Citigroup (C)

Federal Funds Sold (Purchased) and Securities Borrowed (Loaned) or Purchased (Sold) Under Agreements to Resell (Repurchase)

Federal funds sold and federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at Federal Reserve banks. When the Company advances federal funds to a third party, it is selling its excess reserves. Similarly, when the Company receives federal funds, the Company is purchasing reserves from a third party. These interest-bearing transactions typically have an original maturity of one business day.

Securities borrowed and securities loaned are recorded at the amount of cash advanced or received, with a minimal amount adjusted for fair value in accordance with SFAS 159. With respect to securities borrowed, the Company pays cash collateral in an amount in excess of the market value of securities borrowed, and receives excess in the case of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis with additional collateral advanced or obtained as necessary. Interest received or paid for these transactions is recorded in interest income or interest expense.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are primarily carried at fair value in accordance with SFAS 159 since January 1, 2007. In prior periods, these agreements were carried at cost. The Company’s policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure.

During 2008 the decrease of $90 billion, or 33%, in federal funds sold and securities borrowed or purchased under agreements to resell, and the decrease of $99 billion, or 33%, in federal funds purchased and securities loaned or sold under agreements to repurchase were primarily driven by balance sheet management.

For further information regarding these balance sheet categories, see Note 13 to the Consolidated Financial Statements on page 155.

Federal Funds Sold (Purchased) and Securities Borrowed (Loaned) or Purchased (Sold) Under Agreements to Resell (Repurchase)

Federal funds sold and federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at Federal Reserve banks. When the Company advances federal funds to a third party, it is selling its excess reserves. Similarly, when the Company receives federal funds, the Company is purchasing reserves from a third party. These interest-bearing transactions typically have an original maturity of one business day.

Securities borrowed and securities loaned are recorded at the amount of cash advanced or received, with a minimal amount adjusted for fair value in accordance with SFAS 159. With respect to securities borrowed, the Company pays cash collateral in an amount in excess of the market value of securities borrowed, and receives excess in the case of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis with additional collateral advanced or obtained as necessary. Interest received or paid for these transactions is recorded in interest income or interest expense.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are primarily carried at fair value in accordance with SFAS 159 since January 1, 2007. In prior periods, these agreements were carried at cost. The Company’s policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure.

During 2008 the decrease of $90 billion, or 33%, in federal funds sold and securities borrowed or purchased under agreements to resell, and the decrease of $99 billion, or 33%, in federal funds purchased and securities loaned or sold under agreements to repurchase were primarily driven by balance sheet management.

For further information regarding these balance sheet categories, see Note 13 to the Consolidated Financial Statements on page 155.

Federal Funds Sold (Purchased) and Securities Borrowed (Loaned) or Purchased (Sold) Under Agreements to Resell (Repurchase)

Federal funds sold and federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at Federal Reserve Banks. When the Company advances federal funds to a third party, it is selling its excess reserves. Similarly, when the Company receives federal funds, the Company is purchasing reserves from a third party. These interest-bearing transactions typically have an original maturity of one business day.

Securities borrowed and securities loaned are recorded at the amount of cash advanced or received, with a minimal amount adjusted for fair value in accordance with SFAS 159. With respect to securities borrowed, the Company pays cash collateral in an amount in excess of the market value of securities borrowed, and receives excess in the case of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis with additional collateral advanced or obtained as necessary. Interest received or paid for these transactions is recorded in interest income or interest expense.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are primarily carried at fair value in accordance with SFAS 159 since January 1, 2007; in prior periods, these agreements were carried at cost. The Company’s policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure.

The decrease of $9 billion, or 3%, in federal funds sold and securities borrowed or purchased under agreements to resell and the decrease of $45 billion, or 13%, in federal funds purchased and securities loaned or sold under agreements to repurchase were primarily driven by lower funding requirements for long and short positions, as well as reduced activity in the Company’s secured financing trading strategy, offset by the consolidation of Nikko Cordial.

For further information regarding these balance sheet categories, see Note 13 to the Consolidated Financial Statements on page 141.

Federal Funds Sold (Purchased) and Securities Borrowed (Loaned) or Purchased (Sold) Under Agreements to Resell (Repurchase)

Federal funds sold and federal funds purchased consist of unsecured advances of excess balances in reserve accounts held at Federal Reserve Banks. When the Company advances federal funds to a third party, it is selling its excess reserves. Similarly, when the Company receives federal funds, the Company is purchasing reserves from a third party. These interest-bearing transactions typically have an original maturity of one business day.

Securities borrowed and securities loaned are recorded at the amount of cash advanced or received. With respect to securities borrowed, the Company pays cash collateral in an amount in excess of the market value of securities borrowed, and receives excess in the case of securities loaned. The Company monitors the market value of securities borrowed and loaned on a daily basis with additional collateral advanced or obtained as necessary. Interest received or paid for these transactions are recorded in interest income or interest expense.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are treated as collateralized financing transactions and are carried at the amounts at which the securities will be subsequently reacquired or resold, including accrued interest, as specified in the respective agreements. The Company’s policy is to take possession of securities purchased under agreements to resell. The market value of securities to be repurchased and resold is monitored, and additional collateral is obtained where appropriate to protect against credit exposure.

The increase of $66 billion, or 30%, in federal funds sold and securities borrowed or purchased under agreements to resell was primarily driven by a shift from securities purchased under agreements to resell to securities borrowed. This resulted in a decline in the netting benefits permissible under FIN 41 as securities borrowed do not qualify for FIN 41 netting. Securities purchased under agreements to resell remained relatively unchanged on a net basis, while securities borrowed increased.

The increase of $107 billion, or 44%, in federal funds purchased and securities loaned or sold under agreements to repurchase was primarily due to a $65 billion decrease in FIN 41 netting, as well as a $27 billion increase in securities loaned, which was driven by the funding needs for the increases in trading assets.

For further information regarding these balance sheet categories, see Note 12 to the Consolidated Financial Statements on page 132.

Federal Funds Sold (Purchased) and Securities Borrowed (Loaned) or Purchased (Sold) Under Agreements
to Resell (Repurchase)

        The increase in both accounts was primarily due to higher levels of proprietary inventory, which are funded in a secured manner (mainly with repurchase agreements). In addition, increased levels of matched activities also contributed to the higher levels of funding assets and liabilities. See Note 6 to the Consolidated Financial Statements on page 124.