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 Citi 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. Citigroup may be the provider of certain credit enhancements as well as the counterparty to any related derivative contracts.

Most of Citigroup’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. Citigroup 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 significantly 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’s involvement with consolidated and unconsolidated VIEs with which the Company holds significant variable interests or has continuing involvement through servicing a majority of the assets in a VIE, each as of June 30, 2015 and December 31, 2014, is presented below:



	As of June 30, 2015
							Maximum exposure to loss in significant unconsolidated VIEs ⁽¹⁾
							Funded exposures ⁽²⁾				Unfunded exposures
In millions of dollars	Total involvement with SPE assets		Consolidated VIE / SPE assets		Significant unconsolidated VIE assets ⁽³⁾		Debt investments		Equity investments		Funding commitments		Guarantees and derivatives		Total
Credit card securitizations	$	55,415	$	55,242	$	173	$	—	$	—	$	—	$	—	$	—
Mortgage securitizations ⁽⁴⁾
U.S. agency-sponsored	248,073		—		248,073		3,983		—		—		102		4,085
Non-agency-sponsored	15,878		1,010		14,868		459		—		—		1		460
Citi-administered asset-backed commercial paper conduits (ABCP)	25,931		25,931		—		—		—		—		—		—
Collateralized debt obligations (CDOs)	4,589		—		4,589		362		—		—		84		446
Collateralized loan obligations (CLOs)	19,136		—		19,136		2,172		—		—		—		2,172
Asset-based financing	67,913		1,178		66,735		24,815		169		2,148		354		27,486
Municipal securities tender option bond trusts (TOBs)	10,496		5,236		5,260		85		—		3,440		—		3,525
Municipal investments	22,418		57		22,361		2,084		2,154		2,660		—		6,898
Client intermediation	2,225		695		1,530		22		—		—		—		22
Investment funds ⁽⁵⁾	31,714		943		30,771		13		374		102		—		489
Trust preferred securities	2,635		—		2,635		—		6		—		—		6
Other	10,187		6,029		4,158		73		576		47		55		751
Total⁽⁶⁾	$	516,610	$	96,321	$	420,289	$	34,068	$	3,279	$	8,397	$	596	$	46,340



	As of December 31, 2014
							Maximum exposure to loss in significant unconsolidated VIEs ⁽¹⁾
							Funded exposures ⁽²⁾				Unfunded exposures
In millions of dollars	Total involvement with SPE assets		Consolidated VIE / SPE assets		Significant unconsolidated VIE assets ⁽³⁾		Debt investments		Equity investments		Funding commitments		Guarantees and derivatives		Total
Credit card securitizations	$	60,503	$	60,271	$	232	$	—	$	—	$	—	$	—	$	—
Mortgage securitizations ⁽⁴⁾
U.S. agency-sponsored	264,848		—		264,848		5,213		—		—		110		5,323
Non-agency-sponsored	17,888		1,304		16,584		577		—		—		1		578
Citi-administered asset-backed commercial paper conduits (ABCP)	29,181		29,181		—		—		—		—		—		—
Collateralized debt obligations (CDOs)	5,617		—		5,617		219		—		—		86		305
Collateralized loan obligations (CLOs)	14,119		—		14,119		1,746		—		—		—		1,746
Asset-based financing	63,900		1,151		62,749		22,928		66		2,271		333		25,598
Municipal securities tender option bond trusts (TOBs)	12,280		6,671		5,609		3		—		3,670		—		3,673
Municipal investments	23,706		70		23,636		2,014		2,197		2,225		—		6,436
Client intermediation	1,745		137		1,608		10		—		—		10		20
Investment funds ⁽⁵⁾	31,992		1,096		30,896		16		382		124		—		522
Trust preferred securities	2,633		—		2,633		—		6		—		—		6
Other	8,298		2,909		5,389		183		1,451		23		73		1,730
Total⁽⁶⁾	$	536,710	$	102,790	$	433,920	$	32,909	$	4,102	$	8,313	$	613	$	45,937


(1)	The definition of maximum exposure to loss is included in the text that follows this table.


(2)	Included on Citigroup’s June 30, 2015 and December 31, 2014 Consolidated Balance Sheet.


(3)	A significant unconsolidated VIE is an entity where the Company has any variable interest or continuing involvement considered to be significant, regardless of the likelihood of loss or the notional amount of exposure.


(4)	Citigroup 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.

(5) Substantially all of the unconsolidated investment funds’ assets are related to retirement funds in Mexico managed by Citi. See “Investment Funds” below for further discussion.

(6) Citi’s total involvement with Citicorp SPE assets was $470.2 billion and $483.9 billion as of June 30, 2015 and December 31, 2014, respectively, with the remainder related to Citi Holdings.

The previous tables do not include:


•	certain venture capital investments made by some of the Company’s private equity subsidiaries, as the Company accounts for these investments in accordance with the Investment Company Audit Guide (codified in ASC 946);


•	certain limited partnerships that are investment funds that qualify for the deferral from the requirements of ASC 810 where the Company is the general partner and the limited partners have the right to replace the general partner or liquidate the funds;


•	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 or Investments, where the Company has no other involvement with the related securitization entity deemed to be significant (for more information on these positions, see Notes 12 and 13 to the Consolidated Financial Statements);

•

certain representations and warranties exposures in legacy Securities and Banking-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 $13 billion and $14 billion at June 30, 2015 and December 31, 2014, respectively; and


•	certain representations and warranties exposures in Citigroup residential mortgage securitizations, where the original mortgage loan balances are no longer outstanding.

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 exposures synthetically through derivative instruments (for example, synthetic CDOs), the tables generally include the full original notional 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.

Funding Commitments for Significant Unconsolidated VIEs—Liquidity Facilities and Loan Commitments

The following table presents the notional amount of liquidity facilities and loan commitments that are classified as funding commitments in the VIE tables above as of June 30, 2015 and December 31, 2014:



	June 30, 2015				December 31, 2014
	Liquidity		Loan		Liquidity		Loan
In millions of dollars	facilities		commitments		facilities		commitments
Asset-based financing	$	5	$	2,143	$	5	$	2,266
Municipal securities tender option bond trusts (TOBs)	3,440		—		3,670		—
Municipal investments	—		2,660		—		2,225
Investment funds	—		102		—		124
Other	—		47		—		23
Total funding commitments	$	3,445	$	4,952	$	3,675	$	4,638

Consolidated VIEs

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 balance sheet, and any proceeds received are recognized as secured liabilities. The consolidated VIEs included in the tables below represent hundreds 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 VIE 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 as of June 30, 2015 and December 31, 2014:



In billions of dollars	June 30, 2015		December 31, 2014
Cash	$	0.1	$	0.3
Trading account assets	1.1		0.7
Investments	6.6		8.0
Total loans, net of allowance	82.4		93.2
Other	6.1		0.6
Total assets	$	96.3	$	102.8
Short-term borrowings	$	15.3	$	22.7
Long-term debt	32.1		40.1
Other liabilities	5.3		0.9
Total liabilities ⁽¹⁾	$	52.7	$	63.7

(1)

The total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Citi were $50.3 billion and $61.2 billion as of June 30, 2015 and December 31, 2014, respectively. Liabilities of consolidated VIEs for which creditors or beneficial interest holders have recourse to the general credit of Citi comprise two items included in the above table: 1) credit enhancements provided to consolidated Citi-administered commercial paper conduits in the form of letters of credit of $2.3 billion at June 30, 2015 and December 31, 2014 and; 2) credit guarantees provided by Citi to certain consolidated municipal tender option bond trusts of $83 million and $198 million at June 30, 2015 and December 31, 2014, respectively.

Significant Interests in Unconsolidated VIEs—Balance Sheet Classification

The following table presents the carrying amounts and classification of significant variable interests in unconsolidated VIEs as of June 30, 2015 and December 31, 2014:



In billions of dollars	June 30, 2015		December 31, 2014
Trading account assets	$	5.9	$	7.6
Investments	2.6		2.6
Total loans, net of allowance	26.8		25.0
Other	2.0		2.0
Total assets	$	37.3	$	37.2

Credit Card Securitizations

The Company securitizes credit card receivables through trusts established to purchase the receivables. Citigroup transfers receivables into the trusts on a non-recourse basis. Credit card securitizations are revolving securitizations; as customers pay their credit card balances, the cash proceeds are used to purchase new receivables and replenish the receivables in the trust.

Substantially all of the Company’s credit card securitization activity is through two trusts—Citibank Credit Card Master Trust (Master Trust) and the Citibank Omni Master Trust (Omni Trust), with the substantial majority through the Master Trust. These trusts are consolidated entities because, as servicer, Citigroup has the power to direct

the activities that most significantly impact the economic performance of the trusts, Citigroup holds a seller’s interest and certain securities issued by the trusts, and also provides liquidity facilities to the trusts, which could result in potentially significant losses or benefits from the trusts. Accordingly, the transferred credit card receivables remain on Citi’s Consolidated Balance Sheet with no gain or loss recognized. The debt issued by the trusts to third parties is included on Citi’s Consolidated Balance Sheet.

The Company utilizes securitizations as one of the sources of funding for its business in North America. The following table reflects amounts related to the Company’s securitized credit card receivables as of June 30, 2015 and December 31, 2014:



In billions of dollars	June 30, 2015		December 31, 2014
Ownership interests in principal amount of trust credit card receivables
Sold to investors via trust-issued securities	$	31.3	$	37.0
Retained by Citigroup as trust-issued securities	9.0		10.1
Retained by Citigroup via non-certificated interests	15.9		14.2
Total	$	56.2	$	61.3

Credit Card Securitizations

The following tables summarize selected cash flow information related to Citigroup’s credit card securitizations for the three and six months ended June 30, 2015 and 2014:



	Three months ended June 30,
In billions of dollars	2015			2014
Proceeds from new securitizations	$	—		$	2.4
Pay down of maturing notes	(3.1		)	(1.3		)



	Six months ended June 30,
In billions of dollars	2015			2014
Proceeds from new securitizations	$	—		$	6.8
Pay down of maturing notes	(5.8		)	(1.3		)

Managed Loans

After securitization of credit card receivables, the Company continues to maintain credit card customer account relationships and provides servicing for receivables transferred to the trusts. As a result, the Company considers the securitized credit card receivables to be part of the business it manages. As Citigroup consolidates the credit card trusts, all managed securitized card receivables are on-balance sheet.

Funding, Liquidity Facilities and Subordinated Interests

As noted above, Citigroup securitizes credit card receivables through two securitization trusts—Master Trust, which is part of Citicorp, and Omni Trust, which is also substantially all part of Citicorp. The liabilities of the trusts are included in the Consolidated Balance Sheet, excluding those retained by Citigroup.

The Master Trust issues fixed- and floating-rate term notes. Some of the term notes are issued to multi-seller commercial paper conduits. The weighted average maturity of

the term notes issued by the Master Trust was 2.8 years as of June 30, 2015 and December 31, 2014.

Master Trust Liabilities (at par value)



In billions of dollars	June 30, 2015		Dec. 31, 2014
Term notes issued to third parties	$	30.0	$	35.7
Term notes retained by Citigroup affiliates	7.1		8.2
Total Master Trust liabilities	$	37.1	$	43.9

The Omni Trust issues fixed- and floating-rate term notes, some of which are purchased by multi-seller commercial paper conduits. The weighted average maturity of the third-party term notes issued by the Omni Trust was 1.4 years as of June 30, 2015 and 1.9 years as of December 31, 2014.

Omni Trust Liabilities (at par value)



In billions of dollars	June 30, 2015		Dec. 31, 2014
Term notes issued to third parties	$	1.3	$	1.3
Term notes retained by Citigroup affiliates	1.9		1.9
Total Omni Trust liabilities	$	3.2	$	3.2

Mortgage Securitizations

The Company provides a wide range of mortgage loan products to a diverse customer base. Once originated, the Company often securitizes these loans through the use of VIEs. These VIEs are funded through the issuance of trust certificates backed solely by the transferred assets. These certificates have the same life as the transferred assets. In addition to providing a source of liquidity and less expensive funding, securitizing these assets also reduces the Company’s credit exposure to the borrowers. These 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. However, the Company’s U.S. consumer mortgage business generally retains the servicing rights and in certain instances retains investment securities, interest-only strips and residual interests in future cash flows from the trusts and also provides servicing for a limited number of ICG securitizations.

The Company securitizes mortgage loans generally through either a government-sponsored agency, such as Ginnie Mae, Fannie Mae or Freddie Mac (U.S. agency-sponsored mortgages), or private-label (non-agency-sponsored mortgages) securitization. The Company is not the primary beneficiary of its U.S. agency-sponsored mortgage securitizations because Citigroup does not have the power to direct the activities of the VIE that most significantly impact the entity’s economic performance. Therefore, Citi does not consolidate these U.S. agency-sponsored mortgage securitizations.

The Company does not consolidate certain non-agency-sponsored mortgage securitizations because Citi is either not the servicer with the power to direct the significant activities of the entity or Citi is the servicer but the servicing relationship is deemed to be a fiduciary relationship; therefore, Citi is not deemed to be the primary beneficiary 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.

Mortgage Securitizations

The following tables summarize selected cash flow information related to Citigroup mortgage securitizations for the three and six months ended June 30, 2015 and 2014:



	Three months ended June 30,
	2015				2014
In billions of dollars	U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages		U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages
Proceeds from new securitizations	$	7.3	$	2.5	$	6.1	$	3.6
Contractual servicing fees received	0.1		—		0.1		—
Cash flows received on retained interests and other net cash flows	—		—		—		—



	Six months ended June 30,
	2015				2014
In billions of dollars	U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages		U.S. agency- sponsored mortgages		Non-agency- sponsored mortgages
Proceeds from new securitizations	$	12.9	$	6.1	$	13.3	$	5.2
Contractual servicing fees received	0.2		—		0.3		—
Cash flows received on retained interests and other net cash flows	—		—		—		—

Gains recognized on the securitizations of U.S. agency-sponsored mortgages were $48 million and $90 million for the three and six months ended June 30, 2015, respectively. For the three and six months ended June 30, 2015, gains recognized on the securitization of non-agency sponsored mortgages were $15 million and $31 million, respectively.

Gains recognized on the securitization of U.S. agency-sponsored mortgages were $19 million and $32 million for the three and six months ended June 30, 2014, respectively. For the three and six months ended June 30, 2014, gains recognized on the securitization of non-agency sponsored mortgages were $25 million and $29 million, respectively.

Key assumptions used in measuring the fair value of retained interests at the date of sale or securitization of mortgage receivables for the three and six months ended June 30, 2015 and 2014 were as follows:



	Three months ended June 30, 2015
			Non-agency-sponsored mortgages ⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests	Subordinated interests
Discount rate	0.0% to 8.2%		—	11.2% to 12.1%
Weighted average discount rate	7.0	%	—	11.6	%
Constant prepayment rate	5.7% to 15.5%		—	3.5% to 8.0%
Weighted average constant prepayment rate	9.3	%	—	5.6	%
Anticipated net credit losses ⁽²⁾	NM		—	38.1% to 52.1%
Weighted average anticipated net credit losses	NM		—	45.7	%
Weighted average life	6.9 to 10.1 years		—	8.9 to 12.9 years



	Three months ended June 30, 2014
			Non-agency-sponsored mortgages ⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests		Subordinated interests
Discount rate	0.7% to 12.0%		4.6	%	2.6% to 7.0%
Weighted average discount rate	10.9	%	4.6	%	6.1	%
Constant prepayment rate	4.7% to 13.3%		0.0	%	3.3	%
Weighted average constant prepayment rate	5.5	%	0.0	%	3.3	%
Anticipated net credit losses ⁽²⁾	NM		40.0	%	58.5	%
Weighted average anticipated net credit losses	NM		40.0	%	58.5	%
Weighted average life	7.4 to 9.4 years		8.6 years		4.0 to 10.1 years



	Six months ended June 30, 2015
			Non-agency-sponsored mortgages⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests		Subordinated interests
Discount rate	0.0% to 8.2%		2.8	%	0.0% to 12.1%
Weighted average discount rate	7.0	%	2.8	%	5.5	%
Constant prepayment rate	5.7% to 34.9%		0.0	%	0.0% to 8.0%
Weighted average constant prepayment rate	13.6	%	0.0	%	3.3	%
Anticipated net credit losses⁽²⁾	NM		40.0	%	0.0% to 55.9%
Weighted average anticipated net credit losses	NM		40.0	%	40.2	%
Weighted average life	3.5 to 10.1 years		9.7 years		0.0 to 12.9 years



	Six months ended June 30, 2014
			Non-agency-sponsored mortgages⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests		Subordinated interests
Discount rate	0.0% to 12.0%		1.4% to 4.6%		2.6% to 9.1%
Weighted average discount rate	10.7	%	3.8	%	6.8	%
Constant prepayment rate	0.0% to 16.0%		0.0	%	3.3% to 6.1%
Weighted average constant prepayment rate	5.1	%	0.0	%	5.2	%
Anticipated net credit losses⁽²⁾	NM		40.0	%	40.0% to 58.5%
Weighted average anticipated net credit losses	NM		40.0	%	52.9	%
Weighted average life	0.0 to 9.7 years		2.6 to 8.6 years		3.0 to 14.5 years


(1)	Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization.


(2)	Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations.

NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

The interests retained by the Company range from highly rated and/or senior in the capital structure to unrated and/or residual interests.

At June 30, 2015 and December 31, 2014, 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.



	June 30, 2015
			Non-agency-sponsored mortgages ⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests		Subordinated interests ⁽³⁾
Discount rate	0.0% to 22.8%		0.4% to 37.6%		1.5% to 20.0%
Weighted average discount rate	6.8	%	10.8	%	8.4	%
Constant prepayment rate	6.1% to 28.6%		3.2% to 100.0%		0.5% to 21.5%
Weighted average constant prepayment rate	13.2	%	13.8	%	8.1	%
Anticipated net credit losses ⁽²⁾	NM		0.0% to 83.0%		5.1% to 79.9%
Weighted average anticipated net credit losses	NM		40.7	%	49.8	%
Weighted average life	0.5 to 21.6 years		0.3 to 24.2 years		0.4 to 21.9 years



	December 31, 2014
			Non-agency-sponsored mortgages ⁽¹⁾
	U.S. agency- sponsored mortgages		Senior interests		Subordinated interests ⁽³⁾
Discount rate	0.0% to 21.2%		1.1% to 47.1%		1.3% to 19.6%
Weighted average discount rate	8.4	%	7.7	%	8.2	%
Constant prepayment rate	6.0% to 41.4%		2.0% to 100.0%		0.5% to 16.2%
Weighted average constant prepayment rate	15.3	%	10.9	%	7.2	%
Anticipated net credit losses ⁽²⁾	NM		0.0% to 92.4%		13.7% to 83.8%
Weighted average anticipated net credit losses	NM		51.7	%	52.5	%
Weighted average life	0.0 to 16.0 years		0.3 to 14.4 years		0.0 to 24.4 years


(1)	Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization.


(2)	Anticipated net credit losses represent estimated loss severity associated with defaulted mortgage loans underlying the mortgage securitizations disclosed above. Anticipated net credit losses, in this instance, do not represent total credit losses incurred to date, nor do they represent credit losses expected on retained interests in mortgage securitizations.


(3)	Citi Holdings held no subordinated interests in mortgage securitizations as of June 30, 2015 and December 31, 2014.

NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.



				Non-agency-sponsored mortgages ⁽¹⁾
In millions of dollars at June 30, 2015	U.S. agency- sponsored mortgages			Senior interests			Subordinated interests
Carrying value of retained interests	$	2,556		$	181		$	547
Discount rates
Adverse change of 10%	$	(71	)	$	(8	)	$	(29	)
Adverse change of 20%	(138		)	(15		)	(56		)
Constant prepayment rate
Adverse change of 10%	(103		)	(3		)	(10		)
Adverse change of 20%	(199		)	(6		)	(20		)
Anticipated net credit losses
Adverse change of 10%	NM			(6		)	(9		)
Adverse change of 20%	NM			(12		)	(15		)



				Non-agency-sponsored mortgages ⁽¹⁾
In millions of dollars at December 31, 2014	U.S. agency- sponsored mortgages			Senior interests			Subordinated interests
Carrying value of retained interests	$	2,374		$	310		$	554
Discount rates
Adverse change of 10%	$	(69	)	$	(7	)	$	(30	)
Adverse change of 20%	(134		)	(13		)	(57		)
Constant prepayment rate
Adverse change of 10%	(93		)	(3		)	(9		)
Adverse change of 20%	(179		)	(5		)	(18		)
Anticipated net credit losses
Adverse change of 10%	NM			(6		)	(9		)
Adverse change of 20%	NM			(10		)	(16		)


(1)	Disclosure of non-agency-sponsored mortgages as senior and subordinated interests is indicative of the interests’ position in the capital structure of the securitization.

NM Not meaningful. Anticipated net credit losses are not meaningful due to U.S. agency guarantees.

Mortgage Servicing Rights

In connection with the securitization of mortgage loans, the Company’s U.S. consumer mortgage business generally retains the servicing rights, which entitle the Company to a future stream of cash flows based on the outstanding principal balances of the loans and the contractual servicing fee. Failure to service the loans in accordance with contractual requirements may lead to a termination of the servicing rights and the loss of future servicing fees.

These transactions create an intangible asset referred to as mortgage servicing rights (MSRs), which are recorded at fair value on Citi’s Consolidated Balance Sheet. The fair value of Citi’s capitalized MSRs was $1.9 billion and $2.3 billion at June 30, 2015 and 2014, respectively. Of these amounts, approximately $1.8 billion was specific to Citicorp, with the remainder to Citi Holdings as of June 30, 2015 and 2014. The MSRs correspond to principal loan balances of $209 billion and $250 billion as of June 30, 2015 and 2014, respectively. The following tables summarize the changes in capitalized MSRs for the three and six months ended June 30, 2015 and 2014:



	Three months ended June 30,
In millions of dollars	2015			2014
Balance, as of March 31	$	1,685		$	2,586
Originations	68			49
Changes in fair value of MSRs due to changes in inputs and assumptions	262			(91		)
Other changes ⁽¹⁾	(82		)	(99		)
Sale of MSRs	(9		)	(163		)
Balance, as of June 30	$	1,924		$	2,282



	Six months ended June 30,
In millions of dollars	2015			2014
Balance, beginning of year	$	1,845		$	2,718
Originations	111			99
Changes in fair value of MSRs due to changes in inputs and assumptions	191			(175		)
Other changes ⁽¹⁾	(182		)	(225		)
Sale of MSRs	(41		)	(135		)
Balance, as of June 30	$	1,924		$	2,282


(1)	Represents changes due to customer payments and passage of time.

The fair value of the MSRs is primarily affected by changes in prepayments of mortgages that result from shifts in mortgage interest rates. Specifically, higher interest rates tend to lead to declining prepayments, which causes the fair value of the MSRs to increase. In managing this risk, the Company economically hedges a significant portion of the value of its MSRs through the use of interest rate derivative contracts, forward purchase and sale commitments of mortgage-backed securities and purchased securities classified as Trading account assets. The Company receives fees during the course of servicing previously securitized mortgages. The amounts of these fees for the three and six months ended June 30, 2015 and 2014 were as follows:



	Three months ended June 30,				Six months ended June 30,
In millions of dollars	2015		2014		2015		2014
Servicing fees	$	141	$	162	$	281	$	332
Late fees	4		5		8		15
Ancillary fees	15		16		22		36
Total MSR fees	$	160	$	183	$	311	$	383

These fees are classified in the Consolidated Statement of Income as Other revenue.

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 three and six months ended June 30, 2015, Citi transferred non-agency (private-label) securities with an original par value of approximately $195 million and $649 million, respectively, to re-securitization entities, compared to $251 million and $389 million for the three and six months ended June 30, 2014. These securities are backed by either residential or commercial mortgages and are often structured on behalf of clients.

As of June 30, 2015, the fair value of Citi-retained interests in private-label re-securitization transactions structured by Citi totaled approximately $435 million (including $79 million related to re-securitization transactions executed in 2015), which has been recorded in Trading account assets. Of this amount, approximately $29 million was related to senior beneficial interests and approximately $406 million was related to subordinated beneficial interests. As of December 31, 2014, the fair value of Citi-retained interests in private-label re-securitization transactions structured by Citi totaled approximately $545 million (including $194 million related to re-securitization transactions executed in 2014). 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 Citi holds a retained interest as of June 30, 2015 and December 31, 2014 was approximately $5.2 billion and $5.1 billion, respectively.

The Company also re-securitizes U.S. government-agency guaranteed mortgage-backed (agency) securities. During the three and six months ended June 30, 2015, Citi transferred agency securities with a fair value of approximately $4.6 billion and $8.9 billion, respectively, to re-securitization entities compared to approximately $4.9 billion and $11.3 billion for the three and six months ended June 30, 2014.

As of June 30, 2015, the fair value of Citi-retained interests in agency re-securitization transactions structured by Citi totaled approximately $2.1 billion (including $1.6 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 Citi holds a retained interest as of June 30, 2015 and December 31, 2014 was approximately $69.0 billion and $73.0 billion, respectively.

As of June 30, 2015 and December 31, 2014, the Company did not consolidate any private-label or agency re-securitization entities.

Citi-Administered Asset-Backed Commercial Paper Conduits

The Company is active in the asset-backed commercial paper conduit business as administrator of several multi-seller commercial paper conduits and also as a service provider to single-seller and other commercial paper conduits sponsored by third parties.

Citi’s multi-seller commercial paper conduits are designed to provide the Company’s clients access to low-cost funding in the commercial paper markets. The conduits purchase assets from or provide financing facilities to clients and are funded by issuing commercial paper to third-party investors. The conduits generally do not purchase assets originated by the Company. The funding of the conduits is facilitated by the liquidity support and credit enhancements provided by the Company.

As administrator to Citi’s conduits, the Company is generally responsible for selecting and structuring assets purchased or financed by the conduits, making decisions regarding the funding of the conduits, including determining the tenor and other features of the commercial paper issued, monitoring the quality and performance of the conduits’ assets, and facilitating the operations and cash flows of the conduits. In return, the Company earns structuring fees from customers for individual transactions and earns an administration fee from the conduit, which is equal to the income from the client program and liquidity fees of the conduit after payment of conduit expenses. This administration fee is fairly stable, since most risks and rewards of the underlying assets are passed back to the clients. Once the asset pricing is negotiated, most ongoing income, costs and fees are relatively stable as a percentage of the conduit’s size.

The conduits administered by the Company do not generally invest in liquid securities that are formally rated by third parties. The assets are privately negotiated and structured transactions that are generally designed to be held by the conduit, rather than actively traded and sold. The yield earned by the conduit on each asset is generally tied to the rate on the commercial paper issued by the conduit, thus passing interest rate risk to the client. Each asset purchased by the conduit is structured with transaction-specific credit enhancement features provided by the third-party client seller, including over collateralization, cash and excess spread collateral accounts, direct recourse or third-party guarantees. These credit enhancements are sized with the objective of approximating a credit rating of A or above, based on the Company’s internal risk ratings. At June 30, 2015 and December 31, 2014, the conduits had approximately $25.9 billion and $29.2 billion of purchased assets outstanding, respectively, and had incremental funding commitments with clients of approximately $12.8 billion and $13.5 billion, respectively.

Substantially all of the funding of the conduits is in the form of short-term commercial paper. At June 30, 2015 and December 31, 2014, the weighted average remaining lives of the commercial paper issued by the conduits were approximately 60 and 57 days, respectively.

The primary credit enhancement provided to the conduit investors is in the form of transaction-specific credit enhancements described above. One conduit holds only loans that are fully guaranteed primarily by AAA-rated government agencies that support export and development financing programs. In addition to the transaction-specific credit enhancements, the conduits, other than the government guaranteed loan conduit, have obtained a letter of credit from the Company, which is equal to at least 8% to 10% of the conduit’s assets with a minimum of $200 million. The letters of credit provided by the Company to the conduits total approximately $2.3 billion as of June 30, 2015 and December 31, 2014. The net result across multi-seller conduits administered by the Company, other than the government guaranteed loan conduit, is that, in the event defaulted assets exceed the transaction-specific credit enhancements described above, any losses in each conduit are allocated first to the Company and then the commercial paper investors.

The Company also provides the conduits with two forms of liquidity agreements that are used to provide funding to the conduits in the event of a market disruption, among other events. Each asset of the conduits is supported by a transaction-specific liquidity facility in the form of an asset purchase agreement (APA). Under the APA, the Company has generally agreed to purchase non-defaulted eligible receivables from the conduit at par. The APA is not designed to provide credit support to the conduit, as it generally does not permit the purchase of defaulted or impaired assets. Any funding under the APA will likely subject the underlying conduit clients to increased interest costs. In addition, the Company provides the conduits with program-wide liquidity in the form of short-term lending commitments. Under these commitments, the Company has agreed to lend to the conduits in the event of a short-term disruption in the commercial paper market, subject to specified conditions. The Company receives fees for providing both types of liquidity agreements and considers these fees to be on fair market terms.

Finally, the Company is one of several named dealers in the commercial paper issued by the conduits and earns a market-based fee for providing such services. Along with third-party dealers, the Company makes a market in the commercial paper and may from time to time fund commercial paper pending sale to a third party. On specific dates with less liquidity in the market, the Company may hold in inventory commercial paper issued by conduits administered by the Company, as well as conduits administered by third parties. Separately, in the normal course of business, the Company invests in commercial paper, including commercial paper issued by the Company's conduits. At June 30, 2015 and December 31, 2014, the Company owned $15.2 billion and $10.6 billion, respectively, of the commercial paper issued by its administered conduits. The Company's investments were not driven by market illiquidity and the Company is not obligated under any agreement to purchase the commercial paper issued by the conduits.

The asset-backed commercial paper conduits are consolidated by the Company. The Company has determined that, through its roles as administrator and liquidity provider, it has the power to direct the activities that most significantly impact the entities’ economic performance. These powers include its ability to structure and approve the assets purchased by the conduits, its ongoing surveillance and credit mitigation activities, its ability to sell or repurchase assets out of the conduits, and its liability management. In addition, as a result of all the Company’s involvement described above, it was concluded that the Company has an economic interest that could potentially be significant. However, the assets and liabilities of the conduits are separate and apart from those of Citigroup. No assets of any conduit are available to satisfy the creditors of Citigroup or any of its other subsidiaries.

Collateralized Debt and Loan Obligations

A securitized collateralized debt obligation (CDO) is a VIE that purchases a pool of assets consisting of asset-backed securities and synthetic exposures through derivatives on asset-backed securities and issues multiple tranches of equity and notes to investors.

A cash CDO, or arbitrage CDO, is a CDO designed to take advantage of the difference between the yield on a portfolio of selected assets, typically residential mortgage-backed securities, and the cost of funding the CDO through the sale of notes to investors. “Cash flow” CDOs are entities in which the CDO passes on cash flows from a pool of assets, while “market value” CDOs pay to investors the market value of the pool of assets owned by the CDO at maturity. In these transactions, all of the equity and notes issued by the CDO are funded, as the cash is needed to purchase the debt securities.

A synthetic CDO is similar to a cash CDO, except that the CDO obtains exposure to all or a portion of the referenced assets synthetically through derivative instruments, such as credit default swaps. Because the CDO does not need to raise cash sufficient to purchase the entire referenced portfolio, a substantial portion of the senior tranches of risk is typically passed on to CDO investors in the form of unfunded liabilities or derivative instruments. The CDO writes credit protection on select referenced debt securities to the Company or third parties. Risk is then passed on to the CDO investors in the form of funded notes or purchased credit protection through derivative instruments. Any cash raised from investors is invested in a portfolio of collateral securities or investment contracts. The collateral is then used to support the obligations of the CDO on the credit default swaps written to counterparties.

A securitized collateralized loan obligation (CLO) is substantially similar to the CDO transactions described above, except that the assets owned by the VIE (either cash instruments or synthetic exposures through derivative instruments) are corporate loans and to a lesser extent corporate bonds, rather than asset-backed debt securities.

A third-party asset manager is typically retained by the CDO/CLO to select the pool of assets and manage those assets over the term of the VIE.

The Company earns fees for warehousing assets prior to the creation of a “cash flow” or “market value” CDO/CLO, structuring CDOs/CLOs and placing debt securities with investors. In addition, the Company has retained interests in many of the CDOs/CLOs it has structured and makes a market in the issued notes.

The Company’s continuing involvement in synthetic CDOs/CLOs generally includes purchasing credit protection through credit default swaps with the CDO/CLO, owning a portion of the capital structure of the CDO/CLO in the form of both unfunded derivative positions (primarily “super-senior” exposures discussed below) and funded notes, entering into interest-rate swap and total-return swap transactions with the CDO/CLO, lending to the CDO/CLO, and making a market in the funded notes.

Where a CDO/CLO entity issues preferred shares (or subordinated notes that are the equivalent form), the preferred shares generally represent an insufficient amount of equity (less than 10%) and create the presumption that preferred shares are insufficient to finance the entity’s activities without subordinated financial support. In addition, although the preferred shareholders generally have full exposure to expected losses on the collateral and uncapped potential to receive expected residual returns, they generally do not have the ability to make decisions significantly affecting the entity’s financial results because of their limited role in making day-to-day decisions and their limited ability to remove the asset manager. Because one or both of the above conditions will generally be met, the Company has concluded, even where a CDO/CLO entity issued preferred shares, the entity should be classified as a VIE.

In general, the asset manager, through its ability to purchase and sell assets or—where the reinvestment period of a CDO/CLO has expired—the ability to sell assets, will have the power to direct the activities of the entity that most significantly impact the economic performance of the CDO/CLO. However, where a CDO/CLO has experienced an event of default or an optional redemption period has gone into effect, the activities of the asset manager may be curtailed and/or certain additional rights will generally be provided to the investors in a CDO/CLO entity, including the right to direct the liquidation of the CDO/CLO entity.

The Company has retained significant portions of the “super-senior” positions issued by certain CDOs. These positions are referred to as “super-senior” because they represent the most senior positions in the CDO and, at the time of structuring, were senior to tranches rated AAA by independent rating agencies.

The Company does not generally have the power to direct the activities of the entity that most significantly impact the economic performance of the CDOs/CLOs, as this power is generally held by a third-party asset manager of the CDO/CLO. As such, those CDOs/CLOs are not consolidated. The Company may consolidate the CDO/CLO when: (i) the Company is the asset manager and no other single investor has the unilateral ability to remove the Company or unilaterally cause the liquidation of the CDO/CLO, or the Company is not the asset manager but has a unilateral right to remove the third-party asset manager or unilaterally liquidate the CDO/CLO and receive the underlying assets, and (ii) the Company has economic exposure to the entity that could be potentially significant to the entity.

The Company continues to monitor its involvement in unconsolidated CDOs/CLOs to assess future consolidation risk. For example, if the Company were to acquire additional interests in these entities and obtain the right, due to an event of default trigger being met, to unilaterally liquidate or direct the activities of a CDO/CLO, the Company may be required to consolidate the asset entity. For cash CDOs/CLOs, the net result of such consolidation would be to gross up the Company’s balance sheet by the current fair value of the securities held by third parties and assets held by the CDO/CLO, which amounts are not considered material. For synthetic CDOs/CLOs, the net result of such consolidation may reduce the Company’s balance sheet, because intercompany derivative receivables and payables would be eliminated in consolidation, and other assets held by the CDO/CLO and the securities held by third parties would be recognized at their current fair values.

Key Assumptions and Retained Interests

At June 30, 2015 and December 31, 2014, the key assumptions used to value retained interests in CLOs and CDOs, and the sensitivity of the fair value to adverse changes of 10% and 20% are set forth in the tables below:



	June 30, 2015
	CDOs	CLOs
Discount rate	44.9% to 49.4%	1.5% to 1.6%



	December 31, 2014
	CDOs	CLOs
Discount rate	44.7% to 49.2%	1.4% to 5.0%



	June 30, 2015
In millions of dollars	CDOs			CLOs
Carrying value of retained interests	$	7		$	1,816
Discount rates
Adverse change of 10%	$	(1	)	$	(10	)
Adverse change of 20%	(1		)	(20		)



	December 31, 2014
In millions of dollars	CDOs			CLOs
Carrying value of retained interests	$	6		$	1,549
Discount rates
Adverse change of 10%	$	(1	)	$	(9	)
Adverse change of 20%	(2		)	(18		)

Asset-Based Financing

The Company provides loans and other forms of financing to VIEs that hold assets. Those loans are subject to the same credit approvals as all other loans originated or purchased by the Company. Financings in the form of debt securities or derivatives are, in most circumstances, reported in Trading account assets and accounted for at fair value through earnings. The Company generally does not have the power to direct the activities that most significantly impact these VIEs’ economic performance, and thus it does not consolidate them.

Asset-Based Financing

The primary types of Citigroup’s asset-based financings, total assets of the unconsolidated VIEs with significant involvement, and the Company’s maximum exposure to loss at June 30, 2015 and December 31, 2014 are shown below. For the Company to realize the maximum loss, the VIE (borrower) would have to default with no recovery from the assets held by the VIE.



	June 30, 2015
In millions of dollars	Total unconsolidated VIE assets		Maximum exposure to unconsolidated VIEs
Type
Commercial and other real estate	$	30,731	$	11,292
Corporate loans	586		685
Hedge funds and equities	368		58
Airplanes, ships and other assets	35,050		15,451
Total	$	66,735	$	27,486



	December 31, 2014
In millions of dollars	Total unconsolidated VIE assets		Maximum exposure to unconsolidated VIEs
Type
Commercial and other real estate	$	26,146	$	9,476
Corporate loans	460		473
Hedge funds and equities	—		—
Airplanes, ships and other assets	36,143		15,649
Total	$	62,749	$	25,598

The following table summarizes selected cash flow information related to asset-based financings for the quarters ended June 30, 2015 and 2014:

Municipal Securities Tender Option Bond (TOB) Trusts

TOB trusts may hold fixed- or floating-rate, taxable or tax-exempt securities issued by state and local governments and municipalities. The trusts are typically structured as single-issuer trusts whose assets are purchased from either the Company or from other investors in the municipal securities market. TOB trusts finance the purchase of their municipal assets by issuing two classes of certificates: long-term, floating rate certificates (“Floaters”) that are supported by a liquidity facility and residual interest certificates (“Residuals”). The Floaters are purchased by third-party investors, typically tax-exempt money market funds. The Residuals are purchased by the original owner of the municipal securities that are being financed.

Generally, there are two types of TOB trusts: customer TOB trusts and non-customer TOB trusts. Customer TOB trusts are trusts utilized by customers of the Company to finance their municipal securities investments; the Residuals issued by such trusts are purchased by the customer employing the funding. Non-customer TOB trusts are trusts used by the Company to finance its own investments in municipal securities; the Residuals issued by non-customer TOB trusts are purchased by the Company.

With respect to both customer and non-customer TOB trusts, the Company provides remarketing agent services. If Floaters are optionally tendered and the Company, in its role as remarketing agent, is unable to find a new investor within a specified period of time, the Company may, but is not obligated to, purchase the tendered Floaters into its own inventory. The level of the Company’s inventory of such Floaters fluctuates over time. At June 30, 2015 and December 31, 2014, the Company held $108 million and $3 million, respectively, of Floaters related to customer and non-customer TOB trusts.

For certain customer TOB trusts, the Company may also serve as a voluntary advance provider. In this capacity, the Company may, but is not obligated to, make loan advances to customer TOB trusts, which advances would be used by the Trusts to purchase optionally tendered Floaters that have not otherwise been successfully remarketed to a new investor. Such loans are secured by pledged Floaters. As of June 30, 2015, the Company had no outstanding voluntary advances to customer TOB trusts.

For certain non-customer trusts, the Company also provides credit enhancement. At June 30, 2015 and December 31, 2014, approximately $83 million and $198 million, respectively, of the municipal bonds owned by TOB trusts have a credit guarantee provided by the Company.

The Company also provides liquidity services to many of the outstanding customer and non-customer trusts. If a trust is unwound early due to an event other than a credit event on the underlying municipal bond, the underlying municipal bonds are sold out of the Trust and bond sale proceeds are used to redeem the outstanding Trust certificates. If there is a shortfall in the trust’s cash flows between the redemption price of the tendered Floaters and the proceeds from the sale of the underlying municipal bonds, the trust draws on the liquidity agreement in an amount equal to the shortfall. For certain customer TOB trusts the Company has executed a reimbursement agreement with the holder of the Residuals, pursuant to which the Residual holder is obligated to reimburse the Company for any payment it is required to make under the liquidity arrangement. Through this reimbursement agreement, the Residual holder remains economically exposed to fluctuations in value of the underlying municipal bonds. These reimbursement agreements may be subject to daily margining based on changes in value of the underlying municipal bond. In cases where a third party provides liquidity to a non-customer TOB trust, a similar reimbursement arrangement may be made whereby the Company (or a consolidated subsidiary of the Company) as Residual holder absorbs any losses incurred by the liquidity provider.

At June 30, 2015 and December 31, 2014, liquidity agreements provided with respect to customer TOB trusts totaled $3.4 billion and $3.7 billion, respectively, of which $2.5 billion and $2.6 billion, respectively, were offset by reimbursement agreements. For the remaining exposure related to TOB transactions, where the Residual owned by the customer was at least 25% of the bond value at the inception of the transaction, no reimbursement agreement was executed.

The Company also provides other liquidity agreements or letters of credit to customer-sponsored municipal investment funds, which are not variable interest entities, and municipality-related issuers that totaled $6.5 billion and $7.4 billion as of June 30, 2015 and December 31, 2014, respectively. These liquidity agreements and letters of credit are offset by reimbursement agreements with various term-out provisions.

The Company considers both customer and non-customer TOB trusts to be VIEs. Customer TOB trusts are not consolidated by the Company as the power rests with the customer Residual holder, which may unilaterally cause the sale of the trust’s bonds.

Non-customer TOB trusts generally are consolidated as the Company holds the Residual interest, and thus has the power to direct the activities that most significantly impact the trust’s economic performance (i.e. unilateral sale).

Municipal Investments

Municipal investment transactions include debt and equity interests in partnerships that finance the construction and rehabilitation of low-income housing, facilitate lending in new or underserved markets, or finance the construction or operation of renewable municipal energy facilities. The Company generally invests in these partnerships as a limited partner and earns a return primarily through the receipt of tax credits and grants earned from the investments made by the partnership. The Company may also provide construction loans or permanent loans for the development or operation of real estate properties held by partnerships. These entities are generally considered VIEs. The power to direct the activities of these entities is typically held by the general partner. Accordingly, these entities are not consolidated by the Company.

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 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 three and six months ended June 30, 2015 totaled approximately $0.6 billion and $0.8 billion, respectively, compared to $0.3 billion and $1.2 billion for the three and six months ended June 30, 2014.

Investment Funds

The Company is the investment manager for certain investment funds and retirement funds that invest in various asset classes including private equity, hedge funds, real estate, fixed income and infrastructure. The Company earns a management fee, which is a percentage of capital under management, and may earn performance fees. In addition, for some of these funds the Company has an ownership interest in the investment funds. The Company has also established a number of investment funds as opportunities for qualified employees to invest in private equity investments. The Company acts as investment manager to these funds and may provide employees with financing on both recourse and non-recourse bases for a portion of the employees’ investment commitments.

The Company has determined that a majority of the investment entities managed by Citigroup are provided a deferral from the requirements of ASC 810, because they meet the criteria in Accounting Standards Update No. 2010-10, Consolidation (Topic 810), Amendments for Certain Investment Funds (ASU 2010-10). These entities continue to be evaluated under the requirements of ASC 810-10, prior to the implementation of SFAS 167 (FIN 46(R), Consolidation of Variable Interest Entities), which required that a VIE be consolidated by the party with a variable interest that will absorb a majority of the entity’s expected losses or residual returns, or both. See Note 1 to the Consolidated Financial Statements for a discussion of ASU 2015-02 which includes impending changes to targeted areas of consolidation guidance. When ASU 2015-02 becomes effective on January 1, 2016, it will eliminate the above noted deferral for certain investment entities pursuant to ASU 2010-10.

Trust Preferred Securities

The Company has previously raised financing through the issuance of trust preferred securities. In these transactions, the Company forms a statutory business trust and owns all of the voting equity shares of the trust. The trust issues preferred equity securities to third-party investors and invests the gross proceeds in junior subordinated deferrable interest debentures issued by the Company. The trusts have no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the preferred equity securities held by third-party investors. Obligations of the trusts are fully and unconditionally guaranteed by the Company.

Because the sole asset of each of the trusts is a receivable from the Company and the proceeds to the Company from the receivable exceed the Company’s investment in the VIE’s equity shares, the Company is not permitted to consolidate the trusts, even though it owns all of the voting equity shares of the trust, has fully guaranteed the trusts’ obligations, and has the right to redeem the preferred securities in certain circumstances. The Company recognizes the subordinated debentures on its Consolidated Balance Sheet as long-term liabilities. (For additional information, see Note 17 to the Consolidated Financial Statements.)

Three months ended
June 30,

In billions of dollars

Proceeds from new securitizations

Cash flows received on retained interests and other net cash flows