cal.) (Mueller, J.); 13 Civ. 2149 (S.D. Tex.) (Hoyt, J.); 13 Civ. 2244 (N.D. Cal.) (Hamilton, J.); 13 Civ.
2921 (N.D. Cal.) (Chesney, J.); 13 Civ. 2979 (N.D. Cal.) (Tigar, J.); 13 Civ. 4352 (E.D. Pa.) (Restrepo, J.); 13 Civ. 5278
(N.D. Cal.) (Vadas, J.); 15 Civ. 1334 (S.D.N.Y.) (Buchwald, J.); and 15 Civ. 2973 (S.D.N.Y.) (Buchwald, J.).
On August 4, 2015, the court in IN RE LIBOR-BASED FINANCIAL INSTRUMENTS ANTITRUST LITIGATION
granted in part defendants’ motions to dismiss various individual actions that were previously stayed, dismissing
plaintiffs’ antitrust claims for failure to state a claim, and holding that plaintiffs cannot pursue certain other claims based
on lack of personal jurisdiction or the operation of the applicable statute of limitations. The court allowed certain of
plaintiffs’ claims for common law fraud, breach of contract, unjust enrichment and tortious interference to proceed. On
October 8, 2015, the City of Philadelphia and the Pennsylvania Intergovernmental Cooperation Authority amended their
complaint in response to the court’s August 4, 2015 decision. Additional information concerning these actions is publicly
available in court filings under the docket number 11 MD 2262 (S.D.N.Y.) (Buchwald, J.).
On June 30, 2014, the United States Supreme Court granted a petition for a writ of certiorari in GELBOIM, ET AL. v.
BANK OF AMERICA CORP., ET AL. with respect to the dismissal by the United States Court of Appeals for the
Second Circuit of an appeal by the plaintiff class of indirect OTC purchasers of U.S. debt securities. On January 21,
2015, the Supreme Court ruled that, contrary to the Second Circuit’s opinion, the plaintiffs had a right to appeal, and
remanded the case to the Second Circuit for consideration of the plaintiffs’ appeal on the merits. The Second Circuit
heard oral argument on November 13, 2015. Additional information concerning this appeal is publicly available in court
filings under the docket numbers 13-3565 (2d Cir.), 13-3636 (2d Cir.), and 13-1174 (U.S.).
Citigroup and Citibank, along with other USD LIBOR panel banks, also are named as defendants in an individual action
filed in the United States District Court for the Southern District of New York on February 13, 2013, captioned 7 WEST
57th STREET REALTY CO. v. CITIGROUP, INC., ET AL. The plaintiff alleges that the defendant panel banks
manipulated USD LIBOR to keep it artificially high and that this manipulation affected the value of plaintiffs’ OTC
municipal bond portfolio in violation of federal and state antitrust laws and federal RICO law. The plaintiff seeks
compensatory damages, treble damages where authorized by statute, and declaratory relief. On March 31, 2015, the
United States District Court for the Southern District of New York dismissed this action. On June 1, 2015, the plaintiff
moved for leave to file a second amended complaint. Additional information concerning this action is publicly available
in court filings under the docket number 13 Civ. 981 (Gardephe, J.).
On May 2, 2014, plaintiffs in the class action SULLIVAN v. BARCLAYS PLC, ET AL. pending in the United States
District Court for the Southern District of New York filed a second amended complaint naming Citigroup and Citibank,
N.A. as defendants. Plaintiffs claim to have suffered losses as a result of purported EURIBOR manipulation and assert
claims under the Commodity Exchange Act, the Sherman Act and the federal RICO law, and for unjust enrichment. On
September 11, 2014, the court granted the U.S. Department of Justice’s motion to stay discovery for eight months, until
May 12, 2015. Plaintiffs filed a fourth amended complaint on August 13, 2015. Defendants filed a motion to dismiss on
October 14, 2015. Additional information concerning this action is publicly available in court filings under the docket
number 13 Civ. 2811 (S.D.N.Y.) (Castel, J.).
CITIGROUP GLOBAL MARKETS HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
73
Money Laundering Inquiries Regulatory Actions: Citigroup and Related Parties, including Citigroup’s indirect, wholly owned subsidiary Banamex
USA (BUSA), a California state-chartered bank, have received grand jury subpoenas issued by the United States
Attorney’s Office for the District of Massachusetts concerning, among other issues, policies, procedures and activities
related to BUSA, Citibank and related parties’ compliance with Bank Secrecy Act (BSA) and anti-money laundering
(AML) requirements under applicable federal laws and banking regulations. Citigroup and BUSA also have received
inquiries and requests for information from other regulators, including the Financial Crimes Enforcement Network,
concerning BSA- and AML-related issues. Citigroup is cooperating fully with these inquiries.
Citibank has received a subpoena from the United States Attorney for the Eastern District of New York in connection
with its investigation of alleged bribery, corruption and money laundering associated with the Federation Internationale
de Football Association (FIFA), and the potential involvement of financial institutions in that activity. The subpoena
requests information relating to, among other things, banking relationships and transactions at Citibank and its affiliates
associated with certain individuals and entities identified as having had involvement with the alleged corrupt conduct.
Citi is cooperating with the authorities in this matter.
Derivative Actions and Related Proceedings: On September 22, 2015, a derivative action captioned FIREMAN’S
RETIREMENT SYSTEM OF ST. LOUIS, ET AL. v. CORBAT, ET AL. was filed in the United States District Court for
the Southern District of New York on behalf of Citigroup (as nominal defendant) against certain of Citigroup’s and
certain of its affiliates’ present and former directors and officers. The plaintiffs asserted claims derivatively for violation
of Section 14(a) of the Securities Exchange Act of 1934, breach of fiduciary duty, waste of corporate assets, and unjust
enrichment in connection with the defendants’ alleged failure to exercise appropriate oversight and management of BSA
and AML laws and regulations and related consent decrees concerning Citigroup’s subsidiaries Banco Nacional de
Mexico, or Banamex, and BUSA. On December 14, 2015, plaintiffs, with the permission of the court, filed an amended
complaint naming additional present and former directors and officers of Citigroup affiliates as defendants. Defendants’
motion to dismiss the amended complaint was filed on January 22, 2016. Additional information concerning this action is
publicly available in court filings under the docket number 15 Civ. 7501 (S.D.N.Y.) (Furman, J.).
Sovereign Securities Matters Regulatory Actions: Government and regulatory agencies in the U.S. and in other jurisdictions are conducting
investigations or making inquiries regarding Citigroup’s sales and trading activities in connection with sovereign
securities. Citigroup is fully cooperating with these investigations and inquiries.
Antitrust and Other Litigation: Beginning in July 2015, CGMI, along with numerous other U.S. Treasury primary dealer
banks, have been named as defendants in a number of substantially similar putative class actions involving allegations
that they colluded to manipulate U.S. Treasury securities markets. The actions are based upon the defendants’ roles as
registered primary dealers of U.S. Treasury securities and assert claims of alleged collusion under the antitrust laws and
manipulation under the Commodity Exchange Act. These actions were filed in the United States District Court for the
Southern District of New York, the Northern District of Illinois, the Southern District of Alabama and the District of the
Virgin Islands.
In December 2015, the cases were consolidated before Judge Paul G. Gardephe in the United States District Court for the
Southern District of New York by the Judicial Panel on Multidistrict Litigation. Additional information relating to these
actions is publicly available in court filings under the docket number: 15-MD-2673 (S.D.N.Y.) (Gardephe, J.).
Settlement Payments Payments required in settlement agreements described above have been made or are covered by existing litigation
accruals.
* * * Additional matters asserting claims similar to those described above may be filed in the future.
16. SUBSEQUENT EVENTS
The Company has evaluated whether events or transactions have occurred after December 31, 2015 that would require
recognition or disclosure in these financial statements through April 29, 2016, which is the date these financial
statements were available to be issued. In March 2016, Citigroup contributed $2.5 billion in capital to CGMHI. No other
transactions required recognition or disclosure in the financial statements for the year ended December 31, 2015.