FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2012

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

19.    FAIR VALUE MEASUREMENT

        ASC 820-10 (formerly SFAS 157) defines fair value, establishes a consistent framework for measuring fair value and requires disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Among other things, the standard requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

        Under ASC 820-10, the probability of default of a counterparty is factored into the valuation of derivative positions and includes the impact of Citigroup's own credit risk on derivatives and other liabilities measured at fair value.

Fair Value Hierarchy

        ASC 820-10, Fair Value Measurement, specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair value hierarchy:

• •

  Level 1: Quoted prices for identical instruments in active markets.

  •

  Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

  •

  Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

        This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the amount of adjustment necessary when comparing similar transactions are all factors in determining the liquidity of markets and the relevance of observed prices in those markets.

        The Company's policy with respect to transfers between levels of the fair value hierarchy is to recognize transfers into and out of each level as of the end of the reporting period.

Determination of Fair Value

        For assets and liabilities carried at fair value, the Company measures such value using the procedures set out below, irrespective of whether these assets and liabilities are carried at fair value as a result of an election or whether they are required to be carried at fair value.

        When available, the Company generally uses quoted market prices to determine fair value and classifies such items as Level 1. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified as Level 2.

        If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based parameters, such as interest rates, currency rates, option volatilities, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

        Where available, the Company may also make use of quoted prices for recent trading activity in positions with the same or similar characteristics to that being valued. The market activity and the amount of the bid-ask spread are among the factors considered in determining the liquidity of markets and the relevance of observed prices from those markets. If relevant and observable prices are available, those valuations may be classified as Level 2. If prices of similar instruments are not available from the market, other valuation techniques may be used and the item may be classified as Level 3.

        Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors or brokers. Vendors and brokers' valuations may be based on a variety of inputs ranging from observed prices to proprietary valuation models.

        The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models and any significant assumptions.

Market valuation adjustments

        Liquidity adjustments are applied to items in Level 2 and Level 3 of the fair value hierarchy to ensure that the fair value reflects the liquidity or illiquidity of the market. The liquidity reserve may utilize the bid-offer spread for an instrument as one of the factors.

        Counterparty credit-risk adjustments are applied to derivatives, such as over-the-counter uncollateralized derivatives, where the base valuation uses market parameters based on the LIBOR interest rate curves. Not all counterparties have the same credit risk as that implied by the relevant LIBOR curve, so it is necessary to consider the market view of the credit risk of a counterparty in order to estimate the fair value of such an item.

        Bilateral or "own" credit-risk adjustments are applied to reflect the Company's own credit risk when valuing derivatives and liabilities measured at fair value. Counterparty and own credit adjustments consider the expected future cash flows between Citi and its counterparties under the terms of the instrument and the effect of credit risk on the valuation of those cash flows, rather than a point-in-time assessment of the current recognized net asset or liability. Furthermore, the credit-risk adjustments take into account the effect of credit-risk mitigants, such as pledged collateral and any legal right of offset (to the extent such offset exists) with a counterparty through arrangements such as netting agreements.

        Generally, the unit of account for a financial instrument is the individual financial instrument. The Company applies market valuation adjustments that are consistent with the unit of account, which does not include adjustment due to the size of the Company's position, except as follows. ASC 820-10 permits an exception, through an accounting policy election, to measure the fair value of a portfolio of financial assets and financial liabilities on the basis of the net open risk position when certain criteria are met. Citi has elected to measure certain portfolios of financial instruments, such as derivatives, that meet those criteria on the basis of the net open risk position. The Company applies market valuation adjustments, including adjustments to account for the size of the net open risk position, consistent with market participant assumptions and in accordance with the unit of account.

Valuation Process for Level 3 Fair Value Measurements

        Price verification procedures and related internal control procedures are governed by the Citigroup Pricing and Price Verification Policy and Standards, which is jointly owned by Finance and Risk Management. Finance has implemented the ICG Securities and Banking Pricing and Price Verification Standards and Procedures to facilitate S&B's compliance with this policy.

        For fair value measurements of assets and liabilities held by the Company, the front office traders are primarily responsible for valuing the trading account asset and liabilities, and Finance performs independent price verification procedures to evaluate those fair value measurements. Fair value measurements of assets and liabilities are determined using various techniques, including, but not limited to, discounted cash flows and internal models, such as Black-Scholes and Monte Carlo simulation.

        When a position involves one or more significant inputs that are not directly observable, price verification procedures are designed using the most relevant market data available and may involve extrapolation, interpolation, review of relevant historical data, and stress testing. Based on the observability of inputs used, Finance classifies the inventory as Level 1, Level 2 or Level 3.

        Reports of inventory that is classified within Level 3 of the fair value hierarchy are distributed to senior management in each of Finance, Risk and the individual business. This inventory is also discussed in Risk committees and in monthly meetings with senior trading management. As deemed necessary, reports may go to the Audit Committee of the Board of Directors or the full Board of Directors.

        In addition, the pricing models used to measure fair value are governed by an independent control framework. Although the models are developed and tested by the businesses, they are independently validated by Risk Management and reviewed by Finance with respect to their impact on the price verification procedures. To ensure their continued applicability, models are independently reviewed annually.

Securities purchased under agreements to resell and securities sold under agreements to repurchase

        No quoted prices exist for such instruments so fair value is determined using a discounted cash-flow technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded derivative or other features. Expected cash flows are discounted using interest rates appropriate to the maturity of the instrument as well as the nature of the underlying collateral. Generally, when such instruments are held at fair value, they are classified within Level 2 of the fair value hierarchy as the inputs used in the valuation are readily observable. However, certain long-dated positions are classified within Level 3 of the fair value hierarchy.

Trading account assets and liabilities—trading securities and trading loans

        When available, the Company uses quoted market prices to determine the fair value of trading securities; such items are classified as Level 1 of the fair value hierarchy. Examples include some government securities and exchange-traded equity securities.

        For bonds and secondary market loans traded over the counter, the Company generally determines fair value utilizing valuation techniques, such as discounted cash flows, price-based and internal models, including Black-Scholes and Monte Carlo simulation. The two primary valuation methods are discounted cash flows and internal models. Fair value estimates from these internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Vendors compile prices from various sources and may apply matrix pricing for similar bonds or loans where no price is observable. If available, the Company may also use quoted prices for recent trading activity of assets with similar characteristics to the bond or loan being valued. The yields used in discounted cash flow models are derived from the same price information. Trading securities and loans priced using such methods are generally classified as Level 2. However, when less liquidity exists for a security or loan, a quoted price is stale or prices from independent sources vary, a loan or security is generally classified as Level 3.

        Where the Company's principal market for a portfolio of loans is the securitization market, the Company uses the securitization price to determine the fair value of the portfolio. The securitization price is determined from the assumed proceeds of a hypothetical securitization in the current market, adjusted for transformation costs (i.e., direct costs other than transaction costs) and securitization uncertainties such as market conditions and liquidity. As a result of the severe reduction in the level of activity in certain securitization markets since the second half of 2007, observable securitization prices for certain directly comparable portfolios of loans have not been readily available. Therefore, such portfolios of loans are generally classified as Level 3 of the fair value hierarchy. However, for other loan securitization markets, such as commercial real estate loans, pricing verification of the hypothetical securitizations has been possible, since these markets have remained active. Accordingly, this loan portfolio is classified as Level 2 in the fair value hierarchy.

Trading account assets and liabilities—derivatives

        Exchange-traded derivatives are generally measured at fair value using quoted market (i.e., exchange) prices and are classified as Level 1 of the fair value hierarchy.

        The majority of derivatives entered into by the Company are executed over the counter and are valued using internal valuation techniques as no quoted market prices exist for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instrument. The principal techniques used to value these instruments are discounted cash flows and internal models, including Black-Scholes and Monte Carlo simulation. The fair values of derivative contracts reflect cash the Company has paid or received (for example, option premiums paid and received).

        The key inputs depend upon the type of derivative and the nature of the underlying instrument and include interest rate yield curves, foreign-exchange rates, volatilities and correlation. The Company uses overnight indexed swap OIS curves as fair value measurement inputs for the valuation of certain collateralized interest-rate related derivatives. The instrument is classified in either Level 2 or Level 3 depending upon the observability of the significant inputs to the model.

Subprime-related direct exposures in CDOs

        The valuation of high-grade and mezzanine asset-backed security (ABS) CDO positions utilizes prices based on the underlying assets of each high-grade and mezzanine ABS CDO. The high-grade and mezzanine positions are largely hedged through the ABX and bond short positions. This results in closer symmetry in the way these long and short positions are valued by the Company. Citigroup uses trader marks to value this portion of the portfolio and will do so as long as it remains largely hedged.

        For most of the lending and structuring direct subprime exposures, fair value is determined utilizing observable transactions where available, other market data for similar assets in markets that are not active and other internal valuation techniques.

Investments

        The investments category includes available-for-sale debt and marketable equity securities, whose fair value is generally determined by utilizing similar procedures described for trading securities above or, in some cases, using consensus pricing as the primary source.

        Also included in investments are nonpublic investments in private equity and real estate entities held by the S&B business. Determining the fair value of nonpublic securities involves a significant degree of management resources and judgment as no quoted prices exist and such securities are generally very thinly traded. In addition, there may be transfer restrictions on private equity securities. The Company uses an established process for determining the fair value of such securities, utilizing commonly accepted valuation techniques, including comparables analysis. In determining the fair value of nonpublic securities, the Company also considers events such as a proposed sale of the investee company, initial public offerings, equity issuances or other observable transactions. As discussed in Note 11 to the Consolidated Financial Statements, the Company uses net asset value (NAV) to value certain of these investments.

        Private equity securities are generally classified as Level 3 of the fair value hierarchy.

Short-term borrowings and long-term debt

        Where fair value accounting has been elected, the fair value of non-structured liabilities is determined by utilizing internal models using the appropriate discount rate for the applicable maturity. Such instruments are generally classified as Level 2 of the fair value hierarchy as all inputs are readily observable.

        The Company determines the fair value of structured liabilities (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (where performance is linked to risks other than interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.

Auction rate securities

        Auction rate securities (ARS) are long-term municipal bonds, corporate bonds, securitizations and preferred stocks with interest rates or dividend yields that are reset through periodic auctions. The coupon paid in the current period is based on the rate determined by the prior auction. In the event of an auction failure, ARS holders receive a "fail rate" coupon, which is specified in the original issue documentation of each ARS.

        Where insufficient orders to purchase all of the ARS issue to be sold in an auction were received, the primary dealer or auction agent would traditionally have purchased any residual unsold inventory (without a contractual obligation to do so). This residual inventory would then be repaid through subsequent auctions, typically in a short time. Due to this auction mechanism and generally liquid market, ARS have historically traded and were valued as short-term instruments.

        Citigroup acted in the capacity of primary dealer for approximately $72 billion of ARS and continued to purchase residual unsold inventory in support of the auction mechanism until mid-February 2008. After this date, liquidity in the ARS market deteriorated significantly, auctions failed due to a lack of bids from third-party investors, and Citigroup ceased to purchase unsold inventory. Following a number of ARS refinancings, at March 31, 2012, Citigroup continued to act in the capacity of primary dealer for approximately $14 billion of outstanding ARS.

        The Company classifies its ARS as trading and available-for-sale securities. Trading ARS include primarily securitization positions and are classified as Asset-backed securities within Trading securities in the table below. Available-for-sale ARS include primarily preferred instruments (interests in closed-end mutual funds) and are classified as Equity securities within Investments.

        Prior to the Company's first auction failing in the first quarter of 2008, Citigroup valued ARS based on observation of auction market prices, because the auctions had a short maturity period (7, 28 or 35 days). This generally resulted in valuations at par. Once the auctions failed, ARS could no longer be valued using observation of auction market prices. Accordingly, the fair values of ARS are currently estimated using internally developed discounted cash flow valuation techniques specific to the nature of the assets underlying each ARS.

        For ARS with student loans as underlying assets, future cash flows are estimated based on the terms of the loans underlying each individual ARS, discounted at an appropriate rate in order to estimate the current fair value. The key assumptions that impact the ARS valuations are the expected weighted average life (WAL) of the structure, estimated fail rate coupons, the amount of leverage in each structure and the discount rate used to calculate the present value of projected cash flows. The discount rate used for each ARS is based on rates observed for basic securitizations with similar maturities to the loans underlying each ARS being valued. In order to arrive at the appropriate discount rate, these observed rates were adjusted upward to factor in the specifics of the ARS structure being valued, such as callability, and the illiquidity in the ARS market.

        The majority of ARS continue to be classified as Level 3.

Alt-A mortgage securities

        The Company classifies its Alt-A mortgage securities as held-to-maturity, available-for-sale and trading investments. The securities classified as trading and available-for-sale are recorded at fair value with changes in fair value reported in current earnings and AOCI, respectively. For these purposes, Citi defines Alt-A mortgage securities as non-agency residential mortgage-backed securities (RMBS) where (1) the underlying collateral has weighted average FICO scores between 680 and 720 or (2) for instances where FICO scores are greater than 720, RMBS have 30% or less of the underlying collateral composed of full documentation loans.

        Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair values of Alt-A mortgage securities utilizing internal valuation techniques. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Consensus data providers compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities with the same or similar characteristics to the security being valued.

        The valuation techniques used for Alt-A mortgage securities, as with other mortgage exposures, are price-based and discounted cash flows. The primary market-derived input is yield. Cash flows are based on current collateral performance with prepayment rates and loss projections reflective of current economic conditions of housing price change, unemployment rates, interest rates, borrower attributes and other market indicators.

        Alt-A mortgage securities that are valued using these methods are generally classified as Level 2. However, Alt-A mortgage securities backed by Alt-A mortgages of lower quality or subordinated tranches in the capital structure are mostly classified as Level 3 due to the reduced liquidity that exists for such positions, which reduces the reliability of prices available from independent sources.

Commercial real estate exposure

        Citigroup reports a number of different exposures linked to commercial real estate at fair value with changes in fair value reported in earnings, including securities, loans and investments in entities that hold commercial real estate loans or commercial real estate directly. The Company also reports securities backed by commercial real estate as available-for-sale investments, which are carried at fair value with changes in fair value reported in AOCI.

        Similar to the valuation methodologies used for other trading securities and trading loans, the Company generally determines the fair value of securities and loans linked to commercial real estate utilizing internal valuation techniques which incorporate assumptions regarding defaults, recoveries and collateral values, among other inputs. Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from independent vendors. Consensus data providers compile prices from various sources. Where available, the Company may also make use of quoted prices for recent trading activity in securities or loans with the same or similar characteristics to that being valued. Securities and loans linked to commercial real estate valued using these methodologies are generally classified as either Level 2 or Level 3. Positions are classified as Level 3 as a result of reduced liquidity in the market for such exposures.

        The fair value of investments in entities that hold commercial real estate loans or commercial real estate directly is determined using a similar methodology to that used for other non-public investments in real estate held by the S&B business. The Company uses an established process for determining the fair value of such securities, using commonly accepted valuation techniques, including the use of earnings multiples based on comparable public securities, industry-specific non-earnings-based multiples and discounted cash flow models. In determining the fair value of such investments, the Company also considers events, such as a proposed sale of the investee company, initial public offerings, equity issuances, or other observable transactions. Investments in entities that hold commercial real estate exposures are valued using these methodologies and are generally classified as either Level 2 or Level 3.

Items Measured at Fair Value on a Recurring Basis

        The following tables present for each of the fair value hierarchy levels the Company's assets and liabilities that are measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011. The Company's hedging of positions that have been classified in the Level 3 category is not limited to other financial instruments that have been classified as Level 3, but also instruments classified as Level 1 or Level 2 of the fair value hierarchy. The effects of these hedges are presented gross in the following table.

In millions of dollars at March 31, 2012	Level 1		Level 2		Level 3		Gross inventory		Netting(1)			Net balance
Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	—	$	216,275	$	4,497	$	220,772	$	(48,337	)	$	172,435
Trading securities
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	—	$	27,601	$	1,115	$	28,716	$	—		$	28,716
Prime		—		437		744		1,181		—			1,181
Alt-A		—		510		106		616		—			616
Subprime		—		262		375		637		—			637
Non-U.S. residential		—		499		122		621		—			621
Commercial		—		1,291		548		1,839		—			1,839
Total trading mortgage-backed securities	$	—	$	30,600	$	3,010	$	33,610	$	—		$	33,610
U.S. Treasury and federal agency securities
U.S. Treasury	$	14,479	$	2,414	$	—	$	16,893	$	—		$	16,893
Agency obligations		—		2,649		—		2,649		—			2,649
Total U.S. Treasury and federal agency securities	$	14,479	$	5,063	$	—	$	19,542	$	—		$	19,542
State and municipal	$	—	$	5,747	$	223	$	5,970	$	—		$	5,970
Foreign government		53,421		26,260		833		80,514		—			80,514
Corporate		—		36,059		3,763		39,822		—			39,822
Equity securities		42,714		3,056		191		45,961		—			45,961
Asset-backed securities		—		1,638		5,655		7,293		—			7,293
Other debt securities		—		15,008		2,587		17,595		—			17,595
Total trading securities	$	110,614	$	123,431	$	16,262	$	250,307	$	—		$	250,307
Trading account derivatives
Interest rate contracts		2		684,823		2,112		686,937
Foreign exchange contracts		1		73,182		772		73,955
Equity contracts		2,834		16,089		1,741		20,664
Commodity contracts		859		13,787		932		15,578
Credit derivatives		—		60,748		6,230		66,978
Total trading account derivatives	$	3,696	$	848,629	$	11,787	$	864,112
Gross cash collateral paid							$	52,714
Netting agreements and market value adjustments									$	(860,083	)
Total trading account derivatives	$	3,696	$	848,629	$	11,787	$	916,826	$	(860,083	)	$	56,743
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	56	$	44,114	$	932	$	45,102	$	—		$	45,102
Prime		—		115		2		117		—			117
Alt-A		—		1		—		1		—			1
Subprime		—		—		—		—		—			—
Non-U.S. residential		—		6,426		—		6,426		—			6,426
Commercial		—		482		6		488		—			488
Total investment mortgage-backed securities	$	56	$	51,138	$	940	$	52,134	$	—		$	52,134
U.S. Treasury and federal agency securities
U.S. Treasury	$	11,212	$	43,703	$	—	$	54,915	$	—		$	54,915
Agency obligations		—		34,259		—		34,259		—			34,259
Total U.S. Treasury and federal agency securities	$	11,212	$	77,962	$	—	$	89,174	$	—		$	89,174

In millions of dollars at March 31, 2012	Level 1			Level 2			Level 3			Gross inventory			Netting(1)			Net balance
State and municipal	$	—		$	13,462		$	682		$	14,144		$	—		$	14,144
Foreign government		34,910			53,992			375			89,277			—			89,277
Corporate		—			10,912			1,062			11,974			—			11,974
Equity securities		453			644			1,326			2,423			—			2,423
Asset-backed securities		—			7,773			3,073			10,846			—			10,846
Other debt securities		—			555			55			610			—			610
Non-marketable equity securities		—			555			8,287			8,842			—			8,842
Total investments	$	46,631		$	216,993		$	15,800		$	279,424		$	—		$	279,424
Loans(2)	$	—		$	466		$	4,278		$	4,744		$	—		$	4,744
Mortgage servicing rights		—			—			2,691			2,691			—			2,691
Nontrading derivatives and other financial assets measured on a recurring basis, gross	$	—		$	10,620		$	2,322		$	12,942
Gross cash collateral paid										$	144
Netting agreements and market value adjustments													$	(3,673	)
Nontrading derivatives and other financial assets measured on a recurring basis	$	—		$	10,620		$	2,322		$	13,086		$	(3,673	)	$	9,413
Total assets	$	160,941		$	1,416,414		$	57,637		$	1,687,850		$	(912,093	)	$	775,757
Total as a percentage of gross assets(3)		9.9	%		86.6	%		3.5	%		100.0	%
Liabilities
Interest-bearing deposits		—			869			458			1,327			—			1,327
Federal funds purchased and securities loaned or sold under agreements to repurchase		—			184,883			1,025			185,908			(48,337	)		137,571
Trading account liabilities
Securities sold, not yet purchased		71,850			10,175			177			82,202						82,202
Trading account derivatives
Interest rate contracts		5			667,925			1,421			669,351
Foreign exchange contracts		2			78,126			716			78,844
Equity contracts		3,131			29,698			2,818			35,647
Commodity contracts		889			14,349			1,791			17,029
Credit derivatives		—			57,485			6,002			63,487
Total trading account derivatives	$	4,027		$	847,583		$	12,748		$	864,358
Gross cash collateral received											44,972
Netting agreements and market value adjustments													$	(855,576	)
Total trading account derivatives	$	4,027		$	847,583		$	12,748		$	909,330		$	(855,576	)	$	53,754
Short-term borrowings		—			794			423			1,217			—			1,217
Long-term debt		—			20,181			6,519			26,700			—			26,700
Nontrading derivatives and other financial liabilities measured on a recurring basis, gross	$	—		$	2,561		$	2		$	2,563
Gross cash collateral received										$	4,249
Netting agreements and market value adjustments													$	(3,673	)
Nontrading derivatives and other financial liabilities measured on a recurring basis		—			2,561			2			6,812			(3,673	)		3,139
Total liabilities	$	75,877		$	1,067,046		$	21,352		$	1,213,496		$	(907,586	)	$	305,910
Total as a percentage of gross liabilities(3)		6.5	%		91.7	%		1.8	%		100.0	%

(1)

Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral and the market value adjustment.

(2)

There is no allowance for loan losses recorded for loans reported at fair value.

(3)

Percentage is calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding collateral paid/received on derivatives.

In millions of dollars at December 31, 2011	Level 1		Level 2		Level 3		Gross inventory		Netting(1)			Net balance
Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	—	$	188,034	$	4,701	$	192,735	$	(49,873	)	$	142,862
Trading securities
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	—	$	26,674	$	861	$	27,535	$	—		$	27,535
Prime		—		118		759		877		—			877
Alt-A		—		444		165		609		—			609
Subprime		—		524		465		989		—			989
Non-U.S. residential		—		276		120		396		—			396
Commercial		—		1,715		618		2,333		—			2,333
Total trading mortgage-backed securities	$	—	$	29,751	$	2,988	$	32,739	$	—		$	32,739
U.S. Treasury and federal agency securities
U.S. Treasury	$	15,612	$	2,615	$	—	$	18,227	$	—		$	18,227
Agency obligations		—		1,169		3		1,172		—			1,172
Total U.S. Treasury and federal agency securities	$	15,612	$	3,784	$	3	$	19,399	$	—		$	19,399
State and municipal	$	—	$	5,112	$	252	$	5,364	$	—		$	5,364
Foreign government		52,429		26,601		521		79,551		—			79,551
Corporate		—		33,786		3,240		37,026		—			37,026
Equity securities		29,707		3,279		244		33,230		—			33,230
Asset-backed securities		—		1,270		5,801		7,071		—			7,071
Other debt securities		—		12,818		2,209		15,027		—			15,027
Total trading securities	$	97,748	$	116,401	$	15,258	$	229,407	$	—		$	229,407
Trading account derivatives
Interest rate contracts	$	67	$	755,473	$	1,947	$	757,487
Foreign exchange contracts		—		93,536		781		94,317
Equity contracts		2,240		16,376		1,619		20,235
Commodity contracts		958		11,940		865		13,763
Credit derivatives		—		81,123		9,301		90,424
Total trading account derivatives	$	3,265	$	958,448	$	14,513	$	976,226
Gross cash collateral paid								57,815
Netting agreements and market value adjustments									$	(971,714	)
Total trading account derivatives	$	3,265	$	958,448	$	14,513	$	1,034,041	$	(971,714	)	$	62,327
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	59	$	45,043	$	679	$	45,781	$	—		$	45,781
Prime		—		105		8		113		—			113
Alt-A		—		1		—		1		—			1
Subprime		—		—		—		—		—			—
Non-U.S. residential		—		4,658		—		4,658		—			4,658
Commercial		—		472		—		472		—			472
Total investment mortgage-backed securities	$	59	$	50,279	$	687	$	51,025	$	—		$	51,025
U.S. Treasury and federal agency securities
U.S. Treasury	$	11,642	$	38,587	$	—	$	50,229	$	—		$	50,229
Agency obligations		—		34,834		75		34,909		—			34,909
Total U.S. Treasury and federal agency securities	$	11,642	$	73,421	$	75	$	85,138	$	—		$	85,138

In millions of dollars at December 31, 2011	Level 1			Level 2			Level 3			Gross inventory			Netting(1)			Net balance
State and municipal	$	—		$	13,732		$	667		$	14,399		$	—		$	14,399
Foreign government		33,544			50,523			447			84,514			—			84,514
Corporate		—			9,268			989			10,257			—			10,257
Equity securities		6,634			98			1,453			8,185			—			8,185
Asset-backed securities		—			6,962			4,041			11,003			—			11,003
Other debt securities		—			563			120			683			—			683
Non-marketable equity securities		—			518			8,318			8,836			—			8,836
Total investments	$	51,879		$	205,364		$	16,797		$	274,040		$	—		$	274,040
Loans(2)	$	—		$	583		$	4,682		$	5,265		$	—		$	5,265
Mortgage servicing rights		—			—			2,569			2,569			—			2,569
Nontrading derivatives and other financial assets measured on a recurring basis, gross	$	—		$	14,270		$	2,245		$	16,515
Gross cash collateral paid											307
Netting agreements and market value adjustments													$	(3,462	)
Nontrading derivatives and other financial assets measured on a recurring basis	$	—		$	14,270		$	2,245		$	16,822		$	(3,462	)	$	13,360
Total assets	$	152,892		$	1,483,100		$	60,765		$	1,754,879		$	(1,025,049	)	$	729,830
Total as a percentage of gross assets(3)		9.0	%		87.4	%		3.6	%		100.0	%
Liabilities
Interest-bearing deposits	$	—		$	895		$	431		$	1,326		$	—		$	1,326
Federal funds purchased and securities loaned or sold under agreements to repurchase		—			161,582			1,061			162,643			(49,873	)		112,770
Trading account liabilities
Securities sold, not yet purchased		58,456			10,941			412			69,809						69,809
Trading account derivatives
Interest rate contracts		37			738,833			1,221			740,091
Foreign exchange contracts		—			96,549			814			97,363
Equity contracts		2,822			26,961			3,356			33,139
Commodity contracts		873			11,959			1,799			14,631
Credit derivatives		—			77,153			7,573			84,726
Total trading account derivatives	$	3,732		$	951,455		$	14,763		$	969,950
Gross cash collateral received											52,811
Netting agreements and market value adjustments													$	(966,488	)
Total trading account derivatives	$	3,732		$	951,455		$	14,763		$	1,022,761		$	(966,488	)	$	56,273
Short-term borrowings		—			855			499			1,354			—			1,354
Long-term debt		—			17,268			6,904			24,172			—			24,172
Nontrading derivatives and other financial liabilities measured on a recurring basis, gross	$	—		$	3,559		$	3		$	3,562
Gross cash collateral received										$	3,642
Netting agreements and market value adjustments													$	(3,462	)
Nontrading derivatives and other financial liabilities measured on a recurring basis	$	—		$	3,559		$	3		$	7,204		$	(3,462	)	$	3,742
Total liabilities	$	62,188		$	1,146,555		$	24,073		$	1,289,269		$	(1,019,823	)	$	269,446
Total as a percentage of gross liabilities(3)		5.0	%		93.0	%		2.0	%		100.0	%

(1)

Represents netting of: (i) the amounts due under securities purchased under agreements to resell and the amounts owed under securities sold under agreements to repurchase; and (ii) derivative exposures covered by a qualifying master netting agreement, cash collateral and the market value adjustment.

(2)

There is no allowance for loan losses recorded for loans reported at fair value.

(3)

Percentage is calculated based on total assets and liabilities measured at fair value on a recurring basis, excluding collateral paid/received on derivatives.

Changes in Level 3 Fair Value Category

        The following tables present the changes in the Level 3 fair value category for the three months ended March 31, 2012 and March 31, 2011. The Company classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

        The Company often hedges positions with offsetting positions that are classified in a different level. For example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do not reflect the effect of offsetting losses and gains on hedging instruments that have been classified by the Company in the Level 1 and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with instruments also classified in Level 3 of the fair value hierarchy. The effects of these hedges are presented gross in the following tables.

				Net realized/unrealized gains (losses) included in
																												Unrealized gains (losses) still held(3)
In millions of dollars	Dec. 31, 2011			Principal transactions			Other(1)(2)		Transfers into Level 3			Transfers out of Level 3			Purchases		Issuances		Sales			Settlements			Mar. 31. 2012
Assets
Fed funds sold and securities borrowed or purchased under agreements to resell	$	4,701		$	33		$	—	$	25		$	(262	)	$	—	$	—	$	—		$	—		$	4,497		$	32
Trading securities
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	861		$	50		$	—	$	379		$	(127	)	$	183	$	31	$	(225	)	$	(37	)	$	1,115		$	22
Prime		759			46			—		5			(103	)		354		—		(316	)		(1	)		744			11
Alt-A		165			18			—		3			(42	)		69		—		(107	)		—			106			(3	)
Subprime		465			(50	)		—		20			(20	)		201		—		(240	)		(1	)		375			1
Non-U.S. residential		120			5			—		2			(15	)		68		—		(58	)		—			122			3
Commercial		618			(67	)		—		36			(108	)		211		—		(142	)		—			548			2
Total trading mortgage-backed securities	$	2,988		$	2		$	—	$	445		$	(415	)	$	1,086	$	31	$	(1,088	)	$	(39	)	$	3,010		$	36
U.S. Treasury and federal agency securities
U.S. Treasury	$	—		$	—		$	—	$	—		$	—		$	—	$	—	$	—		$	—		$	—		$	—
Agency obligations		3			—			—		—			—			—		—		(3	)		—			—			—
Total U.S. Treasury and federal agency securities	$	3		$	—		$	—	$	—		$	—		$	—	$	—	$	(3	)	$	—		$	—		$	—
State and municipal	$	252		$	(3	)	$	—	$	—		$	—		$	22	$	—	$	(48	)	$	—		$	223		$	(4	)
Foreign government		521			3			—		2			(263	)		710		—		(140	)		—			833			4
Corporate		3,240			119			—		327			(125	)		1,496		—		(595	)		(699	)		3,763			121
Equity securities		244			4			—		18			(9	)		78		—		(120	)		(24	)		191			(3	)
Asset-backed securities		5,801			335			—		17			(36	)		2,651		—		(3,054	)		(59	)		5,655			66
Other debt securities		2,209			(40	)		—		154			(65	)		904		—		(520	)		(55	)		2,587			(22	)
Total trading securities	$	15,258		$	420		$	—	$	963		$	(913	)	$	6,947	$	31	$	(5,568	)	$	(876	)	$	16,262		$	198
Derivatives, net(4)
Interest rate contracts		726			(217	)		—		342			(17	)		199		—		(129	)		(213	)		691			(456	)
Foreign exchange contracts		(33	)		97			—		(5	)		(8	)		129		—		(107	)		(17	)		56			29
Equity contracts		(1,737	)		474			—		3			436			134		—		(175	)		(212	)		(1,077	)		(135	)
Commodity contracts		(934	)		74			—		(5	)		9			45		—		(68	)		20			(859	)		2
Credit derivatives		1,728			(1,235	)		—		(204	)		(53	)		111		—		(10	)		(109	)		228			(1,030	)
Total derivatives, net(4)	$	(250	)	$	(807	)	$	—	$	131		$	367		$	618	$	—	$	(489	)	$	(531	)	$	(961	)	$	(1,590	)
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	679		$	—		$	9	$	—		$	(641	)	$	885	$	—	$	—		$	—		$	932		$	4
Prime		8			—			—		—			(6	)		—		—		—			—			2			—
Alt-A		—			—			—		—			—			—		—		—			—			—			—
Subprime		—			—			—		—			—			—		—		—			—			—			—
Commercial		—			—			—		—			—			6		—		—			—			6			—
Total investment mortgage-backed debt securities	$	687		$	—		$	9	$	—		$	(647	)	$	891	$	—	$	—		$	—		$	940		$	4

			Net realized/unrealized gains (losses) included in
																											Unrealized gains (losses) still held(3)
In millions of dollars	Dec. 31, 2011		Principal transactions			Other(1)(2)			Transfers into Level 3		Transfers out of Level 3			Purchases			Issuances		Sales			Settlements			Mar. 31. 2012
U.S. Treasury and federal agency securities	$	75	$	—		$	—		$	—	$	(75	)	$	—		$	—	$	—		$	—		$	—	$	—
State and municipal		667		—			(1	)		—		—			32			—		(16	)		—			682		(7	)
Foreign government		447		—			3			—		(17	)		89			—		(80	)		(67	)		375		1
Corporate		989		—			(4	)		—		—			87			—		(7	)		(3	)		1,062		1
Equity securities		1,453		—			45			—		—			—			—		(172	)		—			1,326		16
Asset-backed securities		4,041		—			3			—		(43	)		—			—		(7	)		(921	)		3,073		—
Other debt securities		120		—			—			—		—			—			—		(64	)		(1	)		55		—
Non-marketable equity securities		8,318		—			196			—		—			138			—		(8	)		(357	)		8,287		231
Total investments	$	16,797	$	—		$	251		$	—	$	(782	)	$	1,237		$	—	$	(354	)	$	(1,349	)	$	15,800	$	246
Loans	$	4,682	$	—		$	(37	)	$	—	$	(25	)	$	86		$	—	$	(8	)	$	(420	)	$	4,278	$	300
Mortgage servicing rights	$	2,569	$	—		$	187		$	—	$	—		$	2		$	142	$	(5	)	$	(204	)	$	2,691	$	184
Other financial assets measured on a recurring basis	$	2,245	$	—		$	7		$	8	$	(1	)	$	1		$	276	$	(38	)	$	(176	)	$	2,322	$	14
Liabilities
Interest-bearing deposits	$	431	$	—		$	(5	)	$	83	$	—		$	—		$	8	$	—		$	(69	)	$	458	$	(58	)
Federal funds purchased and securities loaned or sold under agreements to repurchase		1,061		27			—			—		—			—			—		—			(9	)		1,025		—
Trading account liabilities
Securities sold, not yet purchased		412		(72	)		—			4		(7	)		—			—		71			(375	)		177		(75	)
Short-term borrowings		499		(56	)		—			—		(9	)		—			126		—			(249	)		423		(2	)
Long-term debt		6,904		(78	)		29			159		(416	)		—			287		—			(464	)		6,519		(203	)
Other financial liabilities measured on a recurring basis		3		—			(1	)		—		—			(1	)		—		—			(1	)		2		(1	)

				Net realized/unrealized gains (losses) included in
										Transfers in and/or out of Level 3															Unrealized gains (losses) still held(3)
In millions of dollars	Dec. 31, 2010			Principal transactions			Other(1)(2)						Purchases		Issuances		Sales		Settlements			March 31, 2011
Assets
Fed funds sold and securities borrowed or purchased under agreements to resell	$	4,911		$	(152	)	$	—		$	(1,493	)	$	—	$	—	$	—	$	—		$	3,266		$	(102	)
Trading securities
Trading mortgage-backed securities
U.S. government-sponsored agency guaranteed		831			53			—			236			94		—		190		—			1,024			43
Prime		594			98			—			24			1,153		—		267		—			1,602			13
Alt-A		385			12			—			71			1,551		—		73		—			1,946			(1	)
Subprime		1,125			36			—			13			309		—		367		—			1,116			10
Non-U.S. residential		224			32			—			85			122		—		173		—			290			1
Commercial		418			64			—			(5	)		240		—		132		—			585			48
Total trading mortgage-backed securities	$	3,577		$	295		$	—		$	424		$	3,469	$	—	$	1,202	$	—		$	6,563		$	114
U.S. Treasury and federal agencies securities
U.S. Treasury	$	—		$	—		$	—		$	—		$	—	$	—	$	—	$	—		$	—		$	—
Agency obligations		72			1			—			(14	)		3		—		31		—			31			—
Total U.S. Treasury and federal agencies securities	$	72		$	1		$	—		$	(14	)	$	3	$	—	$	31	$	—		$	31		$	—
State and municipal	$	208		$	62		$	—			(5	)	$	893	$	—	$	43		—		$	1,115		$	31
Foreign government		566			1			—			(4	)		518		—		174		—			907			1
Corporate		6,006			169			—			(484	)		1,849		—		1,454		—			6,086			(47	)
Equity securities		776			56			—			(511	)		105		—		121		—			305			30
Asset-backed securities		6,618			218			—			(59	)		1,299		—		2,351		—			5,725			(61	)
Other debt securities		1,305			(2	)		—			31			264		—		183		—			1,415			26
Total trading securities	$	19,128		$	800		$	—		$	(622	)	$	8,400	$	—	$	5,559	$	—		$	22,147		$	94
Derivatives, net(4)
Interest rate contracts	$	(730	)	$	(243	)	$	—		$	724		$	—	$	—	$	—	$	(253	)	$	4		$	(486	)
Foreign exchange contracts		164			141			—			(42	)		—		—		—		24			239			(3	)
Equity contracts		(1,639	)		24			—			(743	)		—		—		—		210			(2,568	)		(253	)
Commodity contracts		(1,023	)		(59	)		—			(88	)		—		—		—		126			(1,296	)		(143	)
Credit derivatives		1,845			(538	)		—			(178	)		—		—		—		1,436			(307	)		(334	)
Total derivatives, net(4)	$	(1,383	)	$	(675	)		—		$	(327	)	$	—	$	—	$	—	$	1,543		$	(3,928	)	$	(1,219	)
Investments
Mortgage-backed securities
U.S. government-sponsored agency guaranteed	$	22		$	—		$	(9	)	$	344		$	5	$	—	$	—	$	—		$	362		$	(15	)
Prime		166			—			2			—			—		—		18		—			150			—
Alt-A		1			—			—			1			—		—		—		—			2			—
Subprime		—			—			—			—			—		—		—		—			—			—
Commercial		527			—			3			—			15		—		18		—			527			—
Total investment mortgage-backed debt securities	$	716		$	—		$	(4	)	$	345		$	20	$	—	$	36	$	—		$	1,041		$	(15	)
U.S. Treasury and federal agencies securities	$	17		$	—		$	—		$	—		$	—	$	—	$	1	$	—		$	16		$	—
State and municipal		504			—			(24	)		(93	)		21		—		27		—			381			(30	)
Foreign government		358			—			7			64			50		—		53		—			426			5
Corporate		1,018			—			15			37			27		—		12		—			1,085			(4	)
Equity securities		2,055			—			(29	)		(29	)		—		—		168		—			1,829			62
Asset-backed securities		5,424			—			46			43			36		—		547		—			5,002			26

			Net realized/unrealized gains (losses) included in
									Transfers in and/or out of Level 3														Unrealized gains (losses) still held(3)
In millions of dollars	Dec. 31, 2010		Principal transactions			Other(1)(2)						Purchases		Issuances		Sales		Settlements			March 31, 2011
Other debt securities		727		—			(33	)		67			33		—		122		—			672		(33	)
Non-marketable equity securities		6,467		—			449			(320	)		3,190		—		844		—			8,942		551
Total investments	$	17,286		—		$	427		$	114		$	3,377			$	1,810				$	19,394	$	562
Loans	$	3,213	$	—		$	(87	)	$	(19	)	$	—	$	341	$	—	$	296		$	3,152	$	(112	)
Mortgage servicing rights		4,554		—			208			—			—		—		—		72			4,690		208
Other financial assets measured on a recurring basis		2,509		—			(16	)		(19	)		—		201		—		190			2,485		8
Liabilities
Interest-bearing deposits	$	277	$	—		$	(34	)	$	60		$	—	$	215	$	—	$	(1	)	$	585		91
Federal funds purchased and securities loaned or sold under agreements to repurchase		1,261		18			—			90			—		—		165		—			1,168		(15	)
Trading account liabilities
Securities sold, not yet purchased		187		63			—			(82	)		—		—		—		67			109		63
Short-term borrowings		802		178			—			(41	)		—		25		—		(217	)		391		52
Long-term debt		8,494		(71	)		96			25			—		463		—		(165	)		8,792		(301	)
Other financial liabilities measured on a recurring basis		19		—			(4	)		7			—		4		—		(25	)		9		5

(1)

Changes in fair value for available-for-sale investments (debt securities) are recorded in Accumulated other comprehensive income (loss), while gains and losses from sales are recorded in Realized gains (losses) from sales of investments on the Consolidated Statement of Income.

(2)

Unrealized gains (losses) on MSRs are recorded in Other revenue on the Consolidated Statement of Income.

(3)

Represents the amount of total gains or losses for the period, included in earnings (and Accumulated other comprehensive income (loss) for changes in fair value for available-for-sale investments), attributable to the change in fair value relating to assets and liabilities classified as Level 3 that are still held at December 31, 2011 and 2010.

(4)

Total Level 3 derivative assets and liabilities have been netted in these tables for presentation purposes only.

        The significant changes from December 31, 2011 to March 31, 2012 in Level 3 assets and liabilities were due to:

• •

  A net increase in trading securities of $1.0 billion that included:

  •

  Purchases of Corporate debt trading securities of $1.5 billion and sales of $0.6 billion.

  •

  Purchases of asset-backed securities of $2.7 billion and sales of $3.1 billion, reflecting trading in CDO and CLO positions as credit market increased in the first quarter, which increased demand. As these positions are bespoke, they are classified as Level 3.

  •

  Purchases of other debt trading securities of $0.9 billion and sales of $0.5 billion.

  •

  A net decrease in credit derivatives of $1.5 billion. The net decrease was composed of losses of $1.2 billion recorded in Principal transactions, $0.6 billion of which related to total return swaps referencing returns on Corporate loans, offset by gains on the referenced loans which are classified as Level 2. Losses of $0.3 billion related to bespoke CDOs and index CDOs due to credit spreads tightening, $0.2 billion of which was offset by gains on index positions classified as Level 2.

        The significant changes from December 31, 2010 to March 31, 2011 in Level 3 assets and liabilities were due to:

• •

  A decrease in Federal funds sold and securities borrowed or purchased under agreements to resell of $1.6 billion, driven primarily by transfers of $1.5 billion from Level 3 to Level 2 due to a decrease in expected maturities on certain structured reverse repos resulting in more observable pricing;

  •

  A net increase in trading securities of $3.0 billion that included:

  •

  The reclassification of certain securities from Investments held-to-maturity to Trading account assets during the first quarter of 2011, as discussed in Note 11 to the Consolidated Financial Statements, which resulted in an increase in Level 3 assets of $4.3 billion at March 31, 2011. These reclassifications have been included in purchases in the Level 3 roll-forward table above. These Level 3 assets included $2.8 billion of trading mortgage-backed securities ($1.5 billion of which were Alt-A and $1.0 billion of Prime), $0.9 billion of state and municipal debt securities, $0.3 billion of Corporate debt securities and $0.3 billion of asset-backed securities.

  • •

    Purchases of corporate debt trading securities of $1.8 billion and sales of $1.5 billion, reflecting increased trading activity during the first quarter.

    •

    Purchases of asset-backed securities of $1.3 billion during the first quarter, reflecting an increase in trading activity in the ABS sector. Sales of $2.4 billion of asset-backed securities included sales and redemptions of auction-rate securities of $1.1 billion, as well increased trading activity.

  •

  A decrease in credit derivatives of $2.2 billion during the first quarter of 2011, which included settlements of $1.4 billion, relating primarily to the settlement of certain contracts under which the Company had purchased credit protection on commercial mortgage-backed securities from a single counterparty.

  •

  A net increase in Level 3 Investments of $2.1 billion, which included a net increase in non-marketable equity securities of $2.5 billion. Purchases of non-marketable equity securities of $3.2 billion during the first quarter included Citi's acquisition of the share capital of Maltby Acquisitions Limited, the holding company that controls EMI Group Ltd. Sales of $0.8 billion related primarily to sales and redemptions by the Company of investments in private equity and hedge funds.

Transfers between Level 1 and Level 2 of the Fair Value Hierarchy

        During the three months ended March 31, 2012, the Company had the following transfers between Level 1 and Level 2 of the fair value hierarchy:

• •

  Transfers of $358 million of Trading equity securities from Level 2 to Level 1 and $5 million from Level 1 to Level 2;

  •

  Transfers of $66 million of Securities sold, not yet purchased from Level 2 to Level 1, and $1 million from Level 1 to Level 2.

  •

  Transfers of $111 million of Foreign government trading securities from Level 2 to Level 1.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements

        The Company's Level 3 inventory consists of both cash securities and derivatives of varying complexities. The valuation methodologies applied to measure the fair value of these positions include discounted cash flow analyses, internal models and comparative analysis. A position is classified within Level 3 of the fair value hierarchy when at least one input is unobservable and is considered significant to its valuation. The specific reason for why an input is deemed unobservable varies. For example, at least one significant input to the pricing model is not observable in the market, at least one significant input has been adjusted to make it more representative of the position being valued, or the price quote available does not reflect sufficient trading activities.

        The following table presents the valuation techniques covering the majority of Level 3 inventory and the most significant unobservable inputs used in Level 3 fair value measurements as of March 31, 2012.

	Fair Value (in millions)		Methodology	Input	Low(1)(2)			High(1)(2)
Assets
Federal funds sold and securities borrowed or purchased under agreements to resell	$	4,497	Cash flow	Interest Rate		1.52	%		2.15	%
Trading and investment securities
Mortgage-backed securities		3,950	Cash flow	Yield		0.01	%		35.95	%
			Price-based	Prepayment Period		0.78yrs			10.59yrs
				Price	$	—		$	125.43
State and municipal	$	905	Cash Flow	Yield		0.01	%		6.00	%
			Price-based	Underlying Price(s)	$	100.00		$	100.00
Foreign government		1,208	Price-based	Price	$	0.001		$	115.00
			Internal Model	Yield		1.00	%		16.00	%
			Cash flow	Interest Rate		0.07	%		9.10	%
Corporate		4,825	Cash flow	Credit Spread		22bps			110bps
			Price-based	Yield		1.50	%		16.00	%
			Internal Model	Equity Volatility		14.41	%		55.49	%
				Interest Rate		0.35	%		16.38	%
				Price	$	—		$	126.97
Equity securities		1,517	Internal Model	Equity Volatility		8.10	%		241.80	%
			Price—based	Price	$	—		$	115.00
			Cash flow	Recovery Rate		10.00	%		100.00	%
				Yield		5.00	%		15.00	%
				Weighted Average Life (WAL)		3yrs			3yrs
Asset—backed securities		8,729	Cash flow	Credit Correlation		20.00	%		60.00	%
			Internal Model	Yield		0.55	%		30.67	%
			Price—based	Price	$	0.00		$	127.86
				Recovery Rate		—	%		100.00	%
				WAL		1.44yrs			21.42yrs
Other debt securities	$	2,642	Cash flow	Credit Spread		22bps			703bps
			Internal Model	Yield		1.75	%		14.40	%
			Price—based	Price	$	—		$	110.27
				Recovery Rate		40.00	%		40.00	%
				WAL		1.44yrs			21.42yrs
Non—marketable equity		8,268	Cash flow	Adjustment factor		—			0.5
			Comparables Analysis	Yield		9.09	%		12.00	%
			Price—based	EBITDA Multiples		0.70			13.55
				Price	$	—		$	3.70
Total trading and investment securities	$	32,062
Derivatives—Gross(3)
Interest rate contracts (gross)	$	3,533	Cash flow	Yield		1.50	%		15.00	%
			Internal Model	Interest Rate		0.23	%		3.25	%
				Interest Rate Volatility		8.70	%		85.00	%
				Interest Rate—Foreign Exchange Rate (IR—FX) Correlation		(50.00	)%		60.00	%
				Interest Rate—Interest Rate (IR—IR) Correlation		(13.28	)%		100.00	%
Foreign exchange contracts (gross)		1,489	Internal Model	FX Volatility		0.06	%		29.00	%
				FX—Credit Correlation		65.00	%		100.00	%
				IR Volatility		8.70	%		71.63	%
				IR—FX Correlation		40.00	%		60.00	%
				Recovery Rate		20.00	%		40.00	%
Equity contracts (gross)(4)		4,559	Cash flow	Yield		1.50	%		15.00	%
			Internal Model	Credit Spread		150bps			500bps
			Price—based	Equity Forward		23.60	%		248.00	%
				Equity Volatility		3.36	%		241.80	%
				Equity—Equity Correlation		26.20	%		98.00	%
				Equity—IR Correlation		(43.00	)%		57.00	%

	Fair Value (in millions)		Methodology	Input	Low(1)(2)			High(1)(2)
				FX Volatility		14.84	%		16.04	%
				Price	$	0.01		$	115.00
				Yield Volatility		4.45	%		13.00	%
Commodity contracts (gross)	$	2,723	Internal Model	Commodity Correlation		(72.00	)%		96.00	%
				Commodity Volatility		8.00	%		141.00	%
				Forward Price		74.00	%		328.00	%
Credit derivatives (gross)		12,232	Cash flow	Credit Spread(5)		1bps			33,555bps
			Internal Model	Credit Correlation		5.00	%		95.00	%
			Price—based	FX—Credit Correlation		65.00	%		100.00	%
				Recovery Rate		9.00	%		75.00	%
				Price	$	0.00		$	100.00
Nontrading derivatives and other financial assets and liabilities measured on a recurring basis (gross)		2,325	Internal Model	Redemption Rate		6.70	%		99.60	%
			Price—based	Price	$	100.00		$	100.00
Total derivatives—Gross	$	26,861
Loans and leases	$	4,279	Cash flow	Credit Spread		46bps			668bps
			Internal Model	Yield		0.90	%		3.50	%
			Price—based	Price	$	0.01		$	113.38
				Recovery Rate		36.00	%		70.00	%
Mortgage servicing rights		2,691	Cash flow	Yield		0.00	%		44.83	%
				Prepayment Period		0.78yrs			10.59yrs
Liabilities
Interest—bearing deposits	$	458	Internal Model	IR Volatility		13.00	%		20.00	%
				IR—FX Correlation		(38.90	)%		55.39	%
				IR—IR Correlation		20.00	%		90.00	%
Federal funds purchased and securities loaned or sold under agreements to repurchase		1,025	Cash flow	Interest Rate		0.93	%		2.83	%
Trading account liabilities
Securities sold, not yet purchased		177	Cash flow	Yield		—	%		30.67	%
			Price—based	Price	$	—			105.01
				WAL		1.44yrs			21.42yrs
Short—term borrowings and long—term debt		6,941	Internal Model	Credit Spread(5)		70bps			10,399bps
			Price—based	Equity Forward		23.60	%		248.00	%
				Equity Volatility		8.10	%		241.80	%
				Equity—Equity Correlation		26.20	%		98.00	%
				Equity—FX Correlation		(83.00	)%		60.00	%
				Interest Rate		0.25	%		2.00	%
				IR Volatility		8.70	%		71.63	%
				Price	$	0.01		$	128.53

(1)

Some inputs are shown as zero due to rounding.

(2)

When the low and high inputs are the same, there is either a constant input applied to all positions, or the methodology involving the input applies to one large position only.

(3)

Includes both trading and nontrading account derivatives—assets and liabilities—on a gross basis.

(4)

Includes hybrid products.

(5)

Large credit spreads related to credit default swaps on distressed underlying assets that have deteriorated credit quality.

Sensitivity to Unobservable Inputs and Interrelationships between Unobservable Inputs

        The impact of key unobservable inputs on the Level 3 fair value measurements may not be independent of one another. For certain instruments, the pricing, hedging, and risk management is sensitive to the correlation between various inputs rather than on the analysis and aggregation of the individual inputs.

        The following section describes the sensitivities and interrelationships of the most significant unobservable inputs used by the Company in Level 3 fair value measurements.

Correlation

        For these instruments, price risk is nonseparable, i.e. a change in one input will affect the sensitivity of valuation to another input. A variety of correlation-related assumptions are required for a wide range of instruments including, equity baskets, foreign-exchange options, CDOs backed by loans, mortgages, subprime mortgages, credit default swaps and many other instruments. Estimating correlation can be especially difficult where it may vary over time. Extracting correlation information from market data requires significant assumptions regarding the informational efficiency of the market (for example, swaption markets). Changes in correlation levels can have a major impact, favorable or unfavorable, on the value of an instrument.

Volatility

        Represents the speed and severity of market price changes and is a key factor in pricing derivatives. Typically, instruments can become more expensive if volatility increases. For example, as an index becomes more volatile, the cost to Citi of maintaining a given level of exposure increases because more frequent rebalancing of the portfolio is required. Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the contract. Volatilities for certain combinations of tenor and strike are not observable. Some instruments benefit from an increase in volatility, others benefit from a decrease. The general relationship between changes in the value of a portfolio to changes in volatility also depends on changes in interest rates and the level of the underlying index.

Yield

        Sometimes, a yield of a similar instrument is available in the market. However, this yield may need to be adjusted to capture the characteristics of the security being valued. When the amount of the adjustment is significant to the value of the security, the fair value measurement is classified as Level 3.

        Adjusted yield is generally used to discount the projected future principal and interest cash flows. Adjusted yield is impacted by changes in the interest rate environment and relevant credit spreads.

        In other situations, the yield of a similar security may not represent sufficient market liquidity, and therefore, the fair value measurement is classified as Level 3.

Prepayment

        Prepayment is generally negatively correlated with delinquency and interest rate. A combination of low prepayment and high delinquencies amplify each input's negative impact on mortgage securities' valuation. As prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or negatively, depending upon the nature of the security and the direction of the change.

Recovery

        For many credit securities, there is no directly observable market input for recovery, but indications of recovery levels are available from pricing services. The assumed recoveries of a security may differ from its true recoveries that will be observable in the future. An increase in the recovery rate typically results in an increased market value from the perspective of a protection seller. Recovery rate impacts the valuation of credit securities, including mortgage securities. Generally, an increase in the recovery rate assumption increases the fair value of the security. An increase in loss severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and as a result, decreases the fair value from the perspective of a protection seller.

Credit Spread

        Changes in credit spread affect the fair value of securities differently depending on the characteristics and maturity profile of the security. Credit spread reflects the market perception of changes in prepayment, delinquency, and recovery rates, therefore capturing the impact of other variables on the fair value.

Items Measured at Fair Value on a Nonrecurring Basis

        Certain assets and liabilities are measured at fair value on a nonrecurring basis and therefore are not included in the tables above. These include assets measured at cost that have been written down to fair value during the periods as a result of an impairment. In addition, these assets include loans held-for-sale and other real estate owned that are measured at the lower of cost or market (LOCOM).

        The following table presents the carrying amounts of all assets that were still held as of March 31, 2012 and December 31, 2011, and for which a nonrecurring fair value measurement was recorded during the twelve months then ended:

In millions of dollars	Fair value		Level 2		Level 3
March 31, 2012
Loans held-for-sale	$	2,177	$	816	$	1,361
Other real estate owned		307		66		241
Loans(1)		4,094		3,551		543
Total assets at fair value on a nonrecurring basis	$	6,578	$	4,433	$	2,145

(1)

Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate secured loans.

In millions of dollars	Fair value		Level 2		Level 3
December 31, 2011
Loans held-for-sale	$	2,644	$	1,668	$	976
Other real estate owned		271		88		183
Loans(1)		3,911		3,185		726
Total assets at fair value on a nonrecurring basis	$	6,826	$	4,941	$	1,885

(1)

Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate secured loans.

        The fair value of loans-held-for-sale is determined where possible using quoted secondary-market prices. If no such quoted price exists, the fair value of a loan is determined using quoted prices for a similar asset or assets, adjusted for the specific attributes of that loan. Fair value for the other real estate owned is based on appraisals. For loans whose carrying amount is based on the fair value of the underlying collateral, the fair values depend on the type of collateral. Fair value of the collateral is typically estimated based on quoted market prices if available, appraisals or other internal valuation techniques.

Nonrecurring Fair Value Changes

        The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at March 31, 2012 and December 31, 2011.

In millions of dollars	March 31, 2012
Loans held-for-sale	$	(50	)
Other real estate owned		(14	)
Loans(1)		(769	)
Total nonrecurring fair value gains (losses)	$	(833	)

(1)

Represents loans held for investment whose carrying amount is based on the fair value of the underlying collateral, including primarily real-estate loans.

In millions of dollars	March 31, 2011
Total nonrecurring fair value gains (losses)(1)	$	(111	)

(1)

Excludes loans held for investment whose carrying amount is based on the fair value of underlying collateral.

Estimated Fair Value of Financial Instruments Not Carried at Fair Value

        The table below presents the carrying value and fair value of Citigroup's financial instruments which are not carried at fair value. The table below therefore excludes items measured at fair value on a recurring basis presented in the tables above. The disclosure also excludes leases, affiliate investments, pension and benefit obligations and insurance policy claim reserves. In addition, contract-holder fund amounts exclude certain insurance contracts. Also, as required, the disclosure excludes the effect of taxes, any premium or discount that could result from offering for sale at one time the entire holdings of a particular instrument, excess fair value associated with deposits with no fixed maturity and other expenses that would be incurred in a market transaction. In addition, the table excludes the values of non-financial assets and liabilities, as well as a wide range of franchise, relationship and intangible values, which are integral to a full assessment of Citigroup's financial position and the value of its net assets.

        The fair value represents management's best estimates based on a range of methodologies and assumptions. The carrying value of short-term financial instruments not accounted for at fair value, as well as receivables and payables arising in the ordinary course of business, approximates fair value because of the relatively short period of time between their origination and expected realization. Quoted market prices are used when available for investments and for liabilities, such as long-term debt not carried at fair value. For loans not accounted for at fair value, cash flows are discounted at quoted secondary market rates or estimated market rates if available. Otherwise, sales of comparable loan portfolios or current market origination rates for loans with similar terms and risk characteristics are used. Expected credit losses are either embedded in the estimated future cash flows or incorporated as an adjustment to the discount rate used. The value of collateral is also considered. For liabilities such as long-term debt not accounted for at fair value and without quoted market prices, market borrowing rates of interest are used to discount contractual cash flows.

	March 31, 2012
					Estimated fair value
	Carrying value		Estimated fair value
In billions of dollars					Level 1		Level 2		Level 3
Assets
Investments	$	17.9	$	17.4	$	—	$	15.5	$	1.9
Federal funds sold and securities borrowed or purchased under agreements to resell		116.6		116.6		—		109.0		7.6
Loans(1)(2)		611.7		599.4		—		4.7		594.7
Other financial assets(2)(3)		282.2		282.0		9.9		240.8		31.3
Liabilities
Deposits	$	904.7	$	903.9	$	—	$	837.2	$	66.7
Federal funds purchased and securities loaned or sold under agreements to repurchase		88.4		88.4		—		87.0		1.4
Long-term debt		284.4		284.4		—		236.2		48.2
Other financial liabilities(4)		143.3		143.3		—		92.1		51.2

	December 31, 2011
In billions of dollars	Carrying value		Estimated fair value
Assets
Investments	$	19.4	$	18.4
Federal funds sold and securities borrowed or purchased under agreements to resell		133.0		133.0
Loans(1)(2)		609.3		598.7
Other financial assets(2)(3)		245.7		245.4
Liabilities
Deposits	$	864.6	$	864.5
Federal funds purchased and securities loaned or sold under agreements to repurchase		85.6		85.6
Long-term debt		299.3		289.7
Other financial liabilities(4)		141.1		141.1

(1)

The carrying value of loans is net of the Allowance for loan losses of $29.0 billion for March 31, 2012 and $30.1 billion for December 31, 2011. In addition, the carrying values exclude $2.6 billion and $2.5 billion of lease finance receivables at March 31, 2012 and December 31, 2011, respectively.

(2)

Includes items measured at fair value on a nonrecurring basis.

(3)

Includes cash and due from banks, deposits with banks, brokerage receivables, reinsurance recoverable and other financial instruments included in Other assets on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

(4)

Includes brokerage payables, separate and variable accounts, short-term borrowings (carried at cost) and other financial instruments included in Other liabilities on the Consolidated Balance Sheet, for all of which the carrying value is a reasonable estimate of fair value.

        Fair values vary from period to period based on changes in a wide range of factors, including interest rates, credit quality, and market perceptions of value and as existing assets and liabilities run off and new transactions are entered into.

        The estimated fair values of loans reflect changes in credit status since the loans were made, changes in interest rates in the case of fixed-rate loans, and premium values at origination of certain loans. The carrying values (reduced by the Allowance for loan losses) exceeded the estimated fair values of Citigroup's loans, in aggregate, by $12.3 billion and by $10.6 billion at March 31, 2012 and December 31, 2011, respectively. At March 31, 2012, the carrying values, net of allowances, exceeded the estimated fair values by $8.4 billion and $3.9 billion for Consumer loans and Corporate loans, respectively.

        The estimated fair values of the Company's corporate unfunded lending commitments at March 31, 2012 and December 31, 2011 were liabilities of $7.1 billion and $4.7 billion, respectively, which are substantially fair valued at level 3. The Company does not estimate the fair values of consumer unfunded lending commitments, which are generally cancelable by providing notice to the borrower.