GUARANTEES, LEASES AND COMMITMENTS

6 Months Ended

Jun. 30, 2019

Guarantees, Leases And Commitments [Abstract]

Citi 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, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees.

For additional information regarding Citi’s guarantees and indemnifications included in the tables below, as well as its other guarantees and indemnifications excluded from the tables below, see Note 26 to the Consolidated Financial Statements in Citi’s 2018 Annual Report on Form 10-K.

The following tables present information about Citi’s guarantees at June 30, 2019 and December 31, 2018:



	Maximum potential amount of future payments
In billions of dollars at June 30, 2019	Expire within 1 year		Expire after 1 year		Total amount outstanding		Carrying value (in millions of dollars)
Financial standby letters of credit	$	32.9	$	66.2	$	99.1	$	132
Performance guarantees	7.7		4.3		12.0		27
Derivative instruments considered to be guarantees	39.3		63.6		102.9		413
Loans sold with recourse	—		1.3		1.3		8
Securities lending indemnifications⁽¹⁾	105.3		—		105.3		—
Credit card merchant processing⁽¹⁾⁽²⁾	90.0		—		90.0		—
Credit card arrangements with partners	0.1		0.8		0.9		136
Custody indemnifications and other	—		31.7		31.7		41
Total	$	275.3	$	167.9	$	443.2	$	757



	Maximum potential amount of future payments
In billions of dollars at December 31, 2018	Expire within 1 year		Expire after 1 year		Total amount outstanding		Carrying value (in millions of dollars)
Financial standby letters of credit	$	32.1	$	67.5	$	99.6	$	131
Performance guarantees	7.7		4.2		11.9		29
Derivative instruments considered to be guarantees	23.5		87.4		110.9		567
Loans sold with recourse	—		1.2		1.2		9
Securities lending indemnifications⁽¹⁾	98.3		—		98.3		—
Credit card merchant processing⁽¹⁾⁽²⁾	94.7		—		94.7		—
Credit card arrangements with partners	0.3		0.8		1.1		162
Custody indemnifications and other	—		35.4		35.4		41
Total	$	256.6	$	196.5	$	453.1	$	939


(1)	The carrying values of securities lending indemnifications and credit card merchant processing were not material for either period presented, as the probability of potential liabilities arising from these guarantees is minimal.

(2)

At June 30, 2019 and December 31, 2018, this maximum potential exposure was estimated to be $90 billion and $95 billion, respectively. However, Citi believes that the maximum exposure is not representative of the actual potential loss exposure based on its historical experience. This contingent liability is unlikely to arise, as most products and services are delivered when purchased and amounts are refunded when items are returned to merchants.

Loans Sold with Recourse

Loans sold with recourse represent Citi’s obligations to

reimburse the buyers for loan losses under certain

circumstances. Recourse refers to the clause in a sales

agreement under which a seller/lender will fully reimburse

the buyer/investor for any losses resulting from the

purchased loans. This may be accomplished by the seller

taking back any loans that become delinquent.

In addition to the amounts shown in the tables above,

Citi has recorded a repurchase reserve for its potential

repurchases or make-whole liability regarding residential

mortgage representation and warranty claims related to its

whole loan sales to U.S. government-sponsored

enterprises (GSEs) and, to a lesser extent, private investors.

The repurchase reserve was approximately $43 million and $49 million at June 30, 2019 and December 31, 2018, respectively, and these amounts are included in Other liabilities on the Consolidated Balance Sheet.

Credit Card Arrangements with Partners

Citi, in certain of its credit card partner arrangements,

provides guarantees to the partner regarding the volume of

certain customer originations during the term of the

agreement. To the extent that such origination targets are not met, the guarantees serve to compensate the partner for certain payments that otherwise would have been generated in connection with such originations.

Other Guarantees and Indemnifications

Credit Card Protection Programs

Citi, through its credit card businesses, provides various

cardholder protection programs on several of its card

products, including programs that provide insurance

coverage for rental cars, coverage for certain losses

associated with purchased products, price protection for

certain purchases and protection for lost luggage. These

guarantees are not included in the table, since the total

outstanding amount of the guarantees and Citi’s maximum

exposure to loss cannot be quantified. The protection is

limited to certain types of purchases and losses, and it is not

possible to quantify the purchases that would qualify for

these benefits at any given time. Citi assesses the probability

and amount of its potential liability related to these programs

based on the extent and nature of its historical loss

experience. At June 30, 2019 and December 31, 2018, the actual and estimated losses incurred and the carrying value of Citi’s obligations related to these programs were

immaterial.

Value-Transfer Networks

Citi is a member of, or shareholder in, hundreds 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. Citi’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 claims that have

not yet occurred. Citi believes the risk of loss is remote

given historical experience with the VTNs. Accordingly,

Citi’s participation in VTNs is not reported in the guarantees

tables above, and there are no amounts reflected on the

Consolidated Balance Sheet as of June 30, 2019 or

December 31, 2018 for potential obligations that could arise

from Citi’s involvement with VTN associations.

Long-Term Care Insurance Indemnification

In 2000, Travelers Life & Annuity (Travelers), then a subsidiary of Citi, entered into a reinsurance agreement to transfer the risks and rewards of its long-term care (LTC) business to GE Life (now Genworth Financial Inc., or Genworth), then a subsidiary of the General Electric Company (GE). As part of this transaction, the reinsurance obligations were provided by two regulated insurance subsidiaries of GE Life, which funded two collateral trusts with securities. Presently, as discussed below, the trusts are referred to as the Genworth Trusts.

As part of GE’s spin-off of Genworth in 2004, GE retained the risks and rewards associated with the 2000 Travelers reinsurance agreement by providing a reinsurance contract to Genworth through its Union Fidelity Life Insurance Company (UFLIC) subsidiary that covers the Travelers LTC policies. In addition, GE provided a capital maintenance agreement in favor of UFLIC that is designed to assure that UFLIC will have the funds to pay its reinsurance obligations. As a result of these reinsurance agreements and the spin-off of Genworth, Genworth has reinsurance protection from UFLIC (supported by GE) and has reinsurance obligations in connection with the Travelers LTC policies. As noted below, the Genworth reinsurance obligations now benefit Brighthouse Financial, Inc. (Brighthouse). While neither Brighthouse nor Citi are direct beneficiaries of the capital maintenance agreement between GE and UFLIC, Brighthouse and Citi benefit indirectly from the existence of the capital maintenance agreement, which helps assure that UFLIC will continue to have funds necessary to pay its reinsurance obligations to Genworth.

In connection with Citi’s 2005 sale of Travelers to MetLife Inc. (MetLife), Citi provided an indemnification to MetLife for losses (including policyholder claims) relating to the LTC business for the entire term of the Travelers LTC policies, which, as noted above, are reinsured by subsidiaries of Genworth. In 2017, MetLife spun off its retail insurance business to Brighthouse. As a result, the Travelers LTC policies now reside with Brighthouse. The original reinsurance agreement between Travelers (now Brighthouse) and Genworth remains in place and Brighthouse is the sole beneficiary of the Genworth Trusts. The fair value of the Genworth Trusts is approximately $8.3 billion as of June 30, 2019, compared to approximately $7.5 billion at December 31, 2018. The Genworth Trusts are designed to provide collateral to Brighthouse in an amount equal to the statutory liabilities of Brighthouse in respect of the Travelers LTC policies. The assets in the Genworth Trusts are

evaluated and adjusted periodically to ensure that the fair value of the assets continues to provide collateral in an amount equal to these estimated statutory liabilities, as the liabilities change over time.

If both (i) Genworth fails to perform under the original

Travelers/GE Life reinsurance agreement for any reason,

including insolvency or the failure of UFLIC to perform in a timely manner, and (ii) the assets of the two Genworth Trusts

are insufficient or unavailable, then Citi, through its LTC

reinsurance indemnification, must reimburse Brighthouse for

any losses incurred in connection with the LTC policies. Since both events would have to occur before Citi would become responsible for any payment to Brighthouse pursuant to its indemnification obligation, and the likelihood of such events occurring is currently not probable, there is no liability reflected on the Consolidated Balance Sheet as of June 30, 2019 and December 31, 2018 related to this indemnification. Citi continues to closely monitor its potential exposure under this indemnification obligation.

Separately, Genworth announced that it had agreed to

be purchased by China Oceanwide Holdings Co., Ltd, subject to a series of conditions and regulatory approvals. Citi is monitoring these developments.

Futures and Over-the-Counter Derivatives Clearing

Citi provides clearing services on central clearing parties (CCP) for clients that need to clear exchange-traded and over-the-counter (OTC) derivative contracts with CCPs. Based on all relevant facts and circumstances, Citi has concluded that it acts as an agent for accounting purposes in its role as clearing member for these client transactions. As such, Citi does not reflect the underlying exchange-traded or OTC derivatives contracts in its Consolidated Financial Statements. See Note 19 for a discussion of Citi’s derivatives activities that are reflected in its Consolidated Financial Statements.

As a clearing member, Citi collects and remits cash and securities collateral (margin) between its clients and the

respective CCP. In certain circumstances, Citi collects a higher amount of cash (or securities) from its clients than it needs to remit to the CCPs. This excess cash is then held at depository institutions such as banks or carry brokers.

There are two types of margin: initial and variation. Where Citi 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 or depository institutions is reflected within Brokerage payables (payables to customers) and Brokerage receivables (receivables from brokers, dealers and clearing organizations) or Cash and due from banks, respectively.

However, for exchange-traded and OTC-cleared derivative contracts where Citi does not obtain benefits from or control the client cash balances, the client cash initial margin collected from clients and remitted to the CCP or depository institutions is not reflected on Citi’s Consolidated Balance Sheet. These conditions are met when Citi has contractually agreed with the client that (i) Citi will pass through to the client all interest paid by the CCP or depository institutions on the cash initial margin, (ii) Citi

will not utilize its right as a clearing member to transform cash margin into other assets, (iii) Citi does not guarantee and is not liable to the client for the performance of the CCP or the depository institution and (iv) the client cash balances are legally isolated from Citi’s bankruptcy estate. The total amount of cash initial margin collected and remitted in this manner was approximately $14.1 billion and $13.8 billion as of June 30, 2019 and December 31, 2018, 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, Citi 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, Citi 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 Citi as clearing

member. Citi generally holds incremental cash or securities

margin posted by the client, which would typically be

expected to be sufficient to mitigate Citi’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 Citi’s Consolidated Balance Sheet.

Carrying Value—Guarantees and Indemnifications

At June 30, 2019 and December 31, 2018, the total carrying amounts of the liabilities related to the guarantees and indemnifications included in the tables above amounted

to approximately $0.8 billion and $0.9 billion, respectively. The carrying value of financial and performance guarantees is included in Other liabilities. For loans sold with recourse, the carrying value of the liability is included in Other liabilities.

Collateral

Cash collateral available to Citi to reimburse losses realized under these guarantees and indemnifications amounted to $71 billion and $55 billion at June 30, 2019 and December 31, 2018, respectively. Securities and other marketable assets held as collateral amounted to $55 billion at both June 30, 2019 and December 31, 2018. The majority of collateral is held to reimburse losses realized under securities lending indemnifications. Additionally, letters of credit in favor of Citi held as collateral amounted to $4.0 billion and $4.1 billion at June 30, 2019 and December 31, 2018, respectively. Other property may also be available to Citi to cover losses under certain guarantees and indemnifications; however, the value of such property has not been determined.

Performance Risk

Presented in the tables below are the maximum potential amounts of future payments that are classified based upon internal and external credit ratings. 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, Citi believes such amounts bear no relationship to the anticipated losses, if any, on these guarantees.



	Maximum potential amount of future payments
In billions of dollars at June 30, 2019	Investment grade		Non-investment grade		Not rated		Total
Financial standby letters of credit	$	71.6	$	11.7	$	15.8	$	99.1
Performance guarantees	9.7		2.0		0.3		12.0
Derivative instruments deemed to be guarantees	—		—		102.9		102.9
Loans sold with recourse	—		—		1.3		1.3
Securities lending indemnifications	—		—		105.3		105.3
Credit card merchant processing	—		—		90.0		90.0
Credit card arrangements with partners	—		—		0.9		0.9
Custody indemnifications and other	19.1		12.6		—		31.7
Total	$	100.4	$	26.3	$	316.5	$	443.2



	Maximum potential amount of future payments
In billions of dollars at December 31, 2018	Investment grade		Non-investment grade		Not rated		Total
Financial standby letters of credit	$	71.3	$	11.9	$	16.4	$	99.6
Performance guarantees	9.2		2.1		0.6		11.9
Derivative instruments deemed to be guarantees	—		—		110.9		110.9
Loans sold with recourse	—		—		1.2		1.2
Securities lending indemnifications	—		—		98.3		98.3
Credit card merchant processing	—		—		94.7		94.7
Credit card arrangements with partners	—		—		1.1		1.1
Custody indemnifications and other	22.2		13.2		—		35.4
Total	$	102.7	$	27.2	$	323.2	$	453.1

Leases

The Company’s operating leases, where Citi is a lessee, include real estate, such as office space and branches, and various types of equipment. These leases have a weighted-average remaining lease term of approximately six years as of June 30, 2019. The operating lease ROU asset and lease liability were $2.9 billion and $3.1 billion, respectively, as of June 30, 2019. The Company recognizes fixed lease costs on a straight-line basis throughout the lease term in the Consolidated Statement of Income. Additionally, variable lease costs are recognized in the period in which the obligation for those payments is incurred. The total operating lease expense (principally for offices, branches and equipment), net of approximately $14 million and $35 million of sublease income, was approximately $265 million and $537 million for the three and six months ended June 30, 2019, respectively. The decrease in the lease liability and related financial information for operating leases from March 31, 2019 reflects the impact of a purchase of a previously leased property in London during the second quarter of 2019. The purchased property is included in Other assets on the Consolidated Balance Sheet at June 30, 2019.

While Citi has, as a lessee, certain finance leases, such leases are not material to the Company's Consolidated Financial Statements.

Citi’s lease arrangements that have not yet commenced as of June 30, 2019 and the Company’s short-term lease costs, variable lease costs and finance lease costs, for the three and six months ended June 30, 2019 are not material to the Consolidated Financial Statements. Citi’s operating cash outflows related to operating leases were approximately $252 million and $486 million for the three and six months ended June 30, 2019, respectively, while the future lease payments are as follows:



In millions of dollars	Operating leases
As of June 30, 2019
Remaining 2019	$	436
2020	716
2021	592
2022	464
2023	355
Thereafter	930
Total future lease payments	$	3,493
Less imputed interest (based on weighted-average discount rate of 3.7%)	(391		)
Lease liability	$	3,102

Credit Commitments and Lines of Credit

The table below summarizes Citigroup’s credit commitments:



In millions of dollars	U.S.		Outside of U.S.		June 30, 2019		December 31, 2018
Commercial and similar letters of credit	$	928	$	4,485	$	5,413	$	5,461
One- to four-family residential mortgages	2,367		1,783		4,150		2,671
Revolving open-end loans secured by one- to four-family residential properties	9,769		1,283		11,052		11,374
Commercial real estate, construction and land development	12,054		1,505		13,559		11,293
Credit card lines	613,905		94,579		708,484		696,007
Commercial and other consumer loan commitments	198,479		106,442		304,921		300,115
Other commitments and contingencies	3,033		415		3,448		3,321
Total	$	840,535	$	210,492	$	1,051,027	$	1,030,242

The majority of unused commitments are contingent upon customers maintaining specific credit standards.

Commercial commitments generally have floating interest rates and fixed expiration dates and may require payment of fees. Such fees (net of certain direct costs) are deferred and, upon exercise of the commitment, amortized over the life of

the loan or, if exercise is deemed remote, amortized over the commitment period.

Other commitments and contingencies

Other commitments and contingencies include all other transactions related to commitments and contingencies not reported on the lines above.

Unsettled reverse repurchase and securities borrowing agreements and unsettled repurchase and securities lending agreements

In addition, in the normal course of business, Citigroup enters into reverse repurchase and securities borrowing agreements, as well as repurchase and securities lending agreements, which settle at a future date. At June 30, 2019 and December 31, 2018, Citigroup had approximately $52.5 billion and $36.1 billion of unsettled reverse repurchase and securities borrowing agreements, and approximately $61.1 billion and $30.7 billion of unsettled repurchase and securities lending agreements, respectively. For a further discussion of securities purchased under agreements to resell and securities borrowed, and securities sold under agreements to repurchase and securities loaned, including the Company’s policy for offsetting repurchase and reverse repurchase agreements, see Note 10 to the Consolidated Financial Statements.

Restricted Cash

Citigroup defines restricted cash (as cash subject to withdrawal restrictions) to include cash deposited with central banks that must be maintained to meet minimum regulatory requirements, and cash set aside for the benefit of customers or for other purposes such as compensating balance arrangements or debt retirement. Restricted cash includes minimum reserve requirements with the Federal

Reserve Bank and certain other central banks and cash segregated to satisfy rules regarding the protection of customer assets as required by Citigroup broker-dealers’ primary regulators, including the United States Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission and the United Kingdom’s Prudential Regulation Authority.

Restricted cash is included on the Consolidated Balance Sheet within the following balance sheet lines:



In millions of dollars	June 30, 2019		December 31, 2018
Cash and due from banks	$	2,624	$	4,000
Deposits with banks	29,519		27,208
Total	$	32,143	$	31,208