CITIGROUP GLOBAL MARKETS LIMITED (Registered · PDF fileCITIGROUP GLOBAL MARKETS LIMITED...
Transcript of CITIGROUP GLOBAL MARKETS LIMITED (Registered · PDF fileCITIGROUP GLOBAL MARKETS LIMITED...
CITIGROUP GLOBAL MARKETS LIMITED
(Registered Number: 01763297)
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended 31 December 2014
CITIGROUP GLOBAL MARKETS LIMITED DIRECTORS' REPORT
for the year ended 3 I December 20 I 4
The Directors present their
(the for the year ended
and the audited financial statements of
December 2014.
Global Markets Limited
Business environment
The of and is authorised
(FCAJ and PRA.
the Prudential
Citi conducts its business two segments: Citicorp,
Group (ICG; and Global Consumer Bank (GCB) businesses; and Citi Holdings. of businesses and
of assets that Citi has determined are not central to its core Citicorp businesses. Clients choose Citi for its
global footprint, market position. in-country relationships and full range of solutions through its extensive suite of
products and services.
The is Citi's international broker-dealer. 1be Company's business is almost entirely wholesale in nature,
falling within the ICG segment of Citi's operations. Within Europe, the Middle East and Africa (EMEA), Citi's
ICG segment has one of the market's largest fixed income, currency. commodity and equity sales and trading
platforms, offering clients liquidity and hedging capabilities across the full range of products as well as capital
markets and other investment banking and advisory services. The Company is instrumental in offering many of
these services not only in EMEA. but also globally. Citi maintains a physical presence in 55 countries in EMEA
and also serves clients in a number of other countries where it has no physical presence. A more detailed
description of the Company's activities is set out in the Strategic Report.
Citi operates its businesses across many legal vehicles globally, including the branches and subsidiaries of Citibank
N.A and also its broker-dealer network. Bank chain entities 1
are subject to US legislative measures providing
protection to deposit taking institutions and their subsidiaries, while non-bank chain entities2
are not.
There are certain businesses, particularly within the ICG segment, that transact both on broker-dealer and bank
chain entities. Customer transactions may be recorded on either set of vehicles, although typically the risks carried
by such businesses are centralised in one place. Front office, support and technology costs may be booked on a
legal entity other than the entity in which the associated revenues are recorded. There are a number of transfer
pricing agreements in place within Citi that move either costs or revenues between different legal vehicles to ensure
that the entities are compensated for their involvement in transactions. The Company is a party to a number of
these agreements and this is discussed in more detail in the Strategic Report.
Going concern basis
The financial statements are prepared on a going concern basis taking into account the Company's existing capital
and liquidity resources and the level of reliance placed on support from the Company's ultimate parent. The
Directors acknowledge the risk that extreme circumstances might adversely impact the Company's ability to
continue trading and are satisfied that the Company has the resources to continue in business for the foreseeable
future. In making this assessment, the Directors have considered a wide range of information relating to present
and future conditions. Given the ultimate reliance support of the referred to the
CITIGROUP GLOBAL MARKETS LllVIITED DIRECTORS' REPORT for the year ended 31 December 2014
Risk Management
The has elected to include information on financial risk management as per Schedule 7 6( I l(aJ (h)
the and Medium-sized and Regulations 2008'' in the as the directors
consider financial risk management to be of
Statement of Directors' responsibilities The Directors are responsible for preparing the Strategic Report and the Directors'
statements in accordance with applicable law and regulations.
and the financial
law requires the Directors to prepare financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements unless they are satisfied that they
a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently:
• make judgments and estimates that arc reasonable and prudent:
• state whether applicable United Kingdom Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
• prepare the financial statements on a going concern basis unless it is inappropriate to assume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company's transactions, disclose with reasonable accuracy at any time the financial position of the Company, and
enable them to ensure that the financial statements comply with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Directors The Directors who held office during the year ended 31 December 2014 were:
Non-Executive
1 P Asquith (Chair)
DJ Challen (resigned 31 March 2014)
S H Dean
M L Jones (appointed 8 September 2014)
DL
CITIGROUP GLOBAL MARKETS LIMITED DIRECTORS' REPORT for the year ended 31 December 2014
the suney.
Note 9 'Share-based incentive
Statement of Directors' responsibilities (continued)
in incentive schemes as described in
Employment of disabled people The is committed to a of recruitment and without
discrimination of any kind. for disabled persons are
regard to the aptitudes and abilities of each Efforts are made to enable any
disabled during employment to continue their careers within the Training, career development and
of disabled persons are, as far as identical to those available to other who arc not
disabled.
Diversity is as one of the key values. The Company therefore fosters a culture where the
best people want to work. where people are promoted on their merits. where respect for others is demanded and
valued and where opportunities to develop are widely available to all regardless of differences. The Company
maintains a workplace with different backgrounds, perspectives and ideas and provides employees with a wide
range of experiences and skills to develop to their full potentiaL Citi's code of conduct prohibits discrimination and
harassment
Environment The Company recognises the importance of its environmental responsibilities. monitors its impact on the
environment. and designs and implements policies to reduce any damage that might be caused by its activities.
Initiatives designed to minimise the Company's impact on the environment include safe disposal of waste. recycling
and reducing energy consumption.
Political contributions No political contributions were made during the year (2013: $nil).
Disclosure of information to auditors In accordance with, and subject to all the provisions of. section 418 of the Companies Act 2006. it is stated by the
Directors who held office at the date of approval of this Directors' Report that
• so far as each is aware, there is no relevant audit information of which the Company's Auditors are
unaware; and
• each Director has taken all the steps that he I she ought to have taken as a director to make himself I herself
aware of any relevant audit information and to establish that the Company's Auditors are aware of that
information.
Auditors Pursuant to Section 487 of the
will therefore continue in
Act 2006, the auditors will be KPMGLLP
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 3 J December 2014
The Directors present the of the for the year ended 31 December 2014.
Overview, principal activities and governance
is in London and operates
with the remainder from Asia and the Americas.
the of its business from the
The has eleven branch offices and five subsidiaries. The Company's branches in the European Union
(EU) were established under the 1993 Investment Services Directive. which has been superseded by the 2005
Markets in Financial Instruments Directive (MiFID). These branches arc located in France. Greece.
Ireland. Italy. Spain. Sweden and the Czech and Slovak Republics. The Company has made notit!eations to the
PRA to conduct cross-border MiFID services into all European Economic Area (EEA) states. Additionally. the
Company has non-EU branches in Dubai. Israel and Switzerland as well as subsidiaries in Luxembourg. Monaco
and South Africa.
EU Branches
• France
• Greece (in liquidation)
• Ireland
• Italy
• Spain
• Sweden
• Czech Republic
• Slovak Republic (closed in 1anuary 2015)
Non-EU branches
• Switzerland
• Dubai
• Israel
Subsidiaries
• Citigroup Global Markets Luxembourg LLC (Luxembourg)
• Citigroup Global Markets Funding Luxembourg SCA (Luxembourg)
• Citigroup Global Markets Funding Luxembourg S.a.R.L. (Luxembourg)
• Citi Global Wealth Management S.A.M (Monaco)
• Citigroup South Africa Credit Products (Proprietary) Limited (South Africa)
The Company is a dealer. market maker and underwriter in equities. fixed income securities and commodities, and
provides investment banking and advisory services to a wide range of corporate. institutional and government
clients. The Company's trading activities. which are part of Citi's Markets and Securities Services division within
the ICG segment. encompass cash. exchange traded and Over The Counter (OTC) derivative markets. The
l'nnn:rPrn;u·ti'''' are banks. other investment firms. managers. insurers and
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 31 December 2014
Overview, principal activities and governance (continued)
EME4 and the Company's governance structure
-- -----------L-----------.----------------
BRCC refers ro the Business Risk Compliance and Comrols Committee.
Business review and financial results
The 2014 financial results provided evidence of further progress towards the objective of sustainable profitability
for the Company throughout the business cycle.
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 31 Decem her 2014
Business review and financial results
Company's performance
Commission income and fees
Net dealing income
Interest receivable
Interest payable
Gross profit
Operating expenses
Other income and expenses
Operating profit/(loss) on ordinary activities
before taxation
2014 2013 Change Change
$Million $ :\:Jillion $ I\lillion in%
2,195 !.618 577 36t7r,
731 1.085 (354) (33'!::)
773 897 ( 124) ( 14'!::)
(638) 159
3,061 2,803 258 9%
(2.955) (3.021) 66 2Si
7 9
113 (209) 322 N/A
Gross Profit
Total income, including interest receivable and payable, was $3,061 million, representing a 9'/t increase from the
previous year.
Commission income and fees increased to $2,195 million from $L618 million. 2014 saw an increase in revenues
from intermediation activity in the Rates and G 10 FX businesses, between a number of institutional clients and
Citibank NA. in response to the implementation of a set of US regulations governing the OTC derivatives market.
In addition the improved gross profit reflected higher capital markets earnings due to a recovery in primary market
activity.
Net dealing income decreased from $1,085 million to $731 million. During the year the Equities business' client
revenues were offset by losses on certain inventory positions. In addition, 2014 saw some valuation adjustments
relating to financing transactions in the Commodities business.
Net interest income increased from $100 million in 2013 to $135 million in 2014. The Company benefited from
savings in interest expense on intercompany subordinated debt. These savings were offset by a decrease in interest
income within Credit Markets.
Operating Expenses
The Company remained committed to executing on the Citi-wide priorities of efficient resource allocation and
disciplined expense management. Company management actively monitored expenses, carefully managing
expense reduction exercises while taking account of investments necessary for the future.
CITIGROUP GLOBAL MARKETS Lll\UTED
STRATEGIC REPORT
for tht: year ended 31 December 2014
Business review and t'inancial results (continued)
Intercompany Revenue and Expemes
party:
revenue and expense from transactions with other Citi entities,
There were four main revenue transfer agreements to which the
• intermediation fees fees from other entities, for the usage of the ''""m"'"'" • trading management fees - fees from other entities for services by the
Company:
• investor sales expected value - fees from other entities. where products have been sold by sales people
employed by the Company: and
• investment banking allocation of Global Investment Banking revenue. based upon the location of
Investment Banking staff.
Further details of the Company's intercompany revenues can be found in the Other I Corporate section of Note 32
'Segmental Disclosures'.
Expenses relating to operations. technology, support functions (including finance, risk, legal and compliance. audit
and human resources) and senior management costs were allocated out to businesses and legal entities based on a
number of criteria. As part of the allocation process. the Company both paid and recovered expenses. All of these
transfer pricing arrangements undergo regular review for appropriateness and global consistency. This resulted in a
regularisation reflected in 2014 of some prior year transfer pricing arrangements with other Citi entities.
Balance Sheet
Company's position at 31 December
2014 2013 Change Change
$ !Ylillion $1Ylillion $Million in%
Fixed assets 259 271 (12) (4%)
Current assets 364,902 234,002 130.900 56%
Debtors: amounts due after more than one year 29 13 16 123%
Creditors: amounts falling due within one year 348,105 217.219 130.886 60%
Total assets less current liabilities 17,085 17,067 18 0%
Creditors: amounts falling due after more 4.202 4,360 (158) (4%)
than one year
Provisions for liabilities 119 56 63 112%
Net pension asset (6%)
Neta'isets 108 1%
CITIGROUP GLOBAL lVIARKETS Lll\tfiTED
STRATEGIC REPORT
for the year ended 31 December 2014
Business review and financial results (cominued)
Key performance indicators
In addition to the financial results of the senior management considers the
financial and non-financial items critical to the future: '"""uwt<Jl
and future
Regulatory Capital
2014
2013
Change
$ lVtillion $Million $Million
Tier 1 12.754 12.794
(40)
Tier 2 capital 4,080 4,086 (6)
Tier 3 capital (234) 234
Deductions (871) (265) (606)
Total regulatory capital resources 15.963 16,381 (418)
The Company's regulatory capital is held to meet minimum capital standards as set by the PRA in its Individual
Capital Guidance. Management maintains a sufficiently strong and stable capital balance, in excess of the
regulatory requirements, and monitors the Company's capital balance to ensure an excess is maintained at all
times.
Tier I capital encompassed tangible shareholders' funds less certain capital deductions. Under CRD IV. Tier 3
capital became ineligible from l January 2014. At 31 December 2013 Tier 3 capital comprised the unaudited loss
for the year. The increase in capital deductions in 2014 was primarily driven by the inclusion of holdings in
capital instruments of other financial sector entities under CRD IV.
Throughout the year, the Company's minimum regulatory capital requirements were met by its available capital
resources.
Details surrounding the Company's capital management policies and procedures are set out in Note 28 'Financial
instruments and risk management'.
Subsequent to the 2014 year-end, an additional $1.55 billion in Tier 2 capital, in the form of subordinated debt,
was injected into the Company.
Liquidity
CITIGROUP GLOBAL MARKETS LIMITED STRATEGIC REPORT
for the year ended 31 December 2014
Risk management - overview
utilises Citi's risk management model and
processes and systems to ensure robust
management and controls, to ensure local
for the
CitL and the believe that effecti vc risk management is of Citi' s risk management process is been designed to monitor, evaluate and manage the principal risks
it assumes in its activities, Specifically, the activities that the Company engages in, and the risks those
activities generate, must be consistent with the underlying commitment to the principles of ''Responsible Finance",
"Responsible Finance" denotes conduct that is transparent prudent and dependable, and that delivers better
outcomes for Citi's clients and society. In order to achieve these princi pies, Citi establishes and enforces
expectations for its risk-taking activities through its risk culture, through detlned roles and responsibilities and
through its supporting policies, procedures and processes that enforce these standards.
While the management of risk is the collective responsibility of all employees, Citi and the Company assign
accountability into three lines of defence:
• first line of defence: the business owns all of its risks and is responsible for the management of those
risks;
• second line of defence: the Company's control functions (e.g., risk. finance, compliance, etc.) establish
standards for the management of risks and effectiveness of controls; and
• third line of defence: Citi's internal audit function independently provides assurance, based on a risk
based audit plan, that processes arc reliable and governance and controls are effective.
Risk Culture
The Company's risk management framework is designed to balance business ownership and accountability for
risks with well-defined independent risk management oversight and responsibility. The Company applies Citi's
global risk management framework, tailored as appropriate for the Company, based on the following principles
established by the Chief Risk Officer:
• a defined risk appetite, aligned with business strategy;
• accountability through a common framework to manage risks;
• risk decisions based on transparent, accurate and rigorous analytics:
• a common risk capital model to evaluate risks;
• expertise, stature, authority and independence of risk managers; and
• risk managers empowered to make decisions and escalate issues.
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 31 December 201 4
Risk management- oveniew rcontinucd)
Roles and
The risk management framework aims the range of the business
corporate with risk management functions within each business.
managers at the for and implementing risk
management and practices within their business, for the risk in their business, and for
responding to the needs and issues of their business. This ensures the active management of the principal risks of
the Company.
Since the financial cns1s in 2008, both Citi and the Company"s risk management and internal governance
processes have undergone significant improvements in all major areas. These include more credit
assessments and credit re\iew of obligors; enhanced identification of risk and heightened controls over business
and reporting processes through a formal Manager's Control Assessment (MCAJ process; implementation of a
formalised operational risk scenario analysis process; and enhancement of comprehensive entity stress testing.
Entity specific risk management and oversight have been put in place, and control and governance processes
continue to evolve in line with the best practices specific to the Risk domain.
Review practices and governance committees are detailed in Note 28 'Financial instruments and risk management'
starting on page 51.
Risk management - principal risks
The Company's principal risks arise from the diverse services provided to its clients and include both financial and
non-financial risks. The main risks covered by the Company's risk management framework are market risk,
funding and liquidity risk, credit and counterparty default risk (including country and concentration risk).
operational risk (including franchise and reputational risk) and regulatory risk and developments.
The following principal risks have been identified by management.
Market risk
Price risk losses arise from tluctuations in the market value of trading and non-trading positions resulting from
changes in interest rates, credit spreads, foreign exchange rates, equity and commodity prices, and in their implied
volatilities. Through its activity as a broker-dealer with a global reach to clients and a highly dynamic trading
activity the Company's trading results are particularly exposed to movements in these market factors.
Each business that uses the Company in client facing transactions is required to establish. with approval from
market risk management, a market risk limit framework for identified risk factors. This framework must clearly
define approved risk profiles and remain within the parameters of Citi's overall risk appetite. The limits thus
established are monitored by independent market risk management. In all the businesses are ulttul•w::ty
for the taken for within defined
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 31 December 2014
Risk management- principal risks (continued)
Credit and cmmterparty default risk
Credit risk is the from the failure bmrower coumerparty to honour its
Credit risk arises from the and reverse
and lending transactions and
Credit risk also arises from settlement and clearing activities. when the Company transfers an asset in advance of
receiving its counter-value or advances funds to settle a transaction on behalf of a client. Concentration risk.
within credit risk. is the risk associated with having credit exposure concentrated within a specific client. industry.
region or other category. Credit risk is one of the most risks the faces as an institution. As a
result. Citi has a well established framework in place for managing credit risk across all businesses. This includes a
defined risk appetite. credit limits and credit policies. both at the business level as well as at the firm-wide level.
Citi"s credit risk management also includes processes and policies with respect to problem recognition. including
'·watch lists," portfolio review. updated risk ratings and classification triggers.
Operational risk
Operational risk is the risk of Joss resulting from inadequate or failed internal processes, systems, human factors or
from external events.
It includes the reputation and franchise risk associated with business practices or market conduct in which Citi is
involved.
Operational risk is inherent in the Company's and Citi's global business activities, as well as the internal processes
that support those business activities, and can result in losses arising from events related to the following, among
others:
fraud, theft and authorized activities;
employment practices and workplace environment;
clients, products and business practices;
physical assets and infrastructure; and
execution, delivery and process management.
Where applicable, losses stemming from fines and regulatory penalties are ineluded in the relevant categories
above, which are consistent with the Basel framework.
In recent years there has been an increased focus internally and from the public and regulators with regard to the
identification, measurement and management of the operational risk of large financial institutions. This focus was
the that the the of 2008 as well as number
CITIGROUP GLOBAL MARKETS LIMITED
STRATEGIC REPORT
for the year ended 31 December 2014
Risk management - principal risks
Regulatory risk and developments
risk is the risk of or
and increased
environment continues to evolve, Citi and the Company remain committed to implementing new
to ensuring compliance vvith The most
develooments assessed by the Company are:
• Capital Requirements Directive (CRD IV)
• Bank and Resolution Directive (BRRD)
• Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
• European Market Infrastructure Regulation (E.\HR)
• Markets in Financial Instruments Directive (MiFlD) and Regulation on Markets in Financial Instruments
(MiFTR)
Specific details of the above are included in Note 28 'Financial instruments and risk management' starting on page
51.
Future outlook
The Company's strategy continues to focus on developing and enhancing the depth and quality of service to its
core clients in the markets in which it operates. The Company's strategic objectives must he executed against a
backdrop of continued uncertainty arising from an uneven global economic recovery, a changing competitive and
technology environment, and evolving regulatory requirements, coupled with changes in fiscal and monetary
policies, both within the United States and globally.
The Company is well-positioned to address the impact of these uneven external trends and remains poised for
future growth by leveraging Citi's product depth, geographic breadth and scalable technology platforms. The
Company's strategy centres on the following guiding principles:
• Putting the client at the centre of its business model:
• Embracing leading practices in bank governance, risk management and control;
• Harnessing its capabilities in markets where it has competitive advantages; and
• Responding and adapting to changes in the economic, regulatory and competitive environment.
These will enable it to deliver valuable services to its clients and exploit business opportunities while ensuring
effective risk management, robust and control
of
INDEPENDENT AUDITOR'S REPORT TO THE MEMBER OF CITIGROUP GLOBAL
MARKETS LIMITED
20!4 set out on pages 15 to 69.
law and United
Markets Limited for rnr>r>rtinH framework that has been
Standards
This report is made to the Company's member, as a in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's member those
matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's
member, as a body, for our audit work. for this report, or for the opinions we have formed.
Respective responsibilities of Directors and Auditor As explained more fully in the Directors' Responsibilities Statement set out on pages 3 and 4. the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit, and express our opinion on, the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board's (APE's) Ethical Standards for Auditors.
Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council's web site at www.frc.org. uk/auditscopeukpri vate.
Opinion on financial statements In our opinion the financial statements:
• give a true and fair view of the state of the Company's affairs as at 31 December 2014 and of its profit for
the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept, or returns for our audit have not been received
from branches visited
..
CITIGROUP GLOBAL MARKETS LllVIITED
PROFIT AND LOSS ACCOUNT for the year ended 31 December 20!4
2014 2013
Notes $ !\Jillion $!\Jillion
Commission income and fees
Net income
Interest receivable
Interest payable
Gross profit
4 2.195 1.618
6 731 1.085
5 773 897
5
3.061 2.803
Operating expenses
Other finance income/( expense)
Other income
Operating profit/(loss) on ordinary activities before taxation
Tax on profits/(losses) on ordinary activities
Profit/(loss) for the financial year
7
8
ll(a)
(2.955) (3.021)
4 (3)
3 12
!13 (209)
(3) (25)
110 (234)
The accompanying notes on pages 18 to 69 form an integral part of these financial statements.
CITIGROUP GLOBAL IVIARKETS LIMITED
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (STRGL) for thc ycar ended 31 Dccemher 2014
2014 2013
Notes $:Million $Million
Profit/(loss) for the financial year
Nct movement in STRGLin respect ofthe scheme
Total for the financial year
110 (234)
8 5 (50)
115 (284)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDER'S FUNDS for the year ended 3 I December 2014
2014 2013
Notes $:Million $Million
Pro tit/(loss) tor the tinancia1 year 11 () (234)
Capital Contribution 27
Share based payment transactions 9
Other recognised gains/(losses) relating to the year (net) 8
(8)
5
3.000
(83)
(50)
Opening shareholder's funds 12.754 10.119
Oosing shareholder's funds 12.861 12,754
The accompanying notes on pages 18 to 69 form an integral part of these financial statements.
CITIGROUP GLOBAL 1\1ARKETS LIMITED
BALANCESHEET as at 31 December :2014
Fixed assets
2014 2013
Notes $Million $Million
fixed assets 12 :219 221
Fixed Asset Investments 13 40 50
259 271
Current assets
Debtors 15 114304 111.623
Investments 17 249.027 119.574
Cash at bank and in hand 19 1.571 2.805
Debtors: amounts due after more than one year
Debtors 15 29 13
364.931 234.015
Creditors:amounts falling due ""ithin one year
Creditors 21 348,105 217.219
348.105 217.219
Net current assets 16.797 !6.796
Total assets, less current liabilities 17,085 17,067
Creditors: amounts falling due after more than one year
Creditors 21 122 !60
Subordinated loans 24 4,080 4.200
4.202 4.360
Provisions for liabilities 25 119 56
Net assets excluding net pension asset !2.764 12,651
Net pension asset 8 97 103
Net assets 12,861 !2,754
Capital and reserves
Called up share capital 26 1.500 1.500
Capital reserve 27 9,989 9,989
Profit and loss 27
CITIGROUP GLOBAL MARKETS Lll\UTED
NOTES TO THE FINANCIAL STATEMENTS
1. Principal accounting policies
(a) Basis of presentation
The tlnancial statements have been in accordance with UK
the Act 2006. The financial statements have been nn••n•Tn•rl
the
• derivative and trading financial instruments arc measured at fair value; and
• financial instruments designated at fair value through or loss arc measured at fair value.
Practice and
The risks and uncertainties faced by the Company arc discussed further in the Directors' Report and Strategic
Report on pages l to 13, including details on where ro find information about the risks faced by the Company's
parent. The Directors acknowledge and accept the intent and ability of Citi to >upport to the if
required and consequently present these financial statements on a going concern basis.
The principal accounting policies have been applied consistently throughout the current and preceding year.
Forthcoming clumges to accounting standards:
The Financial Reporting Council (FRC) revised the financial reporting standards for the United Kingdom and
Republic of Ireland. This revision fundamentally reforms financial reporting, replacing almost all extant standards
with three Financial Reporting Standards which are effective for periods beginning on or after 1 January 2015.
• FRS 100 "Application of Financial Reporting Requirements" sets out a new financial reporting regime
explaining which standards apply to which entity and when an entity can apply the reduced disclosure
framework.
• FRS 101 "Reduced Disclosure Framework" sets out the disclosure exemptions for the individual financial
statements of subsidiaries, including intermediate parents, and ultimate parents that otherwise apply the
recognition, measurement and disclosure requirements of EU-adopted International Financial Reporting
Standards (JFRS).
• FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" based on the
IFRS for SMEs, with amendments for application in the UK and Republic of Ireland.
For periods beginning 1 January 2015, the Company will adopt FRS 101. The adoption is not expected to result in
significant changes to assets, liabilities and shareholders' equity of the Company as at I January 2015.
Other matters:
The financial statements have been prepared in US Dollars, which is the functional currency of the Company, and
any reference to$ in these financial statements refers to US Dollars.
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. Principal accounting policies
{b) Financial instruments
assets and liabilities
Financial instruments that have been for the purpose of in the near term. or form part
of a financial instruments that are and which there is evidence of short term
ate classified as "held for Financial assets classified as "held for trading" include
coilateralised transactions, government bonds, eurobonds and other corporate bonds,
certificates of deposit, commercial paper and derivatives. Financial liabilities classified as "held for
include securities sold but not yet collateralised transactions and derivatives.
assets and liabilities are initially at fair value on settlement date and subsequently re-measured
at fair value. changes in fair value between trade date and settlement date are reported in the profit and loss
account. Gains and losses realised on disposal or redemption and unrealised gains and losses from changes in fair
value are reported in the profit and loss account.
Derivative contracts
Derivative contracts used in trading activities are recognised at fair value on the date the derivative is entered into
and are subsequently re-measured at fair value. All derivatives ate carried as assets when fair value is positive and
as liabilities when fair value is Gains and losses realised on disposal or redemption and unrealised gains
and losses from changes in fair value are reported in the profit and loss account
Repurchase and resale agreements Repurchase and resale agreements are treated as collateralised financing transactions. Securities which have been
sold with an agreement to repurchase continue to be shown on the balance sheet and the sale proceeds are recorded
as a collateralised financing transaction within creditors. Securities acquired in purchase and resale transactions
are not recognised in the balance sheet and the purchase is recorded as a collateralised financing transaction within
debtors. The difference between the sale price and the repurchase price is recognised over the life of the
transaction and is charged or credited to the profit and loss account as interest payable or receivable. Assets and
liabilities recognised under collateralised financing transactions ate classified as "held for trading" and are
recorded at fair value, with changes in fair value reported in the profit and loss account
Financial instruments designated at fair value
Financial instruments, other than those held for trading, are classified as fair value through profit and loss when
they meet one or more of the criteria set out below, and are so designated by management. The Company may
designate financial instruments at fair value when this will:
• eliminate or significantly reduce valuation or recognition inconsistencies that would otherwise arise from
measuring financial assets or financial liabilities, or recognising gains and losses on them, on different
bases;
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. Principal accounting policies (continued)
(b) Financial instruments (continued)
The Company has elected to the fair value to certain corporate bonds on
part of a that is "w'"'t"u and evaluated on a fair value basis.
basis that such bonds are
rff1,•Jm•Jm assets
Financial assets other than those which are classified as ''held for or at fair value
profit and loss·· are classified as loans and receivables. Loans and receivables trade debtors, including
settlement receivables. and are initially recognised at fair value direct and incremental transaction costs
and subsequently measured at amortised cost using the effective interest rate method.
At each date the Company assesses whether there is evidence that financial assets carried at
amortised cost are impaired. A financial asset or a group of financial assets is impaired when objective evidence
demonstrates that a loss event has occurred after the initial recognition of the asset(s). and that the loss event has
an impact on the future cash tlows of the asset(s) that can be estimated reliably.
Objective evidence that financial assets are impaired can include significant financial difficulty of the debtor or
other observable data such as adverse changes in the payment status of debtors, or economic conditions that
correlate with defaults of the debtor.
Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount
of the financial asset and the present value of estimated future cash flows discounted at the asset's original
effective interest rate. Impairment losses are recognised in profit or loss and retlected in an allowance account
against loans and receivables. Interest on impaired assets continues to be recognised through the unwinding of the
discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment
loss is reversed through profit or Joss. The Company writes off loans and receivables and fixed asset investments
when they are determined to be uncollectible.
Other financial liabilities and subordinated loans Financial liabilities and subordinated loans are measured at amortised cost using the effective interest rate, except
those which are "held for trading". which are held at fair value through the profit and loss account.
Determination of fair value
Where the classification of a financial instrument requires it to be stated at fair value, this is determined by
reference to the quoted market value in an active market wherever possible. Where no such active market exists
for fhe particular instrument, the Company uses a valuation technique to arrive at the fair value, including the use
of prices obtained in recent arms' length transactions. discounted cash tlow analysis, option pricing models and
other valuation techniques commonly used by market participants. See Note 14 ·Financial assets and liabilities
accounting classifications and fair values' for further details.
CITIGROUP GLOBAL l\1ARKETS LIMITED NOTES TO THE FINANCIAL STATEJ\IENTS
1. Principal accounting policies
(b) Financial instruments
are
has transferred its contractual
all the risks and rewards of
w receive cash flows from the assets has or when the
to receive the cash !lows of the financial assets and either
have been transferred or all the risks and rewards
have neither been retained nor transferred but control is not retained.
If the Company enters into a transaction that results in it retaining all of the risks and rewards of a
financial asset it will continue to recognise that financial asset and will recognise a financial liability equal to the
consideration received under the transaction.
In transactions in which the Company neither retains nor transfers substantially all the risks and rewards of
ownership of a financial asset and it retains control over the asset, the group continues to recognise the asset to the
extent of its continuing involvement, determined by the extent to which it is exposed to changes in the value of the
transferred asset.
Financial liabilities are derecognised when they are extinguished, that 1s when the obligation 1s modified,
discharged, cancelled or expired.
(c) Physical commodities
Physical commodities are initially recognised at fair value on settlement date and subsequently re-measured at fair
value. Realised gains and losses on sales of commodities inventory are included in Net dealing income.
(d) Commission income and fees
Commission revenues and expenses are recognised when the right to consideration has been obtained in exchange
for performance.
(e) Interest receivable and payable
Interest income and expense is recognised in the profit and loss account for all financial assets classified as loans
and receivables and non-trading financial liabilities, using the effective interest rate method.
Interest arising on financial assets or financial liabilities that are "held for trading" or "designated at fair value" is
reported within interest income and expense respectively.
(f) Net dealing income
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
1. Principal accounting policies (continued)
(h) Fixed asset investments
Investments in
permanent.
are stated at cost. less any write down for diminution in value as
at fair value on settlement date and re-measured
(i) Taxation
The charge for taxation is based on the taxable for the year and takes into account taxation deferred
because of timing differences between the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can be deducted. Full provision is
made for deferred tax assets and liabilities arising from timing differences between the recognition of gains and
losses in the tlnancial statements and their treatment for tax purposes except as otherwise provided by FRS 19 on
an undiscounted basis.
(j) Pension and other post retirement benefit costs
The Company operates both a defined benefit and a defined contribution pension scheme.
The cost of the Company's defined contribution pension scheme is the amount of contributions payable in respect
of the year. For defined benefit obligations, the current service cost and any past service costs are included in the
profit and loss account within operating expenses and the expected return on the scheme's assets, net of the impact
of the unwinding of the discount on scheme liabilities. is included within other finance income. The post
retirement benefit surplus or deficit is included on the balance sheet. net of the related deferred tax. Actuarial
gains and losses are recognised in the statement of total recognised gains and losses. These include differences
between the expected and actual return on scheme assets and differences which arise from experience and
assumption changes.
(j) Pension and other post retirement benefit costs (continued)
Under FRS 17 paragraph 41, net asset surpluses can only be recognised on the balance sheet if the surplus can be
recovered either by a refund to the Company (which must have been agreed at the balance sheet date) or by the
reduction of future employer contributions. FRS 17 specifies that the maximum amount that can be recognised in
respect of the reduction of future contributions is the present value of the liability expected to arise from future
service. net of employee contributions.
currencies
CITIGROUP GLOBAL "MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
1. Principal accounting policies (continued)
(I) Share-based incentive plans
The Inc. shanc:-based incentive
Pursuant to a separate Stock Plans Affiliate
makes a cash settlement to Citi for the fair value of the share-based incentive awards
under these
The Company applies equity-settled accounting for its share based incentive plans, with separate accounting for its
associated to make payments to Citigroup Inc. The Company the fair value of the awards at
grant date as compensation expense over the vesting period with a credit to the intercompany payable to Citigroup
Inc. All amounts paid to Citigroup Inc. and the associated obligations are recognised over the vesting period.
Subsequent changes in the fair value of all unexercised awards are reviewed annually and any changes in value are
recognised in the equity reserve, again over the vesting period. The SPAPA is also updated annually.
For Citi's share based incentive plans that have a graded vested period each "tranche" of the award is treated as a
separate award. Where a plan has a cliff vest, the award only has a single '"tranche". The expense is recognised
as follows:
% of expense recognised
Vesting Period of Award
2 Years (2 Tranches)
Year 1
75%
Year2
25%
Year3 Year4
2 Years (1 Tranche) 50% 50% 3 Years (3 Tranches) 61'K 28% 11% 3 years (I Tranche) 33% 33'K 33% 4 Years (4 Tranches) 52% 27% 15% 6%
4 Years (1 Tranche) 25% 25% 25o/c 25%
Employees who meet certain age plus years of service requirements (retirement eligible employees) may terminate
active employment and continue vesting in their awards provided they comply with specified non-compete
provisions. The cost of share based incentive plans are recognised over the requisite service period. For awards
granted to retirement eligible employees, the services are provided prior to grant date, and subsequently the costs
are accrued in the year prior to the grant date.
EU Short Term awards are a form of Capital Accumulation Program (CAP) awarded to qualifying staff. The
award is accounted for similarly to CAP awards but is delivered in the form of immediately vested restricted
shares subject to a six month sale restriction.
(m) Profit sharing plan
CITIGROUP GLOBAL MARKETS LllVUTED
NOTES TO THE FINANCIAL STATEMENTS
2. Use of assumptions, estimates and judgements
of are described in detail above.
management to make estimates and that
and the amounts of assets. liabilities. income and expenses.
Actual results may differ from these estimates.
Estimates and are reviewed on an ongoing basis. Revisions to
recognised in the period in which the estimate is revised and in any future periods affected.
estimates arc
Further information about those areas where estimation. uncertainty and the application of critical judgements to
accounting policies have the most significant effect on the amounts recognised in the financial statements are set
out below.
Valuation of financial instruments
The Company's accounting policy for valuation of financial instruments is described in Note I (b). The fair values
of financial instruments that are not quoted in active markets are determined by using valuation techniques. To the
extent practicable, models use only observable data. Where this is not possible, management may be required to
make estimates. Note 14 'Financial assets and liabilities accounting classifications and fair values' discusses
further the valuation of financial instruments.
Credit value adjustment
The Company has a number of financial liabilities that are valued at fair value. Under FRS 26, the Company is
required to consider its own credit risk in determining the fair value of such financial liabilities. Management
judgement is required in determining the appropriate measure of own credit risk to be included in the valuation
model of the financial liability.
Credit valuation adjustments (CVA) and, effective in the third quarter of 2014. funding valuation adjustments
(FV A), are applied to OTC derivative instruments in which the base valuation generally discounts expected cash
t1ows using the relevant base interest rate curve for the currency of the derivative (e.g., LIBOR for uncollateralized
U.S. dollar derivatives). As not all counterparties have the same credit risk as that implied by the relevant base
curve. a CV A is necessary to incorporate the market view of both countcrparty credit risk and Citi's own credit
risk in the valuation. FVA ret1ects a market funding risk premium inherent in the uncollateralized portion of
derivative portfolios and in collateralized derivatives where the terms of the agreement do not permit the reuse of
the collateral received.
Citi' s CV A methodology is composed of two steps. First. the credit exposure profile for each counterparty is
determined using of all individual derivative positions and a Monte Carlo simulation or other
cash flows at future in time. The calculation of this
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
2. Use of assumptions, estimates and judgements I continued)
Credir value (continued)
credit or
may be reversed or otherwise
risk associated with the derivative instruments.
in future in the event of in the
the Company recorded net CV A losses of $19 million (2013: $63 million losses) due to the
of the credit These were offset a net FVA of$ 22 million (2013: nil) due
to the tightening of Citi's bond spreads throughout 2014. The total recorded in the balance sheet at the
was $180 million 3:$193 million).
Pension
The Company's defined benefit schemes are measured on an actuarial basis. with the key assumptions being
int1ation. discount rate, mortality. and investment returns. Return on assets is an average of expected returns
weighted by asset class. Returns on investments in equity are based upon government bond yields with a premium
to ret1ect an additional return expected on equity investments.
Mortality assumptions are based upon the relevant standard industry and national mortality tables. Discount rates
are based on specific corporate bond indices which ret1ect the underlying yield curve of each scheme.
Management judgement is required in estimating the rate of future salary growth. Ali assumptions are unbiased.
mutually compatible and based upon market expectations at the reporting date.
Share-based incentive plans
Awards granted through Citi's Stock Option Programme are measured by applying an option pricing model. taking
into account the terms and conditions of the programme. Analysis of past exercise behaviour, Citi's dividend
history and historical volatility are inputs to the valuation model. Management judgement is required in estimating
the forfeiture rate.
3. Turnover and results
As permitted by paragraph 4 of Schedule I to the Companies Act 2006 The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (SI 2008 No 41 0). the format of the profit and loss account
has been adapted to the circumstances of the Company. Instead of turnover. the Directors have reported
commission income and fees. net dealing income and interest income less interest expense in determining the
gross profit of the Company.
CITIGROUP GLOBAL MARKETS Lll\UTED NOTES TO THE FINANCIAL STATEMENTS
4. Commission income and fees
Commission income and fees are derived from
5. Interest receivable and interest payable
Interest recehable comprises:
Interest on current asset investments and collateralised "'""" 'u"' transactions
at fair value through profit and loss
Interest on debtors and cash assets not at fair value and loss
2014 2013
$ i\fillion $ :Vfillion
751 890
"-L 7
773 897
Interest payable comprises:
Interest on collateral held and collateralised financing transactions at fair
value through profit and loss
Interest on borrowings not at fair value through profit and loss
Interest on subordinated debt
414
131
93
377
208
212
Included within interest receivable is interest received on client money.
638 797
6. Gains and losses on tinancial assets and financial liabilities held at fair value through profit and loss
2014 2013
$ JYiillion $Million
Gains and losses on financial assets and financial liabilities held for trading:
Net dealing income
Interest receivable
Interest payable
739 1.120
751 890
(414) (377)
Gains and losses on financial assets "designated at fair value through profit or loss"·
:.Jet (8)
CITIGROUP GLOBAL MARKETS Lll\UTED
NOTES TO THE F1NANCIAL STATEMENTS
rrrlni<>Vc''i, remuneratiOn 1,260 1.243
Share-based incentive expense (Note 9) 186 224
taxes 166 185
Pension costs defined benefit scheme (Note 8) 10 10
defined contribution scheme 64 57
Depreciation (Note 12)
56
53
Auditor's remuneration:
Audit of these financial statements 0.84 1.25
Audit related assurance services
0.51
0.65
Taxation compliance services 0.09 0.12
7. Operating expenses
include:
2014 2013
$ l'Vfillion $ lVfillion
Amounts receivable by the company's auditor and its associates in respect of:
The Company employed an average of 3,931 (2013: 3,824) employees during the year.
8. Pension costs
Defmed contribution scheme
The Citigroup (UK) Pension Plan was established in September 2000 and provides defined contribution benefits to
all new hires.
Defined benefit scheme
The Citigroup Global Markets Limited Pension and Life Assurance Scheme ("the Scheme'') is a funded pension
scheme providing benefits on both a defined benefit and defined contribution basis. The Scheme is now closed to
new entrants. The assets of the Scheme are held separately from those of the Company, in a trustee administered
fund. Employees are not required to contribute to the Scheme, which is contracted out of the State Earnings
Related Pension Scheme.
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
8. Pension costs (continued)
1
The financial used in the defined benefit scheme liabilities as at 31 December 2014 are
2014 2013 2012
Discount rate for scheme liabilities
lnt1ation
3.7'/r 4.5'k
3.31/,: 3.3(/'f
Rate of general long-term increase in salaries
Rate of increase to in payment
1.5'7t L5'7t '"' (f - ._1 /(
-Pensions accrued from I May 2005
Pensions accrued prior to I May 2005
2.4% 2.5% 2.4%
3.0% 3.2% 3.0%
In addition to the assumptions on which the Scheme obligation at the balance sheet date is based. it is also
necessary to select expected rates of return on assets. Assumptions that are affected by economic conditions
(financial assumptions) are based on market expectations, at the balance sheet date. for the period over which the
obligations are settled. The overall expected rate of return on assets is derived by aggregating the expected return
for each asset class over the actual asset allocation for the scheme. The expected rate of return on assets (EROA) in
2015 of 3.7% is set at the 2014 year end discount rate. As such. the EROA is provided as the total rate and is not
split by asset category.
The expected return and fair value at the reporting date are set out as follows:
Government bonds
Corporate bonds
Insured Pensions
Other
Total market value of assets
Expected rate of return on assets
Fair wlue
2014 2013 2012
$.Million $ !VIillion $ !VIillion
1,279 937 906
608 592 569
I
19 13 4
1,907 1,543 1,480
3.7% 4.1% 3.6%
Analysis of amounts in and loss account:
2014
!\!Jillion
2013
!\.Jillion
CITIGROUP GLOBAL lVIARKETS LIMITED
NOTES TO THE FlNANCIAL STATEMENTS
8. Pension costs (continued)
of amount in Statement of Total Gains and (STRGL):
2014
$Million
2013
$Million
Actual return less expected return on pens ion scherre assets
Actuarial losses on scherre liabilities
in unrecognised surplus in respect ofFR<; J7 para 41
Impact of foreign
398
(126)
!266)
(21)
(67)
51
(13)
Actuarial gains/(losses) recognised in STRGL
Deferred taxadjustrrent in respect oflosses in STRGL
Total gains/(losses) recognised in STRGL net of tax
29 (50)
(24)
5 (50)
Cumulative amount of pre tax losses recognised in STRGL (486) (515)
Under FRS 17. any surplus in a Scheme can only be recognised on the balance sheet if the surplus can be recovered
either by an agreed refund to the Company or by the reduction of future contributions. As the Scheme is closed to
new entrants. the surplus has been calculated as the present value of the service cost expected to arise over the
average future working lifetime of the active membership resulting in an unrecognised asset of $381 million (2013:
$115 million).
Reconciliation to the balance sheet:
2014 2013
$ :Million $ :Million
Total market value of assets
Present value of scheme liabilities
Net pension asset excluding unrecognised asset
Unrecognised asset due to limit in para 41
Gross pension
1.907 1,543
(1,405) ( 1.325)
502 218
(381) (l15)
121 103
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
8. Pension costs (continued)
2014 20U
$ $Million
Surplus in scheme at beginning of the year
Current service cost
Contributions
Curtailments
Other tinance income/(expense)
Actuarial gain/(loss)
Foreign exchange adjustment
Change in unrecognised asset due to FRS 17 para 41
Surplus in sch.;me at end of year
!03 Ill
(9) (l(J)
30 34
(!)
4 (3)
272 (88)
(12) 8
(266) 51
121
The impact of para 41 limitation in FRS 17:
2014 2013
$Million $:Million
Fair value of scheme assets
Defined benefit obligation
Net asset
Present value of service cost over next II years
Unrecognisable surplus in respect of FRS 17 para 41
1,907 1.543
(1.405) (1,325)
502 218
(121) (103)
381 115
The changes to the present value of the defined obligation during the year are as follows:
2014 2013
$ J\!Iillion $1\-Iillion
Opening defined benefit obligation
Current service cost
Interest cost
Actuarial losses on scheme liabilities
1.325 1.203
9 10
59 54
126 67
(38)
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
8. Pension costs (continued)
The to the value scheme
fair value of scheme
2014
$1\lillion
1,543
2013
$Million
1,480
J:::Jq:Jecteo return on scheme assets 63 52
Actuarial scheme assets 398 (21)
30 34
(35) (38)
(92) 36
fair value of scheme assets 1,907
Less unrecognisable surplus in respect of FRS 17 para 41 (381)
1,543
(115)
1,428
The actual return on assets is as follows:
Expected return on assets
Actuarial on scheme assets
2014
$Million
63
398
2013
$Million
52
(21)
Actual return on assets 461 31
The actual return on the pension scheme assets of $398 million was significantly higher than the expected return
of $63 million, which is based on a long-term assumption about the rate of return on assets.
History of experience gains and losses: 2014 2013 2012 2011 2010
$Million $1VIillion $1VIillion $:1\lillion $ IVIillion
Difference between expected and actual return on scheme assets 398 (21) (13) 145 (12)
Gains on scheme liabilities due to experience 9 3 37 due to
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
9. Share-based incentive plans
remuneration programme it in a number of Citi share-based incentive
of restricted or deferred share awards and share payments. Such awards are used to
attract. retain and motivate officers and to provide incentives for their contributions to the
<>rrm""'" and of Citi. and to their interests with those of the shareholders. The award programmes
Committee of the Inc. Board of Directors. which is
directors.
In the share award program Citi issues common shares in the form of restricted share awards. deferred share awards
and share payments. For all stock award programs during the applicable vesting period. the shares awarded are not
issued to participants (in the case of a deferred stock award) or cannot be sold or transferred by participants the
case of a restricted stock award). until after the vesting conditions have been satisfied. Recipients of deferred share
awards do not have any shareholder rights until shares are delivered to them. but they generally are entitled to
receive payments during the Recipients of restricted share awards are entitled
to limited voting rights and to receive dividends or dividend-equivalent payments during the vesting period. Once a
share award vests the shares become freely transferrable. but in the case of certain employees. may be subjeet to
transfer restrictions by their terms or share ownership commitment.
Certain stock-based awards contain discretionary clawback provisions and are subject to variable accounting. The
associated value of the award tluctuates with changes in Citi's common stock price until the date that the award is
settled, either in cash or shares. Any fluctuation from the grant date value of the award until the award is fully
vested is recognised through the income statement.
(i) Stock award programme
The Company participates in the Citigroup Capital Accumulation Program (CAP), under which shares of Citi
common stock are awarded in the form of restricted or deferred stock to participating employees.
Generally. CAP awards of restricted or deferred stock constitute a percentage of annual incentive compensation and
vest over a three or four year period beginning on or about the first anniversary of the award date. Except in
specific circumstances, continuous employment within Citi is required for CAP and other stock award programs to
vest.
The program provides that employees who meet certain age plus years-of-service requirements (retirement-eligible
employees) may terminate active employment and continue vesting in their awards provided they comply with
speeified non-compete provisions. Awards granted to retirement-eligible employees are accrued in the year prior to
the grant date in the same manner as cash incentive compensation is accrued.
For all stock award programmes. the shares awarded cannot be sold or transferred by the participant during the
applicable vesting period. and the award is subject to cancellation if the participant's employment is terminated.
After the award vests. the shares become transferable to sale restrictions). From the date of
award, the of to the
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FlNANCIAL STATEMENTS
9. Share-based incentive plans (continued)
(ii) Stock option programme
Stock have not been toCiti as part of the annual incentive award programs since 2009.
In 2009 the Company made grants of to eligible pursuant to the broad-based
Grant (CEOG) Program under the Stock Incentive Plan. Under CEOG. the
vest over three years. the term is 6 years from the grant date and the shares
acquired on exercise are not subject to a sale restriction. To the extent permitted. CEOG granted to eligible
UK were granted under an HMRC approved sub-plan with any excess mer the applicable individual
limit being granted under the global plan. which is not an HMRC approved plan.
In 20 II. outside the annual incentive award programme. Citi granted to certain of its executive officers. The
have six-year terms and vest in three equal annual instalments. The exercise price of the options is $49.10.
equal to the closing price of a share of Citi common stock on the grant date. Upon exercise of the options before the
fifth anniversary of the grant date, the shares received on exercise (net of the amount required to pay taxes and the
exercise price) are subject to a one-year transfer restriction.
The stock option activity with respect to 2014 and 2013 under Citi stock option plans is as follows:
2014 2013
Weighted Weighted
merage average
Options exercise price Options exercise price
$ $
Outstanding, beginning of year 4,535,017 44.50 4,887,279 44.00
Forfeited
(2,393)
244.50
Exercised (673,720) 41.46 (372,155) 40.80
Transfers to/from other Citi entities (38,160) 41.50 23,453 135.08
Expired (20,563) 244.50 ( LI67) 543.80
Outstanding, end of year 3,802,574 43.99 4,535,0!7 44.50
Exercisable. end of year
3,801,878
43.99
4.459,305
44.43
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
9. Share-based incentive plans
The table summarises the at 31 December 2014:
2014
Options outstanding Options exercisable
Weighted a\erage Weighted Weighted
contractual average average
Range of exercise prices Number
outstanding life
remaining exercise
price Number
Exercisable exercise
price
$ $
<$50.00 3,770,010 1.00 42.98 3,769.314 42.98
$50.01 $399.99 32,564 1.54 161.43 32.564 161.43
3,802,574 1.01 43.99 3,801.878 43.99
The weighted average share price at the exercise date for options exercised during the year was $52.42 (2013:
$43.24).
The following table summarises the stock options outstanding under Citi stock option plans at 31 December 2013:
2013 Options outstanding Options exercisable
Range of exercise prices
Number
Weighted
a\erage
contractual
life
Weighted
average
exercise
Number
Weighted
average
exercise
outstanding remaining price Exercisable price
$ $
<$50.00 4,475,634 1.98 42.62 4,399,922 42.51
$50.00- $399.90 59,383 !.61 186.08 59,383 186.08
4,535,017 1.97 44.50 4,459,305 44.43
Fair value assumptions
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
9. Share-based incentive plans (continued)
2014 2013
Weighted awrage fair \aloe for options granted during the year SO.OO so.oo
Weighted awrage expected life
life
Valuation assumptions
Expected fper annum)
Risk-free interest rate
E\j:Jected annual dividend yield per share
r·meutotl annual forfeitures
35.69'7r 37.23%
0.35'7, 0.45'1(
0.08'1[; 0.08<7,
9.62% 9.62%
(iii) Profit and loss statement impact
The table below details the profit and loss impact of the share based incentive plans.
2014
$million
2013
$million
Stock A wards
Granted in 2014
132
Granted in 2013 35 157
Granted in 2012 13 43
Granted in 2011 (3) 24
Granted in 2010 (I) (7)
Granted in 2009 & prior (2)
Stock Options
Granted in 2011
8
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
10. Directors' remuneration
Aggregate emoluments
Contributions to money purchase pension scheme
was follows: 2014 2013
$'000 $'000
4.936 3.564
76
The contributions to the money purchase pension schemes were to four of the Directors (2013: five). Five
of the Directors (2013: five) of the Company participated in parent company share and share option plans and,
during the year. none of the Directors (20!3: none) exercised
The remuneration of the highest paid Director was $2.438.014 (2013: $1.872.397) and accrued pension of $59.620
(2013: $3,222).
The Directors benefited from qualifying third party indemnity provisions in place during the financial year and at
the date of this report.
The above remuneration was based on the apportionment of time incurred by the Directors for services to the
Company, both in their capacity as a Director and. where applicable, their normal employment.
11. Tax on profit on ordinary activities
(a) Analysis of tax charge in the year
Current tax:
Overseas current tax
Adjustment in respect of overseas tax for previous years
Total current tax(Note ll(b))
2014 2013
$Million $ IVlillion
20 21
5
20 26
Deferred tax:
Origination and reversal of timing differences
-UK (24)
-overseas 7
Total defeiTed (17) (I)
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
11. Tax on profit on ordinary activities (continued)
(b) Factors affecting tax charge for the year
2014
$ l\fillion
2013
$ l\fillion
Prot]t/(]oss) on ordinary activities before tax
Protit/(loss) on ordinary activities multiplied by the standard rate
in the UK of 21.49Sf (2013: 23.25'7r J 24 (49)
Hfects of:
Expenses not deductible for tax purposes
Foreign taxdeductions
Depreciation in excess of capital allowances
Accrued interest paid
Other timing differences
Pensions
Overseas tax in respect of European branch operations and dividends received
Group relief for nil consideration
Losses carried forward
Adjustments in relation to previous years
Current tax charge for year
(c) Factors that may affect future tax charges:
24 20
(4) (5)
15 (8)
(134)
3 6
(6) ( 10)
20 21
179
(56)
5
20 25
The Company has not recognised a deferred tax asset of $347 million (2013: $379 million) in relation to carried
forward losses and timing differences where the recoverability of potential benefits is not considered likely.
The UK Corporate tax rate applying to CGML was 21.49%. Other subsidiaries and overseas branches provided for
taxation at the appropriate rates for the countries in which they operate.
The main rate of corporation tax in the UK was reduced from 23% to 21 'k on I April 2014 and will be further
reduced to 20% on I April2015. The reduction in the corporate tax rate was enacted through the 20!3 Finance Act
on the future
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
12. Tangible fixed assets
The movement in fixed assets for the was as follows:
Cost
F.quipment
and sofh are
$!\Jillion
Premises
irnprowrnents
$!\:Jillion
Total
$ !\:Jillion
At 1 January 2014
Additions
At 31 December2014
Accumulated depreciation
At 1 January 20!4
Charge for the year (Note 7)
Additions
At 31 December2014
Net book mlue
At 31 December2014
At 31 December2013
13. Fixed asset investments
Cost
At I January
Additions
Disposals
Gains/(losses) recognised in profit and loss account
At 31 December
403
56 459
190
55
2 247
212
213
15 418
56
15 474
7 197
56
2
8 255
7 219
8 221
Unlisted Unlisted
Imestments Imestments
2014 2013
$ Million $ 1\-lillion
50 36
2
(9)
( 1) 12
40 50
The amounts for are included in fixed asset investments:
2014
$'000
2013
$'000
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities accounting classifications and fair values The
fair values.
their
31 December 2014
Other Total
Held for Designated Loans and amortised carrying
Trading at fair value recehables cost amount Fair value
$Million $Million $!VIi Ilion $Million $Million $1\lillion
Cash 1.571 1.571 1.571
Current investments -14.557 576 45.133 .+5.133
Derivatives 203.894 203.894 203.894
Co1lateralised financing transactions 93.054 93.054 93.054
Cash collateral pledged 11.482 11.482 11.482
Trade debtors 9.459 9.459 9.459
Other debtors 281 281 281
Fixed asset investments 40 40 40
341.505 576 22.793 40 364.914 364.914
Bank loans and overdrafts
Collateralised financing transactions
79.218
10.10-+
\0.10-+
79.218
IO.lW
79.218
Derivatives 203.375 203.375 203.375
Cash collateral held
Securities sold but not yet purchased
32.754 15.4W 15.4W
32.754
15.4W
32.754
Trade creditors 6.276 6.276 6.276
Other creditors and accruals LW3 1.043 1.043
Subordinated loans 4.080 4.080 4.547
Other Total
Held for Designated Loans and amortised carrying
Trading at fair value recehables cost amount Fair alue
31 December 2013
Cash
$1VIillion $l\lillion $l\lillion
2.805
$l\lillion $l\lillion
2.805
$ !VIi Ilion
2.805
Current asset investments 40.529 1.397 41.926 41.926
Derivatives 77.648 77.648 77.648
Collateralised financing transactions 98.874 98.874 98.874
Cash collateral pledged 4.650 4.650 4.650
Trade debtors 7.930 7.930 7.930
Other debtors !30 130 130
Fixed asset investments 50 50 50
2l!.05! !.397 15.515 50 234.013 234.Ql3
CITIGROUP GLOBAL lVIARKETS Ll tiTED NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities accounting classifications and fair values (continued)
table shows an of financial assets and liabilities classified as held for or
31 December 2014 l \ell
$Million
I vel2
$Million
l vel3
$Million
Total
$ l\lillion
Hnancial assetheld for trading
Current asset investments
Derivatives
Government bonds
Eurobonds and other corporate bonds
Equities
Physical Commodities
Collateralised financing transactions
31 201,244 2.619 203.894
20.662 1.228 12 21.902
II i0.621 421 11.053
8.487 1.540 117 10.144
1.458 1.458
92.789 265 93.054
Hnancial assets designated at fair vruue
Current asset investments
Eurobonds and other corporate bonds 576 576
29,191 309.456 3.434 342,081
Hnancialliabilities held for trading
Derivatives
Collatera1ised financing transactions
Securities sold but not yet purchased
24 199,802 3,549 203,375
79,218 79,218
28.486 4.263 5 32,754
28.510 283,283 3,554 315,347
31 December 2013
Hnancial asset"> held for trading
Uvell
$Million
uvel2
$Million
uvel3
$.Million
Total
$ J\ilillion
Current asset investments Derivatives 17 74.890 2.741 77,648
Government bonds 20.418 2.464 19 22.901
Eurobonds and other bonds 8.345 9.485
506
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities accounting classifications and fair values (continued)
Given the short term nature and characteristics of trade debtors. other debtors, trade creditors. other creditors and
accruals the fair value has been assumed to the value. The fair value of subordinated loans
has been calculated the present value of future estimated cash flows. discounted a discount rate of
USD 3 month Overnight Indexed (O!S) or 3 month Euro Index (EONIA) the
Company's credit as at 31 December 2014.
The calculation of fair value incorporates the estimate of the fair value of financial assets and
financial liabilities. Other entities may use different valuation methods and m determining fair
values, so of fair values between entities may not necessarily be meaningful.
The Company measures fair values using the following fair value hierarchy that indicates whether the inputs to
those valuation techniques are observable or unobservable. Observable inputs denote market data obtained from
independent sources, while unobservable inputs reflect the Company's market assumptions.
The 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 signit1cant 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.
The Company considers relevant and observable market prices in its valuations where possible. The frequency of
transactions and the size of the bid-ask spread when comparing similar transactions are factors that are driven by
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 recognise
transfers into and out of each level as of the end of the reporting period.
Determination of Fair Value
As set out in Note l(b), when available, the Company generally uses quoted market prices in an active market to
calculate the fair value of a financial asset and such Level l In some cases where a
market available, of as
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities accounting classifications and fair values
The to determine the fair value of financial assets and financial
of whether they are "held for or have been at fair value". The
includes an indication of the level in the fair value in which each financial instrument is
details are of the valuation models. the to those
models and any
Derivatives Exchange-traded derivatives in active markets are generally fair valued using quoted market prices (i.e. exchange
prices) and are therefore classified as Level I of the fair value
The of derivatives entered into by the Company are executed over the counter and are valued using a
combination of external prices and internal valuation techniques. including benchmarking to pricing vendor
services. The valuation techniques and inputs vary according to the type of derivative and the nature of the
underlying instrument. The principal methods used to value these instruments are those adopted industry wide
and include discounted cash flows, modelling and numerical approaches.
The type of inputs may include interest rate yield curves, credit spreads, foreign exchange rates. volatilities and
correlations.
Government bonds, Corporate bonds and Equities
When available, the Company uses quoted market prices to determine the fair value of government bonds and
exchange traded equities; such items are typically classified as Level 1 of the fair value hierarchy.
For government bonds, corporate bonds and equities traded over the counter, the Company generally determines
fair value utilising internal valuation techniques. Fair value estimates from 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. Government bonds, corporate bonds and equities and loans priced using such methods are
generally classified as Level 2. However, when less liquidity exists for government bonds, corporate bonds or
equities, a quoted price is stale or prices from independent sources vary. they are generally classified as Level 3.
The Company discounts future cashtlows using appropriate interest rate curves. In the case of collateralised
interest rate derivatives and equity derivatives the Company follows the terms in the collateral agreement
governing the transaction. The agreements generally provide that an OIS curve is used. The OIS curves reflect
the interest rate paid on the collateral against the fair value of these derivatives.
CITIGROUP GLOBAL IARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities acconnting classifications and fair values
The movement Level 3 items for the year was:
2014
Financial assets held for trading
Current asset investrre:nts
Gain/(loss)
recorded in
At 1 the profit and
January Joss statement
$ Million $ '>lillion
Purchases
$ 'VIillion
Sales Settlements
S '>lillion $ Million
Transfer
froml(to)
Level 1 and At 31
Level 2 December
$ Millioo $ 'Vlillion
Derivatives 1589) 68 (116)
Govemm2nt bonds 19 (J) (222)
Eorobonds and other corporate bonds 1.141 17 L227 (1,698)
Equities 111 (18) 150 (132)
94 421 2.619
('!71
(266) 421
6 117
Collateralised financing transactions 343 13 !53 (58) (!86) 265
Financial liabilities held for trading
Derivatives
Long TennDebt
Securities sold but not yet purchased
2013
Financial assets held for trading
Current asset investn£nts
Derivatives
Govemm2nt bonds
Eorobonds and other corporate bonds
Equities
Collateralised financing transactions
(Gain )floss Transler
recorded in froml(to)
Atl the profit and Levell and At31
January loss statement Purchases Sales Settlements Level2 December
$Million $ 'Vlillion $Million $!VIi Ilion $ !V61Jion $ 'Vlillioo $ '>lillion
3.376 (738) (23) 39 70 825 3549
20 12 36 (51) (12) 5
3.396 (726) (23) 75 19 813 3.554
Gain/(loss) Transfer
recorded in froml(to)
Atl the profit and Levell and At31
January Joss statement Purchases Sales Settlements Level2 Decemher
$Million $Million $Million $ 'Vlillion $ 'Vlillion $ !VIillion $1\lillion
3.447 (771) 13 (11) (551) 614 2.741
77 (23) 113 (]43) (5) 19
679 439 L663 (L480) (!61) 1.140
60 24 42 (37) (6) 29 112
292 (391) 442 343
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
14. Financial assets and liabilities accounting classifications and fair Yalues (continued)
Financial instruments may mO\e between levels in the fair value when factors such as or the
of parameters As conditions around these factors financial instruments may
up the fair value hierarchy. There were no transfers of investments between Level 1
the years ended 31 December 2014 and 2013.
Valuation process for Level 3 Fair Value Measurements
Price verification and related internal control are governed by the Citi Pricing and Price
Verification Policy and Standards. which are jointly owned by Finance and Risk Management. Finance has
implemented the ICG Securities and Banking Pricing and Price Verification Standards and Procedures to
facilitate compliance with this policy.
Transfers into or out of Level 3 are primarily driven by changes in the availability of independent data for
positions where the Company has risk exposure. yet the market is no longer considered to be active. As liquidity
and transparency improves. the financial instrument may transfer back to a previous classit1cation level.
The key derivative contributors to the Level 3 financial instrument decrease over 2014 focussed on exotic
inventory across the Rates, Commodities and Credit Trading businesses.
Movements across purchases, issuances. sales and settlements were driven by asset backed securities across the
Securitised Markets business and corporate bonds across the European Rates and Credit Trading businesses.
Transfers into Level 3 were driven by Credit Trading across trading securities. and a decrease in observability of
input parameters, such as correlation, over the year. Transfers out of Level 3 were driven by greater
observability around Securitised Markets and Credit Trading. mainly across asset backed securities. as visibility
improved.
During the year, total changes in fair value, representing a gain of $147 million (2013: $94 million loss) were
recognised in the profit and loss account relating to items where fair value was estimated using a valuation
technique that incorporates one or more significant inputs based on unobservable market data. As these
valuation techniques are based upon assumptions. changing the assumptions will change the estimate of fair
value. The potential impact of using reasonably possible alternative assumptions for the valuation techniques for
both observable and unobservable market data has been quantified as approximately $176 million (2013:
$185 million). The main contributors to this impact are Equity Markets. Emerging Markets Credit Trading.
Credit Trading and other cross-asset businesses.
Valuation uncertainty is computed on a quarterly basis. The methodology used to derive the impact across each
is determined by the model in
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
15. Debtors
The amounts are included in debtors:
Amounts due within one year:
2014 2013
$ l\lillion $ l\lillion
Trade debtors 9,459 7,930
Collateralised financing transactions 93,054 98,874
Cash collateral ll ,482 4.650
Other debtors 281 130
Prepayments and accrued income 16 18
Corporation tax recoverable 12 21
Amounts due in greater than one year:
Deferred tax asset (Note 20) 29 13
114.333 111,636
Included within debtors are the following balances due from group undertakings:
Amounts due V <ithin one year:
2014 2013
$ J\llillion $ J\llillion
Trade debtors 3,118 3.068
Collateralised financing transactions 28,335 24,324
Cash collateral pledged 666 776
Other debtors 45 13
32,164 28.181
16. Pledged assets
Collateral accepted as security for assets
The fair value of financial assets including government bonds. eurobonds and other corporate bonds, equities.
and cash that were to be sold absence of $!50.2 billion
The fair value of had l December 2014
3: !0.4
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
17. Current asset investments
Current asset investments form part of the asset
securities and other financial assets. The
the and marketable
amounts are included in current asset investments:
2014
$Million
2013
$Million
Govemment bonds 21.902 22.901
Eurobonds and other corporate bonds 11.629 10,881
Equities -listed on a recognised UK exchange 2.201 1.440
lis ted elsewhere 7.943 6.121
Physical Commodities 1,458 530
Certificates of deposit 0 I
Commercial Paper 0 52
Derivatives (Note 18) 203,894 77.648
249,027 119.574
Eurobonds and other corporate bonds include $576 million (2013: $1,397 million) of bonds that are "designated
at fair value" and the remainder are classified as "held for trading".
18. Derivatives
Swap agreements, swap options and
interest rate cap and floor agreements
Index and equity options and similar
contractual commitments
Other options and contractual
commitments
2014 2013
Fair Value Fair Value
Asset Liability Asset Liability
$ J\ilillion $ J\llillion $ J\llillion $ J\ilillion
18!.245 180,538 60.879 62,556
5.661 7.219 8,379 9,863
16.988 15,618 8,390 7,580
203.894 203.375
$
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATElVIENTS
20. Deferred tax asset
The amounts are included within deferred tax: 2014
$ :\fillion
2013
$Million
Short term timing differences
At 1 January
Increase during the year- P&L
FXmovement
At 31 December
13 12
17
(ll
Deferred tax assets are recognised to the extent that it is more likely than not that there will be suitable taxable
profits from which the reversal of the underlying timing differences can be deducted.
Deferred tax is recognised on timing differences arising in the Company's non-UK branch operations. including
differences in relation to share based payments and pensions. The recognition accords with the Company's
accounting policies. because it is more likely than not that there will be suitable taxable profits arising in these
operations from which the future reversal of underlying timing differences can he deducted.
The Company has not recognised a deferred tax asset of $347 million (2013: $379 million) in relation to carried
forward losses and timing differences where the recoverability of potential benefits was not previously
considered likely. This year the Company is profitable and, if this continues, the directors will reconsider
whether recognition is appropriate on the basis that there is sufficient certainty around the future profitability of
the Company to enable the use of the recognised deferred tax asset against future profits of the Company.
21. Creditors
The following amounts are included within creditors.
Included within 'Other creditors and accruals' is the accrual in respect of the bank levy.
Amounts falling due within one year:
Securities sold. but not yet purchased
Derivatives (Note 18)
Collateralised financing transactions
collateral held
2014 2013
$Million $ 1\!Jillion
32.754 29,429
203.375 79,999
79.218 87,474
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
21 Creditors
Included vvithin creditors are the balances due to group
Amounts falling due "'ithin one year:
Collateralised financing transactions
Cash collateral held
Bank loans and overdrafts
Trade creditors
Other creditors and accruals
Amounts falling due in greater than one year:
Trade creditors
22. Derecognition of financial assets and financial liabilities
Transferred financial assets that are not derecognised in their entirety
2014 2013
$Million $Million
13.221 9.124
5.407 2.623
9.960 5.591
573 930
354 423
29,515 18.691
122 160
There are certain instances where the Company continues to recognise financial assets that it has transferred.
The Company enters into collateralised financing transactions where it sells or lends debt or secunt1es
with a concurrent agreement to repurchase them. As significantly all of the risks and rewards of the underlying
securities are retained, a collateralised financing liability is recognised and the securities remain on balance
sheet.
As at 31 December 2014 the Company recognised $44.893 million of assets (2013: $42,931 million), with an
associated $41,916 million of collateralised financing liabilities (2013: $31,789 million).
23. Trading financial assets and liabilities
Any initial gain or loss on financial instruments where valuation is dependent on valuation techniques using
unobservable parameters are deferred over the life of the contract or until the instrument is redeemed, transferred
or sold or the fair value becomes observable.
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
24. Subordinated loans
The subordinated loans form part of the Cc•mJ)ariy
the PRA and can
held to meet the
The amounts were included within subordinated loans: 2014
$ Jillion
2013
$ .\Jillion
Amounts falling due after tive years 4,080
4,080
The subordinated loans, on which interest is payable at market rates, are due to other group undertakings,
4,200
On 10 September 2014 the Company repaid $1,300 million of subordinated loan borrowings to Citigroup
Financial Products Inc, and simultaneously drew down EUR I ,000 million of subordinated Joan borrowings from
Citigroup Financial Products Inc,
On 27 October 2014 the Company repaid $700 million of subordinated loan borrowings to Citigroup Financial
Products Inc, and simultaneously drew down EUR 550 million of subordinated loan borrowings from Citigroup
Financial Products Inc.
These repayments and borrowings were made in order to enhance the efficient allocation of Citi's resources,
At 31 December 2014, the Company had in place the following subordinated loan facilities:
Facilities with other group undertakings:
Facilities expiring between one and five years
2014
Total
facilities
av.lilable
$Million
2013
Total
facilities
av.lilable
$Million
5,()00
5,000
On 4 February 2015 the Company drew down $800 million of subordinated loan nn1rrnu111"'< from Citigroup
Financial Products Inc,
CITIGROUP GLOBAL .MARKETS LIMITED NOTES TO THE FINANCIAL STATEMENTS
25. Provisions for liabilities
Restructuring
pnnision
Litigation
pro"isions
Other
prmisions
Total
$Million $ Jillion $Million $ Jillion
At I 2014 14 14 28 56
Charge to profits 56 14 36 106
Provisions utilised (40) (l) (2) (43)
At 31 December 2014 30 62 119
The restructuring provision is in respect of the cost of staff redundancies. The full amount is expected to be utilised in 2014. There are no releases anticipated.
No additional information is disclosed in respect of the litigation provision due to its sensitive nature. Other
provisions are held in respect of accounting reconciliation and control procedures as part of the balance sheet
substantiation process.
26. Called up share capital
The Company's share capital comprises: 2014
$Million
2013
$Million
Allotted, called-up and fully [IDd:
I ,499,626,620 ordinary shares of $1 each I ,500 1.500
====1.5=00 1.500
27. Reserves
The Company's reserves comprise: Capital Profit and
reserve
$!\:Jillion
loss account
$ J\!Iillion
Total
$]\;Jillion
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28. Financial instruments and risk management
Objectives, policies and strategies
in financial instruments is fundamental to the business. The risks associated with financial
instruments are a component of the overall risk faced the in turbulent
financial markets.
The in financial instruments for four reasons:
• as a result of the sale or
over-the-counter market):
• to satisfy its clients' requirements to
of structured or deriYative to its clients in the
or sell investments:
• as a result of underwriting activities: and
• to economically hedge positions on its hooks created by the business noted above.
The Company also acts as agent for its customers in the purchase, sale and assignment of securities and
derivatives listed on recognised investment exchanges.
The Company's derivative transactions are principally in the equity, interest rate. credit and commodity markets.
Most of the counterparties to the Company's derivative transactions are banks and other financial institutions.
The risks involved in trading derivatives include market. liquidity, credit and operational risk.
Market uncertainty places additional importance on the risk management policies and procedures which are
outlined below. The Company believes that effective risk management is of primary importance to its overall
operations. Accordingly. the Company seeks to maintain a comprehensive risk management process to monitor,
evaluate and manage the principal risks it assumes in conducting its activities. These risks include market.
liquidity. credit and operational risks. Citi's risk management framework. as established by the Chief Risk
Officer. is designed to balance business ownership and accountability for risks with well-defined independent
risk management oversight and responsibility to monitor. evaluate and manage the principal risks it assumes in
conducting its activities. Citi's risk management framework. tailored as appropriate for the Company, is based
on the following principles established by the Chief Risk Officer:
• a defined risk appetite, aligned with business strategy;
• accountability through a common framework to manage risks;
• risk decisions based on transparent. accurate and rigorous analytics:
• a common risk capital model to evaluate risks;
• expertise, stature, authority and independence of Risk Managers: and
• risk managers empowered to make decisions and escalate issues.
CITIGROUP GLOBAL MARKETS LllVIITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Objectives, policies and strategies
local risk governance and ensure
while at the same time their
meets not less than
Risk management
of local risk and of the
risk strategy. The CGML Risk Committee
Citi manages risk across three dimensions: businesses, regions and critical products.
groups has a Business Chief Risk Officer who is the focal for risk decisions (such as
approving transactions) in the business.
There are also Regional Chief Risk Officers. accountable for the risks in their geographic area and who are the
primary risk contact for the regional business heads and local regulators. In addition. there are Product Chief
Risk Officers for those areas of critical importance to Citi such as real estate and fundamental credit. The Product
Risk Officers are accountable for the risks within their specialities across businesses and regions. The Product
Risk Officers serve as a resource to the Chief Risk Officer, as well as to the Business and Regional Chief Risk
Officers, to better enable the Business and Regional Chief Risk Oft!cers to focus on the day-to-day management
of risks and respond in a timely manner to business needs. Risk management within the Company is overseen by
the Regional Risk Manager along with the managers for the different risk types within the region. such as market
risk. liquidity risk, credit risk and operational risk.
The Citi risk organisation also includes a Business Management team who seek to ensure that the risk
organisation has the appropriate infrastructure, processes and management reporting. This team, which supports
risk management within the Company, includes the following groups:
• the risk capital group. which continues to enhance the risk capital model and its consistency across all
business activities;
• the risk architecture group. which seeks to ensure integrated systems and common metrics, and thereby
facilitates aggregation and stress testing of exposures across the institution;
• the operational risk management group, which focuses on improving the effectiveness of existing
controls while increasing accountability and eliminating redundancy; and
• the office of Strategic Regulatory Relationships and the Chief Administrative Officer, which focuses on
critical regulatory relationships as well as risk communications.
The Company utilises Citi's risk management model and organisation, with its multi-dimensional risk oversight
and its people. processes and systems to ensure robust oversight of entity risks. In addition, the Company has
risk management and controls, to facilitate to risk and to ensure the
for the
CITIGROUP GLOBAL MARKETS Lll\HTED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Risk management (continued)
Board of Directors about the potential economic impacts to the Company that may occur. directly or indirectly.
as a result of scenarios. based on judgmental from independent risk managers.
The stress testing and risk assessment exercises are a supplement to the standard limit-setting and risk capital
exercises described later in this section. as these processes incorporate events in the marketplace and within the
Company that impact the firm's view of the form. magnitude. correlation and timing of identified risks that may
arise. In addition to enhancing awareness and understanding of potential exposures within the Company. the
results of these processes serve as the starting point for risk management and mitigation
A Citi-wide (including an EMEA-based) Business Practices Committee (BPC) reviews practices involving
potentially significant reputational or franchise issues. These committees review whether Citi's business
practices have been designed and implemented in a way that meets the highest standards of professionalism,
integrity and ethical behaviour.
Additional committees ensure that product risks are identified, evaluated and determined to be appropriate for
Citi and its customers, and safeguard the existence of necessary approvals. controls and accountabilities.
The New Product Approval Committee (NPAC) is designed to ensure that significant risks. including reputation
and franchise risks, for all new ICG products, services or complex transactions, are identified and evaluated.
determined to be appropriate. properly recorded for risk aggregation purposes, effectively controlled, and have
accountabilities in place.
The Investment Products Risk (IPR) Committee oversees two product approval committees that facilitate
analysis and discussion of new retail investment products and services created and/or distributed by Citi. The
Manufacturing Product Approval Committee is responsible for reviewing new or modified products or
transactions created by Citi that are distributed to individual investors as well as third-party retail distributors.
The Distribution Product Approval Committee (DPAC) approves new investment products and services,
including those created by third parties as part of Citi's "open architecture" distribution model. before they are
offered to individual investors via Citi distribution businesses (e.g. private bank. consumer, etc.).
Along with the processes described above. the following sections summarise the processes that were in place
during 2014 for managing the Company's major risks.
As summarised in the Strategic Report, Citi has identified the following as the key risks facing the Company.
Market risk
CITIGROUP GLOBAL MARKETS Lll\UTED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
with the who work most with the customers,
ds up to the s enior executives manage these businesses with a
exten
'""""'1'""'" :J<Yarerr:Htcm up to the country level. In all cases. the businesses are for the
take and for within their defined limits.
Market risk is measured through a complementary set of tools, factor sensitivities. VaR, and stress
Each of these is discussed in greater detail below. Each business has its own market risk limit
framework. these measures and other controls, permitted product lists and a new
product approval process for complex products.
The Company's VaR reports are circulated daily for monitoring of: the VaR usage against the overall VaR
limit; (ii) the standalone VaR by market risk factor; the component Value at Risk (CVaR) contribution to
total VaR; and (iv) the stressed VaR. As well as an overall VaR limit, the Company has factor sensitivity
triggers in place for each market risk factor that are monitored daily. Factor sensitivities are defined as the
in the value of a position for a defined change in a market risk factor (e.g. the change in the value of a Treasury
bill for a one basis point change in interest rates). It is the responsibility of each business to seek to
ensure that factor sensitivities are calculated and reported for all relevant risks taken within a trading portfolio.
Exposure that approaches or exceeds limit or trigger levels is escalated within market risk management and to
the Company's Market Risk Manager and Legal Entity Risk Manager, with necessary actions taken.
Where the Equities business is concerned, an ex-ante stress loss based escalation framework has been put in
place to cover all block trades, including accelerated equity offerings, equity underwritings, rights offerings and
special situation (event-driven) transactions. Transactions with estimated stress losses above certain levels
require escalation to the EMEA Chief Risk Officer, the Company's Chief Executive Officer and to the
Company's board.
VaR methodology
VaR estimates the potential decline in the value of a position or a portfolio, under normal market conditions, over a
specified holding period and confidence level. The VaR methodology developed and applied at Citi at a global
level is also used at subsidiary level, including the Company. The Citi standard is a one-day holding period, at a
99 per cent confidence level. The VaR methodology incorporates the factor sensitivities of the trading portfolio and the volatilities and correlations of those factors. The Company's VaR is based on the volatilities of. and
correlations between, a wide range of market risk factors, including factors that track the specific issuer risk in
debt and VaR statistics can be different firms differences
VaR
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Jfarket risk
VaR limiwtions of VaR
size of loss when it occurs. Hence a \ aried set of factor
VaR limits.
A VaR limit is in place for the to ensure that any excesses are discussed and resolved between risk
officers and the business and entity management. This limit is complemented by the factor triggers
defined above.
Although it provides a valuable guide to risk. YaR should also he viewed in the context of its limitations:
• the use of historical data as a proxy for estimating future events may not encompass all potential events.
particularly those of an extreme nature:
• the use of a one day holding period assumes that all positions can he liquidated or their risks offset in one
day. This may not fully ret1ect the market risk arising at times of severe illiquidity. when a one day
holding period may he insufficient to fully liquidate or hedge positions:
• the use of a 99'7c confidence level, by definition. does not take into account losses that might occur
beyond this confidence level:
• VaR is calculated on the basis of exposures outstanding at close of business and therefore does not
necessarily reflect intra-day exposures: and
• VaR is unlikely to reflect loss potential on exposures that only arise under significant market movements.
As set out above, stress testing is performed on portfolios on a weekly basis to estimate the impact of extreme
market movements. Stress testing is performed on individual portfolios. as well as on aggregations of portfolios
and businesses. as appropriate. It is the responsibility of independent market risk management. in conjunction with
the businesses, to develop stress scenarios, review the output of periodic stress testing exercises. and use the
information to make judgments concerning the on-going suitability of exposure levels and limits.
The following table summarises market risk by disclosing the Company's average VaR during the reporting
period, together with the VaR as at 31 December. broken down into component Value at Risk (CYaR). CVaR
represents the correlation or diversification adjusted standalone VaR contribution from a particular sub-portfolio to
the total YaR:
Interest
2014
$Million
Foreign
risk Credit Risk
Overall
VaR
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Liquidity risk
risk as the risk that the will not be both
The s funding and liquidity aim to maintain liquidity, to fund the asset base and grow
the core business, while at the same time conserving sufficient excess liquidity, structured appropriately, to
continue operating under a wide variety of market conditions, including both short and long-term market
disruptions.
The UK forum for liquidity management is the UK Committee (UK ALCO). which
includes senior executives from within the Company and is chaired by the Chief Country Officer. This forum is
composed of the UK CFO, EY!EA CFO, UK legal entity Risk Manager, UK Treasurer, EMEA Regional
Treasurer. the Financing Desk Heads and key business representatives. The UK ALCO reviews the current and
prospective funding requirements of the Company. as well as its capital position and balance sheet.
A liquidity plan is prepared annually and the liquidity profile is monitored on an on-going basis and reported daily.
Liquidity risk is monitored using various ratios and limits in accordance with the Liquidity Risk Management
Policy for Citi. The funding and liquidity plan includes analysis of the balance sheet as well as of the economic
and business conditions impacting the major operating subsidiaries in the UK. As part of the funding and liquidity
plan. liquidity limits. liquidity ratios and assumptions for periodic stress tests are reviewed and approved.
In order to meet its liquidity stress testing requirements and liquidity ratio hurdles. the Company holds a pool of
liquid assets including highly liquid government bonds.
Stress testing and scenario analyses are intended to quantify the potential impact of a liquidity event on the
Company's balance sheet and liquidity position. and to identify viable funding alternatives that can be utilised.
These scenarios include potential significant changes in key funding sources, market triggers (such as credit rating
downgrades), uses of funding, and political and economic conditions, including standard and stressed market
conditions as well as firm-specific events. Some tests span liquidity events over a full year while others may cover a
more intense shock over a shorter period such as one month. These potential liquidity events can identify
potential mismatches between liquidity sources and uses over a variety of time horizons, and liquidity limits are
set accordingly. To monitor the liquidity of a unit. these stress tests and potential mismatches may be calculated
with varying frequencies, with several important tests performed daily.
Given the range of potential stresses, Citi maintains a series of contingency funding plans on a consolidated basis
as well as for individual entities, including the Company. The plans specify a wide range of readily available
actions under a variety of adverse market conditions or idiosyncratic disruptions.
CITIGROUP GLOBAL MARKETS LIMITED NOTES TO THE FINANCIAL STATEJ\IENTS
28 Financial instruments and risk management (continued)
Liquidity risk
the assets and liabilities to relevant
from the balance sheet date to the contractual date.
risk. management uses certain based on a combination of contractual and behavioural
which differ from the contractual dates shown below.
Total
31 Decemher 2014 $Million
On
demand
$ JVIillion
3 months
& less
$ '\Iillion
3-12 months
$ lVIiIIion
5 years
$ l\Iillion
'\lore than
5 years
$ l\Iillion
Cash 1.571 Ill 1.460 Current asset investments 45.133 45.133 Derivatives 203,894 203.894 Collateralised financing
transactions 93,054 28.220 61.287 2.820 264 463
Cash collateral pledged 11.482 11.482 Trade debtors 9.459 9,459 Other debtors 281 281 Fixed asset investments 40 40
Total financial assets 364.914 277.358 83.969 2.820 264 503
Total
On
demand
3 months
& less
3- 12 months
1-5 years
More than
5 years
$Million $1Vlillion $ lVIillion $Million $Million $ JVIillion
Bank loans and overdrafts 10,104 1.310 3,922 841 2.675 U56
Collateralised financing 79.218 19.617 51.282 7.252 1.067
transactions
Derivatives 203,375 203,375
Cash collateral held 15,404 15.404
Securities sold but not yet 32,754 32,754
purchased
Trade creditors 6.276 6.154 122
Other creditors and accruals 1.043 l.043
Subordinated loans 4,080 4.080
Total financial liabilities 352.254 224.302 110.559 8.093 3.864 5.436
(26.590) (3,6()())
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Liquidity risk
3 months 3 -12 On lVIore than
Total demand & less months 1 5 years 5 years
31 December 2013 $ lVlillion $ l\lillion $Million $1\lillion $Million $Million
Cash 2,805 1,367 1,438
Current asset investrrents 41,926 4[,926
Derivatives 77,648 77,648
Collateralised 98,874 30.715 64,857 l.l13 1.078 I,Ill
transactions
Cash collateral pledged 4,650 4,650
Trade debtors 7,930 7.930
Other debtors 130 130
Fixed asset investrrents 50 50
Total financial assets 234,013 151,656 79,005 1.113 1,078 1,161
On 3 months 3-12 1\<lore than
Total demand & less months 1-5 years 5 years
$ J\;lillion $ J\;lillion $ J\;lillion $Million $Million $Million
Bank loans and overdrafts 5,881 1,090 6!7 1,087 3,087
Collateralised financing 87,474 23,179 55.111 8,818 366
transactions
Derivatives 79,999 79,999
Cash collateral held 7,457 7,457
Securities sold but not yet 29,429 29,429
purchased
Trade creditors 5,781 5,621 !60
Other creditors and accruals 1,214 1,214
Subordinated loans 4,200 4,200
Total financial Iiabili ties 221,435 104,268 99,449 9,905 3.613 4,200
Net liquidity gap 12,578 47.388 (8,792) (2.535) (3,039)
Cumnlati\e gap 47,388
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Liquidity risk
Contractual On 3 months 3- 12 More than
31 December 2014
\alue
$Million
demand
$Million
& less
$Million
months
$Million
5 years
$ 'VIillion
5 years
$ 'VIillion
Subordinated loans 4,610 14 42 225 4.329
Total financial liabilities 4,6!0 14 42 225 4329
Contractual
\alue
On
demand
3 months
& less
3 -12
months
1-5 years
More than
5 years
31 December 2013 $ 'VIillion $!VIiIlion $ l\lillion $ J\:lillion $ 'VIillion $Million
Subordinated loans
Total financial liabilities
Credit risk
5,401 43 129 686 4,543
43 129 686
Credit risk is the potential for financial loss resulting from the failure of a borrower or counterparty to honour its
financial or contractual obligations. Credit risk arises in many of the Company's business activities. including:
• sales and trading:
• derivatives:
• securities transactions;
• settlement; and
• when Citi acts as an intermediary on behalf of its clients and other third parties.
Credit risk is captured in the Company's defined risk appetite framework, which is supplemented by regular stress
testing and monitoring of exposures, with monthly and quarterly reporting to the senior management and the
Board of Directors respectively.
The credit process is grounded in a series of fundamental policies. including:
• joint business and independent risk management responsibility for managing credit risks:
• a single centre of control for each credit relationship to coordinate credit activities with that client:
• a requirement for a minimum of two authorised-credit-officer signatures on extensions of credit, one of
which must from a officer from credit
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instrnments and risk management (continued)
Credit risk
form of concentration risk and arises when there is a strong correlation between
of default and the mark-to-market value of the transaction. Citi uses a
leveL and
to monitor and control wrong-way risk.
wrong-way risk transactions outside
includes circulation of a report that
entities to obtain prior
This is monitored at a
identifies CDS based. OTC or securities finance
transactions (SFT) that generate specific wrong-\vay risk. Wrong-way risk is mitigated through the use of
enforceable agreements and
The Company seeks to restrict its exposure to credit losses by entering into master netting arrangements with most
mt. rn.,rt"'' with which it undertakes a significant volume of transactions. Master netting arrangements do not
generally result in an offset of balance sheet assets and liabilities. as transactions are usually settled on a gross
basis. However. the credit risk associated with favourable contracts is reduced by a master netting arrangement to
the extent that if an event of default occurs. all amounts with the counterparty are terminated and settled on a net
basis. Many of these arrangements also provide for the calling and posting of variation margin or collateraL
further reducing the Company's exposures. The internal measurement of exposure on each credit facility takes
into account legally enforceable netting and margining arrangements both in terms of current exposure and in
terms of the simulated calculation of potential future exposure.
Large exposure limit reports are circulated daily that show the Company's exposure to various counterparty
groupings as a proportion of its own funds. Regulations require that the Company does not exceed specified limits
for its non trading book exposures. Within a certain percentage below the maximum permitted level, the
Regulatory Reporting group conducts initial analysis and provides a breakdown of exposures to credit risk
management At or above the maximum permitted level. the credit risk management team takes action and
escalates to the front office in order to reduce exposure to that counterparty and thereby bring exposure back
within permitted levels. Similar reporting is carried out against internal limits for the trading book exposures.
The following table presents the maximum exposure to credit risk. before taking account of any collateral held or
other credit enhancements (where such credit enhancements do not meet offsetting requirements).
31 December 2014
Cash
Maximum
exposure
$Million
1.571
Exposure to credit
Offset risk (net)
$ J\!Iillion $ J\!Iillion
1.571
Current asset investments 249.027 (205.145) 43.882
Collateralised financing transactions
Cash collateral
Tmde debtors
93.054
l 1.482
9.459
28!
(11,552) 81,502
l1.482
28!
CITIGROUP GLOBAL MARKETS Lll\1ITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Credit risk
The current asset investments offset amount in the above table relates to exposures where the counterpany has an
derivative exposure with the and a master agreement is in These amounts do
for net for purposes as settlement may not be made on a net basis.
The collateralised financing transactions offset adjustment relates to balances from rcpo and reverse repo
transactions. The offsets relate to balances where there is a legally enforceable right of offset in the event of
counterparty default and consequently a net exposure for credit risk management purposes. However as there is
no intention to settle individual transactions on a net basis under normal circumstances. they do not qualify for net
presentation for accounting purposes. Credit risk exposure is monitored on an asset basis except for positions
which arc specifically collatcralised. normally in the form of cash.
As at 31 December the Company's third party credit exposure (mark to market plus potential future exposure as
determined by the Company's internal measure) in relation to collateralised financing transactions and derivatives
was distributed as follows (these exposures do not include derivative and collateraliscd financing transactions with
other group undertakings):
Industry 2014 2013
% %
Commercial and universal banks
37.4
45.6
Insurance and fund management 29.4 16.2
Brokers and investment banks 5.9 5.0
Other (including Corporates. SPVs and Hedge Funds) 27.3 33.2
100 100
The credit quality of the Company's financial assets is maintained by adherence to Citi policies on the provision of
credit to counterparties. The Company monitors the credit ratings of its counterparties with the table below
presenting an analysis of the Company's current asset investments and derivative transactions by rating agency
designation based on Standard & Poor, Moody's and Fitch ratings as at 31 December:
Government bond
2014 2013
Eurobonds and
corporate bonds
2014 2013
Derivatives
2014 2013
% % % % % %
CITIGROUP GLOBAL IVIARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Country Risk
Country risk is the risk that an event in country
will impair the value of Citi's franchise or will
honour their to Citi. Country risk events may include
currency crises and/or political events.
\Vi thin or external to that
of to
defaults or crises.
The information below is based on Citi's internal risk management measures. The country designation in Citi's
risk management systems is based on the country to which the client relationship. taken 3S a whole. is most
directly exposed with regard to economic. financial. socio-political or legal risks. This includes exposure to
subsidiaries within the client relationship that are domiciled outside of the country.
Citi assesses the risk of loss associated with certain of the country exposures on a regular basis. These analyses
take into consideration alternative scenarios that may unfold. as well as specific characteristics of the Company's
portfolio. such as transaction structure and collateraL The Company currently believes that the risk of loss
associated with the exposures set forth below is likely to be materially lower than the exposure amounts disclosed
below and is sized appropriately relative to its operations in these countries.
The sovereign entities of all the countries disclosed below, as well as the financial institutions and corporations
domiciled in these countries. are important clients both to the Company and to the global Citi franchise. Citi fully
expects to maintain its presence in these markets to service all of its global customers. Hence the Company's
exposure in these countries may vary over time, based upon its franchise, client needs and transaction structures.
The economic and fiscal situations of several European countries remain fragile, and geopolitical tensions
throughout the region, including in Russia, have added to the uncertainties. Fisc:JI and monetary actions, or
expected actions. throughout the region have further impacted the global financial markets. While concerns
relating to sovereign defaults or a partial or complete break-up of the European Monetary Union (EMU), including
potential accompanying redenomination risks and uncertainties, seemed to have abated during 2014, such
concerns have resurfaced with the election of a new government in Greece in January 2015. The table below
outlines the Group's exposures to these countries as of 31 December:
2014
$Millions Greece Ireland Italy Portugal S!Xlin Russia Total
Net current funded credit exposure
125
282
8
14
44
473
Net trading exposure 45 162 1.308 356 1.502 (2) 3,371
Net current funded exposure 45 287 1,590 364 1.516 42 3,844
Net current funded credit el!.']JOS ure:
86
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Country Risk
The exposures detailed above represent nominal levels of exposure without account of the benefit of any
collateraL but the benefits of and credit The net exposures are marked to
market daily. and levels of exposure vary as the are maintained consistent with customer needs. As
discussed above. the net exposure is lower than shown in this table.
Operational risk (unaudited)
Operational risk is the risk of loss resulting from inadequate or failed internal processes. systems or human factors.
or from external events. It includes the reputation and franchise risk associated with business practices or market
conduct in which Citi is involved. Operational risk is inherent in the Company's global business activities. as well
as its internal processes that support those business activities. and can result in losses from events related to
the following. among others:
• fraud. theft and unauthorised activities;
• employment practices and workplace environment:
• clients. products and business practices;
• physical assets and infrastructure: and
• execution, delivery and process management.
Where applicable. losses stemming from fines and regulatory penalties are included in the relevant categories
above. which are consistent with the Basel framework.
Framework
Citi's global operational risk is managed through an overall framework designed to balance strong corporate
oversight with well-defined independent risk management. This framework includes:
• recognised ownership of the risk by the businesses:
• oversight by Citi's independent risk management and control functions; and
• independent assessment by Citi's Internal Audit function.
The goal is to keep operational risk at appropriate levels relative to the characteristics of the Company's
businesses, the markets in which it operates. its capital and liquidity, and the competitive. economic and regulatory
environment.
To anticipate.
consistent framework for monitoring, as;,e smtg
the internal control across Citi.
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Operational risk
Framework (continued)
In addition.
businesses.
controls and
Risk Management, within Citi's Franchise Risk and
and and the other independent control groups in
risks across business lines and
risk at a Citi and
assists the
and facilitates the
Operational risk is pan of the Company's defined risk appetite framework supplemented with regular reporting
and updates to the senior management and the Board of Directors.
Measurement
To support advanced capital modelling and management. each business is required to capture relevant operational
risk event information. An enhanced version of the Citi risk capital model for operational risk has been developed
and applied across the major business segments. The PRA has approved this modeL inc!uding the associated
capital allocation, for use within the Company as an "Advanced Measurement Approach". It uses a combination
of internal and external loss data to support statistical modelling of capital requirement estimates, which are then
adjusted to incorporate qualitative aspects of the operational risk and control environment.
To enhance its operational risk management the Company has implemented a forward looking scenario analysis to
identify and quantify emerging operational risks, through a systematic process of obtaining opinions from business
managers and risk management experts to devise reasoned assessments of the likelihood and loss impact of
plausible, high severity operational risk losses. This development has been integrated into the operational risk
capital assessment for the Company.
Anti Money Laundering and Sanctions
Local and international Anti-Money Laundering (AML) and Sanctions requirements impact the activities carried
out by the Company and its clients. The development of Sectoral Sanctions to address the political situation in
Ukraine may restrict the Company's ability to act for certain clients with respect to advisory services connected to
longer term lending and capital raising activities by those clients. To facilitate Citi's overall compliance with
these requirements, including recent and upcoming changes, Citi has developed an enhanced control infrastructure
around activities that may be affected by applicable Sanctions regimes. Regulatory requirements concerning AML
controls may continue to cause elevated costs to the Company, particularly those associated with customer due
diligence and suspicious activity monitoring, as Citi continues to implement enhancements in these programme
areas.
Conduct Risk
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management (continued)
Operational risk
Cliellf Assets Sourcebook (CASS)
The FCA's Client Assets Sourcebook (CASS)
or client assets (client money and safe assets). Due to recent market
insolvencies the FCA has published to its CASS rules. which all firms
and be fully compliant with I June 20 I 5.
The CK rules are designed to help ensure that clients' assets are protected and returned to clients within a
reasonable timeframe in the event of a firm·s failure and that the UK market is regarded as a safe place to conduct
business. The rules also prescribe requirements for arrangements. controls and governance. In line
with this. Citi has a CASS Oversight Oftleer and continues to develop CASS governance arrangements and is
working towards the implementation of the new CASS rules coming into force on I June 2015. which may result
in elevated costs to the Company.
Outsourcing Risk
Third parties with which Citi does business may also be sources of cybersecurity or other technological risks. Citi
outsources certain functions. such as uploading content on customer-facing websites, and developing software for
new products and services. These relationships allow for the storage and processing of customer information by
third-party hosting of or access to Citi websites, which could result in service disruptions or website defacements.
and the potential to introduce vulnerable code. resulting in security breaches impacting Citi customers. While Citi
engages in certain actions to reduce the exposure resulting from outsourcing, such as performing onsite security
control assessments, limiting third-party access to the least privileged level necessary to perform job functions and
restricting third-party processing to systems stored within Citi's data centres. ongoing threats may result in
unauthorized access, loss or destruction of data or other cyber incidents with increased costs and consequences to
Citi such as those discussed above.
Furthermore, because financial institutions are becoming increasingly interconnected with central agents.
exchanges and clearing houses. partly because of the derivatives reforms over the last few years. Citi has increased
exposure to operational failure or cyber attacks through third parties.
Regulatory risk and developments
Regulatory risk is the risk of failing to comply with regulatory requirements. regulatory change or regulators·
expectations. Failing to manage regulatory risk properly may result in regulatory sanctions and increased
reputational and franchise risk.
the regulatory environment continues to evolve. Citi and the
and
CITIGROUP GLOBAL l\1ARKETS LllVIITED NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
arc also
management processes.
such more reliance on
There is an increased focus from local on that subsidiaries and branches of international
financial seniees companies are adequately capitalised and managed such that in the event of a local
market disruption they would be able to sustain their business and cover any losses incurred without an
exaggerated reliance on offshore parental financial aid.
As of l
investment firms. as prescribed by the BRRD.
crises across the EU.
a single rulebook for the resolution of banks and
to harmonise and improve the tools for with bank
Additionally, the Company has been identified as a Material Legal Entity in Citi's Resolution Plan. Citi defines
Material Legal Entities as those legal entities, including subsidiaries and foreign offices, with business lines,
including associated operations, services. functions and support that upon failure would result in a material loss of
revenue, protlt or franchise value ofCiti. Citi's Resolution Plan can be found at·
Dodd Frank Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act and the Wall Street Transparency and
Accountability Act (together commonly referred to as the Dodd-Frank Act) introduced an array of new regulations
in respect of over-the-counter derivatives (swaps). and the activities of major institutions transacting in these
products. These included registration and regulatory requirements for swap dealers, an enhanced risk management
framework, segregation of initial margin for uncleared swaps. business conduct rules applicable when transacting
swaps with certain types of counterpartics, and rules on mandatory clearing and trade execution of certain swaps.
Financial intermediaries that transact above certain thresholds with U.S. counterparties (or counterparties with US
originated guarantees) were required to register with the Commodity Futures Trading Commission (CFTC). The
directors and senior management of the Company accordingly elected to register the Company as a Swap Dealer,
and the Company was provisionally registered by the CFTC as a non-US Swap Dealer in October 2013. A
consequence of registering as a Swap Dealer is increased regulatory oversight by the CFTC and enhanced
compliance obligations. 2014 represented the first full year of the Company operating as a CFTC-registered non
US Swap Dealer for purposes of the Dodd-Frank Act.
In December 2013 the CFTC granted limited relief from certain requirements under the Dodd-Frank Act for EU
based Swap Dealers. to the extent that Swap Dealers comply with comparable regulatory obligations under
law. The has elected to take of certain elements of this relief. Whilst this CFTC
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
28 Financial instruments and risk management
Regulatory risk and developments (continued)
derivatives and the
management framework. Final rules for client of OTC
for derivatives not cleared will continue to be
with EU and non-EU affiliates. The
readiness once the final
,4/arkets in Financial Instruments Directive (J'vfiFID} and on Jl;farkers in Financial Instruments (lv!iFIR)
The new rules relating to MiFID Il/MiFIR will start to to firms early in 2017. The MiFID ll/MiFIR reforms
will have a significant impact on a number of areas including market structure, transparency requirements,
transaction commodities. the third eountry investment research and
supervision.
Some key aspects of MiFID li/MiFIR include the introduction of a new multilateral, discretionary trading venue
for non-equity instruments, the Organised Trading Facility (OTF), and an extension of the Systematic lnternaliser
(Sl) regime to non-equity instruments. There will also be a requirement for investment firms to trade listed
equities on a Regulated Market, Multilateral Trading Facility, OTF or SL There are new systems and controls
requirements for organised trading venues, trading controls for algorithmic trading activities, an obligation to trade
clearable derivatives on organised trading platforms and the introduction of a harmonised EU regime for access to
trading venues, CCPs and benchmarks. MiFID Il/MiFIR will also cover structured deposits and commodities.
The scope of transaction reporting obligations will be widened. There will additionally be an increase in the
transparency requirements for the equities market and new transparency requirements for fixed income
instruments and derivatives, with additional requirements including the submission of post-trade data to
Authorised Reporting Mechanisms. There are increased conduct of business requirements aimed at increasing
investor protection, including rules relating to inducements and the provision of investment research.
Strengthened supervisory powers and administrative sanctions will also apply.
Capital management
The Company's regulatory capital is held to ensure that sufficient loss-absorbing capital is available to meet
unexpected losses and to meet minimum capital standards as set by the PRA. The composition and amount of
capital takes full account of the regulations in force, including the recently implemented CRD IV package.
Capital forecasts are prepared taking into account strategic growth plans, as set out in the Company's Internal
Capital Adequacy Assessment Process (ICAAP) document Capital forecasts are updated and reviewed monthly
through the UK ALCO and the Company's Basel Governance Oversight Committee.
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Regulatory capital
deductions from Common
balances and. above certain thresholds. These include certain deferred tax
Tier 3
from 1 which included short-term subordinated liabilities, ceased to as
2014 under the CRR. At 31 December 2013 Tier 3 the unaudited loss for the
year. The increase in
financial sector entities.
deductions in 2014 was in other
The is to maintain a sufficient capital base in order to retain investor. counterparty. creditor and
market confidence and to sustain the future development of the business. The impact of the level of capital on
shareholders' returns is also the need to maintain a balance between the returns that
might be possible with greater gearing and the advantages and security afforded by a sound capital position.
The Company's regulatory capital resources at 31 December were as follows:
2014
2013
$1VIillion $1VIillion
Tier 1 capital 12.754 12,794
Tier 2 capital 4,080 4,086
Tier 3 capital (234)
Deductions (871) (265)
Total regulatory capital resources 15.963
Under CRD IV's framework of capital adequacy regulation, Pillar III mandates enhanced public disclosures in
respect of capital, risk profile and remuneration. Further details on the Company's Pillar III regulatory capital
disclosures can be found at: '-=' '-'-'-:_:_:c -'-'-'="-'-'-'==-'-"-'"-""'-'--'-'--'-'==2-'--"""'"=
29. Other commitments
a) Letters of credit
As at 31 December 2014. the Company had $14 million (2013: $17 million) of unsecured letters of credit
outstanding from banks to satisfy collateral requirements under securities borrowing agreements and margin
requirements.
b) commitments
CITIGROUP GLOBAL MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Latin North Total Other/
America America Regional Corp
31. Group structure
is CGMEL a company
r, ,,n'"""' and ultimate party is in the State of
Delaware. Cnited States of America.
The audited consolidated financial statements of CGMEL are made available to the
with """'""'"'< House and may be obtained from its Wharf, London El4 5LB.
in accordance
Centre. Canada
The audited consolidated financial statements of Citigroup Inc are made available to the
accordance with Securities and Exchange Commission and may be
32. Segmental analysis
in
obtained from
As outlined in the Strategic Report, the Company is Citi's international broker dealer and management reviews its
performance by geography in the same way as Citigroup Inc. report its performance.
It is organised into four regions. Asia Pacitlc, EMEA, Latin America and North America.
Asia EMEA Latin North Total Other/
Total America America Regional Corp
Revenue by Region $Million $Million $Million $Million $Million $Million $Million
2014 Revenues 192 1,439 15 63 1.709 1,352 3.06!
2013 Revenues 258 1,71 I (4) 95 2.060 743 2.803
Increase (decrease)
(66) (272) 19 (32) (351) 609 258 compared to prior year
Asia EMEA Total
Assets by Region $ Billion $Billion $Billion $Billion $Billion $Billion $Billion