Citigroup Statement on Basel III Advanced Approach Reporting
NEW YORK--(BUSINESS WIRE)--The Federal Reserve Board has announced that Citi has been approved to exit parallel Basel III reporting for U.S. regulatory capital purposes and transition from the general risk-based capital rules (Basel I) to Basel III “advanced approaches,” effective for the second quarter of 2014. One of the stipulations for this approval is that Citi will be required to increase its estimated risk-weighted assets (RWA) associated with operational risk to $288 billion from the $232 billion reported as of December 31, 2013, given the overall operating environment for the banking industry. The estimated pro forma impact of the higher operational risk RWA to Citi’s estimated Basel III Tier 1 Common Capital ratio as of December 31, 2013 results in a pro forma ratio of approximately 10.1%.
To date, Citi’s target has been to operate at an estimated Basel III Tier 1 Common Capital ratio of 10%, reflecting a level of capital consistent with Citi being in compliance with the proposed supplementary leverage ratio (SLR) requirement of 5%. While changes in operational risk RWA impact the denominator of Citi’s Basel III Tier 1 Common Capital ratio, they do not impact Citi’s Basel III Tier 1 Capital or the SLR. As a result, even with the higher operational risk RWA, Citi can remain in compliance with the proposed SLR requirement at a lower Basel III Tier 1 Common Capital ratio. Therefore, Citi management has revised its estimated Basel III Tier 1 Common capital target ratio to 9.5%, which remains approximately 50 basis points above Citi’s expected required minimum Basel III Tier 1 Common Capital ratio on a fully phased-in basis.
Accordingly, reflecting these changes, as of December 31, 2013, Citi’s pro forma estimated Basel III Tier 1 Common Capital ratio was 10.1%, compared to a revised target of 9.5%, and Citi’s estimated SLR was 5.4%, compared to the proposed requirement of 5.0%.1
1 Citi’s estimated Basel III Tier 1 Common Capital ratio as of December 31, 2013 and target Basel III Tier 1 Common Capital ratio are based on the “advanced approaches” for determining RWA.
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
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Certain statements in this press release, including Citi’s ability to remain in compliance with the proposed SLR requirement and its target and expected minimum Basel III Tier 1 Common Capital ratio, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These statements are not guarantees of future results or occurrences. Actual results and capital and other financial condition may differ materially from those included in these statements due to a variety of factors, including but not limited to ongoing regulatory reviews, regulatory approval of Citi’s Basel III and II.5 risk models, additional refinements, modifications or enhancements (whether required or otherwise) to Citi’s models and continued Basel III implementation guidance in the U.S. More information about these and other factors that may affect Citi’s future results and capital and other financial condition is contained in Citigroup’s filings with the U.S. Securities and Exchange Commission, including without limitation the “Risk Factors” section of Citigroup’s 2012 Annual Report on Form 10-K. Any forward-looking statements made by or on behalf of Citigroup speak only as to the date they are made, and Citi does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements were made.