DERIVATIVES ACTIVITIES (Tables)

9 Months Ended

Sep. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Information pertaining to Citigroup’s derivative activities, 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 measure of Citi’s exposure to derivative transactions. Rather, Citi’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. For example, if Citi enters into a receive-fixed interest rate swap with $100 million notional, and offsets this risk with an identical but opposite pay-fixed position with a different counterparty, $200 million in derivative notionals is reported, although these offsetting positions may result in de minimis overall market risk. In addition, aggregate derivative notional amounts can fluctuate from period to period in the normal course of business based on Citi’s market share, levels of client activity and other factors.

Derivative Notionals



	Hedging instruments under ASC 815				Trading derivative instruments
In millions of dollars	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Interest rate contracts
Swaps	$	246,079	$	189,779	$	19,759,439	$	18,754,219
Futures and forwards	—		—		8,297,965		6,460,539
Written options	—		—		3,857,773		3,516,131
Purchased options	—		—		3,236,924		3,234,025
Total interest rate contract notionals	$	246,079	$	189,779	$	35,152,101	$	31,964,914
Foreign exchange contracts
Swaps	$	54,502	$	37,162	$	7,004,521	$	5,576,357
Futures, forwards and spot	37,769		33,103		5,711,577		3,097,700
Written options	2,497		3,951		1,727,916		1,127,728
Purchased options	2,934		6,427		1,695,392		1,148,686
Total foreign exchange contract notionals	$	97,702	$	80,643	$	16,139,406	$	10,950,471
Equity contracts
Swaps	$	—	$	—	$	245,167	$	215,834
Futures and forwards	—		—		70,526		72,616
Written options	—		—		436,032		389,961
Purchased options	—		—		333,448		328,154
Total equity contract notionals	$	—	$	—	$	1,085,173	$	1,006,565
Commodity and other contracts
Swaps	$	—	$	—	$	118,699	$	82,039
Futures and forwards	397		23		164,427		153,248
Written options	—		—		72,021		62,045
Purchased options	—		—		69,862		60,526
Total commodity and other contract notionals	$	397	$	23	$	425,009	$	357,858
Credit derivatives⁽¹⁾
Protection sold	$	—	$	—	$	723,060	$	735,142
Protection purchased	—		—		793,792		777,713
Total credit derivatives	$	—	$	—	$	1,516,852	$	1,512,855
Total derivative notionals	$	344,178	$	270,445	$	54,318,541	$	45,792,663

(1)

Credit derivatives are arrangements designed to allow one party (protection buyer) to transfer the credit risk of a “reference 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.

Derivative mark-to-market (MTM) receivables/payables

The following tables present the gross and net fair values of the Company’s derivative transactions and the related offsetting amounts as of September 30, 2018 and December 31, 2017. 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 the enforceability of netting and collateral rights has been obtained. GAAP does not permit similar offsetting for security collateral.

In addition, the following tables reflect rule changes adopted by clearing organizations that require or allow entities to treat certain derivative assets, liabilities and the related variation margin as settlement of the related derivative fair values for legal and accounting purposes, as opposed to presenting gross derivative assets and liabilities that are subject to collateral, whereby the counterparties would record a related collateral payable or receivable. As a result, the tables reflect a reduction of approximately $110 billion and $100 billion as of September 30, 2018 and December 31, 2017, respectively, of derivative assets and derivative liabilities that previously would have been reported on a gross basis, but are now settled and not subject to collateral. The tables also present amounts that are not permitted to be offset, such as security collateral or cash collateral posted at third-party custodians, but which would be eligible for offsetting to the extent that an event of default occurred and a legal opinion supporting enforceability of the netting and collateral rights has been obtained.

Derivative Mark-to-Market (MTM) Receivables/Payables



In millions of dollars at September 30, 2018	Derivatives classified in Trading account assets/liabilities⁽¹⁾⁽²⁾
Derivatives instruments designated as ASC 815 hedges	Assets			Liabilities
Over-the-counter	$	1,411		$	81
Cleared	137			575
Interest rate contracts	$	1,548		$	656
Over-the-counter	$	1,568		$	718
Foreign exchange contracts	$	1,568		$	718
Total derivatives instruments designated as ASC 815 hedges	$	3,116		$	1,374
Derivatives instruments not designated as ASC 815 hedges
Over-the-counter	$	155,901		$	136,989
Cleared	8,262			10,062
Exchange traded	130			136
Interest rate contracts	$	164,293		$	147,187
Over-the-counter	$	169,989		$	164,571
Cleared	3,326			3,360
Exchange traded	88			236
Foreign exchange contracts	$	173,403		$	168,167
Over-the-counter	$	19,891		$	24,766
Cleared	10			9
Exchange traded	10,143			10,354
Equity contracts	$	30,044		$	35,129
Over-the-counter	$	22,449		$	25,024
Exchange traded	826			756
Commodity and other contracts	$	23,275		$	25,780
Over-the-counter	$	4,240		$	5,912
Cleared	7,326			5,781
Credit derivatives	$	11,566		$	11,693
Total derivatives instruments not designated as ASC 815 hedges	$	402,581		$	387,956
Total derivatives	$	405,697		$	389,330
Cash collateral paid/received⁽³⁾	$	10,759		$	13,676
Less: Netting agreements⁽⁴⁾	(322,565		)	(322,565		)
Less: Netting cash collateral received/paid⁽⁵⁾	(37,678		)	(30,701		)
Net receivables/payables included on the Consolidated Balance Sheet⁽⁶⁾	$	56,213		$	49,740
Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet
Less: Cash collateral received/paid	$	(739	)	$	(83	)
Less: Non-cash collateral received/paid	(12,389		)	(11,376		)
Total net receivables/payables⁽⁶⁾	$	43,085		$	38,281


(1)	The derivatives fair values are also presented in Note 20 to the Consolidated Financial Statements.

(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 original counterparties. Exchange-traded derivatives include derivatives executed directly on an organized exchange that provides pre-trade price transparency.


(3)	Reflects the net amount of the $41,460 million and $51,354 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $30,701 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $37,678 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. Approximately $304 billion, $9 billion and $10 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.


(5)	Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received and paid is netted against OTC derivative assets and liabilities, respectively.


(6)	The net receivables/payables include approximately $6 billion of derivative asset and $7 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.



In millions of dollars at December 31, 2017	Derivatives classified in Trading account assets/liabilities⁽¹⁾⁽²⁾
Derivatives instruments designated as ASC 815 hedges	Assets			Liabilities
Over-the-counter	$	1,969		$	134
Cleared	110			92
Interest rate contracts	$	2,079		$	226
Over-the-counter	$	1,143		$	1,150
Foreign exchange contracts	$	1,143		$	1,150
Total derivatives instruments designated as ASC 815 hedges	$	3,222		$	1,376
Derivatives instruments not designated as ASC 815 hedges
Over-the-counter	$	195,677		$	173,937
Cleared	7,129			10,381
Exchange traded	102			95
Interest rate contracts	$	202,908		$	184,413
Over-the-counter	$	119,092		$	117,473
Cleared	1,690			2,028
Exchange traded	34			121
Foreign exchange contracts	$	120,816		$	119,622
Over-the-counter	$	17,221		$	21,201
Cleared	21			25
Exchange traded	9,736			10,147
Equity contracts	$	26,978		$	31,373
Over-the-counter	$	13,499		$	16,362
Exchange traded	604			665
Commodity and other contracts	$	14,103		$	17,027
Over-the-counter	$	12,972		$	12,958
Cleared	7,562			8,575
Credit derivatives	$	20,534		$	21,533
Total derivatives instruments not designated as ASC 815 hedges	$	385,339		$	373,968
Total derivatives	$	388,561		$	375,344
Cash collateral paid/received⁽³⁾	$	7,541		$	14,308
Less: Netting agreements⁽⁴⁾	(306,401		)	(306,401		)
Less: Netting cash collateral received/paid⁽⁵⁾	(38,532		)	(35,666		)
Net receivables/payables included on the Consolidated Balance Sheet⁽⁶⁾	$	51,169		$	47,585
Additional amounts subject to an enforceable master netting agreement, but not offset on the Consolidated Balance Sheet
Less: Cash collateral received/paid	$	(872	)	$	(121	)
Less: Non-cash collateral received/paid	(12,739		)	(6,929		)
Total net receivables/payables⁽⁶⁾	$	37,558		$	40,535


(1)	The derivatives fair values are presented in Note 20 to the Consolidated Financial Statements. Derivative mark-to-market receivables/payables previously reported within Other assets/Other liabilities have been reclassified to Trading account assets/Trading account liabilities to conform with the current-period presentation.

(2)


(3)	Reflects the net amount of the $43,207 million and $52,840 million of gross cash collateral paid and received, respectively. Of the gross cash collateral paid, $35,666 million was used to offset trading derivative liabilities and, of the gross cash collateral received, $38,532 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. Approximately $283 billion, $14 billion and $9 billion of the netting against trading account asset/liability balances is attributable to each of the OTC, cleared and exchange-traded derivatives, respectively.


(5)	Represents the netting of cash collateral paid and received by counterparty under enforceable credit support agreements. Substantially all cash collateral received and paid is netted against OTC derivative assets and liabilities, respectively.


(6)	The net receivables/payables include approximately $6 billion of derivative asset and $8 billion of derivative liability fair values not subject to enforceable master netting agreements, respectively.

Schedule of gains (losses) on derivatives not designated in a qualifying hedging relationship recognized in Other revenue and gains (losses) on fair value hedges

The following table summarizes the gains (losses) on the Company’s fair value hedges:



	Gains (losses) on fair value hedges⁽¹⁾
	Three Months Ended September 30,									Nine Months Ended September 30,
	2018						2017⁽³⁾			2018						2017⁽³⁾
In millions of dollars	Other revenue			Net interest revenue			Other revenue			Other revenue			Net interest revenue			Other revenue
Gain (loss) on the derivatives in designated and qualifying fair value hedges
Interest rate hedges	$	—		$	(857	)	$	(194	)	$	—		$	(497	)	$	(570	)
Foreign exchange hedges	(158		)	—			(166		)	341			—			(803		)
Commodity hedges	(14		)	—			(11		)	(14		)	—			(20		)
Total gain (loss) on the derivatives in designated and qualifying fair value hedges	$	(172	)	$	(857	)	$	(371	)	$	327		$	(497	)	$	(1,393	)
Gain (loss) on the hedged item in designated and qualifying fair value hedges
Interest rate hedges	$	—		$	871		$	189		$	—		$	525		$	532
Foreign exchange hedges	132			—			144			(464		)	—			910
Commodity hedges	8			—			12			9			—			22
Total gain (loss) on the hedged item in designated and qualifying fair value hedges	$	140		$	871		$	345		$	(455	)	$	525		$	1,464
Net gain (loss) excluded from assessment of the effectiveness of fair value hedges
Interest rate hedges	$	—		$	—		$	—		$	—		$	(5	)	$	(7	)
Foreign exchange hedges⁽²⁾	7			—			(5		)	63			—			75
Commodity hedges	(7		)	—			1			(5		)	—			2
Total net gain (loss) excluded from assessment of the effectiveness of fair value hedges	$	—		$	—		$	(4	)	$	58		$	(5	)	$	70

(1)

Beginning January 1, 2018, gain (loss) amounts for interest rate risk hedges are included in Interest income/Interest expense, while the remaining amounts including the amounts for interest rate hedges prior to January 1, 2018 are included in Other revenue or Principal transactions on the Consolidated Statement of Income. The accrued interest income on fair value hedges both prior to and after January 1, 2018 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. After January 1, 2018, amounts include cross-currency basis, which is recognized in accumulated other comprehensive income. The amount of cross-currency basis that was included in accumulated other comprehensive income was $15 million and $57 million for the three and nine months ended September 30, 2018, respectively, none of which was recognized in earnings.

(3)

Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges for the three months ended September 30, 2017 was $(5) million for interest rate hedges and $(17) million for foreign exchange hedges, for a total of $(22) million. Hedge ineffectiveness recognized in earnings on designated and qualifying fair value hedges for the nine months ended September 30, 2017 was $(31) million for interest rate hedges and $32 million for foreign exchange hedges, for a total of $1 million.

The amounts recognized in Other revenue in the Consolidated Statement of Income related to derivatives not designated in a qualifying hedging relationship are shown below. The table below does not include any offsetting gains (losses) on the economically hedged items to the extent such amounts are also recorded in Other revenue.



	Gains (losses) included in Other revenue
	Three Months Ended September 30,						Nine Months Ended September 30,
In millions of dollars	2018			2017			2018			2017
Interest rate contracts	$	(22	)	$	(5	)	$	(65	)	$	(72	)
Foreign exchange	7			596			(6		)	1,897
Credit derivatives	(200		)	(125		)	(271		)	(501		)
Total	$	(215	)	$	466		$	(342	)	$	1,324

Schedule of amounts recorded on the Balance Sheet related to cumulative basis adjustments for fair value hedges



In millions of dollars as of September 30, 2018
Balance sheet line item in which hedged item is recorded	Carrying amount of hedged asset/ liability		Cumulative fair value hedging adjustment increasing (decreasing) the carrying amount
Balance sheet line item in which hedged item is recorded	Carrying amount of hedged asset/ liability		Active			De-designated
Debt securities AFS	$	80,244	$	(326	)	$	421
Long-term debt	154,540		(775		)	1,218

Schedule of pretax change in accumulated other comprehensive income (loss) from cash flow hedges

The pretax change in AOCI from cash flow hedges is presented below:



	Three Months Ended September 30,								Nine Months Ended September 30,
In millions of dollars	2018					2017			2018						2017
Amount of gain (loss) recognized in AOCI on derivative
Interest rate contracts⁽¹⁾	$	(146			)	$	(36	)	$	(665				)	$	103
Foreign exchange contracts	(3				)	(7		)	(4					)	(7		)
Total gain (loss) recognized in AOCI	$	(149			)	$	(43	)	$	(669				)	$	96
Amount of gain (loss) reclassified from AOCI to earnings	Other revenue		Net interest revenue			Other revenue			Other revenue			Net interest revenue			Other revenue
Interest rate contracts⁽¹⁾	$	—	$	(54	)	$	(48	)	$	—		$	(142	)	$	(94	)
Foreign exchange contracts	2		—			(7		)	(8		)	—			(8		)
Total gain (loss) reclassified from AOCI into earnings	$	2	$	(54	)	$	(55	)	$	(8	)	$	(142	)	$	(102	)


(1)	After January 1, 2018, all amounts reclassified into earnings for interest rate contracts are included in Interest income/Interest expense (Net interest revenue). For all other hedges, including interest rate hedges prior to January 1, 2018, the amounts reclassified to earnings are included primarily in Other revenue and Net interest revenue on the Consolidated Income Statement.

Schedule of key characteristics of credit derivative portfolio

The following tables summarize the key characteristics of Citi’s credit derivatives portfolio by counterparty and derivative form:



	Fair values				Notionals
In millions of dollars at September 30, 2018	Receivable⁽¹⁾		Payable⁽²⁾		Protection purchased		Protection sold
By industry/counterparty
Banks	$	5,366	$	5,097	$	222,802	$	234,338
Broker-dealers	1,826		1,661		66,676		67,833
Non-financial	65		90		2,823		4,247
Insurance and other financial institutions	4,309		4,845		501,491		416,642
Total by industry/counterparty	$	11,566	$	11,693	$	793,792	$	723,060
By instrument
Credit default swaps and options	$	10,997	$	11,168	$	771,239	$	712,451
Total return swaps and other	569		525		22,553		10,609
Total by instrument	$	11,566	$	11,693	$	793,792	$	723,060
By rating
Investment grade	$	5,180	$	5,014	$	616,595	$	552,452
Non-investment grade	6,386		6,679		177,197		170,608
Total by rating	$	11,566	$	11,693	$	793,792	$	723,060
By maturity
Within 1 year	$	1,442	$	1,680	$	232,670	$	204,358
From 1 to 5 years	8,083		7,855		472,276		439,089
After 5 years	2,041		2,158		88,846		79,613
Total by maturity	$	11,566	$	11,693	$	793,792	$	723,060


(1)	The fair value amount receivable is composed of $3,657 million under protection purchased and $7,909 million under protection sold.


(2)	The fair value amount payable is composed of $8,476 million under protection purchased and $3,217 million under protection sold.



	Fair values				Notionals
In millions of dollars at December 31, 2017	Receivable⁽¹⁾		Payable⁽²⁾		Protection purchased		Protection sold
By industry/counterparty
Banks	$	7,471	$	6,669	$	264,414	$	273,711
Broker-dealers	2,325		2,285		73,273		83,229
Non-financial	70		91		1,288		1,140
Insurance and other financial institutions	10,668		12,488		438,738		377,062
Total by industry/counterparty	$	20,534	$	21,533	$	777,713	$	735,142
By instrument
Credit default swaps and options	$	20,251	$	20,554	$	754,114	$	724,228
Total return swaps and other	283		979		23,599		10,914
Total by instrument	$	20,534	$	21,533	$	777,713	$	735,142
By rating
Investment grade	$	10,473	$	10,616	$	588,324	$	557,987
Non-investment grade	10,061		10,917		189,389		177,155
Total by rating	$	20,534	$	21,533	$	777,713	$	735,142
By maturity
Within 1 year	$	2,477	$	2,914	$	231,878	$	218,097
From 1 to 5 years	16,098		16,435		498,606		476,345
After 5 years	1,959		2,184		47,229		40,700
Total by maturity	$	20,534	$	21,533	$	777,713	$	735,142


(1)	The fair value amount receivable is composed of $3,195 million under protection purchased and $17,339 under protection sold.


(2)	The fair value amount payable is composed of $3,147 million under protection purchased and $18,386 million under protection sold.

- Definition

Tabular disclosure of credit derivatives which includes information by sellers of credit derivatives, about each credit derivative, or each group of similar credit derivatives, including (a) the nature of the credit derivative - its term, how it arose, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative; (b) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative; (c) the current fair value of the credit derivative; and (d) the nature of any recourse provisions under the credit derivative, and any assets held either as collateral or by third parties. A credit derivative is a derivative instrument (1) in which one or more of its underlyings are related to the credit risk of a specified entity (or a group of entities) or an index based on the credit risk of a group of entities and (2) that exposes the seller to potential loss from credit-risk-related events specified in the contract. Examples of credit derivatives within the scope of this paragraph include, but are not limited to, credit default swaps, credit spread options, and credit index products; also includes a hybrid instrument that has an embedded credit derivative (for example, but not limited to, a credit-linked note).

+ References + Details