CITIBANK EUROPE PLC
(Registered Number: 132781)
ANNUAL REPORT AND FINANCIAL STATEMENTS
for the year ended 31 December 2022
BOARD OF DIRECTORS AND OTHER INFORMATION .......................................................................................... 3
DIRECTORS’ REPORT .................................................................................................................................................. 4
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CITIBANK EUROPE PLC ................................ 25
INCOME STATEMENT ................................................................................................................................................. 35
STATEMENT OF OTHER COMPREHENSIVE INCOME .......................................................................................... 36
STATEMENT OF FINANCIAL POSITION .................................................................................................................. 37
STATEMENT OF CHANGES IN EQUITY ................................................................................................................... 38
STATEMENT OF CASH FLOWS .................................................................................................................................. 39
NOTES TO THE FINANCIAL STATEMENTS ............................................................................................................ 41
1. Principal accounting policies .............................................................................................................................. 41
2. Use of assumptions and estimates ...................................................................................................................... 62
3. Net interest income ............................................................................................................................................. 65
4. Net fee and commission income ......................................................................................................................... 66
5. Net trading income ............................................................................................................................................. 66
6. Net investment income ....................................................................................................................................... 66
7. Net income from other financial instruments designated at fair value through profit or loss ............................ 67
8. Other operating income ...................................................................................................................................... 67
9. Auditor’s remuneration ....................................................................................................................................... 67
10. Personnel expenses ........................................................................................................................................... 67
11. Directors’ emoluments ..................................................................................................................................... 68
12. Other expenses .................................................................................................................................................. 68
13. Tax on profit ..................................................................................................................................................... 69
14. Retirement benefit obligation ........................................................................................................................... 70
15. Notes to the statement of cash flows ................................................................................................................ 74
16. Trading assets ................................................................................................................................................... 75
17. Derivative financial instruments ....................................................................................................................... 75
18. Investment securities ........................................................................................................................................ 76
19. Loans and advances to banks and customers .................................................................................................... 77
20. Other assets ....................................................................................................................................................... 79
21. Risk management ............................................................................................................................................. 80
22. Reserves ............................................................................................................................................................ 110
23. Financial assets and liabilities .......................................................................................................................... 111
24. Property and equipment .................................................................................................................................... 125
25. Intangible assets ................................................................................................................................................ 126
26. Deferred tax ...................................................................................................................................................... 127
27. Shares in subsidiaries........................................................................................................................................ 128
28. Subordinated liabilities ..................................................................................................................................... 128
29. Provisions ......................................................................................................................................................... 129
30. Other liabilities ................................................................................................................................................. 130
31. Called up share capital ...................................................................................................................................... 130
32. Share-based incentive plans .............................................................................................................................. 131
33. Contingent liabilities and commitments ........................................................................................................... 132
34. Business transfer under common control ......................................................................................................... 134
35. Involvement with unconsolidated structured entities ....................................................................................... 134
36. Leases ............................................................................................................................................................... 135
37. Related party transactions ................................................................................................................................. 136
38. Prior year adjustment ........................................................................................................................................ 139
39. Parent companies .............................................................................................................................................. 140
40. Events after reporting period ............................................................................................................................ 140
41. Approval of financial statements ...................................................................................................................... 140
Independent auditor’s report to the Directors of Citibank Europe plc ....................................................................... 142
Country by Country Reporting ................................................................................................................................... 146
Table of Contents
2
DIRECTORS
Susan Dean - Chairperson - Independent Non-Executive
Silvia Carpitella - Interim Chief Executive Officer/ Chief Financial Officer (Interim
CEO/CFO)
Desmond Crowley - Independent Non-Executive
Gillian Lungley - Independent Non-Executive
Jeanne Short - Independent Non-Executive
John Gollan - Independent Non-Executive
Patrick Dewilde - Non-Executive
Peter McCarthy - Non-Executive
Peter Jameson - Executive Director (appointed on 4 January 2023)
Cecilia Ronan- Chief Executive Officer (CEO) (resigned on 7 November 2022)
COMPANY SECRETARY
Fiona Mahon
REGISTERED OFFICE
1 North Wall Quay, Dublin 1
SOLICITORS
A&L Goodbody LLP
International Financial Services Centre, 3 Dublin Landings,
North Wall Quay, Dublin 1
Arthur Cox LLP
Ten, Earlsfort Terrace, Dublin 2
Matheson LLP
70 Sir John Rogersons Quay, Dublin 2
AUDITOR
KPMG
Statutory Auditor and Chartered Accountants
1 Harbourmaster Place, IFSC, Dublin 1
BANKERS
Citibank NA, London Branch
Citigroup Centre, Canada Square,
Canary Wharf, London, E14 5LB
BOARD OF DIRECTORS AND OTHER INFORMATION
3
The Directors present their report and the annual financial statements of Citibank Europe Plc (“the Company” or
“CEP”) for the year ended 31 December 2022, which have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union (IFRS).
Principal Activities
The Company is headquartered in Dublin, Ireland and for the year under review had branches across 21
European countries (2021: 21 European countries), and one subsidiary (2021: one subsidiary). Its ultimate parent
is Citigroup Inc. (hereafter referred to as either “Citigroup” or “Citi”).
The Company, which holds a banking licence from the Central Bank of Ireland (CBI) under Section 9 of the
Central Bank Act 1971, provides financial services to clients and other Citigroup businesses on a worldwide
basis. From 1 January 2017 the Company has been directly regulated by the European Central Bank (ECB)
through the Single Supervisory Mechanism (“SSM” or “The Regulator”).
The Company is passported under the EU Banking Consolidation Directive and accordingly is permitted to
conduct a broad range of banking and financial services activities across the European Economic Area (EEA)
through its branches and on a cross-border basis.
The core activities of the Company comprise the Institutional Clients Group (ICG) with Markets and Securities
Services, Treasury and Trade Solutions (TTS) and Banking businesses. The activities in Banking comprise
corporate and commercial lending and private banking services. These businesses service a wide range of target
market clients including financial institutions, fund managers, governments, public sector clients, large local and
multinational corporations, and high net worth individuals.
Business Review
For the year ended 31 December 2022, the Company reported a profit after tax of $1,030 million (31 December
2021: $1,013 million) and has maintained robust capital and liquidity positions.
The net income before impairment was $3,003 million for the year ended 31 December 2022 (31 December
2021: $2,472 million), which increased 21%, driven by TTS and Markets, partially offset by decline in
Investment Banking as heightened macroeconomic uncertainty and volatility continued to impact client activity.
In the environment of rising interest rates, TTS delivered strong performance driven by business actions, which
included managing deposit repricing, higher spreads, as well as higher volumes and fees in payments,
commercial cards and trade finance. Markets business had an increase year on year with revenue growth in FX,
commodities and interest rate derivatives trading as a result of an increase in client activity and widened spreads.
The Company recorded a net impairment loss of $70 million (31 December 2021: net impairment gain of $249
million). This was driven by a reserve build due to geo political tensions and its impact on macro-economic
outlook. Note 21 contains further details within the credit risk section.
Total operating expenses increase was driven primarily by a rise in personnel expenses reflecting the Company’s
continued investment in its workforce in alignment with its growth plans.
The Company’s total assets increased to $129.3 billion (31 December 2021: $92.3 billion). The growth was led
by the Markets business expansion in European Government Bonds trading as primary dealer and an increase in
placements due to customer deposit growth which resulted in placing excess liquidity with central banks.
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
4
Future Developments
The Company continues to monitor the evolving macroeconomic and geopolitical outlook which remains
complex and uncertain including constraints in energy supplies in Europe, high inflation and rising interest rates
where the Company operates and its impact on GDP.
The Company has a balanced and sustainable business model that has proven its performance and resilience
through the period of stress in the last three years and places it in a strong and sustainable position to benefit
from opportunities for future growth. The Company plans to further grow its Markets business, expand Private
Bank Business offering including Wealth at Work initiatives in Germany, France and Luxembourg markets as
well as its Commercial Banking activities in Western Europe, including Germany, France and Nordics. Further
growth of the balance sheet is also expected due to the proposed Intermediate Parent Undertaking Transaction
described in more detail below.
The Company retains its commitment to continued investment in innovation and digitisation which will enable it
to enhance the product offering in the TTS business segment and support market share growth in the
Commercial and Private Bank.
The Company aspires to establish itself as a sustainable company by embedding environmental and social
governance (ESG) in all the key functions of the bank. Works are ongoing to address upcoming climate related
regulatory requirements, and ensure consideration of ESG embeddedness in relevant product offering and
growth plans while managing associated ESG risks. For further details please refer to the Non Financial
Statement of the Company on page number 11.
Minimum requirements for own funds and eligible liabilities (MREL) are expected to increase due to the
planned balance sheet growth and increased regulatory requirements.
Intermediate Parent Undertaking Transaction
Citi is subject to the intermediate parent undertaking (“IPU”) legal requirement under the Capital Requirements
Directive IV as amended (“CRD”) for third-country financial services groups with more than one credit
institution and/or investment firm in the EU and with more than €40bn of assets. Groups must hold all credit
institutions and/or investment firms established in the EU under a single intermediate parent undertaking, itself
established in the EU by 30 December 2023, unless a derogation is granted. The derogation permits groups to
operate under two IPUs and must be applied for by the group and granted by the European Central Bank,
following consultation with resolution authorities and other regulators.
It was determined that Citibank Europe plc will be Citi’s EU bank chain IPU, and that Citibank Holdings Ireland
Ltd (“CHIL”) would be removed from the holding structure in order to meet the IPU requirements. In addition to
this Citibank Overseas Investment Corporation’s (“COIC”) controlling interest in Bank Handlowy Warszwie
(“BHW”) will be transferred to CEP.
The proposed changes to the ownership of CEP are intra-group and do not involve a new entity entering the
chain of ownership of CEP. The transaction merely changes the character of the qualifying holding held by Citi
Overseas Holdings Bahamas Limited (“COHBL" – parent of CHIL) from being an indirect qualifying holding to
being a direct qualifying holding. Under IFRS 10 upon completion of the Proposed Transaction BHW will be
included within the consolidated financial statements of CEP.
The proposed transaction is subject to a number of risks and uncertainties which may impact the structure of
transaction. These include: satisfying relevant conditions precedent, obtaining regulatory and other approvals
and other transaction execution risks and uncertainties. Accordingly, the proposed transaction is subject to
change, however CEP is fully committed to ensuring that compliance with IPU rules is achieved by 30
December 2023.
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
5
Key Performance Indicators
The Company’s key financial indicators during the year were as follows:
31 December
2022
31 December
2021
Variance
Profit before tax (USD m) 1,274 1,206 6 %
Profit for the year (USD m) 1,030 1,013 2 %
Operating efficiency [1] 47% 53% (6) %
Shareholders' funds (USD m)[2] 14,095 11,599 22 %
Return on capital employed[3] 9% 10% (1) %
Return on assets[4] 1.0% 1.3% — %
The key performance indicators above consider both IFRS and Alternative Performance Measures (APM) to
analyse the Company’s performance, providing comparability year on year. These performance measures are
consistent with those presented to the Board. These performance measures may not be uniformly defined by all
companies and accordingly they may not be directly comparable with similarly titled measures and disclosures
used by other companies. These measures should be considered in conjunction with IFRS measures as set out in
the financial statements from page 31.
Please refer to a list and description of APM below:
[1] Operating efficiency is a proportionate representation of operating expenses over net operating income
(excluding interest expense).
2022 2021
Calculation Source $m $m
Total operating expenses Income Statement
(1,659)
(1,515)
Net Operating Income Income Statement
2,933
2,721
Exclude:
Interest Expense Income Statement
(581)
(163)
3514 2,884
Operating efficiency
47% 53%
[2] The Shareholders’ funds equate to total equity attributable to equity shareholders, which is different from
regulatory capital. Shareholders’ funds increase is primarily driven by $1.7Bn capital injection and Profit for the
year of $1,030m, partially offset by $373m post tax fair value reserve losses on debt securities at FVOCI. Fair
value losses on debt securities held at FVOCI can primarily be attributed to the valuation impact of rising
interest rates on fixed rate debt securities.
[3] Return on Capital Employed is profit before tax over total equity attributable to shareholders.
2022 2021
Calculation Source $m $m
Profit before tax Income Statement
1,274
1,206
Total equity attributable to
shareholders
Statement of Financial Position
14,095 11,599
Return on capital employed
9% 10%
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
6
Key Performance Indicators (continued)
[4] Return on assets is profit before tax over total assets.
2022 2021
Calculation Source $m $m
Profit before tax Income Statement
1,274
1,206
Total Assets Statement of Financial Position
129,287 92,259
Return on assets
1.0% 1.3%
Credit Rating
The long-term credit rating for the Company is A+ (Standard & Poor’s) (2021: A+ (Standard & Poor’s)), Aa3
(Moody’s) (2021: Aa3 (Moody’s)) and A+ (Fitch) (2021: A+ (Fitch)).
Capital Management
The Company had regulatory capital of $12.8 billion as at 31 December 2022 ($11 billion as at 31 December
2021) which is entirely made up of Tier One equity. The capital ratio at 31 December 2022 was 19.0% (20 % as
at 31 December 2021) which exceeds the minimum regulatory requirement of 15.02%. Further information on
the Company’s capital requirements and risk management is available in the Pillar 3 disclosure document (http://
citigroup.com/citi/investor/reg.htm). For further details, please refer to Note 21 – ‘Risk management’.
Dividends
The Directors do not propose any dividends in relation to 2022 earnings. ($nil paid in relation to 2021 earnings).
Corporate Governance
Internal Accounting and Financial Controls
The Directors are responsible for preparing the Directors’ Report and the Company’s financial statements in
accordance with applicable law. The Board of Directors (Board) has established an Audit Committee that
operates within specific terms of reference approved by the Board. The Company’s finance function is
responsible for preparing the financial statements in accordance with IFRS and with respect to local legal
requirements.
Audit Committee
The Audit Committee is a sub-committee of the Board. Its role is to oversee the adequacy of the internal control
environment established by management in relation to the Company’s businesses. The Audit Committee also
assists the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s financial
statements, financial reporting process and systems of internal accounting and financial controls. The Audit
Committee draws on the work of Internal Audit and the Company’s Senior Management.
Risk Committee
The Risk Committee is a sub-committee of the Board. Its role is to review the Company’s overall Risk
Governance Framework and inform the Board on the Company’s risk appetite by taking account of the current
and future financial position of the Company as well as the business strategy, objectives, corporate culture, and
values. The Risk Committee also reviews amendments to the Company’s risk policies including regulatory
developments and is responsible for the monitoring of economic capital and material risks. The Risk Committee
draws on the work of the independent Risk Management function and the Company’s Senior Management.
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
7
Remuneration Committee
The Remuneration Committee is a sub-committee of the Board. It is responsible for assisting the Board on
decisions regarding remuneration, including those which have implications for risk management of the
Company. The Remuneration Committee is also responsible for designing and implementing the Company's
Remuneration Policy to ensure that remuneration practices do not promote excessive risk taking, evaluating
compliance with this policy and assessing whether these remuneration practices are creating the desired
incentives for managing risk, capital and liquidity, and that the remuneration policy is gender neutral.
Nomination Committee
The Nomination Committee is a sub-committee of the Board. It is responsible for assisting the Board on
decisions regarding the appointment of Directors and Senior Management and related matters including
succession planning, fitness and probity and diversity and inclusion.
Related Party Lending Committee
The Related Party Lending Committee is a sub-committee of the Board and is responsible for assisting the
Company in the discharge of its obligations under the Code of Practice on Lending to Related Parties 2013
issued by the Central Bank of Ireland.
Executive Committee
The Executive Committee reports to the Board and makes key decisions regarding the management of the
Company, in line with the Company’s strategic plan and as directed by the Board.
Corporate Governance Code for Credit Institutions 2015
The Company is designated as a High Impact credit institution per the Corporate Governance Requirements for
Credit Institutions 2015 (Code). As such, the Company has complied with the additional requirements for High
Impact designated institutions.
The Company is rated as an Other Systemically Important Institution (O-SII). Under Regulation 121(1) of the
European Union (Capital Requirements) Regulations 2014 (S.I. No. 158 of 2014) (CRD Regulations).
Political Donations
During the year the Company did not make any political donations (2021: $nil).
Directors, Company Secretary and their interests
The names of the persons who were Directors at any time during the financial year ended 31 December 2022 are
set out on page 3. Neither the Directors, nor the Company Secretary, have any beneficial interest in the share
capital of the Company. Neither the Directors, nor the Company Secretary, had an interest in more than 1% of
the nominal value of the ultimate holding Company's issued share capital during the year ended 31 December
2022 and 2021.
Accounting records
The Directors believe that they have complied with the requirements of Sections 281 to 285 of the Companies
Act 2014 with regard to adequate accounting records by employing accounting personnel with appropriate
expertise and by providing adequate resources to the Finance function. The accounting records of the Company
are available at 1 North Wall Quay, Dublin 1.
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
8
Principal Risks and Uncertainties
Information regarding the principal risks and uncertainties facing the Company and its management is
described in Note 21 – ‘Risk management’ on page 80.
Going Concern
To assess any potential impact on the Company, the Directors assessed the components of capital, liquidity and
the financial position of the Company and have a reasonable expectation that it has adequate resources to
continue in operational existence for the 12 months from the approval of the financial statements. Therefore the
Directors have prepared these financial statements on the going concern basis.
Non-Financial Statement
The Directors are responsible for ensuring the Company’s compliance with the directive 214/95/EU ‘Non-
Financial Reporting Directive’ (NFRD). Please see the Non-Financial Statement on pages 11 to 23.
Auditor
In accordance with Section 383(2) of the Companies Act 2014, the auditors, KPMG, Statutory Auditor and
Chartered Accountants were first appointed in May 2001, will continue in office.
The Directors have taken all requisite steps to make themselves aware of all audit information and to establish
that auditors are aware of all such information and, so far as the Directors are aware, there is no relevant audit
information of which the auditors are unaware, in accordance with Section 330 (1)-(3) of the Companies Act
2014.
Directors’ Compliance Statement
As required by Section 225 of the Companies Act 2014, the Directors acknowledge that they are responsible for
ensuring the Company’s compliance with its “relevant obligations” (as defined in that legislation). The Directors
further confirm that a compliance policy statement has been drawn up, and that appropriate arrangements and
structures have been put in place that are, in the Directors’ opinion, designed to ensure material compliance with
the relevant obligations. A review of those arrangements and structures has been conducted in the financial year
to which this report relates.
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
9
Statement of Directors' responsibilities in respect of the Directors’ Report and the audited financial
statements
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with
applicable law and regulations.
Company 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 IFRS as adopted by the European Union
(EU).
Under company law, the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the assets, liabilities and financial position of the Company and of its profit or loss
for that year. In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
• assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
relating to the Company. Legislation in the Republic of Ireland governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy
at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to
ensure that the financial statements of the Company comply with the provision of the Companies Act 2014 and
with the requirements of the European Union (Credit Institutions: Financial Statements) Regulations 2015. They
are responsible for such internal controls as they determine are necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility for taking all reasonable steps to ensure such records are kept by its subsidiaries. This enables the
Company to ensure that the financial statements of the Company comply with the provisions of the Companies
Act 2014 and with the requirements of the European Union (Credit Institutions: Financial Statements)
Regulations 2015.
They are also responsible for safeguarding the assets of the Company, and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities. The Directors are also responsible for preparing a
Directors’ Report that complies with the requirements of the Companies Act 2014.
On behalf of the board: 16 March 2023
Susan Dean Silvia Carpitella John Gollan Fiona Mahon
Chairperson Interim CEO/CFO Audit Committee Chair Company Secretary
CITIBANK EUROPE PLC
DIRECTORS’ REPORT
For the year ended 31 December 2022
10
1. Introduction
As an important subsidiary of Citigroup Inc (“Citi”), the ultimate parent group, CEP is subject to the strategy,
policies and targets of Citi relating to Environmental, Social and Governance (“ESG”) matters. Citi’s approach
on environmental, social and employee, diversity, anti-bribery and anti-corruption matters, and respect for
human rights is detailed in its Environmental, Social and Governance (ESG) Report, Taskforce on Climate-
Related Financial Disclosures Report, and Environmental and Social Policy Framework which can be accessed
on the group website www.citigroup.com/citi/about/esg/.
CEP is developing its local environmental, social policies and disclosures in alignment with Citi, based on
applicable sustainable finance regulation and guidance, including the ECB Guide on Climate-Related and
Environmental Risks, the EBA Roadmap on Sustainable Finance, the Non-Financial Reporting Directive and the
EU Taxonomy, Capital Requirements Regulation, the MiFID II Sustainability Amendments and the Sustainable
Finance Disclosure Regulation.
This statement intends to meet the disclosures and information requirements of CEP and banking industry
stakeholders on non-financial matters. ESG matters and the implementation of ESG-related regulatory and
supervisory requirements are a key focus area for CEP. While this year’s non-financial disclosure represents a
significant enhancement on prior statements, CEP will continue to develop its ESG disclosures over future
iterations to address evolving regulatory expectations and stakeholder needs. CEP, as part of Citi, is committed
to contributing to methodology improvements and developing tools to assess climate risk and climate data,
including the quantification of the greenhouse gas (GHG) emissions; these capabilities will continue to evolve as
the underlying data improves.
Non-financial statements are regulated by Directive 2014/95/EU (Non-Financial Reporting Directive “NFRD”)
amending Directive 2013/34/EU. NFRD requires companies to disclose their view of how climate change
impacts their business model and strategy, and how their activities can affect the climate; information on the
involvement of the board and management, their responsibilities in relation to climate change; information on
how companies identify climate-related risks, and how they manage those risks. CEP’s non-financial statement
discloses information on environmental, social and employee, diversity, anti-bribery and anti-corruption matters.
Climate related information is included in the category of environmental matters. The report provides qualitative
and quantitative information to enable the understanding of CEP’s development, performance, position and
impact in regard to these activities.
2. Sustainability strategy
ESG Strategy and Business Model
As part of Citi, CEP has progressively developed its understanding of ESG issues. Citi has a demonstrated record
of ESG progress, including participating in the creation and adoption of ESG-related principles and standards.
Citi is guided by principles for sustainable business and banking, including the Equator Principles, United
Nations Environment Programme Finance Initiative Principles for Responsible Banking and the UN Guiding
Principles on Business and Human Rights.
For CEP, sustainability includes integrating relevant ESG commitments and priorities into its business strategy,
while aligning with Citi’s policies. CEP is contributing to Citi’s initiatives of achieving net zero GHG emissions
by 2050, in its’ own operations by 2030, and $1 trillion in sustainable finance by 2030. It aims to further
accelerate the transition to a sustainable, low-carbon economy that balances society’s environmental, social and
economic needs. These priorities follow Citi’s most recent Sustainable Progress Strategy, which launched in
2020.
The sustainable transformation across industries is expected to lead to challenges and opportunities for CEP and
its clients. Environmental and social issues are closely linked with economic stability and have an impact on
CEP, its clients and wider stakeholders. Therefore, CEP is driven to embedding ESG matters into its operating
culture through the implementation of its ESG strategy.
CITIBANK EUROPE PLC
NON-FINANCIAL STATEMENT
11
2. Sustainability strategy (continued)
Consistent with Citi Sustainable Progress Strategy to help to drive the sustainability transformation, CEP
developed a strategic approach focusing on the following three pillars:
• Accelerate the transition to a low-carbon economy: finance and facilitate low-carbon solutions and
support our clients in their decarbonisation and transition strategies
• Measure, manage and reduce ESG risk and impact of our client portfolio: continue our work in
incorporating ESG risks in our risk management practices, including policy development, portfolio
analysis and stake-holder engagement, as well as enhancing our ESG disclosures in line with
sustainability reporting requirements
• Reduce the environmental footprint of our facilities and strengthen our sustainability culture: minimize
the impact of our own operations through operational footprint goals in line with Citi and further
integrate sustainable practices across CEP
To advance CEP’s ESG goals, taking Citi’s vision into account, the Company considers external global
principles and standards such as Taskforce for Climate-Related Financial Disclosures and Principles for
Responsible Banking. Through application of these principles and the execution of both sustainable progress
strategy and net zero commitments, CEP intends to ensure compliance with relevant regional and local
regulatory requirements as outlined under the European Union (Disclosure of Non-Financial and Diversity
Information by certain large undertakings and groups) Regulations 2017. Further information on CEP business
model is included under the Principal Activities section of the Directors Report.
ESG Governance
CEP identifies ESG as one of its risk drivers. Roles and responsibilities for the management of ESG risks are
assigned within CEP’s organisational structure including the Board and its Committees, Management
Committees and across its three lines of defence. In addition to the roles and responsibilities at the legal entity
level, CEP also collaborates with various subject matter experts and teams across Citi to support a holistic
implementation of ESG governance. In order to meet regulatory, client and other stakeholder requirements as
well as to mitigate and manage ESG-related risks, CEP intends to integrate ESG considerations across its
portfolios, products, and business operations. In addition, to achieve its ESG goals and contribute to its
commitments, while appropriately mitigating and managing identified ESG risks and their impact, CEP aims to
monitor key metrics per ESG risk categories: Environmental, Social, and Governance. This will facilitate CEP’s
effective monitoring and progress towards ESG goals and its contribution to commitments made.
We recognise the importance of diversity including at the Board level. At the end of 2022 the number of
independent non-executive Directors on the Board was 5 out of 8 Directors, and the ratio of female members was
50%.
Board of Directors
The Board is collectively responsible for the long-term sustainable success of CEP and is ultimately responsible
for overseeing the implementation of the ESG program in CEP, including the review and approval of related
ESG metrics as recommended by the CEP Executive Committee.
Board Risk Committee
The Board Risk Committee will oversee the integration of ESG into CEP’s risk management framework. This
includes appropriate monitoring of ESG risk that currently affects, or that in the future will affect CEP as well as
setting and overseeing the progress against ESG risk-related metrics and consideration of any interaction
between ESG risks and financial risks.
ESG Climate Risk Steering Committee
The purpose of the CEP ESG Climate Risk Steering Committee is to act as a cross functional forum across CEP
to progress ESG risk integration, to provide support and challenge.
CITIBANK EUROPE PLC
NON-FINANCIAL STATEMENT
12
2. Sustainability strategy (continued)
Materiality assessment
In line with Citi, the ESG topics identified, which we refer to as “material ESG issues” throughout this report,
inform which issues we report on and which issues are considered to be raised to the Board.
Citi recognises that in general, assessing materiality requires thoughtful consideration not only of any applicable
materiality standards, but also of our purpose in assessing materiality and in communicating to stakeholders.
Citi’s public disclosures related to ESG include a range of topics that are relevant to CEP’s businesses and that
are of interest to investors and wider stakeholders.
CEP is guided by a four steps approach
1
for materiality assessment, enabling the organisation to determine its
material topics and report them:
• Step 1: Understand the organisation’s context
• Step 2: Identify actual and potential impacts
• Step 3: Assess the significance of the impacts
• Step 4: Prioritise the most significant impacts for reporting
The first three steps relate to the organisation’s ongoing identification and assessment of impacts. The fourth step
determines the material topics through organisational prioritisation of the most significant impacts for reporting.
The following table outlines CEP’s key material ESG issues included in the report:
ESG factors
Material ESG issues
Reference chapter
Environmental
GHG emissions 3. Environmental matters - climate change
Operational footprint 3. Environmental matters - climate change
Climate change 3. Environmental matters - climate change
Social
Attractive employer 4. Customers, employees and society
Social engagement 4. Customers, employees and society
Human rights 4. Customers, employees and society
Innovation & digitisation 4. Customers, employees and society
Governance
Business Ethics 5. Leadership and governance
Anti-corruption and bribery matters, anti-financial crime 5. Leadership and governance
Data Security/ Financial Product Safety 5. Leadership and governance
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1
Four-steps approach as defined by Global Reporting Initiative (“GRI”)
2. Sustainability strategy (continued)
Stakeholder dialogue
CEP is committed to meeting its legal obligations and voluntary commitments to sustainability and the
advancement of human and worker rights. CEP actively engages with its regulators, clients, and workforce to
understand key areas of concern and opportunities for improvement.
The CEP Board considers and discusses a wide range of information to help it understand the impact on CEP’s
operations and the interests and views of its key stakeholders.
Stakeholder group Engagement
Clients and customers
The Company’s clients
include corporates,
financial institutions and
public sector entities.
The businesses within CEP operate a coordinated client-centric sales and
relationship management organisation.
CEP performs a Voice of the Client survey which provides in-depth understanding
of the corporate clients’ needs and expectations, alongside regular client
performance and service benchmarking, leveraging external reporting and analysis
where relevant and appropriate.
Employees
Employees are encouraged to present their suggestions and views to CEP through
various channels, including the Voice of the Employee survey, the results of which
are presented to the Board each year by Human Resources.
The Board request updates on important actions identified as areas of focus.
Suppliers
CEP has a well-established framework for the engagement with and on-going
relationship management and controls relating to risks of its key suppliers,
ensuring shared values in the conduct of their business.
Communities
Citi is in regular dialogue with charities and non-governmental organisations
(NGOs), as part of its community investing commitment and mission to support the
communities in which it operates.
Citi works closely with community partners to understand the issues local
communities are facing so that it can respond appropriately by providing funding,
volunteers or other support as required.
Government and
regulators
CEP maintains an open and regular engagement with regulators to ensure clarity
and transparency over its strategy and plan, key risks and opportunities, and
progress on ongoing initiatives.
Primary regulatory engagement for CEP is with the Central Bank of Ireland and the
European Central Bank supervisory team and its senior management.
Regulatory engagement is maintained both at the Board as well as the Executive
Management level to ensure regulatory requirements and expectations are
consistently understood and met.
Policymakers
As part of Citi, CEP engages with policymakers both directly and as part of
industry efforts, as a member of a number of financial services trade associations.
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2. Sustainability strategy (continued)
ESG Risks and Risk management
ESG risks are the risks of any negative financial impact on the institution stemming from the current or
prospective impacts of ESG factors on its counterparties or invested assets.
Environmental risks are divided into climate-related and other environmental risks resulting from climate change
and environmental degradation. Social risks are related to human rights, well-being and health of people and
communities, and include factors such as diversity, equality, inclusiveness, labour relations, workplace health
and safety. Governance risks are related to governance practices, including business ethics, anti-corruption and
bribery, transparency and trust, data security, tax honesty, shareholder rights, board remuneration and
information disclosure.
Working towards a broader climate risk integration in business, CEP has developed Climate Related and
Environmental Risk Management Framework (CRMF) that provides a globally consistent approach to managing
climate risk across the bank. CEP is committed to maintaining strong and consistent climate risk management
practices. In addition to the CRMF, Citi’s Environmental and Social Risk Management (ESRM) Policy applies
to all Citi entities globally and provides a framework for how we identify, assess and manage the potential risk to
Citi, including credit and reputational risk, associated with the environmental and social risks of our clients’
activities. Some sectors, e.g. energy and power, have particularly sensitive environmental and social risks that
require sector-specific ESRM screening.
Climate-related and Environmental Risk Management
Climate change presents short-term, medium-term and long-term risks to CEP and to its clients and customers,
with the risks expected to increase over time. Climate related & environment risk (CR&E) refers to the risk of
loss arising either through physical risk or through transition risk. Physical risk originates from the increase in
severity and frequency of either acute physical risks, which are related to extreme weather events, or chronic
physical events which stem from longer term shifts caused by climate change (e.g., average precipitation changes
which may drive long-term shifts in agriculture and water availability). Transition Risks result from action (or
lack of action) to transition to a low-carbon economy and more environmentally sustainable economy, such as
changes in regulations, technological developments, stakeholder expectations and legal implications.
CEP views CR&E risk as a crosscutting risk which can manifest through or amplify existing risks within CEP’s
risk taxonomy. Transmission channels are the causal chains that explain how CR&E risk drivers may materialise
directly or indirectly as sources of financial or non-financial risk to CEP. CR&E Risk is integrated into business-
as-usual risk management activities across the risk management lifecycle (risk identification, risk measurement,
risk monitoring, risk control and risk reporting) and through Risk Enterprise Programs.
To assess how environmental and in particular climate risk drivers may impact the credit profile of CEP obligors,
CEP assesses the associated transition and physical risks. Using industry classifications, based on data and
internal expert insights, Citi has assessed the exposure of different sectors to climate risk and has created a heat
map. The heat map allows CEP to efficiently screen its loan portfolio to identify the areas of the portfolio with
the highest exposure to transition and physical risks and accordingly focus on further assessing and managing
these risks.
For physical risk, the heat map is based on the extent to which sectors and subsectors are exposed to the impacts
of extreme weather events or changes to weather patterns.
For transition risk, the heat map is based on the extent to which sectors and subsectors are exposed to policy,
technology and/or market shifts in the short to medium term.
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3. Environmental matters – climate change
Citi and CEP understand critical sustainability issues and recognise the important role of the financial sector in
addressing this crisis by supporting the transition to a sustainable and low-carbon economy. CEP understands the
complexity of developing solutions to these challenges, which require a combination of strong governmental
policy and regulatory frameworks, corporate leadership, investor engagement and individual actions. To
continue advancing our response to these challenges, in 2020 Citi launched an updated Sustainable Progress
Strategy, which CEP’s ESG Strategy was designed to align with and augment.
Net Zero Commitment
In 2021, Citi announced the commitment to net zero greenhouse gas (GHG emissions) by 2050 in alignment with
the objectives of the Paris Agreement and prevailing climate science. The net zero commitment includes both
financed emissions and own operations. For operations, CEP is targeting net zero emissions by 2030 which
builds on the global operational footprint goals and the 100% renewable electricity goal that Citi achieved in
2020. CEP’s ESG strategy is aligned to Citi’s policies and initiatives, including the Net Zero commitment and
Operational Footprint Goals outlined in the 2022 Taskforce on Climate-Related Financial Disclosures Report.
Climate protection
As outlined in the Environmental and Social Policy Framework, Citi and CEP will not provide project-related
financial services for new thermal coal mines or significant expansion of existing mines; new coal-fired power
plants or expansion of existing plants; oil and gas exploration, development and production in the Arctic Circle;
projects that negatively impact the Outstanding Universal Value of UNESCO World Heritage Sites; and mining
projects that utilise submarine waste disposal.
The following metrics were identified in line with the set targets of Citi and CEP to monitor the carbon-intensity
of CEP’s assets.
Key metrics have been selected and calculated based on the recommendations of the Guidelines on non-financial
reporting and in alignment with CEP strategy.
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3. Environmental matters – climate change (continued)
Amount and volume of carbon-related assets among CEP’s Non-trading Loan assets
Description Description
Unit of
measure
Loan
portfolio
(2022)
Banking
book
(2022)
Amount of carbon-related assets
in the Non-trading Loan
portfolio
Exposures towards sectors that
highly contribute to climate
change (NACE A-I, L
categories) calculated from
Banking book (Gross carrying
amount of loans and advances,
debt securities, equity
securities) other than those
held for trading
$ million 12,785 12,785
Carbon-related assets in the non-
trading portfolio as a percentage
of the current portfolio value
% 29 24
Banking book includes debt security and equity instrument portfolios besides the loan portfolio. Volume of
carbon-related assets is relevant for the loan portfolio of the banking book, representing 29% of the total loan
portfolio, or 24% of the total loan, equity instrument and debt portfolio. The ratio provides information on the
volume of CEP portfolio covered by carbon-related assets as defined by Commission delegated regulation (EU)
2020/1818.
Exposures by sector of counterparty
The concentration of exposures in CEP to high-carbon and low-carbon sectors as at 31 December 2022 was:
Vulnerability category
Balance in $ million
%
Major 2,814 5%
of which Energy sector 1,695 3%
Moderate 8,691 16%
of which Power sector 570 1%
Other 42,035 79%
Total 53,539 100%
Exposures grouped based on vulnerability to climate risk heat map
2
calculated from the banking book covering
Gross carrying amount of loans and advances, debt securities, equity securities other than those held for trading.
CEP ESG strategy is aligned to Citi policies and initiatives, while meeting European regulatory requirements.
CEP is aware of the risk of exposure towards high vulnerability sectors, and identifies measures and actions in
order to mitigate the impacts; 21% of its banking book portfolio is identified as vulnerable (including major and
moderate impacts), of which the energy sector represents 3%, and the power sector represents 1%. Citi has made
announcements regarding ‘Net Zero by 2050’ with interim emissions targets for 2030 for its energy and power
portfolios’ that CEP follows in its own portfolio.
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2
Major impact industries based on Citi heatmap 2022: Oil & Gas, Auto & Motorcycle Manufacturers, Coal and consumable fuels, Shipping
& Maritime logistics – Offshore. Moderate impact industries based on Citi heatmap 2022: Chemicals, Commercial Real Estate, Residential
Real Estate, Capital goods, Multi-Utilities, Electric Utilities and Power other, Gas and Water utilities, Agricultural Products, Airlines and
Tour Operators, Aviation Operation lessors, Aviation transitional Finance, Auto-related Fincos, Beverages, Building products & related,
Reinsurance, Metals & mining exl. coal, Food products, Paper Forest Products & Packaging, Shipping & Maritime Logistics excl. Offshore,
Commodity Trader
3. Environmental matters – climate change (continued)
Credit risk exposures with an indication of those countries/geographies highly exposed to physical risk
Unit of measure 2022
Exposure with countries and sectors which are
vulnerable to climate risk - physical risk
$ million 2,826
Exposure with countries and sectors which are
vulnerable to climate risk - physical risk as a
percentage of the total portfolio value
% 5%
Values show the concentration of exposures and collateral in countries and geographies highly exposed to
physical risks. CEP uses a dedicated portal and database recommended by the European Banking Authority
guidelines that defines geographical areas exposed to climate change related acute and chronic events. For the
2022 disclosures CEP applied reference data of Thinkhazard’s physical risk mapping.
According to the reference data, six countries are identified as highly affected within the CEP jurisdictions:
Spain, Germany, France, Italy, Greece and Portugal. The exposures towards physical risks were further
examined in the portfolios of counterparties’ according to their primary operational locations according to
sectors that highly contribute to climate change as defined above (NACE A-I, L). Altogether 5% of the CEP
banking book is impacted by high vulnerability factor regarding physical risk.
Collateral instruments are important in addressing climate risk mitigation, and relevant for both residential, and
commercial property portfolio of CEP. The total balance of loan portfolios collateralised by immovable property
in countries determined to have a high level physical risk can be regarded as immaterial.
Operational Footprint and GHG Emissions
Operational footprint
As part of Citi, CEP is working toward the 2025 operational footprint goals, which aim to reduce GHG
emissions and energy consumption for the operations. These goals cover GHG emissions, energy use, water
consumption, waste reduction and diversion, and sustainable building design.
Citi’s emissions are calculated in line with the Greenhouse Gas Protocol Corporate Accounting and Reporting
Standard (revised edition). The boundaries of the GHG inventory are defined using the operational control
approach and cover the emissions the Company is responsible for across Scope 1, (building emissions such as
direct gas, diesel consumption or emissions of Citi’s car fleet), Scope 2 (location-based building emissions such
as electricity, district steam) and Scope 3 business travel (car, air, rail emissions).
Citi’s Net Zero Operations team gathers data from its operations on an ongoing basis, with primary evidence
sourced from vendors and power companies. Where Citi pay for occupancy via service charges and the share of
consumption is not known, consumption is calculated by benchmarking the energy/square foot against our global
portfolio. CEP calculates GHG emissions in line with Citi’s methodology. A summary of CEP’s GHG emissions
in 2022 is provided below. For 2022 CEP focused on calculating emissions from its own operations including the
emissions resulting from business travel.
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3. Environmental matters – climate change (continued)
Greenhouse Gas (GHG) Emissions Unit 2022
Scope 1 – Direct tCO2e 598
Scope 2 – Indirect tCO2e 7,272
Scope 3 – Business travel tCO2e 2,225
Total tCO2e 10,096
CEP understands that in disclosing indicators related to GHG emissions, banks should focus on their Scope 3
GHG emissions. As the methodology is still evolving in relation to Scope 3 emissions, CEP is disclosing
information for financial year ended 2022 for its operational emissions for all locations (Scope 1 and 2) and for
business travel (Scope 3).
CEP is committed to reducing its operational footprint by using energy and other resources efficiently, by
purchasing renewable energy and leasing certified office buildings.
Citi sources 100% renewable electricity through green tariffs for electricity purchased directly at locations in
France, Germany, UK, Ireland, Italy, Luxembourg, Netherlands (Landlord purchase). Where electricity is
obtained in leased properties from landlords, EU Guarantee of Origin certificates are purchased for the
equivalent amount used. Over 50% of CEP locations are certified by the US Green Building Council’s
Leadership in Energy and Environmental Design (LEED) programme.
Business travel emissions (Scope 3 Category 6) include emissions from the transportation of employees for
business-related activities in vehicles owned or operated by third parties, such as aircraft, trains, and passenger
cars.
Sustainable Building Principles
Whether undertaking new construction or renovating existing buildings, CEP shares Citi’s principles in
prioritizing efficiency and sustainability, to minimise the environmental impact of our facilities across the globe.
Since Citi’s own operations consist largely of buildings, Citi has developed and is piloting requirements for new
and newly leased buildings to be zero carbon by 2030, in support of its net zero commitments. These
requirements address both operational and embodied carbon emissions, inclusive of energy use, energy supply,
integration with utilities and material use.
Efficient Travel Options
For many years, Citi has encouraged employees to use video and web conferencing technologies rather than
traveling, whenever possible. With the onset of the global pandemic, Citi quickly transitioned the entire company
to adopt use of these platforms for their daily interactions. Many CEP offices are centrally located near public
transportation, which reduces the need for employees to drive to work. Now that many colleagues across the firm
have started traveling again, we are working to build awareness for how business travel impacts our carbon
footprint.
Disclosures in accordance with Article 8 of the Taxonomy Regulation
The Regulation on the establishment of a framework to facilitate sustainable investment (‘Taxonomy
Regulation’), has created a unified EU classification system of environmentally sustainable economic activities
and imposed transparency obligations on certain non-financial and financial undertakings with respect to those
activities. The Delegated Act supplementing Article 8 of the Taxonomy Regulation sets out specific
requirements for Taxonomy-related reporting by undertakings covered by Directive EU 2014/95 (the Non-
Financial Reporting Directive).
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3. Environmental matters – climate change (continued)
An economic activity is eligible irrespective of whether it meets any or all of the technical screening criteria laid
down in the Climate Delegated Act (and future delegated acts). Therefore, the fact that an economic activity is
Taxonomy-eligible does not give any indication of the environmental performance and sustainability of that
activity. Taxonomy regulation is intended to be a dynamic framework that should expand its scope of activities
over time, in particular by including other environmental objectives, which should expand the scope of eligible
activities accordingly.
A Taxonomy-eligible activity becomes Taxonomy-aligned, if it substantially contributes to one of the six EU
Taxonomy environmental objectives, while also not doing significantly harm to any of those objectives and
meeting minimum safeguards on human rights and labour standards.
According to the Taxonomy Regulation, eligibility-related disclosures of financial undertakings with regard to
financial or non-financial undertakings in scope of Article 8 of the Taxonomy Regulation shall be based on
actual information provided by the counterparties. CEP uses the most recently available information provided by
the financial or non-financial underlying counterparty for their eligibility reporting based on external third party
data.
As EU Taxonomy information was due to be disclosed for the first time in 2022, there is still limited data
availability from our counterparties on the Taxonomy-eligibility of their economic activities. As the EU
Taxonomy develops further and Taxonomy-alignment data becomes available, CEP aims to utilise the
Taxonomy to a greater extent within the business.
Balance sheet positions Gross carrying
amount
%
Total assets covered by the taxonomy ratio over total balance sheet assets 42%
Assets in scope of taxonomy assessment (in numerator) over assets covered by the
taxonomy ratio – turnover based
44 %
eligible
1 %
non-eligible
43 %
Assets not in scope of taxonomy assessment (in denominator) over assets covered by
the taxonomy ratio
56 %
Derivatives
—
Exposures to entities not required to publish non-financial information under Article 19a or
Article 29a of Directive 2013/34/EU
31 %
Short-term interbank loans
5 %
Other excluded assets
20 %
Assets not in scope of taxonomy over total balance sheet assets 58%
Exposures to states, state, district governments, central banks and supranational
organisations
33 %
Financial assets held for trading (including trading book derivatives) 25%
Total balance sheet assets 100%
External data provider was used to gather the eligibility revenue percentage counterparties have reported.
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3. Environmental matters – climate change (continued)
CEP has also chosen to estimate the proportion of eligibility of economic activities as part of its voluntary
disclosure where a counterparty has not yet disclosed its taxonomy-eligibility.
Voluntary disclosure based on combined reported and estimated data by external data provider:
Balance sheet positions Gross carrying
amount
%
Assets in scope of taxonomy assessment (in numerator) over assets covered by the
taxonomy ratio – turnover based
44 %
eligible
4 %
non-eligible
40 %
4. Customers, employees and society
Attractive employer
Diversity and inclusion
In line with Citi’s values CEP believes that diversity and inclusion are critical to its future success and growth.
CEP is fully aligned with the overall Citi Diversity policy, strategy and agenda. CEP recognises diversity as one
of its competitive advantages. A diverse workforce helps CEP embrace diverse points of view and foster strong
communications with clients across all backgrounds and geographies bringing out. CEP is fully committed to
equal employment opportunity and compliance with the letter and spirit of the full range of laws regarding fair
employment practices and non-discrimination. Promoting a diverse workforce is a key part of leadership and
people related processes and performance discussion.
CEP is committed to representing diversity and promoting inclusion at Board and Senior Management level to
enhance leadership and organisational culture. Additionally focus is placed upon initiatives that attract, promote,
and retain diverse talent. Each year Citi conducts a global pay equity review, and implementation of pay equity
initiatives continue in this regard.
Across the 22 countries in which CEP operates, employees are active members in a variety of Employee
Network Programs. These Programs consists of Inclusion Network Groups supported by local chapters. Local
chapters are initiated and led by employees. Employee networks like Citi Roots, Citi Disability Network:
Enabling Diverse Abilities, Citi Women's Network, Citi Pride Network, Citi Families Matter Network provide a
wide variety of programs to assist members in providing personal and professional development, celebrating
ethnic, cultural and community diversity among others to members.
Diversity of governance bodies and employees
Description Unit 2022
Social
Diversity CEP Director and Managing Director Female
Representation
% 31
CEP Assistant Vice President and above Female
Representation
% 38
Talent
The CEP talent management strategy covers the entire life cycle of our employees. It is fully aligned with CEP
leadership, mobility, performance management strategy, diversity and engagement strategy and integrated into
its people management processes to bring CEP’s strategy to life. With an employee base of approximately
13,000 staff across 22 countries CEP is committed to identify, attract, develop and retain talent to ensure it has
the best people and leaders to drive future business growth. CEP recognises that the success of its business
depends on the implementation of, and an effective management of the talent framework.
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4. Customers, employees and society (continued)
Learning and development
CEP maintains a mandatory training program underpinned by a standard operating procedure and process, which
is owned and monitored by the Compliance function. This includes training on, amongst other things, the
Company's Code of Conduct, whistleblowing, anti-money laundering and market abuse. Acquiring knowledge in
the ethical standards support the dissemination of the core values and principles applied by Citi and CEP.
All employees are onboarded to CEP through the Hello Citi programme, an enterprise wide programme designed
to help new hires navigate the organisation, make connections and become familiar with our values and culture.
This gives an employee a better understanding of Citi, its structure, management approaches and the dynamics of
the employee lifecycle.
In addition, other resources, courses and development experiences are made available to individuals to support
applicable development in their individual roles. A further suite of training is provided to managers to ensure
they are appropriately trained on how to communicate and have crucial conversations, effective delegation,
giving feedback and coaching, promoting teamwork, inclusion and managing risk responsibly.
Well-being at work
Citi aims to create workspaces that promote employee wellness, and engaging employees in order to maintain a
culture of safety, sustainability and wellness. When looking at how buildings where people work can affect their
well-being, it is important to manage air quality and acoustics, as well as providing ergonomic furniture,
opportunities to stay active, provide healthy food options and a work environment that is both flexible and
effective.
CEP is fully aligned to Live Well programme designed to support the physical and mental well-being of Citi
employees by promoting a culture of health, learn more about healthy nutrition and exercise, prevention, living
tobacco free, and mental health and balance.
Innovation and Digitisation
Through Citi’s transformation, Citi and CEP are working to modernise and simplify the organisation so that risk
can be managed better, service to customers and clients are improved. Through the modernisation of the data
infrastructure and operations, and by evolving the culture, safety and soundness is strengthened and CEP’s
ability in the digital age is improved.
Citi, and CEP, is observing the shift to digital delivery and architecture by its customers, financial market
intermediaries, central banks and the fintech industry. Citi has been making investments across the Company,
including, for example, hiring front office colleagues and enhancing product capabilities and platforms to
improve client digital experiences and add scalability and implementing new capabilities and partnerships. Citi
has also been pursuing productivity improvements through various technology and digital initiatives,
organisational simplification and location strategies.
Social engagement
Throughout 2022, Citi and the Citi Foundation accelerated and expanded investments in communities around the
world, helping to support an inclusive recovery and equitable future. In pursuit of Citi's mission, CEP is
committed to enabling growth and progress in the communities where we operate. In most countries where CEP
operates, it is in regular dialogue with charities and non-governmental organisations (NGOs), as part of its
community investing commitment and mission to support local communities. CEP works closely with
community partners to understand the issues local communities are facing so that it can respond appropriately by
providing funding, volunteers or other support as required.
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4. Customers, employees and society (continued)
Community Affairs is a deeply embedded part of the culture in CEP’s headquarters in Ireland. For the past 20
years, Citi Ireland has partnered with Junior Achievement to help young people reach their full potential through
access to entrepreneurship and employability training. To date, almost 1,000 Citi volunteers have taught Junior
Achievement programs to 18,000 students in Ireland. Citi Ireland has been working with Enactus since 2017.
Enactus is a global organisation that works with university students to develop social entrepreneurship by
partnering business leaders with the students to work on projects to tackle community issues. Each year, teams
from universities around Ireland take part in Citi’s Pathways to Progress program. They are provided with
training, mentoring and seed funding to develop entrepreneurial ideas to tackle social issues facing young people
in disadvantaged communities. Additionally, Citi Ireland works with Business in the Community and supports
their programs for helping schoolchildren in disadvantaged areas with reading and maths and is also involved in
mentoring programs for jobseekers.
In 2022 Citi Ireland signed a two-year partnership with LauraLynn, Ireland's only Children's Hospice. To date,
employees in Citi Ireland have raised 100,000 EUR in support of the organisation. CEP branch employees were
part of the Europe wide initiative ‘Citi in Europe Runs for Refugees’, which supported ASHOKA, an
organisation carrying out vital work as they support refugees and migrants.
Each year employees in CEP branches take part in Global Community Day, which is a global Citi initiative
where employees volunteer a day to work in the local community.
Human rights
Citi and CEP support the protection and fulfilment of human rights around the world and are guided by
fundamental principles of human rights, such as those in the UN Universal Declaration of Human Rights, the
International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work and UN
Guiding Principles on Business and Human Rights. Our commitment to fair, ethical and responsible business
practices, as we engage with employees, clients, vendors and communities around the world, is embodied in our
values and Code of Conduct
Citi’s policies, standards and due diligence practices guide our business decisions with respect to human rights.
To learn more about Citi’s commitment to human rights, see Statement on Human Rights.
The Citi Requirements for Suppliers document detail some of the obligations that Suppliers must meet while
doing business with Citi.
Citi’s Environmental and Social Policy Framework additionally sets out Citi’s process for reviewing social risks
associated with transactions, and includes certain policy prohibitions and areas of high caution.
5. Leadership and governance
Business Ethics
CEP embraces Citi’s mission of enabling growth and economic progress, while adhering to the highest ethical
standards. The Company asks its colleagues to ensure their decisions pass three tests: they are in our clients’
interests, create economic value, and are always systemically responsible. CEP aims to ensure regulatory
compliance through robust internal controls that contribute to building trust with clients, leading to increased
economic value, and to protecting shareholder value by minimizing losses incurred as a result of legal
proceedings.
As part of Citi, CEP complies with required transparency requirements, at both the European Union (EU) and
individual country level. Citi is a signatory to the EU Transparency Register, which requires it to comply with
the register’s code of conduct.
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5. Leadership and governance (continued)
Anti-corruption and bribery matters, anti-financial crime
As a global financial institution that offers banking, securities and insurance products to millions of customers
around the world, Citi recognises its obligation to join with governments, international organisations and other
members of the financial industry to help close off the financial channels that terrorists and money launderers
use for their illicit purposes. CEP embraces Citi’s mission of enabling growth and economic progress, while
adhering to the highest ethical standards. The Company ask its colleagues to ensure their decisions pass three
tests: they are in our clients’ interests, create economic value, and are always systemically responsible.
Citi has policies, procedures and internal controls to comply with anti-bribery laws and conducts an annual
bribery risk assessment of all global business lines. Anti-Bribery& Corruption related training is provided to Citi
staff annually and is supplemented with targeted training and communications as needed. For more information,
see the Citi Anti-Bribery & Corruption Program Statement, which is updated at least annually.
Citi established a number of enterprise-level programs and training to combat financial crimes in alignment with
CEP Compliance as well as with business lines and functions:
• The Global Sanctions Program monitors and fosters awareness of applicable sanctions laws and
regulations, assesses sanctions risk exposure, oversees the quality of sanctions control processes, and
sets global policies/standards/processes to identify, measure, monitor, and manage sanctions risk.
• The Global AML Program is designed to protect both our clients and our franchise from the risks of
money laundering, terrorist financing and other financial crimes.
• Global Financial Crimes Investigations and Intelligence (GFCII) is uniquely positioned within Citi’s
Compliance function to tackle financial crime and provide a globally consistent approach to the
prevention and detection of risk.
These rigorous practices support Citi’s and CEP’s efforts to grow a successful, respected business that delivers
the best possible results for clients, customers, and communities, while managing the inherent risks associated
with financial crimes.
Data Security/ Financial Product Safety
Ensuring the privacy and data security of financial data is an essential responsibility of the financial industry. As
growth in mobile banking and cloud storage continues and more of CEP’s operations become technology- and
internet-dependent, data security will be an increasingly important topic to manage.
Sophisticated technology and continuous training of personnel are essential in a world of growing cybersecurity
threats. CEP makes significant efforts related to safeguarding data against emerging and continuously evolving
cybersecurity threats and technologies, and actual security breaches compromising customers' personally
identifiable information (PII).
Citi’s cyber and information security program sets the requirements under which Citi, its subsidiaries, affiliates,
and third parties safeguard the confidentiality, integrity, and availability of information and information assets.
Protecting information is essential to meeting Citi’s obligations to its customers, partners, and workers, as well
as complying with applicable cyber and information security laws, regulations, and due care obligations, and
meeting the expectations of regulators and authorities.
6. Conclusion
CEP understands the financial sector has an important role to play in supporting the transition to a sustainable,
low-carbon economy that balances the ESG needs of society. CEP is committed to acting responsibly and
integrating ESG across its products and business operations in line with Citi initiatives and policies. CEP is
enhancing its environmental and social policies and disclosures based on the regulatory requirements and is fully
committed to disclose relevant and important information as part of its Non-Financial Statement and EU
Taxonomy disclosures.
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NON-FINANCIAL STATEMENT
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Report on the audit of the financial statements
Opinion
We have audited the financial statements of Citibank Europe Plc (‘the Company’) for the year ended 31
December 2022 set out on pages 35 to 140, which comprise the Income Statement, the Statement of Other
Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement
of Cash flows and related notes, including the summary of significant accounting policies set out in note 1. The
financial reporting framework that has been applied in their preparation is Irish Law and International Financial
Reporting Standards (IFRS) as adopted by the European Union.
In our opinion:
• the financial statements give a true and fair view of the assets, liabilities and financial position of the
Company as at 31 December 2022 and of its profit for the year then ended;
• the financial statements have been properly prepared in accordance with IFRS as adopted by the European
Union; and
• the financial statements have been properly prepared in accordance with the requirements of the Companies
Act 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities
section of our report. We believe that the audit evidence we have obtained is a sufficient and appropriate basis
for our opinion. Our audit opinion is consistent with our report to the audit committee.
We were appointed as auditor by the directors in May 2001. The period of total uninterrupted engagement is the
21 years ended 31 December 2022. We have fulfilled our ethical responsibilities under, and we remained
independent of the Company in accordance with, ethical requirements applicable in Ireland, including the Ethical
Standard issued by the Irish Auditing and Accounting Supervisory Authority (IAASA) as applied to public
interest entities. No non-audit services prohibited by that standard were provided.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors‘
assessment of the entity’s ability to continue to adopt the going concern basis of accounting included the
following:
• We used our knowledge of the Company, the financial services industry, and the general economic
environment to identify the inherent risks to the business model and analysed how those risks might affect
the Company’s financial resources or ability to continue operations over the going concern period. The risks
that we considered most likely to adversely affect the Company’s available financial resources over this
period were:
• the availability of funding and liquidity in the event of a market wide stress scenario; and
• the impact on regulatory capital requirements in the event of an economic slowdown or recession.
• We also considered whether these risks could plausibly affect the availability of financial resources in the
going concern period by comparing severe, but plausible, downside scenarios that could arise from these
risks individually and collectively against the level of available financial resources indicated by the
Company’s financial forecasts.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
25
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a
going concern for a period of at least twelve months from the date when the financial statements are authorised
for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Detecting irregularities including fraud
We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the
financial statements and risks of material misstatement due to fraud, using our understanding of the entity's
industry, regulatory environment and other external factors and inquiry with the directors. In addition, our risk
assessment procedures included:
• Inquiring with the directors and other management as to the Company‘s policies and procedures
regarding compliance with laws and regulations, identifying, evaluating and accounting for litigation
and claims, as well as whether they have knowledge of non-compliance or instances of litigation or
claims.
• Inquiring of directors, the audit committee, internal audit and inspection of policy documentation as to
the Company‘s high-level policies and procedures to prevent and detect fraud, including the internal
audit function, and the Company‘s channel for whistleblowing, as well as whether they have knowledge
of any actual, suspected or alleged fraud.
• Inquiring of directors, the audit committee, and internal audit regarding their assessment of the risk that
the financial statements may be materially misstated due to irregularities, including fraud.
• Inspecting the Company‘s regulatory correspondence.
• Reading minutes of meetings of the Board of Directors, and the audit committee.
• Considering remuneration incentive schemes and performance targets for management and directors.
• Performing planning analytical procedures to identify any usual or unexpected relationships.
We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit
team.
Firstly, the Company is subject to laws and regulations that directly affect the financial statements including
companies and financial reporting legislation. We assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement items, including assessing the financial
statement disclosures and agreeing them to supporting documentation when necessary.
Secondly, the Company is subject to many other laws and regulations where the consequences of non-
compliance could have a material effect on amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or the loss of the Company’s licence to operate. We identified the
following areas as those most likely to have such an effect: regulatory capital and liquidity and certain aspects of
company legislation recognising the financial and regulated nature of the Company’s activities and its legal
form.
Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and
regulations to inquiry of the directors and other management and inspection of regulatory and legal
correspondence, if any. These limited procedures did not identify actual or suspected non-compliance.
We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. As required by auditing standards, we performed procedures to address the risk of
management override of controls. On this audit we do not believe there is a fraud risk related to revenue
recognition. We identified fraud risks in relation to overlays raised by management as part of the expected credit
loss on loans and advances to customers, the valuation of level 3 financial instruments, and the existence and
accuracy of unconfirmed OTC Derivatives.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
26
Further detail in respect of management overlays and the valuation of level 3 financial instruments is set out in
the key audit matters section of this report.
In response to the fraud risks, we also performed procedures including:
• Identifying journal entries and other adjustments to test based on risk criteria and comparing the
identified entries to supporting documentation;
• Assessing significant accounting estimates for bias; and
• Assessing the disclosures in the financial statements.
As the Company is regulated, our assessment of risks involved obtaining an understanding of the legal and
regulatory framework that the Company operates and gaining an understanding of the control environment
including the entity’s procedures for complying with regulatory requirements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the financial statements, even though we have properly planned and performed our
audit in accordance with auditing standards. For example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not
responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and
regulations.
Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of
the financial statements and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as
follows (unchanged from 2021):
IFRS 9 Expected Credit Losses – ECL $300m (2021: $238m)
Refer to note 1 (j) (accounting policies) and notes 19, and 21.2 (financial disclosures)
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
27
The key audit matter How the matter was addressed in our audit
The calculation of credit provisions requires a high
degree of judgement to reflect recent developments
in credit quality, arrears experience and/or
emerging macroeconomic risks.
The key areas where we identified greater levels of
management judgement and therefore increased
levels of audit focus in the Company’s compliance
with IFRS 9 include but are not limited to:
Accuracy of Wholesale Probability of Default
(“PD“) Model
Owing to the complexity and uncertainty in the PD
model, including the underlying assumptions, we
have identified a significant risk of error in
expected credit losses (“ECL“) as a result of
inaccurate PDs being generated by the Wholesale
PD model.
Accuracy of Wholesale PD Model;
• We performed end-to-end process walkthroughs to
identify the key systems, applications and controls
used in the ECL process.
• In conjunction with our credit specialist, we inspected
the relevant PD model validation reports and assessed
whether the findings have been appropriately
considered and addressed by management / model
developers.
• We inspected the model development documentation
and assessed whether model updates in the period were
reasonable.
• We evaluated the adequacy of the significant increase
in credit risk (“SICR“) criteria for compliance with
IFRS 9.
• We independently assessed the reasonableness of the
modelled outputs with reference to external
information.
• In conjunction with our credit modelling specialists,
we performed independent reperformance testing over
key aspects of the Wholesale PD model underlying the
calculation of expected credit losses.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
28
Management Overlays
Management overlays are raised by management to
address known impairment model limitations, data
limitiations and/or emerging trends. We have
identified a significant risk of error and fraud
associated with the valuation of management
overlays.
Economic Scenarios
Economic scenarios have a direct impact on the
proportion of loans in stage 2 and the resultant
ECL. Significant management judgement is applied
to the determination of the economic scenarios and
the weightings applied to them.
We have identified a significant risk due to error
with respect to management judgement applied in
the selection of scenarios, the associated scenario
probabilities and the material economic variables
which drive the scenarios and the related
weightings, particularly given the heightened
economic and geopolitical uncertainty.
Identification and quantification of stage 3 loans
There is a risk that stage 3 loans are not completely
identified and that the individually assessed ECLs
held against these stage 3 counterparties are
incorrectly or inappropriately calculated by
management. Management judgement is applied to
value the collateral, in determining the probability
weighting of scenarios used to calculate the level of
provisioning required and the impact of the likely
courses of action with borrowers on ECL.
Management Overlays
• We performed end-to-end process walkthroughs and
tested the design, implementation, and operating
effectiveness of key controls over the authorisation and
review of management overlays.
• We evaluated the conceptual soundness of
management overlays by critically assessing
management’s methodology, including the limitation
and/or risk that the adjustment is seeking to address,
for compliance with the requirements of IFRS 9.
• We assessed the completeness and overall adequacy of
management overlays, by comparing the overlays
recognised by management to the various risks, model
limitations and/or data limitations that we consider to
exist in the portfolio.
• In conjunction with our credit modelling specialist, we
assessed whether the management overlays were
subject to bias having regard for the risk profile of the
loan book, model limitations and/or data limitations,
performance of the relevant portfolio, inflation, rising
interest rates and market uncertainties.
Economic scenarios
• We performed end-to-end process walkthroughs and
tested the design, implementation and operating
effectiveness of key controls relating to the estimation
of macro-economic forecasts used in measuring ECL,
including the economic scenarios and probability
weightings applied to them.
• In conjunction with our local economic specialist, we
held probing inquiries with mangaement and inspected
related documentation to assess whether the basis for
management assumptions were reasonable and
consistent with consensus forecasts.
• We challenged whether management’s Forward
Looking Information (“FLI“) optimistic/pessimistic
scenario weightings were reaasonable, having regard
to all available information at year end such as external
forecasts and peer information.
• We engaged our local economics specialist to assist us
in assessing the plausibility of the significant
assumption underpinning management’s economic
scenarios which we have defined to be GDP.
Specifically, we challenged the overall reasonableness
of GDP forecasts with reference to independent and
observable economic forecasts.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
29
Ide Identification and quantification of stage 3 loans
• We performed an end-to-end process walkthrough and
tested the design, implementation and operating
effectiveness of key controls relating to the assignment
of credit risk grades;
• In relation to performing loans, we haphazardly
selected a sample of individual loans for testing and
performed independent credit file reviews, critically
assessing by reference to underlying loan
documentation, and through inquiries of management,
whether the credit grade and associated staging was
reasonable. In addition to our haphazardly selected
sample, we judgementally selected a number of
additional risk based cases, focusing on high risk
sectors including those impacted by climate risk,
inflation and geopolitical events; and
• We performed independent credit reviews over a
sample of stage 3 individually assessed loans to test
the reasonableness of the expected credit loss and
challenged management in respect of significant
assumptions underpinning the individually assessed
impairment calculations.
We found the significant judgements used by management
in determining the ECL charge and provision, including
the accuracy of the Wholesale PD model, application of
management overlays, economic scenarios and
identification and quantification of stage 3 loans, to be
reasonable.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
30
Valuation of level 3 and complex level 2 financial instruments
Refer to note 1 (i) (accounting policy) and note 23 (financial disclosures)
The key audit matter How the matter was addressed in our audit
Risk of Error: The determination of the valuation
of financial instruments that are considered to
have unobservable inputs, which represents
management’s estimate of the fair value of the
instrument at the date of the financial statements,
involves judgement and complexity surrounding
the valuation assertion. The significant pricing
inputs are unobservable, involve complex
valuation models or limited market data and
estimation uncertainty can be high. As such, we
have determined there to be a significant risk of
error around the valuation of these financial
instruments. We identified the financial
instruments with a significant risk of error to be
those that are classified as Complex Level 2
instruments (i.e., those financial instruments
valued by models deemed to have a high degree
of complexity) and those that are classified as
having significant unobservable inputs into Level
3 positions (i.e. those financial instruments valued
using alternative pricing procedures due to at least
one significant unobservable input).
• We performed end-to-end process walkthroughs of the
valuation process and tested the design, implementation
and operating effectiveness of key controls identified in
the following areas:
◦ Independent price verification (“IPV“) key
inputs, including completeness of positions and
risk factors subject to IPV;
◦ Fair value adjustments (“FVAs“);
◦ IT systems relevant to the valuation including
interfaces with risk systems and external pricing
providers; and
◦ Validation, completeness, implementation and
usage of valuation models, including controls
over adjustments to model limitations and
assumptions
• In conjunction with our valuation specialists, we:
◦ Independently valued a selection of financial
instruments in both level 2 and level 3 (to
address the risk of fraud);
◦ Performed test of details for a sample of
instruments including re-performance of
management’s process over the reliability and
accuracy of the inputs used in IPV process and
IPV calculation itself for the 31 December 2022
IPV process;
Risk of Fraud: Management makes certain
assumptions as they relate to the valuation of
financial instruments. The valuation of level 3
financial instruments takes into consideration,
among other matters, trader judgement regarding
at least one significant unobservable input. The
significant assumptions and/or judgements used
for the significant unobservable inputs are
subjective and can be manipulated by the trader.
As a result, there is an inherent fraud risk relating
to those financial instruments that are classified as
Level 3. (i.e., those financial instruments valued
using alternative pricing procedures due to at least
one significant unobservable input).
We regard the valuation of level 3 and complex
level 2 financial instruments as a key audit matter
because its calculation is complex and requires a
high degree of management judgement.
◦ Inspected external sources for price inputs used
by management in performing IPV and
recalculated IPV variances as well as FVAs; and
◦ Independently obtained key pricing inputs as
part of our recalculations and challenge.
Overall, we found the valuations of level 3 and more
complex level 2 financial instruments, including the
significant pricing inputs, to be reasonable.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
31
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at $60m (2021: $52.2m), determined with reference to
a benchmark of Net Assets of which it represents 0.5% (2021: 4% of previous benchmark profit before tax).
Materiality for the current year was determined in the aforementioned manner due to the Markets business
expansion during 2022 which had a transformative effect on the statement of financial position and equity of the
Company. The statement of financial position provides a fairer representation of the progress of the Company's
expansion and we consider net assets to be the most appropriate benchmark as it provides a more stable measure
year on year than PBT and is the metric we consider to most influence the decisions of users of the financial
statements.
Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole which
equates to $45m (2021: $39.1m). We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. In
applying our judgement in determining performance materiality, we considered a number of factors including;
the low number and value of misstatements detected and the low number and severity of deficiencies in control
activities identified in the prior year financial statement audit.
We reported to the audit committee any corrected or uncorrected identified misstatements exceeding $3m (2021:
$2.6m), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit was undertaken to the materiality and performance materiality level specified above and was all
performed by a single engagement team in Dublin with assistance from other KPMG offices. In planning the
audit, we applied materiality to assist us in determining what risks were significant risks, including those set out
above, and to determine, the nature, timing and extent of our audit response.
Other information
The directors are responsible for the other information presented in the Annual Report together with the financial
statements. The other information comprises the information included in the directors’ report, the non-financial
statement included on pages 11-24, the European Union Taxonomy Regulation on pages 19 - 21, and the
unaudited notes to the financial statements which include Country by Country Reporting.
The financial statements and our auditor’s report thereon do not comprise part of the other information. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not express an
audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial
statements audit work, the information therein is materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that work we have not identified material misstatements in
the other information.
Based solely on our work on the other information undertaken during the course of the audit, we report that, in
those parts of the directors’ report specified for our consideration:
• we have not identified material misstatements in the directors’ report;
• in our opinion, the information given in the directors’ report is consistent with the financial statements;
and
• in our opinion, the directors’ report has been prepared in accordance with the Companies Act 2014.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
32
Our opinions on other matters prescribed by the Companies Act 2014 are unmodified
We have obtained all the information and explanations which we consider necessary for the purposes of our
audit.
In our opinion the accounting records of the Company were sufficient to permit the financial statements to be
readily and properly audited, information and returns for our audit have been received from branches of the
Company not visited by us and the Company financial statements are in agreement with the accounting records.
We have nothing to report on other matters on which we are required to report by exception
The Companies Act 2014 requires us to report to you if, in our opinion:
• the disclosures of directors’ remuneration and transactions required by Sections 305 to 312 of the Act
are not made; and
• the Company has not provided the information required by section 5(2) to (7) of the European Union
(Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups)
Regulations 2017 for the year ended 31 December 2021 as required by the European Union (Disclosure
of Non-Financial and Diversity Information by certain large undertakings and groups) (amendment)
Regulations 2018.
We have nothing to report in this regard.
Respective responsibilities and restrictions on use
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 10, the directors are
responsible for: the preparation of the financial statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis
of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A fuller description of our responsibilities is provided on IAASA’s website at https://iaasa.ie/publications/
description-of-the-auditors-responsibilities-for-the-audit-of-the-financial-statements/.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
33
The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s members, as a body, in accordance with Section 391 of the
Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members
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 members, as a body, for our audit work, for this report, or for the opinions we have formed.
James Black
16 March 2023
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Harbourmaster Place
IFSC
Dublin 1
Ireland
D01 F6F5
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
CITIBANK EUROPE PLC
34
Note
2022 2021
$m $m
Interest income calculated using the effective interest method 3 1,168 546
Interest income 1,168 546
Interest expense 3 (581) (163)
Net interest income 587 383
Fee and commission income 4 1,368 1,354
Fee and commission expense 4 (228) (217)
Net fee and commission income 1,140 1,137
Net trading income 5 468 165
Net investment income 6 42 52
Net income from other financial instruments designated at fair value
through profit or loss 7 22 59
Other operating income 8 744 676
Net Income before Impairment 3,003 2,472
Net impairment (losses)/gains on financial instruments 21 (70) 249
Net operating income 2,933 2,721
Personnel expenses 10 (1,055) (951)
Other expenses 12 (604) (564)
Total operating expenses (1,659) (1,515)
Profit before tax 1,274 1,206
Corporate tax 13 (244) (193)
Profit for the year 1,030 1,013
The accompanying notes on pages 41 to 148 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 16 March 2023 and signed on their behalf
by:
Susan Dean Silvia Carpitella John Gollan Fiona Mahon
Chairperson Interim CEO/CFO Audit Committee Chair Company Secretary
CITIBANK EUROPE PLC
INCOME STATEMENT
for the year ended 31 December 2022
35
Note
2022 2021
$m $m
Profit for the period 1,030 1,013
Items that will not be reclassified to profit or loss
Gain on remeasurement of defined benefit liability 14 84 40
Related tax 26 (16) (4)
Items that are or may be reclassified to profit or loss
Foreign currency translation gain/(loss) 63 (19)
Net gain/(loss) on hedge of net investment in foreign operation — (10)
Movement in fair value reserve (FVOCI debt instruments)
Debt instruments at FVOCI - net change in fair value (449) (173)
Debt instruments at FVOCI - reclassified to profit or loss 6 6 (2)
Related tax 26 70 24
Other comprehensive expense for the year, net of tax (242) (144)
Total comprehensive income for the year 788 869
The accompanying notes on pages 41 to 148 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 16 March 2023 and signed on their behalf
by:
Susan Dean Silvia Carpitella John Gollan Fiona Mahon
Chairperson Interim CEO/CFO Audit Committee Chair Company Secretary
CITIBANK EUROPE PLC
STATEMENT OF OTHER COMPREHENSIVE INCOME
for the year ended 31 December 2022
36
Note
31 December
2022
31 December
2021
(Restated)
$m $m
Assets
Cash and cash equivalents 15 32,911 27,482
Trading assets 16, 23 9,895 4,443
Derivative financial instruments 17, 23 22,347 13,126
Investment securities 18 9,072 7,525
Loans and advances to banks 19 13,472 11,035
Loans and advances to customers 19 30,821 21,253
Shares in subsidiary undertakings 27 14 14
Other assets* 20 10,183 6,841
Current tax asset 14 44
Goodwill and Intangible assets 25 120 109
Property and equipment 24 183 140
Deferred tax assets 26 255 247
Total assets 129,287 92,259
Liabilities
Deposits by banks 23 8,858 11,148
Customer accounts 23 49,072 38,977
Derivative financial instruments 17, 23 22,844 14,429
Subordinated liabilities 28 4,455 4,773
Current tax liability 54 56
Provisions 29 131 89
Deferred tax liabilities 26 17 20
Other liabilities* 30 29,761 11,168
Total liabilities 115,192 80,660
Equity shareholders' funds
Share capital 31 11 11
Share premium account 31 1,963 1,963
Other reserves (net) 39 2,002 604
Retained earnings 10,119 9,021
Total equity attributable to equity shareholders 14,095 11,599
Total liabilities and equity shareholders' funds 129,287 92,259
*Restated for prior year adjustment, as detailed in Note 38
The accompanying notes on pages 41 to 148 form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 16 March 2023 and signed on their behalf
by:
Susan Dean Silvia Carpitella John Gollan Fiona Mahon
Chairperson Interim CEO/CFO Audit Committee Chair Company Secretary
CITIBANK EUROPE PLC
STATEMENT OF FINANCIAL POSITION
As at 31 December 2022
37
Attributable to equity holders of the Company
Note
Share
capital
Share
premium
Capital
reserve
Merger
reserve
Translation
reserve
Fair value
reserve
Equity
reserve
Retained
earnings Total
$m $m $m $m $m $m $m $m $m
Balance at 1 January 2021 11 1,963 827 2 (88) 28 (1) 7,972 10,714
Total comprehensive income/
(loss):
Profit for the year — — — — — — — 1,013 1,013
Other comprehensive income/
(loss), net of tax:
Remeasurements of defined benefit
liability 14, 26 — — — — — — — 36 36
Foreign currency translation
differences for foreign operations — — — — (19) — — — (19)
Net loss on hedge of net
investment in foreign operation — — — — (10) — — — (10)
Fair value reserve (FVOCI
financial assets) — — — — — (151) — — (151)
Total other comprehensive income/
(loss) — — — — (29) (151) — 36 (144)
Total comprehensive income/(loss) — — — — (29) (151) — 1,049 869
Transactions with owners,
recorded directly in equity
Equity increase resulting from
merger and capital transactions 34 — — — 16 — — — — 16
Total contributions by and
distributions to owners — — — 16 — — — — 16
Balance at 31 December 2021 11 1,963 827 18 (117) (123) (1) 9,021 11,599
Balance at 1 January 2022 11 1,963 827 18 (117) (123) (1) 9,021 11,599
Total comprehensive income/
(loss):
Profit for the year — — — — — — — 1,030 1,030
Other comprehensive income/
(loss), net of tax:
Remeasurements of defined benefit
liability 14, 26 — — — — — — — 68 68
Foreign currency translation
differences for foreign operations — — — — 63 — — — 63
Net loss on hedge of net
investment in foreign operation — — — — — — — — —
Fair value reserve (FVOCI
financial assets) — — — — — (373) — — (373)
Total other comprehensive income/
(loss) — — — — 63 (373) — 68 (242)
Total comprehensive income/(loss) — — — — 63 (373) — 1,098 788
Transactions with owners,
recorded directly in equity
Equity increase resulting from
merger and capital transactions 22 — — 1,700 — — — — — 1,700
Equity settled share-based payment 32 — — — — — — 8 — 8
Total contributions by and
distributions to owners — — 1,700 — — — 8 — 1,708
Balance at 31 December 2022 11 1,963 2,527 18 (54) (496) 7 10,119 14,095
The accompanying notes on pages 41 to 148 form an integral part of these financial statements.
CITIBANK EUROPE PLC
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
38
Note
31 December
2022
31 December
2021
(Restated)
$m $m
Cash flows from operating activities
Profit after tax 1,030 1,013
Adjustments for:
13
244 193
12
56 56
21
59 (267)
29
1 (3)
29
(2) (5)
3
(587) (383)
18
(48) (50)
16, 23
(5,452) (2,630)
17, 23
(9,221) (1,889)
15, 19
(373) (605)
19, 21
(9,585) (3,273)
20
(3,312) (4,730)
23
(2,290) (2,665)
23
10,095 5,779
Income tax charged
Depreciation and amortisation
Net impairment losses/(recoveries) on loans and advances
Provision released and other movements during the year
Provision utilised during the year
Net interest income
Net gain on investment securities***
Change in trading assets
Change in derivative financial instrument assets
Change in loans and advances to banks (more than 3 months)
Change in loans and advances to customers
Change in other assets**
Change in deposits by banks
Change in customer account balances
Change in derivative financial instrument liabilities
17, 23
8,415 3,182
Change in other liabilities (without repurchase agreements)**
14, 30
14,314 5,594
Change in repurchase agreements*
30
4,332 1,065
7,676 382
Interest received
3
1,177 546
Interest paid
3
(581) (163)
Income tax paid (181) (121)
Net cash flow from operating activities 8,091 644
Cash flows from investing activities
Acquisition of investment securities*** (2,130) (3,999)
Disposal of investment securities 172 184
Acquisition of property and equipment
24
(92) (39)
Proceeds from disposal of property and equipment
24
1 5
Acquisition of intangible assets
25
(25) (27)
Cost of acquisition of business
34
— (15)
Proceeds from disposal of business
34
— 31
Net cash flow from investing activities (2,074) (3,860)
Cash flows from financing activities
Payment of lease liabilities
36
54 (5)
Interest on lease liabilities
36
— —
Proceeds from issue of subordinated liabilities
15
— 4,773
Proceeds from capital contribution
22
1,700 —
Net cash flow (used in) financing activities 1,754 4,768
Net increase in cash and cash equivalents 7,771 1,552
Cash and cash equivalents at beginning of year
15
37,008 35,473
Effect of exchange translations and other adjustments (269) (17)
Cash and cash equivalents at end of year
15
44,510 37,008
CITIBANK EUROPE PLC
STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
39
STATEMENT OF CASH FLOWS (Continued)
*Having considered the nature and uses of cash, it is now considered that proceeds from repurchase agreements
may more appropriately represent the results of operating rather than financing activities and have been re-
presented on this basis.
**Restated for prior year adjustment, as detailed in Note 38
*** Net gain on investment securities, Change in other assets, Change in other liabilities (without repurchase
agreements) and Acquisition of investment securities have been restated to more appropriately represent the
Company’s cash flow activity. There has been no change to the Net increase in cash and cash equivalents due to
the restatement of these balances.
CITIBANK EUROPE PLC
STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
40
1. Principal accounting policies
The Company has consistently applied the accounting policies as set out below to all periods presented in these
financial statements, apart from the newly adopted accounting policies mentioned in 1(c) below.
a) Basis of presentation
The financial statements have been prepared in accordance with International Financial Reporting Standards
(collectively “IFRSs”) as adopted by the European Union (“EU”) and applicable for the financial year ended 31
December 2022. The financial statements also comply with those parts of the Companies Act 2014 and the
European Union Credit Institutions: Financial Statements Regulations 2015 applicable to companies reporting
under IFRS. The accounting policies have been applied consistently and are consistent with the previous year,
unless otherwise described.
These financial statements are prepared on a going concern basis and have been prepared under the historical
cost convention as modified to include the fair value of certain financial instruments to the extent required or
permitted under the accounting standards and as set out in the relevant accounting policies.
The Company avails of the Companies Act 2014 s299 (1) exemption to prepare group financial statements. The
Company is a wholly owned subsidiary undertaking of Citibank Holdings Ireland Limited, which is established
under the laws of Ireland.
b) Functional and presentation currency
These financial statements are presented in USD, which is the functional currency and presentation of the
Company.
c) Changes in accounting policy and disclosures
Standards issued and effective
There are a number of accounting standards that have been amended by the International Accounting Standards
Board (IASB), which became effective during 2022. They include:
• Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
• Annual Improvements to IFRS Standards 2018-2020;
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
• Reference to the Conceptual Framework (Amendments to IFRS 3).
• COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) 01 Apr 2021.
Standards and amendments issued but not yet effective as at 31 December 2022
The accounting standards and amendments set out below have been issued by the IASB, but are not yet effective
for the Company. The Company does not plan on early adoption of these standards. These standards either have
no impact or not expected to have material impact to the Company upon adoption.
• IFRS 17 Insurance Contracts, effective date 1 Jan 2023;
• Amendments to IFRS 17, effective date 1 Jan 2023;
• Classification of Liabilities as Current or Non-current (Amendments to IAS 1) (not yet endorsed by the EU),
effective date 1 Jan 2023;
• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to
IFRS 10 and IAS 28) (not yet endorsed), effective date 1 Jan 2023;
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2) (not yet endorsed
by the EU), effective date 1 Jan 2023;
• Definition of Accounting Estimates (Amendments to IAS 8) (not yet endorsed by the EU), effective date 1
Jan 2023;
• Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
(not yet endorsed by the EU), effective date 1 Jan 2023.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
41
1. Principal accounting policies (continued)
c) Changes in accounting policy and disclosures (Continued)
Standards and amendments issued but not yet effective as at 31 December 2022 (continued)
• Lease liability in a sale and leaseback (Amendments to IFRS 16), not yet endorsed;
• Non-current liabilities with Covenants (Amendments to IAS 1), not yet endorsed;
• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS
10 and IAS 28), not yet endorsed;
d) Interest income and interest expense
Interest income and interest expense on financial assets and liabilities are recognised in the income statement
using the effective interest rate (“EIR”) method. Under this method, fees and direct costs directly attributable to
loan origination, re-financing or restructuring and to certain loan commitments are deferred and amortised to
interest earned on loans and advances over the life of the instrument.
The EIR is a method of calculating the amortised cost of a financial asset is the rate that discounts estimated
future cash payments or receipts through the expected life of the financial instrument to:
• The gross carrying amount of the financial asset; or
• The amortised cost of the financial liability.
When calculating the EIR, the Company estimates future cash flows considering all contracted terms of the
financial instrument, but no future credit losses. For assets which are initially recognised as purchased or credit
impaired, interest revenue is calculated through the use of a credit-adjusted effective interest rate which takes
into consideration expected credit losses. A credit-adjusted EIR is the interest rate that exactly discounts
estimated future cash payments or receipts through the expected life of the financial asset to the amortised cost of
a financial asset that is a purchased or originated credit-impaired financial asset.
Interest income and expense presented in the income statement includes:
• Interest on financial assets and liabilities at amortised cost on an effective interest rate basis;
• Interest on investment securities measured at fair value through other comprehensive income; and
• Interest on cash balances.
The Company presents negative interest paid on interest-bearing assets as interest expense, and interest revenue
received from interest-bearing liabilities as interest income.
To the extent that upfront fees are capitalised but subsequently there is a partial sell down of the related asset, the
fees are released to the income statement in proportion to the amount of the asset sold down.
e) Net fee and commission income
Fee and commission income and expenses that are integral to the EIR on a financial asset or liability are included
in the measurement of EIR (see Note 1(d) above).
Investment banking fees are substantially composed of underwriting and advisory revenues. Such fees are
recognised at the point in time when Company’s performance under the terms of a contractual arrangement is
completed, which is typically at the closing of a transaction. Reimbursed expenses related to these transactions
are recorded as revenue and are included within investment banking fees.
Brokerage commissions primarily include commissions and fees from the following: executing transactions for
clients on exchanges and over-the-counter markets; assisting clients in clearing transactions, providing brokerage
services and other such activities. Brokerage commissions are recognised in net fee and commission income at
the point in time the associated service is fulfilled, generally on the trade execution date.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
42
1. Principal accounting policies (continued)
e) Net fee and commission income (continued)
Custody and Fiduciary transactions are primarily composed of custody fees and fiduciary fees. The custody
product is composed of numerous services related to the administration, safekeeping and reporting for both U.S.
and non-U.S. denominated securities. The services offered to clients include trade settlement, safekeeping,
income collection, corporate action notification, recordkeeping and reporting, tax reporting and cash
management. Custody fees are recognised as or when the associated promised service is satisfied, which
normally occurs at the point in time the service is requested by the customer and provided by the Company.
Fiduciary fees consist of trust services and investment management services. As an escrow agent, the Company
receives, safekeeps, services and manages clients’ escrowed assets such as cash, securities, property (including
intellectual property), contracts or other collateral. The Company performs its escrow agent duties by
safekeeping the funds during the specified time period agreed upon by all parties and therefore earns its revenue
evenly during the contract duration.
Transactional service fees primarily consist of fees charged for processing services such as cash management,
global payments, clearing, international funds transfer and other trade services. Such fees are recognised as/when
the associated service is satisfied, which normally occurs at the point in time the service is requested by the
customer and provided by the Company.
Commitment fees includes commission and related servicing fees for letters of credit or other guarantee
arrangements that facilitate customer financing or performance. They also include commissions and related fees
on time drafts or bills of exchange (bankers’ acceptances) that are drawn on the bank and have been accepted by
the bank indicating an unconditional promise to honour such instruments at their maturity. The commitment fee
is recognised on a straight-line basis over the commitment period.
Credit and bank card income is primarily composed of interchange fees, which are earned by card issuers based
on purchase sales and certain card fees, including annual fees. Costs related to customer reward programs and
certain payments to partners are recorded as a reduction of credit- and bank-card income. Interchange revenues
are recognised as earned on a daily basis when the Company's performance obligation to transmit funds to the
payment networks has been satisfied. Annual card fees, net of origination costs, are deferred and amortised on a
straight-line basis over a 12-month period. Costs related to card reward programs are recognised when the
rewards are earned by the cardholders. Payments to partners are recognised when incurred.
Deposit-related fees consist of service charges on deposit accounts and fees earned from performing cash
management activities and other deposit account services. Such fees are recognised in the period in which the
related service is provided.
Other fee and commission income, including sales commission, placement fees and syndication fees, are
recognised as the related services are performed. These fees are recorded in fee income as they are earned.
f) Net trading income and expense
Net trading income comprises all gains and losses related to trading assets and liabilities (except for fair value
changes associated with own credit risk), and includes all realised and unrealised fair value changes, together
with related interest, dividends and foreign exchange differences.
g) Net income on financial instruments designated at fair value through profit or loss
Net income from financial instruments designated at fair value through profit or loss comprises all gains and
losses related to financial assets and liabilities designated at fair value through profit or loss, and includes
realised fair value changes, together with related interest, dividends and foreign exchange differences.
h) Dividend income
Dividend income is recognised when the right to receive income is established. Dividends are presented in ‘Net
trading income’ when the dividend income has arisen from trading assets.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
43
1. Principal accounting policies (continued)
i) Financial assets and liabilities
Classification and Measurement
The Company classifies financial assets in line with the classification and measurement requirements of IFRS 9,
where financial assets are classified based on both the business model used for managing the financial assets and
the contractual cash flow characteristics of the financial asset (known as Solely Payments of Principal and
Interest or “SPPI”).
Business Model Assessment
The Company’s business model is determined at a level that reflects how groups of financial assets are managed
together to achieve a particular business objective.
There are three business models available:
• Hold to collect - Financial assets held with the objective to collect contractual cash flows. They are
subsequently measured at amortised cost and are recorded in multiple lines on the Company’s statement of
financial position.
• Hold to collect and sell - Financial assets held with the objective of both collecting contractual cash flows
and selling financial assets. They are recorded as Financial assets at Fair Value through Other
Comprehensive Income on the Company’s statement of financial position.
• Other - Financial assets that do not meet the criteria of either hold to collect, or hold to collect and sell. They
are recorded as Financial Assets at Fair Value through Profit or Loss on the Company’s statement of
financial position.
The Company’s business model does not depend on management’s intentions for an individual instrument (i.e. it
is not an instrument-by-instrument assessment). This assessment is performed at a higher level of aggregation.
The level of aggregation is at a level which is reviewed by key management personnel, enabling them to make
strategic decisions for the business. The Company has more than one business model for managing its financial
instruments.
The assessment of the business model requires judgment based on facts and circumstances, considering both
quantitative and qualitative factors.
The Company considers all relevant evidence that is available at the date of the assessment. Such relevant
evidence includes, but is not limited to:
a) How the performance of the business model and the financial assets held within that business model are
evaluated and reported to the Company’s key management personnel; and
b) The risks that affect the performance of the business model (and the financial assets held within that business
model) and, in particular, the way in which those risks are managed; and
c) How managers of the business are compensated (e.g. whether the compensation is based on the fair value of
the assets managed or on the contractual cash flows collected); and
d) The frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about
future sales activity.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
44
1. Principal accounting policies (continued)
i) Financial assets and liabilities (continued)
Assessment of whether the contractual cash flows are solely payments of principal and interest (SPPI)
If an instrument is held in either a ‘hold to collect’ or a ‘hold to collect and sell’ business model, then an SPPI
assessment is required to determine classification. For SPPI, interest is defined as consideration for the time
value of money and the credit risk associated with the principal amount outstanding during a period of time. It
can also include consideration for other basic lending risks (e.g. liquidity risk) and costs (e.g. administrative
costs) associated with holding the financial asset for a particular period of time and a profit margin that is
consistent with a basic lending arrangement. Other contractual features that result in cash flows that are not
payments of principal and interest result in the instrument being measured at FVTPL.
Contractual terms that introduce exposure to risks or volatility in the contractual cash flows that are unrelated to
a basic lending arrangement, such as exposure to changes in equity prices or commodity prices, do not give rise
to contractual cash flows that meet the SPPI criteria.
The contractual cash flow test must be performed at initial recognition of the financial asset and, if applicable, as
at the date of any subsequent changes to the contractual provisions of the instrument.
1. Financial Assets – Derivatives and Equity Instruments
Derivatives and in-scope equity instruments are measured at fair value, with changes reflected through the profit
and loss account (FVTPL). Exceptions can only apply if the derivative is part of a hedge accounting programme.
The Company measures all equity instruments in scope of IFRS 9 at FVTPL.
The Company has made an accounting policy choice not to irrevocably elect to classify and measure non-trading
equity instruments at FVOCI as all amounts recognised in OCI can never be reclassified to profit or loss.
2. Financial Assets – Debt Instruments
The following primary classification and measurement categories exist for financial assets-debt instruments:
• Amortised cost;
• Fair value through other comprehensive income (FVOCI); and
• Fair value though profit or loss (FVTPL).
In addition, IFRS 9 provides special designation options for financial assets-debt instruments that are either
measured at ‘amortised cost’ or ‘FVOCI’. An entity has an option to designate such instruments at FVTPL only
where this designation eliminates or significantly reduces an accounting mismatch.
The following paragraphs explain the classification criteria for the 3 categories in more detail.
Amortised Cost
A financial asset-debt instrument shall be classified and subsequently measured at amortised cost (unless
designated under FVO) only if both of the following conditions are met:
a) Business Model test: the financial asset debt instrument is held under a business model whose objective is
to hold assets in order to collect contractual cash flows; and
b) SPPI test.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
45
1. Principal accounting policies (continued)
i) Financial assets and liabilities (continued)
2. Financial Assets – Debt Instruments (Continued)
Recognition and Initial Measurement
The Company initially recognises loans and advances and deposits on settlement date. All other financial
instruments (including regular-way purchase and sales of financial assets) are recognised on the trade date,
which is the date on which the Company becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially recognised at fair value, typically being the transaction price,
plus, for items not measured at FVTPL, transaction costs directly attributable to acquisition or issuance.
Loans and advances to banks and to customers are classified and measured at amortised cost under IFRS 9
unless they failed the business model or SPPI test.
Accounting for reverse repurchase and resale agreements
Securities sold under agreements to repurchase (repos) and securities purchased under agreements to resell
(reverse repos) do not constitute a sale (or purchase) of the underlying securities for accounting purposes and are
treated as collateralised financing transactions as the risks and rewards of ownership are not transferred. Under a
reverse repo agreement, consideration paid is accounted for as a loan or advance at amortised cost, unless it is
designated or mandatorily at fair value through profit and loss. Under a repo agreement, consideration received
is accounted for as a financial liability measured at amortised cost, unless it is designated at fair value through
profit and loss.
Certain reverse repos and repo transactions will be designated at FVTPL as these transactions are linked/funding
the trading portfolio (financial instruments which are measured at FVTPL), therefore this election will eliminate
or significantly reduce an accounting mismatch.
FVOCI
A financial asset shall be classified and measured at FVOCI (unless designated under FVO) if both of the
following conditions are met:
a) Business model test: the financial asset is held under a business model whose objective is achieved by
both collecting contractual cash flows and selling financial assets; and
b) SPPI test.
The following financial assets were classified as FVOCI as at 31 December 2021 and as at 31 December 2022:
Investment debt securities
Investment debt securities consist of government and corporate bonds. Under IFRS 9, these debt securities are
classified and measured as FVOCI as they are held under a business model whose objective is achieved by both
collecting contractual cash flows and selling financial assets unless they fail the SPPI criterion.
FVTPL
Any financial instrument that does not fall into either of the above categories shall be classified and measured at
fair value through profit or loss. For example, where the asset is not held within a business model whose
objective is to hold to collect the contractual cash flows or within a business model whose objective is to both
collect the cash flows and to sell the assets, then the asset will be classified as FVTPL. Examples include
financial assets held for trading or where performance is managed within the business model on a fair value
basis.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
46
1. Principal accounting policies (continued)
i) Financial assets and liabilities (continued)
2. Financial Assets – Debt Instruments (Continued)
Moreover, any instrument for which the contractual cash flow characteristics do not comprise solely payments of
principal and interest (that is, they fail the SPPI test) must be classified in the FVTPL category.
The following financial assets were classified and measured as FVTPL as at 31 December 2021 and as at
31 December 2022:
Trading assets
The trading book of the Company consists of all positions in financial instruments and commodities held either
with trading intent or in order to economically hedge other elements of the trading book and which are free from
any restrictive covenants on their tradability or are able to be hedged. Positions held with trading intent are those
held intentionally for short term resale and/or with the intention of benefiting from actual or expected short term
price differences between buying and selling prices or from other price or interest rate variations. The term
‘positions’ shall include positions arising from client servicing and market making. Trading intent is evidenced
on the basis of the strategies, policies and procedures established by the Company to manage the position or
portfolio.
Derivative contracts
Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are
subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active
markets or using valuation techniques, including discounted cash flow models and option pricing models, as
appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is
negative. Changes in fair value are recognised in the income statement. The payment and receipt of variation
margin for centrally cleared derivatives that are characterised as settle-to-market are deemed as settlement of
those contracts.
3. Financial Liabilities – Debt Instruments
For financial liabilities there are two measurement categories: amortised cost and fair value through profit or loss
(including a fair value option category).
The Company designates financial liabilities at fair value through profit or loss if one of the following exist:
• The liability is managed and performance evaluated on a fair value basis;
• Electing fair value will eliminate or reduce an accounting mismatch; or
• The contract contains one or more embedded derivatives.
For financial liabilities designated at fair value through profit or loss, fair value changes are presented as follows:
• Fair value changes attributable to the Company’s own credit risk are recognised in OCI; and
• The remaining amount of the change in the fair value of the liability is recorded in P&L.
Upon early extinguishment (e.g., liability is repurchased before maturity), changes in own credit previously
recorded in OCI will not be recycled to P&L. The OCI balance is reclassified directly to retained earnings.
4. Reclassifications
Financial asset classification is determined at initial recognition and reclassifications are expected to be
extremely rare. A financial asset can only be reclassified if the business model for managing the financial asset
changes. Reclassification of financial liabilities is not permitted.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
47
1. Principal accounting policies (continued)
i) Financial assets and liabilities (continued)
3. Financial Liabilities – Debt Instruments (Continued)
5. Modifications
Financial assets
If the terms of a financial asset are modified, the Company evaluates whether the cash flows of the modified
asset are substantially different. If the cash flows are substantially different, then the contractual rights to cash
flows from the original financial asset are deemed to have expired. In this case, the original financial asset is
derecognised and a new financial asset is recognised at fair value.
When the contractual cash flows of a financial asset are renegotiated or otherwise modified and the renegotiation
or modification does not result in the derecognition of that financial asset in accordance with IFRS 9, the
Company recognises a modification gain or loss in profit or loss based on the difference between the original
contractual cash flows and the modified cash flows discounted at the original effective interest rate.
As the Company classifies a financial asset at initial recognition on the basis of the contractual terms over the
life of the instrument, reclassification on the basis of change of a financial asset’s contractual cash flows is not
permitted, unless the asset is sufficiently modified that it is derecognised.
Forbearance consists of concessions extended to any facility – in the form of a loan, a debt security as well as
committed but undrawn loans – towards a debtor facing or about to face financial difficulties in meeting its
financial commitments (“financial difficulties”).
The granting of any forbearance measure in CEP requires a detailed assessment of the specific circumstances of
the obligor including an up-to-date assessment of affordability / repayment capacity. The assessment of
forbearance must consider two elements:
1. Has a concession been granted; and
2. Is the obligor facing or about to face financial difficulties?
If CEP assess that an obligor has not been granted a concession or is not facing or about to face financial
difficulties then that obligor will not be classified as forborne.
Financial liabilities
The Company derecognises a financial liability when its terms are modified and the cash flows of the modified
liability are substantially different. In this case, a new financial liability based on the modified terms is
recognised at fair value. The difference between the carrying amount of the financial liability extinguished and
the new financial liability with modified terms is recognised in profit or loss.
If the modified terms are not substantially different the liability is not derecognised.
6. Offsetting
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Company has a currently enforceable legal right to set off the recognised amounts and
it intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Income and
expenses are presented on a net basis only when permitted under IFRS, or for gains and losses arising from a
group of similar transactions such as in the Company’s trading activity.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
48
1. Principal accounting policies (continued)
i) Financial assets and liabilities (continued)
7. Fair Value Measurement
“Fair Value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the principal or, in its absence, the most
advantageous market to which the Company has access at that date.
Fair value is therefore based on the notion of an exit price. Citi typically uses a bid/offer valuation approach, that
is, a bid price for a long position or an offer price for a short position. In addition, the Portfolio Exception (IFRS
13) permits an entity to measure the fair value of a group of financial assets and financial liabilities with
offsetting risk on the basis of the price that would be received to sell or transfer the net open risk position (i.e. on
a portfolio basis), in line with how positions are risk managed.
The fair value of a liability reflects its non-performance risk. When available, the Company measures the fair
value of an instrument using the quoted price in an active market for that instrument. A market is regarded as
active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an on-going basis. If there is no quoted price in an active market, then the Company uses
valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable
inputs. The chosen valuation technique incorporates all of the factors that market participants would consider in
pricing a transaction.
j) Impairment of financial assets
The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price
– i.e. the fair value of the consideration given or received. If the Company determines that the fair value at initial
recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an
active market for an identical asset or liability nor based on a valuation technique that uses only data from
observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the
difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is
recognised in profit or loss on an appropriate basis over the life of the instrument.
The value of a demand deposit is not less than the amount payable on demand, discounted from the first date on
which the amount could be required to be paid.
The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period
during which the change occurred.
The IFRS 9 impairment standard applies to any debt instruments measured at amortised cost or at fair value
through other comprehensive income and also to off balance sheet loan commitments and financial guarantees,
including:
• Investments in debt instruments measured at amortised cost. Such investments will include:
– Corporate, commercial and retail loans (including mortgages and credit card receivables);
– Deposits with banks; and
– Reverse repurchase agreements and securities borrowing transactions.
• Investments in debt instruments measured at fair value through other comprehensive income (FVOCI);
• All irrevocable loan commitments that are not measured at FVTPL;
• Written financial guarantee contracts to which IFRS 9 is applied and that are not accounted for at FVTPL;
• Trade receivables in the scope of IFRS 15 (Revenue contracts with customers); and
• Any other receivables (e.g., brokerage receivables).
The Company shall recognise in profit or loss, as a net impairment loss or gain, the amount of expected credit
losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required
to be recognised.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
49
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
Expected credit loss (ECL) impairment model
Credit loss allowances are measured on each reporting date according to a three-Stage expected credit loss
impairment model under which each financial asset is classified in one of the stages below:
• Stage 1 – From initial recognition of a financial asset to the date on which the asset has experienced a
significant increase in credit risk relative to its initial recognition, a loss allowance is recognised equal to the
credit losses to result from defaults expected over the next 12 months. Interest is calculated based on the
gross carrying amount of the asset.
• Stage 2 – Following a significant increase in credit risk relative to the risk at initial recognition of the
financial asset, a loss allowance is recognised equal to the full credit losses expected over the remaining life
of the asset. Interest is calculated based on the gross carrying amount of the asset.
The credit losses for financial assets in Stage 1 and Stage 2 are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the
cash flows that the Company expects to receive).
• Stage 3 – When a financial asset is considered to be credit-impaired, a loss allowance equal to the full
lifetime expected credit losses will be recognised. Credit losses are measured as the difference between the
gross carrying amount and the present value of estimated future cash flows. Interest revenue is calculated
based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount.
Measurement of ECL
ECL are a probability-weighted estimate of credit losses. They are measured as follows:
• Undrawn loan commitments: as the present value of the difference between the contractual cash flows that
are due to the Company if the commitment is drawn down and the cash flows that the Company expects to
receive; and
• Financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the
Company expects to recover.
Evidence that a financial asset is impaired (i.e., in Stage 3) includes observable data that comes to the attention
of the Company such as evidence of default, as mentioned below.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated
future cash flows of that financial asset have occurred. Evidence that a financial asset (on purchase or
origination) is credit-impaired includes observable data about such events, including:
• Significant financial difficulty of the issuer or the borrower;
• A breach of contract, such as a default or past due event;
• The lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;
• It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• The disappearance of an active market for that financial asset because of financial difficulties; and
• The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses.
It may not be possible for an entity to identify a single discrete event. Instead, the combined effect of several
events may have caused the financial asset to become credit-impaired.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
50
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
Further, in assessing whether an investment in sovereign debt is credit-impaired, the Company considers the
following factors:
• The market’s assessment of creditworthiness as reflected in the bond yields;
• The rating agencies’ assessments of creditworthiness;
• The country’s ability to access the capital markets for new debt issuance;
• The probability of debt being restructured, resulting in holders suffering losses through voluntary or
mandatory debt forgiveness; and
• The international support mechanisms in place to provide the necessary support as ‘lender of last resort’ to
that country, as well as the intention, reflected in public statements, of governments and agencies to use those
mechanisms. This includes an assessment of the depth of those mechanisms and, irrespective of the political
intent, whether there is the capacity to fulfil the required criteria.
The estimation of an expected credit loss (ECL) is required to be unbiased and probability weighted, including
information about past events, current conditions, reasonable and supportable forecasts of future events and
economic conditions at the reporting date. The estimate also considers the time value of money.
The measurement of an ECL is primarily determined by an assessment of the financial asset’s probability of
default (PD), loss given default (LGD) and exposure at default (EAD) where the cash shortfalls are discounted to
the reporting date. For a financial asset in Stage 1, the Company will utilise a 12-month PD, whereas a financial
asset within Stage 2 and Stage 3 will utilise a lifetime PD in order to estimate an impairment allowance. Key
inputs into these models include historical default/loss information, risk ratings, sector, geography and facility
characteristics.
Wholesale Classifiably Managed Exposures
Classifiably-managed portfolios are managed on an individual basis where the individual obligors are risk-rated.
An impairment allowance will be estimated for Corporate loans utilising models depending on the relative size,
quality and complexity of the portfolios. Impairment allowances for the small consumer loan portfolios will be
estimated utilising a less sophisticated approach that is reasonable and proportionate after considering both entity
level and portfolio level factors.
Other Asset Approaches
For other financial assets, being short term and simple in nature and where the Company does not have access to
detailed historical information due to limited loss experience, the Company applies a simplified measurement
approach that may differ from what is described above. This approach leverages existing models currently used
globally for stress-testing and regulatory capital reporting purposes, but incorporates specifically developed
components to make the estimates compliant with IFRS 9. Types of financial assets assessed under the
simplified approach include: delinquency managed exposures, cash and cash equivalents, deposits with banks,
vanilla reverse repo transactions, brokerage receivables and receivables from clearing houses and trade
receivables. Receivable receive lifetime ECLs on day 1, as allowed under IFRS 9.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
51
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
Significant increase in credit risk (SICR)
At each reporting date, CEP assesses whether the credit risk on a financial instrument has increased significantly
since initial recognition. When making this assessment, CEP considers the increase in the risk of default (both in
relative terms and absolute terms) over the expected life of the financial asset. The significance of a change in
the credit risk since initial recognition depends on the risk of a default occurring at initial recognition. That is, a
given change in absolute terms, the risk of a default occurring will be more significant for a financial instrument
with a lower initial risk of default compared to one with a higher initial risk of default. Determining whether the
credit risk on a financial instrument has increased significantly since initial recognition is based on a multifactor
and holistic approach, including both quantitative and qualitative information and analysis.
Determining whether credit risk has increased significantly
CEP’s approach to assessing SICR uses a combination of quantitative, qualitative, top-down and backstop
criteria.
Quantitative Criteria:
As a general indicator, the credit risk of a particular exposure is deemed to have increased significantly since
initial recognition if, based on the Company’s quantitative modelling:
• the remaining lifetime PD is greater than 20 basis points at the reporting date; and
• there has been an increase in the lifetime PD between origination and the reporting date of more than
one standard deviation of the lifetime PD at origination.
Qualitative Criteria:
Credit risk may also be deemed to have increased significantly since initial recognition based on qualitative
factors linked to the Company’s credit risk management processes that may not otherwise be fully reflected in its
quantitative analysis. This will be the case for exposures that meet certain heightened risk criteria, which are
placed on a watch list or classification of performing forborne exposures for regulatory reporting purposes.
Top-down Criteria:
Credit risk may also be deemed to have increased significantly since initial recognition based on top-down
analysis linked to the Company’s credit risk management processes that may not otherwise be fully reflected in
its quantitative analysis. This can include analysis of potentially vulnerable cohorts within the portfolio (e.g.
specific sectors) combined with other credit risk attributes.
Backstop Criteria:
• 30 Days Past Due (DPD): There is a rebuttable presumption that credit risk has significantly increased
if contractual payments are more than 30 days past due. This presumption can only be rebutted if there
is a reasonable and supportable information demonstrating that credit risk has not increased since initial
recognition.
• 200% PD Increase: Exposures will be moved to stage 2 if, at the reporting date, there has been a 200%
increase between the remaining lifetime PD and the origination PD.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
52
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
The Company identifies key drivers behind changes in credit risk for portfolios. Generally, a significant increase
in credit risk is assessed based on the estimation of PDs and consideration of qualitative factors, each of which
are designed to reflect forward-looking information, on an individual instrument basis as described above.
However, if the Company identifies a key driver that is not considered in the individual assessment on a timely
basis, then the Company will evaluate whether there is reasonable and supportable information that enables it to
make an additional assessment on a collective basis with respect to all or some of a portfolio. This may lead to
the Company concluding that a segment or proportion of a portfolio has undergone a significant increase in
credit risk.
Exposures move back from Stage 2 to Stage 1 once they no longer meet the criteria for a significant increase in
credit risk. If there is evidence that there is no longer a significant increase in credit risk relative to initial
recognition, then the loss allowance on an instrument returns to being measured at 12-month ECL.
The Company monitors the effectiveness of the criteria used to identify significant increases in credit risk by
regular reviews to confirm that:
• the criteria are capable of identifying significant increases in credit risk before an exposure is in default;
• the criteria do not align with the point in time when an asset becomes 30 days past due; – the average
time between the identification of a significant increase in credit risk and default appears reasonable;
• exposures are not generally transferred directly from 12-month ECL measurement to credit impaired;
and
• there is no unwarranted volatility in loss allowance from transfers between 12-month PD (Stage 1) and
lifetime PD (Stage 2).
Staging
Financial assets can move in both directions through the stages of the IFRS 9 impairment model depending on
the assessment of whether there is a significant increase of credit risk since initial recognition or whether the
asset is credit impaired subsequently changes.
In order to determine the ECL reporting stage for an obligation, the Company determines whether the asset is
already impaired (Stage 3) or not (Stage 1 and 2). Stage 2 is determined by the existence of a significant credit
deterioration (or credit improvement) compared with the credit rating at initial recognition as described in the
section above. Stage 1 assets do not have significant credit deterioration compared with that at initial
recognition. All newly acquired or originated financial assets that are not purchased or originated credit impaired
(POCI) are recognised in Stage 1 initially.
Changes in the required credit loss allowance, including the impact of movements between Stage 1 and Stage 2,
are recorded in the income statement as an adjustment to the allowance for credit losses.
Expected life
When measuring ECL, the Company must consider the maximum contractual period over which the Company is
exposed to credit risk, including possible drawdowns and the expected maturity of the financial asset. For certain
revolving credit facilities that do not have a fixed maturity, the expected life is estimated based on the period
over which the Company is exposed to credit risk and where the credit losses would not be mitigated by
management actions.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
53
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
Financial guarantees
The Company assesses whether a financial guarantee contract held is an integral element of a financial asset that
is accounted for as a component of that instrument or is a contract that is accounted for separately. If the
Company determines that the guarantee is an integral element of the financial asset, then any premium payable
in connection with the initial recognition of the financial asset is treated as a transaction cost of acquiring it. The
Company considers the effect of the protection when measuring the fair value of the debt instrument and when
measuring ECL. Benefits of the credit mitigants are recorded against impairment losses.
If the Company determines that the guarantee is not an integral element of the debt instrument, then it recognises
an asset representing any prepayment of guarantee premium and a right to compensation for credit losses. These
assets are recognised in ‘other assets’. The cost of the credit mitigants are recorded within other expenses and
amortised over the period of protection. Recoveries are recognised as other income.
Stage 3 definition of default
The definition of default is aligned to the CRR Article 178 definition of default and is consistent with that used
for internal credit risk management purposes for the relevant financial instrument. The definition of default used
for this purpose is applied consistently to all financial instruments unless information becomes available that
demonstrates another default definition is more appropriate for a particular financial instrument. There was no
change to the CEP definition of default during the year ending 2022.
As per European Central Bank (ECB) guidance, the Company classifies an exposure as a Non-Performing
Exposure (NPE) if it satisfies either or both of the following criteria:
• There are material exposures which are more than 90 days past-due; and/or
• The obligor is assessed as unlikely to pay its credit obligations in full without realisation of collateral,
regardless of the existence of any past-due amount or of the number of days past due.
NPE include defaulted exposures, impaired exposures and loans on probation that have not yet satisfied the exit
criteria in line with EBA guidance to return to performing. Therefore, all NPEs are defaulted in CEP and vice
versa.
Under the Company’s definition of default an exposure is considered defaulted and is classified as Stage 3 where
an obligor is greater than 90 days past due on any material credit obligation or is otherwise assessed as unlikely
to pay its credit obligations in full without recourse by the Company to actions such as realising security.
Counting of days past due commence where any amount of principal, interest or fee has not been paid on the due
date.
The Company has mandated certain indications of unlikely to pay events to result in mandatory default
classification including material exposures greater than 90 days past due, specific credit adjustment, sale of
credit obligation, distressed restructure and bankruptcy of obligor.
The Company has also mandated certain other financial and non-financial unlikely to pay events to trigger a
case-by-case assessment of the Borrower in order to determine default.
All defaulted exposures will have an Obligor Risk Rating of 8, 9, or 10 (individually and portfolio managed
obligors only).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
54
1. Principal accounting policies (continued)
j) Impairment of financial assets (continued)
Forward-Looking Information and multiple economic scenarios
Estimates must consider information about past events, current conditions and reasonable and supportable
forecasts around future events and economic conditions. The application of forward-looking information (FLI)
requires significant judgment. The Company has developed models that include multiple economic scenarios
which consider the variability and uncertainty in expected losses including factors such as GDP growth rates and
unemployment rates, provided by the economists in Citi’s Global Country Risk Management (GCRM). These
estimates are based on portfolio data that reflect the current risk attributes of obligors and debt instruments
combined with loss projections derived from the rating migration, PD and loss models built for estimating stress
credit losses for wholesale portfolios. As mentioned above, these models have incorporated specifically
developed components to make the estimates compliant with IFRS 9. The PD, LGD and EAD models are
calibrated to the observed historical patterns of defaults and losses over several years and linked to economic
drivers. The model reflects different loss likelihood and loss severity as a function of different economic
forecasts. The Company does not use the best case or worst case scenario, but assesses a representative number
of scenarios (3 when applying a sophisticated approach and where multiple scenarios are deemed to have a
material non-linear impact) and probability weights these scenarios to determine the ECL.
Presentation of the allowance of ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position as follows:
• Financial assets measured at amortised cost: as a deduction from the gross carrying amount of the asset
• Loan commitments and financial guarantee contracts: as a provision
• Debt instruments measured at FVOCI: as the carrying amount of these financial assets is at fair value, no loss
allowance is recognised in the statement of financial position, however, the loss allowance is recognised in
the income statement and the fair value reserve.
Write-off of loans and advances
Loans (and the related impairment allowance accounts) are normally written off, either partially or in full, when
there is no realistic prospect of recovery. Where loans are secured, this is generally after receipt of any proceeds
from the realisation of security. In circumstances where the net realisable value of any collateral has been
determined and there is no reasonable expectation of further recovery, write-off may be earlier. Subsequent
recoveries of amounts previously written off are recorded against Net impairment gain/(loss) in the income
statement.
k) De-recognition of financial assets and liabilities
Financial assets are derecognised when the right to receive cash flow from assets has expired or the Company
has transferred substantially all the risks and rewards of ownership or, in which the Company neither transfers
nor retains substantially all of the risks and rewards of ownership but it does not retain control of the financial
asset. Financial liabilities are derecognised when they are extinguished, that is, when the obligation is
discharged, cancelled or expired.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying
amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received and (ii)
any cumulative gain or loss that had been recognised in OCI is recognised in profit or loss.
l) Interest Rate Benchmark Reform
If the basis for determining the contractual cash flows of a financial asset or financial liability measured at
amortised cost changed as a result of interest rate benchmark reform, then the Company updates the effective
interest rate of the financial asset or financial liability to reflect the change that is required by the reform.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
55
1. Principal accounting policies (continued)
l) Interest Rate Benchmark Reform (continued)
A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if
the following conditions are met:
• The change is necessary as a direct consequence of the reform; and the new basis for determining the
contractual cash flows is economically equivalent to the previous basis;
• When changes were made to a financial asset or financial liability in addition to changes to the basis for
determining the contractual cash flows required by interest rate benchmark reform;
• The Company first updated the effective interest rate of the financial asset or financial liability to reflect the
change that is required by interest rate benchmark reform. After that, the Company applied the policies on
accounting for modifications to the additional changes.
m) Leases
Leases are recognised as a right-of-use (ROU) asset and a corresponding liability at the date at which the leased
asset is available for use by the Company. At inception of a contract, the Company assesses whether a contract
is, or contains, a lease. A contract is, or contains a lease if the contract conveys the right to control the use of
identified asset for a period of time in exchange for consideration.
The following process is followed when determining if a contract is, or contains a lease:
• Identified Asset - An asset is typically identified by being explicitly specified in a contract. However, an
asset also can be identified by being implicitly specified at the time that the asset is made available for use;
• The Company has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use;
• The Company has the right to direct how and for what purpose the identified asset is used throughout the
period of use;
• The Company has the right to operate the asset throughout the period of use without the supplier’s having the
right to change those operating instructions; and
• The Company designed the asset in a way that predetermines how and for what purpose the asset will be used
throughout the period of use.
The Company recognises a ROU asset and a lease liability at the lease commencement date. The ROU asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the lease commencement date, plus any initial direct costs incurred and an estimate
of costs to dismantle and remove the underlying asset or to restore the underlying asset, less any incentives
received.
ROU assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-
line basis. The Company recognises, on the statement of financial position, a ROU asset and corresponding lease
liability in relation to the office buildings where the Company is a lessee.
Further, the ROU asset is assessed for impairment losses at each reporting period and adjusted for certain
remeasurements in the lease liability.
The Company has elected not to recognise ROU assets and lease liabilities for leases of low value assets and
short term leases.
Payments associated with short term leases of equipment and vehicles and all leases of low-value assets are
recognised on a straight-line basis as other expenses in the income statement. Short term leases are leases with a
lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
56
1. Principal accounting policies (continued)
m) Leases (continued)
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing rate
(“IBR”) is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to
obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms,
security and conditions. The IBR is the rate of interest that the Company would have to pay to borrow on a
collateralised basis over a similar term an amount equal to the lease payments in a similar economic
environment.
Lease payments included in the measurement of the lease liability comprise of the following:
• Fixed payments, including in-substance fixed payments;
• Variable lease payments that depend on an index or rate, initially measured using the index or rate as at
commencement date; and
• Amounts expected to be payable under a residual guarantee.
The lease liability is measured at amortised cost using the effective interest rate method. The lease liability is
remeasured to reflect changes in lease payments caused by a change in index or rate (other than in floating
interest rates) if the Company is reasonably certain to exercise a purchase, extension or termination option, if
there is a change in the amount the Company is expected to pay under a residual value guarantee. Lease
payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each
period.
n) Property and equipment
Items of property and equipment, including freehold and leasehold improvements are stated at cost, less
accumulated depreciation and impairment losses (see below). Depreciation is provided to write off the cost, less
the estimated residual value of each asset, on a straight-line basis over their estimated useful lives.
Freehold buildings 50 years
Leasehold property lease term
Leasehold improvements shorter of lease term and 10 years
Vehicles, furniture and equipment between 1 and 10 years
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to the Company and the
cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement
during the financial period in which they are incurred.
o) Intangible assets
Goodwill
Acquired goodwill represents the excess of the fair value of the consideration paid over the fair value of a
business’ net identifiable assets at the date of acquisition. Goodwill is stated at cost less any accumulated
amortisation and impairment losses.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
57
1. Principal accounting policies (continued)
o) Intangible assets (continued)
Computer software
Expenditure on internally developed software is recognised as an asset when the Company is able to demonstrate
its intention and ability to complete the development and use the software in a manner that will generate future
economic benefits, and can reliably measure the costs to complete the development. The capitalised cost of
internally developed software includes all internal and external costs directly attributable to developing the
software and are amortised over its useful life.
Amortisation is charged to the income statement and presented in the other expenses line using the methods that
best reflect the economic benefits over their estimated useful economic lives and residual values which are
reviewed at each financial year end and adjusted if appropriate. The estimated useful lives are as follows.
Acquired computer software licenses 3 - 5 years
Computer software development 1 - 10 years
Other intangibles - Client intangibles
Intangible assets that are acquired by the Company are stated at cost less accumulated amortisation and
impairment losses.
Other intangibles relate to client intangibles that are identifiable assets and are initially recognised at their
present value based on cash flow forecasts on acquired contractual rights over customer relationships.
Amortisation is charged to the income statement and presented in the other expenses line using the methods that
best reflect the economic benefits over their estimated economic lives and residual values which are reviewed at
each financial year end and adjusted if appropriate. The estimated useful lives are as follows.
Client intangibles 3 - 5 years
p) Impairment of non-financial assets
At each reporting date, the Company assesses whether there is any indication that its goodwill and intangible
assets, property and equipment including right-of-use assets and investments in subsidiaries are impaired. These
non-financial assets are tested for impairment annually or more frequently, if events or changes in circumstance
indicate that they might be impaired. Goodwill is allocated to cash-generating units for the purpose of
impairment testing. Impairment losses in respect of goodwill are not reversed. Impairment losses are recognised
in the income statement within Other expenses.
q) Income taxes
Income tax payable on profits is recognised as an expense based on the applicable tax laws in each jurisdiction in
the period in which profits arise. The tax effects of income tax losses available for carry-forward are recognised
as a deferred tax asset if it is probable that future taxable profit will be available against which the losses can be
utilised. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be
paid or received that reflects uncertainty related to income taxes, if any.
The Company considers an uncertain tax position to exist when it considers that ultimately, in the future, the
amount of profit subject to tax may be greater than the amount initially reflected in the Company's tax returns.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
58
1. Principal accounting policies (continued)
q) Income Taxes (continued)
A current tax provision is recognised when it is considered probable that the outcome of a review by a tax
authority of an uncertain tax position will alter the amount of cash tax due to, or from, a tax authority in the
future. From recognition, the current tax provision is then measured at the amount the Company ultimately
expects to pay the tax authority to resolve the position.
Deferred tax assets and liabilities are recognised for taxable and deductible temporary differences between the
tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are
recognised to the extent that it is probable that there will be suitable profits available against which these
differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to
apply in the period in which the asset will be realised or the liability will be settled based on tax rates that are
enacted or substantively enacted at the statement of financial position date.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable
that the related tax benefit will be realised. Current and deferred taxes are recognised as an income tax benefit or
expense in the income statement.
r) Levies
Levies are imposed by governments on the Company in accordance with the legislation, other than income taxes,
fines or other penalties that are imposed for breach of the legislation. The Company recognises a liability to pay
a levy on the date identified by the legislation that triggers the obligation. Levies are recorded under other
administrative expenses in the Company’s income statement.
s) Foreign currencies
The Company’s financial statements are prepared in US Dollars, which is the presentation currency of the
Company. Various branches use a different functional currency, being the currency of the primary economic
environment in which the entity operates.
Foreign currency revenues, expenses, gains and losses are recorded using the rate of exchange at the date of
transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are
translated into the functional currency using the year end spot exchange rates. Non-monetary assets and
liabilities denominated in currencies other than the functional currency that are classified as “FVTPL” are
translated into the functional currency using the year end spot rate. Non-monetary assets and liabilities,
denominated in currencies other than the functional currency that are not measured at fair value, have been
translated at the relevant historical exchange rates. Any gains or losses on exchange are taken to the income
statement as incurred. Foreign currency differences which arise from the translation of a financial liability
designated as a hedge of a net investment in foreign operations to the extent that the hedge is effective are
recognised in OCI.
The assets and liabilities of overseas branches are translated into the Company’s presentation currency (US
Dollars) at the rate of exchange as at the reporting date, and their income statements are translated at the
exchange rates prevailing at the dates of the transactions. Foreign currency differences are recognised in OCI and
accumulated in the translation reserve in equity.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
59
1. Principal accounting policies (continued)
t) Employee benefits
Defined benefit plans
The Company participates in and continues to operate defined benefit pension schemes for employees in Greece,
Netherlands, Belgium, Spain, Austria, Ireland, France, Italy, Germany and Norway. Staff do not make
contributions for basic pensions. The net liability recognised in the statement of financial position is the
actuarially calculated present value of the defined benefit obligation at the statement of financial position date,
less the fair value of the plan assets.
The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated future
cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which
the benefits will be paid and that have terms to maturity approximating to the terms of the related pension
liability.
When the fair value of the plan assets exceeds the calculated defined benefit obligation for a plan, the surplus
recognised in the statement of financial position is restricted to the economic benefits available to the Company.
Any material plan amendments or curtailments occurring during the period result in a past service cost being
recognised in the income statement. Material settlements are also recognised in the income statement. When a
past service cost or settlement occurs part way through the year the pension expense for the remainder of the
year is remeasured to reflect market conditions at the time of the event.
Remeasurement gains and losses are recognised immediately in the statement of comprehensive income. For
defined benefit obligations, the current service cost and any past service costs are included in the income
statement within operating expenses and the interest income on pension scheme assets, net of the impact of the
interest cost on the pension scheme liabilities, is included within personnel expenses.
A surplus is recognised on the statement of financial position where an economic benefit is available as a
reduction in future contributions or as a refund of monies to the Company.
Defined contribution plans
The Company operates a number of defined contribution pension schemes. The Company’s annual contributions
are charged to the income statement in the period to which they relate. The pension scheme’s assets are held in
separate trustee administered funds.
Short term benefits
Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is provided. A provision is recognised for the amount expected to be paid under a short term cash bonus
scheme if the Company has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee and the obligation can be estimated reliably.
Termination benefits
Termination benefits are recognised as an expense when the Company is demonstrably committed, without
realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal
retirement date, or to provide termination benefits as a result of the offer made to encourage voluntary
redundancy. Termination benefits for voluntary redundancies are recognised as part of a restructuring
programme, if the Company has made an offer of voluntary redundancy, it is probable that the offer will be
accepted, and the number of acceptances can be estimated reliably.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
60
1. Principal accounting policies (continued)
u) Share based incentive plans
The Company participates in a number of Citigroup share-based incentive plans under which Citigroup grants
shares to the Company’s employees. Pursuant to a separate Stock Plans Affiliate Participation Agreement
(SPAPA), the Company makes a cash settlement to Citigroup for the fair value of the share-based incentive
awards delivered to the Company’s employees under these plans.
The Company uses equity-settled accounting for its share-based incentive plans, with separate accounting for
financial liabilities reflecting its associated obligations to make payments to Citigroup. The Company recognises
the fair value of the awards at grant date as a compensation expense over the vesting period with a corresponding
credit to the intercompany payable (recharge liability) to Citigroup. All amounts paid to Citigroup and the
associated obligation under the SPAPA are recognised in the equity reserve over the vesting period. Subsequent
changes in the fair value of all unexercised awards and the SPAPA are reviewed annually and any changes in
value are recognised in the equity reserve, again over the vesting period.
For Citigroup’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 over the vesting period.
% of expense recognised
Vesting Period of Award Year 1 Year 2 Year 3 Year 4
2 Years (2 Tranches) 75% 25% —% —%
2 Years (1 Tranche) 50% 50% —% —%
3 Years (3 Tranches) 61% 28% 11% —%
3 Years (1 Tranche) 33% 33% 33% —%
4 Years (4 Tranches) 52% 27% 15% 6%
4 Years (1 Tranche) 25% 25% 25% 25%
However, 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 retiree eligible employees, the services are provided prior to grant date, and subsequently the
costs are accrued in the year prior to the grant date.
v) Accounting for government grants
The Company recognises income from government grants when there is reasonable assurance that it will receive
the grant and will comply with the conditions attached to the grant. Depending on their nature, grants are
presented as part of profit or loss under ‘Other income’; or alternatively, they are deducted in reporting the
related expense.
w) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with original maturity
of less than three months, including: non-restricted and restricted cash balances with central banks, treasury bills
and other eligible bills and loans and advances to banks.
x) Provisions
Provisions are recognised when it is probable that an outflow of economic resources will be required to settle a
current legal or constructive obligation as a result of past events, and a reliable estimate can be made of the
amount of the obligation.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
61
1. Principal accounting policies (continued)
y) Subsidiary undertakings
Shares in subsidiary undertakings, comprising unlisted securities, are measured at cost less allowance for
impairment.
z) Common control transactions
The Company accounts for business combinations between entities under common control at book value.
aa) Discontinued operation
A discontinued operation is a component of the Company’s business that represents a separate major line of
business or geographical area of operations that meets the definition of criteria to be classified as held for sale.
The results of discontinued operations have been disclosed separately as a single amount in the income statement
for the relevant periods presented, comprising the post-tax profit or loss of discontinued operations and the post-
tax gain or loss recognised on measurement to fair value less costs to sell.
ab) Fiduciary activities
The Company commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of
assets on behalf of individuals, trusts, retirement benefit plans and other institutions. In acting in this capacity,
the Company has concluded that it acts as an agent, therefore such assets and income arising thereon are
excluded from these financial statements, as they are not assets of the Company.
2. Use of assumptions and estimates
The results of the Company are sensitive to the accounting policies, assumptions and estimates that underlie the
preparation of its financial statements. The accounting policies used in the preparation of the financial statements
are described in detail in Note 1.
The preparation of financial statements requires the use of judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
When preparing the financial statements, it is the Directors’ responsibility to select suitable accounting policies
and to make judgments and estimates that are reasonable. The accounting policies that are deemed critical to the
Company’s IFRS results and financial position, in terms of the materiality of the items to which the policy is
applied, or which involve a high degree of judgment or estimation are:
Significant Judgements
The significant judgements made by the Company in applying its accounting policies are set out below. The
application of certain of these judgements also necessarily involves estimations which are discussed separately.
• Impairment of loans;
• Secondary Loan trading – Regular way or Non - regular way
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
62
2. Use of assumptions and estimates (continued)
Significant Judgements (continued)
Impairment of loans
The Company’s accounting policy for the Impairment of Loans is described in Note 1(j) – ‘Principal accounting
policies’.
Judgements are applied in estimating the impairment loss which should be recorded in the income statement.
Accounting judgements which could change and have a material influence on the quantum of impairment loss
allowance and net impairment charge within the next financial year include determining if Company
management adjustments may be necessary to impairment model outputs to address impairment model
limitations or late breaking events.
Other key accounting judgements which materially influence the quantum of impairment loss allowance and net
impairment charge within the next financial year, include:
• the Company's criteria for assessing if there has been a significant increase in credit risk since initial
recognition such that a loss allowance for lifetime rather than 12 month ECL is required;
• the selection of appropriate methodologies and model factors for internal risk rating and impairment
models;
• selection of the most relevant macroeconomic variables for particular portfolios and determining
associations between those variables and model components such as PD and LGD;
• the selection of impairment model parameters;
• post-model adjustments to impairment loss allowance and staging classification.
Please refer to Note 1(j) for inputs, assumptions and estimating techniques for impairment of loans. Impairments
are discussed and presented further in Note 21 – ‘Risk management’.
Secondary Loan trading – Regular way or Non - regular way
A regular-way transaction is a purchase or sale of a financial asset under a contract whose terms require delivery
of the asset within the time frame established generally by regulation or convention in the marketplace
concerned. Following a review of the appropriateness of regular-way classification, the Company concluded that
the period between trade date and settlement date for secondary loan trading should be deemed as non-regular-
way as it is difficult to establish a consistent convention or timeframe based on actual trade and settlement data
observed in the marketplace. Whether a secondary loan trade is considered regular-way or non-regular-way is a
matter of judgment and the Company believes that accounting for such transactions as non-regular-way will
provide more relevant and reliable financial information.
Critical accounting estimates
The accounting estimates with a significant risk of material adjustment to the carrying amounts of assets and
liabilities within the next financial year were in relation to:
• Impairment of loans;
• Valuation of financial instruments.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
63
2. Use of assumptions and estimates (continued)
Critical accounting estimates (continued)
Impairment of loans
The Company’s accounting policy for the Impairment of financial assets is described in Note 1(j) – ‘Principal
accounting policies’
The calculation of the ECL allowance is complex and therefore an entity must consider large amounts of
information in their determination. This process requires significant use of estimates and assumptions, some of
which by their nature, are highly subjective and very sensitive to risk factors such as changes to economic
conditions. Changes in the ECL allowance can materially affect net income. Certain of these estimates may have
a significant risk of material adjustment to carrying amounts of assets within the next financial year.
The key estimates and assumptions that the Directors have used in determining the ECL allowance are set out in
Note 21 – ‘Risk management’. The sensitivity of key assumptions is set out in Note 21 to the financial
statements.
Valuation of financial instruments
The fair values of financial instruments that are not quoted in active markets are determined by using valuation
techniques. To the extent practical, models use only observable data and where this is not possible may be
required to make estimates. Note 23 – ‘Financial assets and liabilities – Valuation process for Level 3 Fair Value
Movements’ further outlines the approach to valuation of financial instruments and market value adjustments.
A sensitivity analysis to possible changes in key variables of the fair value of financial instruments classified
under the fair value hierarchy as level 3 is set out in Note 23.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
64
3. Net interest income
2022 2021*
Financial assets at amortised cost $m $m
Cash and cash equivalents
350 21
Loans and advances to banks
119 26
Loans and advances to customers
529 306
Negative interest on financial liabilities 43 132
1,041 485
Financial assets at fair value through other comprehensive income
Investment securities 127 61
127 61
Interest income calculated using the effective interest method
1,168 546
Financial liabilities measured at amortised cost
Deposits by banks (94) (14)
Customer accounts (198) (17)
Negative interest on financial assets (30) (113)
Interest expense calculated using the effective interest method (322) (144)
Other interest expense
Other liabilities (259) (19)
Other interest expense (259) (19)
Interest expense (581) (163)
Net interest income 587 383
*Certain captions for comparatives have been updated for presentation purposes only.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
65
4. Net fee and commission income
2022 2021
Fee and commission income
$m $m
Investment banking
30 32
Brokerage commissions
176 155
Custody and Fiduciary transactions
370 414
Transactional service fees
432 432
Commitment fees
162 173
Credit and bank card
71 38
Deposit-related fees
84 72
Other
43 38
1,368 1,354
Fee and commission expense
Clearing and settlement
(101) (101)
Custody
(84) (77)
Other
(43) (39)
(228) (217)
Net fee and commission income
1,140 1,137
Included in fee and commission income are fees earned by the Company on fiduciary activities where the
Company holds assets on behalf of its customers. This fee income totalled $18 million in 2022 (2021: $36.3
million).
5. Net trading income
2022 2021
$m $m
Derivatives (17) 115
Debt securities 509 12
Loans and advances (24) 38
468 165
6. Net investment income
2022 2021
$m $m
Net (loss)/gain on FVOCI investment securities (6) 2
Equity securities 48 50
42 52
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
66
7. Net income from other financial instruments designated at fair value through profit or loss
2022 2021
$m $m
Financial instruments 22 59
22 59
Financial instruments predominantly include loans designated at fair value through profit or loss. The Company
has elected the fair value option for certain loans, where the economic risks are hedged with derivative
instruments, such as credit default swaps or total return swaps. The Company has elected the fair value option to
mitigate accounting mismatches in cases where hedge accounting is complex and to achieve operational
simplifications.
8. Other operating income
2022 2021
$m $m
Intercompany recoveries 744 676
744 676
A significant portion of expenses within the Company originate from services provided by the Citi Solution
Centre (CSC) to other Citi entities, both globally and regionally. These costs are allocated out to businesses and
legal entities based on a number of drivers. All of these transfer pricing agreements are reviewed regularly for
appropriateness. These recoveries are recognised in other operating income.
9. Auditor’s remuneration
2022 2021
$m $m
Audit fee 1.0 0.8
Other assurance 0.3 0.5
Tax advisory services — —
Other non-audit services — —
1.3 1.3
Additional fees paid to other KPMG member firms outside Ireland for services include local audit fees of $1.4
million (2021: $1.3 million) (of which $0.8 million (2021: $0.7 million) were to offices involved in the statutory
audit of the Company), other assurance fees of $0.3 million (2021: $0.4 million), tax advisory fees of $nil (2021:
$nil) and any other non-audit service fees of $0.06 million (2021: $0.05 million).
10. Personnel expenses
The average number of persons employed by the Company during the year was 12,644 (2021: 11,249). This
comprises 12,461 Direct Staff Full Time and 183 Direct Staff Part-time.
The following table shows the average number of employees by function for 2022 and 2021:
2022 2021
Corporate and Investment Bank 1,228 912
Retail and Private banking 453 303
Corporate Functions 4,628 4,230
Other operations 6,335 5,804
Total number of staff 12,644 11,249
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
67
10. Personnel expenses (continued)
“Other operations” relates primarily to Operation and Technology function headcount which are based in the
Company’s Solution Centres.
2022 2021
$m $m
Wages and salaries 880 804
Social security costs 90 89
Share based payment expenses 36 21
Pensions and post retirement benefits 38 37
Restructuring costs 11 —
Total personnel expenses 1,055 951
The Company operates 20 (2021: 20) defined contribution schemes across its branches. In addition, the
Company also operates 13 (2021: 13) defined benefit schemes. In 2022 contributions of $38 million (2021: $37
million) were made to the schemes. For more details, please refer to Note 14.
11. Directors’ emoluments
2022 2021
$m $m
Directors' emoluments are as follows:
For qualifying services 3 3
Pension schemes
– Defined contribution scheme — —
3 3
As of 31 December 2022 retirement benefits were accruing to two directors (2021: two).
12. Other expenses
2022 2021
$m $m
Research and development 3 4
Depreciation 39 40
Amortisation 17 16
Communications and technology 200 215
Contractors 47 43
Levies and regulatory charges 56 67
Premises 26 29
VAT 38 34
Travel & Entertainment 10 1
Other administrative expenses 168 115
604 564
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
68
13. Tax on profit
(a) Analysis of tax charge in the year:
2022 2021
$m $m
Current tax:
Corporate tax on profits of the period (191)
-
(164)
Adjustments in respect of corporation tax for earlier years (17)
Deferred tax:
Current year deferred tax (53) (13)
Total corporate tax (244) (193)
(b) Reconciliation of effective tax rate:
2022 2021
$m $m
Profit before tax 1,274 1,206
Total profit before tax 1,274 1,206
Corporate tax at Irish corporation tax rate of 12.5% (159) (151)
Effects of:
Taxes paid in foreign jurisdictions (30) (5)
Deferred tax adjustments (26) (20)
Prior year adjustment (29) (17)
Total corporate tax expense (244) (193)
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
69
14. Retirement benefit obligation
The Company participates in locally operated defined benefit and defined contribution schemes for its European
branches. In some of the European countries employers pay contributions towards the state pension scheme. The
Company fulfils its duties in this regard as required by local statute. Across the Company, various countries
participate in defined contribution schemes.
Employer contributions to the defined benefit schemes in 2022 were $34 million (2021: $12 million). The
Company expects to make contributions of approximately $10 million in 2023. The defined benefit obligation
includes benefits for current employees, former employees and current pensioners. The weighted average
duration of the obligation is 14.6 years (2021:17.7years). The main plans provide benefits related to salary close
to retirement or earlier withdrawal from service.
There were no material amendments, curtailments and settlements within the Company during 2022 and 2021.
The amounts recognised in the statement of financial position are determined as follows:
31 December
2022
31 December
2021
$m $m
Present value of funded defined benefit obligation (377) (574)
Present value of unfunded defined benefit obligation (11) (15)
Total defined benefit obligation (388) (589)
Fair value of plan assets 286 361
Unrecognised asset due to impact of asset ceiling (3) —
Net liability recognised on the statement of financial position (Note 30) (105) (228)
Defined benefit schemes in deficit of $121 million are recognised within Other liabilities. This is offset by $16
million of defined benefit schemes in surplus.
The unfunded deficit is kept under review by the Directors on an ongoing basis.
The analysis of the income statement charge is as follows:
2022 2021
$m $m
Operating costs:
Current service cost 5
5
Administration expenses 2
2
Past service cost (incl. curtailments) — —
Financing costs:
Interest cost on defined benefit obligations 6 4
Interest income on scheme assets (4) (2)
Expense recognised in other expenses 9 9
Expense recognised in other expenses for continuing operations 9 9
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
70
14. Retirement benefit obligation (continued)
The changes to the present value of the defined benefit obligation during the year are as follows:
2022 2021
$m $m
Opening defined benefit obligation (589) (667)
Exchange rate adjustments 35 50
Current service cost (5) (5)
Interest cost on defined benefit obligations (6) (4)
Remeasurement gain due to changes in financial assumptions 175 34
Remeasurement loss due to changes in demographic assumptions (3) (1)
Remeasurement loss due to changes in liability experience (10) —
Net benefits paid out 15 16
Net increase in liabilities from acquisitions — (12)
Closing defined benefit obligation (388) (589)
The changes to the fair value of plan assets during the year are as follows:
2022 2021
$m $m
Opening fair value of plan assets 361 388
Exchange rate adjustments (22) (30)
Interest income on plan assets 4 2
Return on plan assets excluding interest income (75) 7
Contributions by the employer 34 12
Net benefits paid out (15) (16)
Administration costs incurred (2) (2)
Net increase in assets from disposals/acquisitions 1 —
Settlements (1) —
Closing fair value of plan assets 285 361
The actual return on plan assets is as follows:
2022 2021
$m $m
Interest income on plan assets 4 2
Remeasurement of plan assets excluding interest income (75) 7
Total return on plan assets (71) 9
The interest income on scheme assets is set using the discount rate assumption. In 2022, there was an decrease in
asset values leading to a remeasurement loss of $75 million (2021: gain of $7 million).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
71
14. Retirement benefit obligation (continued)
The analysis of amounts recognised outside the income statement, and disclosed in the statement of
comprehensive income are as follows:
2022 2021
$m $m
Remeasurement gain/(loss) on scheme liabilities
Remeasurement gain due to changes in financial assumptions 175 34
Remeasurement loss due to changes in demographic assumptions (3) (1)
Remeasurement loss due to changes in liability experience (10) —
Remeasurement loss due to impact of the asset ceiling (3) —
Total remeasurement gain on scheme liabilities 159 33
Remeasurement (loss)/gain on plan assets (75) 7
Gain on remeasurement of defined benefit liability/asset 84 40
The assumptions which have the most significant effect on the results of the valuation are those relating to the
discount rate on scheme liabilities and mortality assumptions. The future life expectancy of scheme members is a
key assumption. However, mortality assumptions are expected to vary from country to country, due to variations
in underlying population mortality as well as in variations of the profile of typical membership of the Company’s
pension scheme. The average life expectancy of an individual retiring at age 65 is 22.3 (2021:22.2) for males and
23.2 (2021:23) for females.
Through its defined benefit pension plan, the Company is exposed to a number of risks, the most significant of
which are detailed below:
• The possibility that bond yields will change which will affect the size of the obligations and the level
of pension cost.
• The possibility that asset returns will be lower than expected.
• The risk of changes in mortality rates as the majority of the Company's defined benefit obligations are
to provide benefits for the life of the member, increases in life expectancy will result in an increase in
the liabilities.
• As the Greek pension plan is integrated with Greek social security, any further amendments to the
Greek Social Security Pension could potentially lead to higher benefits under the plan and thus to
additional obligations and costs for the Company.
The financial weighted average assumptions used in calculating the liabilities as at 31 December are as follows:
2022 2021
Discount rate for assessing scheme liabilities 3.70% 1.10%
Future salary increases 3.50% 3.00%
Rate of increase for pensions in payment 2.40% 2.10%
Inflation rate assumption 2.50% 2.10%
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
72
14. Retirement benefit obligation (continued)
The fair values of the plan assets are as follows:
$m
2022 2021
Total fair
value
Of which not
quoted in
active market
Total fair
value
Of which not
quoted in
active market
Equities 73 — 105 —
Property — — — —
Government bonds 82 — 105 —
Corporate bonds 67 — 109 —
Other 64 5 42 5
Total fair value of assets 286 5 361 5
The key assumption used for IAS 19 is the discount rate although the results are also sensitive, but to a lesser
extent to the other assumptions. If different assumptions were used, there could be a material effect on the results
disclosed. The sensitivity analyses are based on a change in one assumption while holding all other assumptions
constant.
The sensitivity of key assumptions used to value the obligation is as follows:
2022 2021
$m $m
Effect of decreasing the discount rate assumption by 1% on liabilities (59) (116)
Effect of increasing the discount rate assumption by 1% on liabilities 50 95
Effect of increasing the pension increase rate by 1% on liabilities (22) (41)
Effect of decreasing the pension increase rate by 1% on liabilities 18 33
Effect of increasing the salary increase rate by 1% on liabilities (4) (8)
Effect of decreasing the salary increase rate by 1% on liabilities 3 8
Effect of participants living one extra year than expected on liabilities (11) (21)
Future benefits expected to be paid from pension plans are as follows:
2023 2024 2025 2026 2027
2028-
2032
$m $m $m $m $m $m
Expected benefit payments 16 17 17 18 18 98
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
73
15. Notes to the statement of cash flows
a) Cash and cash equivalents
Cash and cash equivalents comprise the following balances, maturing within three months.
31 December
2022
31 December
2021
$m $m
Cash and balances with central banks 30,138 21,903
Other demand deposits 2,776 5,580
Expected credit loss (3) (1)
Cash and cash equivalents 32,911 27,482
Loans and advances to banks with maturity less than 3 months 11,599 9,526
44,510 37,008
b) Expected credit loss – Cash and cash equivalents
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1
2022 2021
$m $m
Outstanding exposure as at 1 January 27,483 19,968
New assets originated or purchased 9,867 7,907
Asset derecognised or matured (4,436) (392)
At 31 December
32,914
27,483
There were no exposures and movements reported under IFRS 9 Stage 2 and 3 for cash and cash equivalents.
ECL Stage 1
2022 2021
$m $m
IFRS 9 ECL as at 1 January 1 —
ECL on new assets originated or purchased 2 1
Exposure derecognised or matured — —
At 31 December
3
1
There were no ECL movements reported under IFRS 9 Stage 2 and 3 for cash and cash equivalents. The ECL in
relation to loans and advances to banks with maturity less than 3 months is disclosed in Note 19.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
74
15. Notes to the statement of cash flows (continued)
c) Change in liabilities arising from financing activities
Subordinated liabilities
2022 2021
$m $m
Opening balance at 1 January 4,773 —
Non-cash movements (318) —
Proceeds from issue of subordinated liabilities
— 4,773
Closing balance at 31 December 4,455 4,773
16. Trading assets
31 December
2022
31 December
2021
$m $m
Government bonds 8,556 2,552
Corporate bonds 1 3
Loans 1,338 1,888
9,895 4,443
17. Derivative financial instruments
31 December 2022 31 December 2021
Notional
amount
Fair value Notional
amount
Fair value
Assets Liabilities Assets Liabilities
$m $m $m $m $m $m
Derivatives held for
trading 2,018,355 22,347 22,844 1,605,211 13,126 14,429
Total 2,018,355 22,347 22,844 1,605,211 13,126 14,429
Derivatives held for
trading
Foreign exchange 755,341 11,544 11,331 705,556 5,898 5,842
– OTC 755,341 11,544 11,331 705,556 5,898 5,842
Interest rate 1,235,871 10,458 10,837 884,596 6,734 8,134
– OTC 1,235,871 10,458 10,837 884,596 6,734 8,134
Equity 4,091 87 421 858 45 —
– OTC 4,091 87 421 858 45 —
Credit 22,715 257 254 14,195 447 451
Commodity 337 1 1 6 2 2
Total 2,018,355 22,347 22,844 1,605,211 13,126 14,429
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
75
18. Investment securities
31 December
2022
31 December
2021
$m $m
FVOCI investment securities
Government bonds 7,661 6,951
Corporate bonds
1,241 436
Total
8,902 7,387
FVTPL investment securities
Equity securities
170 138
Total investment securities
9,072 7,525
Expected credit loss – Investment securities
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1
2022 2021
$m $m
Outstanding exposure as at 1 January 7,387 3,690
New assets originated or purchased 1,687 3,824
Asset derecognised or matured (172) (127)
At 31 December 8,902 7,387
There were no exposures and movements reported under IFRS 9 Stage 2 and 3 for investment securities.
ECL Stage 1
2022 2021
$m $m
IFRS 9 ECL as at 1 January 3 6
ECL on new assets originated or purchased
—
—
Exposure derecognised or matured
—
(3)
At 31 December
3
3
3
There were no ECL movements reported under IFRS 9 Stage 2 and 3 for investment securities.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
76
19. Loans and advances to banks and customers
The total carrying amounts in this table include loans and advances to banks and loans and advances to
customers. See table below for split by category.
31 December
2022
31 December
2021
$m $m
Loans and advances to banks measured at amortised cost
Gross exposure 13,486 11,040
Expected credit loss (14) (5)
13,472 11,035
Loans and advances to customers measured at amortised cost
General governments
258
301
Corporations
18,775
18,647
Retail customers
1,068
1,443
Expected credit loss
(157)
(149)
19,944
20,242
Loans to customers held at fair value through the profit and loss
10,877
1,011
30,821 21,253
Retail customers are in relation to the Private Bank business.
Expected credit loss – Loans and advances to banks
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1 Stage 2 Stage 3 Total
2022
2021
2022
2021
2022
2021
2022
2021
$m
$m
$m
$m
$m
$m
$m
$m
Outstanding exposure
as at 1 January 10,988 16,291 49 124 3 — 11,040 16,415
New assets originated
or purchased 2,591 9,831 112 27 — 3 2,703 9,861
Asset derecognised or
matured (222) (15,158) (32) (78) (3) — (257) (15,236)
Transfers to Stage 1 16 (50) (16) 50 — — — —
Transfers to Stage 2 (102) 74 102 (74) — — — —
Transfers to Stage 3 (1) — — — 1 — — —
Amounts written off — — — — — — — —
Other movements — — — — — — — —
At 31 December 13,270 10,988 215 49 1 3 13,486 11,040
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
77
19. Loans and advances to banks and customers (continued)
ECL Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
IFRS 9 ECL as at 1
January 2 6 2 5 1 — 5 11
ECL on new assets
originated or purchased 6 — 1 (1) — 1 7 —
Exposure derecognised
or matured — (2) — (1) — — — (3)
Transfers to Stage 1 1 1 — (1) (1) — — —
Transfers to Stage 2 — — — — — — — —
Transfers to Stage 3 (3) — — — 3 — — —
Net remeasurement of
loss allowance (1) (1) 2 — 4 — 5 (1)
Amounts written off — — — — (2) — (2) —
Other movements (1) (2) (1) — 1 — (1) (2)
At 31 December 4 2 4 2 6 1 14 5
Expected credit loss – Loans and advances to customers
Exposure Stage 1 Stage 2 Stage 3 Total
2022
2021
2022
2021
2022
2021
2022
2021
$m
$m
$m
$m
$m
$m
$m
$m
Outstanding exposure
as at 1 January 18,638 15,985 1,448 1,400 305 559 20,391 17,944
New assets originated
or purchased 4,556 6,256 1,312 149 7 34 5,875 6,439
Asset derecognised or
matured (5,692) (3,046) (375) (699) (89) (221) (6,156) (3,966)
Transfers to Stage 1 584 474 (555) (387) (29) (87) — —
Transfers to Stage 2 (1,452) (1,000) 1,478 1,000 (26) — — —
Transfers to Stage 3 (219) (29) (33) (15) 252 44 — —
Amounts written off (4) (2) (2) — (3) (24) (9) (26)
Other movements — — — — — — — —
At 31 December 16,411 18,638 3,273 1,448 417 305 20,101 20,391
ECL Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
IFRS 9 ECL as at 1
January 13 31 75 208 61 154 149 393
ECL on new assets
originated or purchased 18 5 30 — 22 14 70 19
Exposure derecognised
or matured (2) (2) (11) (52) (4) (61) (17) (115)
Transfers to Stage 1 62 32 (40) (32) (22) — — —
Transfers to Stage 2 (3) (13) 3 13 — — — —
Transfers to Stage 3 (1) — (3) (2) 4 2 — —
Net remeasurement of
loss allowance (22) (13) 22 (1) 16 14 16 —
Amounts written off — — — — (3) (17) (3) (17)
Other movements (40) (27) 2 (59) (20) (45) (58) (131)
At 31 December 25 13 78 75 54 61 157 149
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
78
20. Other assets
31 December
2022
31 December
2021
(Restated)
$m
$m
Receivables and Prepayments
3,595
1,119
Settlement clearing lines
—
299
Margin account receivables*
6,335
4,849
Secondary loan trading
182
395
Retirement receivable
16
—
Other balances
55
179
10,183
6,841
*Restated for prior year adjustment, as detailed in Note 38
Settlement clearing lines arise from the timing of short term transactions between the point of funding and the
settlement period in the Company’s transaction services business. Other balances represent receivables due and
other financial assets recorded.
Expected credit loss – Other assets
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1
2022
2021
(Restated)
$m $m
Outstanding exposure as at 1 January 6,841 2,099
New assets originated or purchased* 7,878 5,692
Asset derecognised or matured* (4,532) (950)
Amounts written off
(4) —
At 31 December 10,183 6,841
*Restated for prior year adjustment, as detailed in Note 38
There were no exposures and movements reported under IFRS 9 Stage 2 and 3 for other assets.
There were no ECL recognised or any movements reported under IFRS 9 for other assets either at 31 December
2022 or 31 December 2021.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
79
21. Risk management
21.1. Risk management mission, organisation and governance
Risk governance and risk management frameworks
CEP has a comprehensive risk governance framework in place to provide oversight of CEP’s monitoring and
management of risks, ensuring that the risk profile of the Company is well documented and pro-actively
managed at all levels of the organisation so that the Company’s financial strength is safeguarded. The framework
applies to the Company in its entirety, including all businesses, functions and branches.
Risk governance at CEP is cascaded in line with the risk frameworks through risk policies and standards, which
describe how the Company identifies, measures, mitigates, monitors and reports material risk. This ensures
transparent lines of responsibility and accountability for the core risk governance processes performed by the
Company.
Risk management oversight is conducted as described in the Directors’ Report corporate governance section
starting from page 7.
The Board has overall responsibility for the Company’s risk strategy, including risk appetite limits. The Board
Risk Committee (BRC) is a sub-committee of the Board and is governed by terms of reference approved by the
Board. The BRC has responsibility for the oversight and advice to the Board on the current risk exposures of the
Company and future risk strategy. The BRC monitors risk trends and reviews the level of resourcing and
capabilities required to ensure governance standards are met. The BRC oversees Independent Risk Management
and provides recommendations to the Board on risk related matters.
Lines of defence
The risk management framework is based on a ‘lines of defence’ governance model, whereby each line has a
specific role and defined responsibilities in such a way that the execution of tasks is separated from the control of
the same tasks. The lines of defence also collaborate with each other through formalised processes to bring
various perspectives together and to lead the Company toward outcomes that are in clients’ and shareholders’
interests, create economic value and are systemically responsible.
The Company’s business lines, CSC, Operations & Technology and Finance (the first line of defence) owns and
manages the risks inherent in or arising from the business, and are responsible for identifying, assessing and
managing their key risks, for establishing and operating controls to mitigate key risks, performing manager
assessments of the design and effectiveness of internal controls, and promoting a culture of compliance and
control.
The Company’s independent control functions (second line of defence), comprising of Independent Risk
Management and Independent Compliance Risk Management set standards against which the business and
functions, are required to manage and oversee risks, including conformance with applicable laws, regulatory
requirements, policies and other relevant standards of ethical conduct. These functions are involved in
identifying, measuring, monitoring, and controlling aggregate risks, and are independent of front line units.
The Company’s Internal Audit function (third line of defence) independently reviews activities of the first two
lines of defence, based on a risk-based audit plan and methodology approved by the Audit Committee.
The company has enterprise support functions (HR and Legal) that do not meet the definition of front-line unit,
independent risk management or internal audit. While they do not report into the Chief Risk Officer (CRO) or
Chief Country Compliance Officer (CCCO), they are expected to design, implement and maintain an effective
control environment, supportive of safety and soundness. Any front-line unit activities within enterprise support
functions remain subject to challenge by Independent Risk Management and Independent Compliance Risk
Management.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
80
21. Risk management (continued)
21.1. Risk management mission, organisation and governance (continued)
Independent Risk Management
CEP’s Independent Risk Management acts as a strong independent partner of the business to support effective
risk management across all risks to which the Company is exposed in a manner consistent with the Company’s
risk appetite.
The Company’s Independent Risk Management is an independent function within the CEP legal vehicle. The
Company’s CRO reports directly to both the Citi EMEA CRO and the CEP CEO. The CRO has frequent, direct
and independent access to the Board and the BRC. The Company’s Independent Risk Management maintains
appropriate representation on all the Company’s management committees and other governance forum as
appropriate. The CRO reports on the risk profile of the Company on an ongoing basis to the BRC and Board.
The Company aims to ensure that Independent Risk Management employees possess the appropriate expertise,
stature, authority and independence and are empowered to make decisions and escalate issues.
Risk Management Framework
The Company has in place comprehensive, documented risk management frameworks, policies and standards to
support the management of the material risks identified for its activities, and ensure accountability through its
lines of defence model.
The Company’s Risk Management Framework is an overarching framework, based on sound principles of good
risk governance and management and on guidance issued by regulatory authorities. The Risk Management
Framework outlines the risk governance structure in the Company, the core governance processes of the
Company and the roles and responsibilities.
Formalised risk management frameworks by material risk type codify the processes and practices involved in the
management of risk in the Company. The purpose of these risk frameworks is to clearly set out:
• the principles of sound risk management for each material risk type;
• clear lines of authority and risk responsibility, including roles and membership of both management and
risk committees, with the responsibility to monitor adherence to frameworks, policies and standards;
• how the risk is governed under the lines of defence approach;
• supporting policies, standards and processes.
Risk appetite
The Company’s risk appetite statement is the formal articulation of the aggregate levels and types of risk that the
Company is willing to accept or avoid in order to achieve its strategic objectives, which includes the
maintenance of a strong financial position. It includes qualitative statements and associated risk review
thresholds, and quantitative statements and associated risk limits.
The risk appetite statement is core in aligning overall corporate strategy, capital allocation, and risk. It aims to
support business growth whilst constraining any excessive accumulation of risk in the Company’s risk profile.
Independent Risk Management reviews and reports the Company’s risk appetite usage against the established
limits and thresholds on a regular basis to the BRC and the Board. The BRC annually recommends the approval
of risk appetite limits in the form of the risk appetite statement to the Board.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
81
21. Risk management (continued)
21.1. Risk management mission, organisation and governance (continued)
Core risk governance process
Appropriate processes and tools are in place to manage, measure and actively mitigate risks taken by the
Company. Independent Risk Management ensures that key risks are identified, managed, reported, and
monitored effectively by executing the following processes:
• Risk Inventory identification and assessment process which identifies and assesses risk exposures,
concentrations and positions, both quantitative and qualitative, identified as the most significant risks to
the Company, and how these risks are monitored and mitigated;
• Assessing and challenge the Company’s 3-year strategic plan and provide a report outlining the results
of that challenge to the Board on an annual basis;
• Enabling Board review and approval of the Company’s risk appetite statement on an annual basis. This
articulates the amount of risk which the Board is prepared to tolerate in pursuit of its strategy;
• Adopting policies that establish standards, risk limits, and policy adherence processes;
• Stress testing and ensuring appropriate shocks and models are used to assess the Company’s material
risks;
• Documenting an annual, Board-approved risk strategy and plan which outlines key deliverables which
support and enhance risk management. Progress against the plan is tracked and reported to the BRC on
an ongoing basis; and,
• Ensuring all branches in CEP`s branch network are operating in line with the Company’s Risk
Management Framework.
Stress testing
In CEP, stress testing is integrated into CEP’s risk management processes and supports business strategic
decisions.
The stress test programme:
• Supports bottom-up and top-down stress testing, including reverse stress-testing;
• Is a platform that enables modelling of a wide variety of stress tests across business lines and risk types;
• Draws data from across the organisation, as needed; and,
• Enables intervention to adjust assumptions.
Sensitivity analysis supports ongoing risk monitoring by risk teams as appropriate. It is performed at regular
intervals dependent on internal and regulatory requirements.
The Company utilises scenario analyses, which are both dynamic and forward looking. Scenarios appropriately
impact all material risk types, risk factors and specific vulnerabilities relevant to CEP. Reverse stress testing is
used by the Company to assess its business model vulnerabilities and is appropriate to the nature, size and
complexity of its business and the risks it bears.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
82
21. Risk management (continued)
21.1. Risk management mission, organisation and governance (continued)
Risk Monitoring & Reporting
CEP Independent Risk Management complete ongoing monitoring of the risk environment which enables a
comprehensive set of reports to be produced. These reports ensure Management, relevant Committees and the
Board appropriately assess and understand the key risks facing CEP:
• Detailed reports on Risk exposures covering all material risks are sent to the BRC and Board at each
sitting;
• Transparent, and rigorous reporting on exposures and concentrations by risk area are sent to Risk
Committees; and,
• Monthly adherence to CEP RAS reports are sent to Management to ensure that CEP risk taking remains
consistent with the limits set by the CEP Board.
The Company uses a global Citi risk reporting system to monitor credit and market risk exposure. The Company
uses both systems and processes to monitor operational risk, the output of which is consolidated to provide an
operational risk profile.
21.2. Credit risk
Definition
Credit risk is the potential for financial loss resulting from the failure of an obligor to honor its financial or
contractual obligations. Credit risk arises in many of the Company’s business activities, including:
• lending;
• sales and trading;
• derivatives;
• payment services;
• settlement;
• securities transactions; and
• when the Company acts as an intermediary on behalf of its clients and other third parties.
Credit risk includes default, credit concentration, FX lending, securitisation, country, settlement & delivery,
residual, migration and counterparty credit risk.
Governance and Organisation
The Credit risk management framework, approved by the Board, provides the holistic outline of how credit risk
is managed, establishes standards for measuring, managing, monitoring and controlling credit risk in the
Company and sets responsibilities across all lines of defence. As part of the Credit Risk Management
Framework, the following Committees perform an oversight role for credit risk related items:
• Board Risk Committee
• Executive Committee
• Risk Management Committee
• Credit Portfolio Review Group
• Impairment Working Group
• Product Review Committee
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
83
21. Risk management (continued)
21.2. Credit risk (continued)
The Company has put in place CEP specific credit risk and remedial management standards. From the
Company’s credit approval perspective, new and existing credit approvals adhere to Citi global and CEP
policies.
In line with the above framework, the Company has a credit portfolio reporting process. The Company’s credit
risk profile is monitored by the Risk Management Committee and supported by the Credit Portfolio Review
Group and reports to the Company’s Board Risk Committee for review.
The Head of Credit Risk reports directly to the Company’s CRO and is responsible for second line of defence
oversight and management of the credit risk portfolio of the Company.
Risk measurement
CEP sets its credit risk appetite in line with its business model and strategy and specifies credit risk limits in its
risk appetite statement and associated credit risk standards. Adherence to these limits is monitored by the credit
risk team on an ongoing basis and reported to the Risk Management Committee and Board Risk Committee.
To manage the credit risk profile and limit the concentration risk, credit risk limits are also set for each
counterparty, establishing the maximum acceptable level for each one. Credit risk management may freeze
specific limits at any time to take the latest events into account.
Credit quality
The Company has an internal risk rating system that accurately and reliably differentiates between degrees of
credit risk for classifiably managed exposures. To differentiate among degrees of credit risk, the Company must
be able to make meaningful and consistent distinctions among credit exposures along two dimensions (i) default
risk - obligors are assigned to rating grades that approximately reflect likelihood of default, and (ii) loss severity
rating grades (or loss given default estimates) that approximately reflect the loss severity expected in the event of
default during economic downturn conditions.
The Obligor Risk Rating (ORR) represents the probability that an obligor will default within a one-year time
horizon. Risk ratings for obligors are assigned on a scale of 1 to 10, with sub-grades, where “1” is the best
quality risk and “7” is the worst for obligors that are not in default. ORRs of “8” to “10” are assigned to obligors
meeting the definition of default: i.e. the obligor is either 90 days past due on material exposure to the Company
and/or the Company considers the obligor unlikely to pay its credit obligations to the Company in full without
recourse by the Company to actions such as realising security (if held), collecting against a guarantee, filing a
claim against the insurer, or other forms of support.
Obligors assigned ORR of “4-“ and better are considered Investment Grade obligors, which have low default risk
based on their strength of capacity to meet financial commitments.
The ORR is derived using a rating methodology model. The methodology considers both qualitative and
quantitative inputs whilst also considering expert risk judgement. All ORRs must be reviewed annually, at a
minimum, and when new information is expected to have a meaningful impact on the credit quality of the
obligor or facilities to the obligor.
ORRs are a key input into the determination of the term structure of PD. The Company collects performance and
default information about its credit risk exposures, analysed by geography and sector. The company utilises
statistical models to analyse this data and generate estimates of PD and how these are expected to change as a
result of the passage of time.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
84
21. Risk management (continued)
21.2. Credit risk (continued)
Impairment and provisioning under IFRS
Provisions required against all financial instruments (such as cash, loans, investment securities and trade
receivables) recorded at amortised cost or at fair value through other comprehensive income, are derived using
the three stage IFRS 9 ECL model.
• Stage 1 includes assets with no significant increase in credit risk since initial recognition. A 12-month
expected credit loss (ECL) i.e. probability-weighted estimate of credit loss is recognised for these
assets.
• Stage 2 includes assets that have experienced a significant increase in credit risk since initial
recognition, but the exposure is not yet credit-impaired. A lifetime ECL is recognised.
• Stage 3 includes instruments deemed to be credit impaired. A lifetime ECL is recognised for model
calculations. Individual impairment assessments are undertaken for certain other material Stage 3
exposures to derive provisions.
Impairment/expected credit losses oversight
CEP estimates ECLs on a quarterly basis. ECLs are presented at the Impairment Working Group (IWG) jointly
chaired by the CEP Financial Controller and the CEP Head of Credit Policy & Remedial Management for review
and recommendation for Risk Management Committee (RMC) to approve.
Incorporation of forward-looking information
The Company incorporates forward-looking information into both the assessment of whether the credit risk of an
instrument has increased significantly since its initial recognition and the measurement of ECL. Three economic
scenarios are formulated: a base case, which is the central scenario, developed internally based on consensus
forecasts, and two less likely scenarios, one upside and one downside scenario.
The base scenario is aligned with information used by the Company for other purposes such as strategic planning
and budgeting.
The scenarios are prepared by the Economic Scenarios Group team and the external information considered
includes economic data and forecasts published by governmental bodies and monetary authorities in the
countries where the Company operates, supranational organisations such as the OECD and the International
Monetary Fund, and selected private-sector and academic forecasts. Scenarios are refreshed on a quarterly basis.
In developing its IFRS 9 forecasting models, key drivers are identifying such as credit risk and credit losses
based on the sector, product and geography characteristics attach to each financial instrument and analysis of
historical data to estimate relationships between the identified macro-economic drivers and credit risk and credit
losses,using more than 20 years of historical loss data. The Key drivers include GDP growth, unemployment
rates, and other macro indicators including- equity indices. Citi estimates each economic driver for credit risk
over the forecast period followed by a reversion to a long run averages.
The table below provides key GDP and unemployment macroeconomic assumptions used in the base, optimistic
and pessimistic scenarios over a 3-year forecast period for four of the Company’s largest geographies by credit
exposure.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
85
21. Risk management (continued)
21.2. Credit risk (continued)
Country
Macro-economic
Variable
Optimistic Base Pessimistic
2023 2024 2025 2023 2024 2025 2023 2024 2025
#1 France
GDP 2.0 1.5 1.7 1.3 2.3 1.9 (3.6) 2.2 3.5
Unemployment 5.9 6.0 6.5 7.5 7.4 7.6 8.2 8.0 8.1
#2 Germany
GDP 0.6 1.7 1.6 — 3.3 2.4 (3.3) 2.1 2.8
Unemployment 4.2 4.3 4.1 5.6 5.5 5.0 6.6 6.6 5.9
#3 United
States
GDP 2.6 4.1 0.8 (0.1) 2.2 2.2 (2.7) 3.9 2.3
Unemployment 4.1 3.5 3.6 4.7 4.4 4.3 7.2 6.5 6.0
#4 Euro
Area
GDP 1.9 3.0 0.4 0.9 1.8 1.1 (3.4) 2.5 2.3
Unemployment 6.3 6.3 6.4 7.1 7.0 7.0 9.5 9.2 8.7
The assumptions represent the absolute percentage unemployment rates and year-on-year percentage change for
GDP.
The scenarios are refreshed on a quarterly basis to include up to date actual data and to reflect changes in
outlook. Given the scope of Citi’s business activity, the quarterly scenarios produced for ECL calculation are
global in nature. The probability weightings applied in measuring ECL are also reviewed quarterly and are
shown below for the current and previous year-end. The difference in weights observed between 2021 and 2022
primarily reflecting changes to the underlying process to generate the scenario weights and changes in
macroeconomic outlook.
Scenario
31 December 2022 31 December 2021
Optimistic Base Pessimistic Optimistic Base Pessimistic
Probability Weight 9% 59% 32% 15% 55% 30%
After applying the above weights, the model produced a combined ECL of $ 241 million (31 December 2021:
$105 million). In addition to the modelled ECL, a management overlay was considered.
Sensitivity of ECL to future economic conditions and management overlay
The ECL estimation is sensitive to judgements and assumptions made regarding formulation of forward-looking
scenarios and how such scenarios are incorporated into the calculations.
In addition to the macro-economic variables, IFRS 9 ECL estimation is sensitive to many other drivers
incorporated into its calculation including factors such as the credit quality, product, sector, geographic
distribution, collateral and tenor. The IFRS 9 model ECL also takes into account a number of qualitative factors
including concentration, collateralization and other external considerations. Finally, CEP may include
management overlays as a post model adjustment to capture, among other things, idiosyncratic risk events and
model limitations.
Credit quality and tenor characteristics of CEP portfolio are of particular importance in limiting the level of ECL
sensitivity. At 31 December 2022, almost 94 % (31 December 2021: 96%) of the portfolio was in Stage 1.
The IFRS 9 calculation incorporates three probability-weighted scenarios to produce a combined loss allowance.
The table below shows the individual loss allowance for each scenario (Base, Optimistic and Pessimistic)
calculated using the year-end stage profile. The loss allowance figures exclude management overlays.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
86
21. Risk management (continued)
21.2. Credit risk (continued)
31 December 2022
Optimistic Base Pessimistic
$m $m $m
Loss allowance 164 184 367
Total ECLs at 31 December 2022 were $300 million (31 December 2021 : $238 million), including total
management overlays of $59 million (31 December 2021: $134 million). The management overlays included at
year-end 2022 reflect a number of considerations not directly included in the IFRS9 models including inter alia
potential energy supply-related impacts $44 million (31 December 2021:$nil), which was estimated based on a
risk rating simulation. The latent (but reducing) impact caused by Covid 19 $7 million (31 December 2021: $109
million) and geo-political risks due to the on-going Russia-Ukraine conflict. The reduction in management
overlays during the course of 2022 primarily reflects an improved outlook with respect to Covid 19 relative to
2021.
Risk exposure
A breakdown of the Company’s total credit exposure including commitments are as follows:
31 December 2022 31 December 2021 (Restated)
Related amounts not offset
in the statement of
financial position
Related amounts not
offset in the statement of
financial position
Maximum
exposure
Netting
and set-off
Cash
collateral
Non-cash
collateral*
Net
exposure
Maximum
exposure
Netting
and set-off
Cash
collateral
Non-cash
collateral*
Net
exposure
$m $m $m $m $m $m $m $m $m $m
On-balance sheet:
Cash and cash
equivalents 32,911 — — — 32,911 27,482 — — — 27,482
Trading assets 9,895 — — — 9,895 4,443 — — — 4,443
Derivative financial
instruments 40,931 (18,584) (3,962) (101) 22,347 15,329 (2,203) (1,791) (1,195) 13,126
Investment securities 9,072 — — — 9,072 7,525 — — — 7,525
Loans and advances
to banks 13,472 — (12,717) 755 11,035 — — (6,949) 4,086
Loans and advances
to customers 33,844 (3,023) — (23,053) 7,768 22,438 (1,185) — (7,058) 14,195
Other assets* 10,183 — — — 10,183 6,841 — — — 6,841
150,308 (21,607) (3,962) (35,871) 92,931 95,093 (3,388) (1,791) (15,202) 77,698
Off-balance sheet:
Letters of credit 15,424 — — — 15,424 13,802 — — — 13,802
Undrawn
commitments to lend 28,780 — — — 28,780 26,577 — — — 26,577
Other commitments
and guarantees 2,360 — — — 2,360 4,337 — — — 4,337
46,564 — — — 46,564 44,716 — — — 44,716
*Restated for prior year adjustment, as detailed in Note 38
The maximum exposure amounts of the financial assets disclosed in the table above are the carrying values
recorded on the statement of financial position with the exception of derivatives financial instruments and loans
and advances to customers. Derivatives and reverse repos under the loans and advances to customers carrying
value in the statement of financial position are calculated by deducting the eligible netting exposure which
qualify for netting under IAS32 from the maximum exposure. Cash and non-cash collateral does not impact the
carrying value in the statement of financial position.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
87
21. Risk management (continued)
21.2. Credit risk (continued)
* Collateral held by the Company for securing loan transaction includes:
• Financial collateral such as marketable securities;
• Physical collateral such as property and equipment, furniture and fixtures, shipping vessels;
• Other types of lending collateral such as trading receivables.
Collaterals are rated by Moody’s rating agency between AAA and AA3, and there have been no significant
changes in the quality of the collaterals during the reporting period.
The credit quality of assets is monitored regularly and reported to senior management and Board Risk
Committee and the Board on a quarterly basis. In addition, high risk exposures are reported to senior
management monthly. Any sudden credit events are promptly escalated to senior risk and business managers.
Expected credit loss - On and Off Balance Sheet (All financial instruments)
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1 Stage 2 Stage 3 Total
2022
2021
(Restated) 2022 2021 2022 2021 2022
2021
(Restated)
$m $m $m $m $m $m $m $m
Outstanding exposure as at 1 January 113,812 103,204 3,573 3,263 474 666 117,859 107,133
New assets originated or purchased* 33,040 37,013 2,239 717 13 66 35,292 37,796
Asset derecognised or matured* (19,723) (25,802) (1,088) (987) (177) (255) (20,988) (27,044)
Transfers to Stage 1 1,332 877 (1,237) (790) (95) (87) — —
Transfers to Stage 2 (3,618) (1,404) 3,662 1,404 (44) — — —
Transfers to Stage 3 (292) (74) (57) (34) 349 108 — —
Amounts written off (8) (2) (2) — (3) (24) (13) (26)
Other movements — — — — — — — —
At 31 December 124,543 113,812 7,090 3,573 517 474 132,150 117,859
ECL Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022
2021
(Restated)
$m $m $m $m $m $m $m $m
IFRS 9 ECL as at 1 January 53 63 103 269 79 176 238 508
ECL on new assets originated or
purchased 38 7 59 (1) 23 15 120 21
Exposure derecognised or matured (2) (58) (4) (68) (136)
Transfers to Stage 1 81
(10
)
(12)
39 (49)
(39) (32) — —
Transfers to Stage 2 (4) (13) 5 13 (1) — —
Transfers to Stage 3 (4) — (4) 8 3 —
Net remeasurement of loss allowance (33) 29 20
(18)
—
—
—
39
6
Amounts written off —
(17) 43
— —
(3)
3
—
(5) (17) (5) (17)
Other movements (67) (16) 11 (78) (18) (50) (74) (144)
At 31 December 62 53 159 106 79 79 300 238
“ECL on new assets originated or purchased” represents the increase in ECL on outstanding exposures in the
specific stage as at year end. The “transfers to” stages within the ECL table represents the ECL held on the
associated obligors as at prior year end. The “net remeasurement of loss allowance” is the increase or decrease in
ECL following a transfer between stages. The “other movements’’ in ECL relates to the movement in
management overlays and other adjustments during the year.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
88
21. Risk management (continued)
21.2. Credit risk (continued)
Expected credit loss
The following table shows the ECL charges on all financial assets in the income statement.
31 December 2022 and 31 December 2021:
IFRS 9 ECL
Stage 1 Stage 2 Stage 3 Total
Income statement 2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
Financial assets
Cash and cash equivalents (2) (1) — — — — (2) (1)
Loans and advances to banks (2) 4 (2) 2 (4) (1) (8) 5
Loans and advances to
customers (12) 18 (3) 132 7 93 (8) 243
Investment securities — 4 — — — — — 4
Total On Balance Sheet (16) 25 (5) 134 3 92 (18) 251
Off Balance Sheet
Letters of credit 19 (19) (11) 6 (7) (9) 1 (22)
Undrawn commitments to
lend (12) 4 (38) 22 7 14 (43) 40
Other commitments and
guarantees — — — — — — — —
Total Off Balance Sheet 7 (15) (49) 28 — 5 (42) 18
Recoveries of amounts
previously written-off 2 6
Write-offs (12) (26)
Total Impairment (Losses)/
Recoveries (70) 249
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
89
21. Risk management (continued)
21.2. Credit risk (continued)
The following table shows the ECL reserve on financial assets in the statement of financial position and on Off
Balance Sheet assets.
As at 31 December 2022 and 31 December 2021:
IFRS 9 ECL
Stage 1 Stage 2 Stage 3 Total
Statement of financial
position
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
Cash and cash equivalents 3 1 — — — — 3 1
Loans and advances to banks 4 2 4 2 6 1 14 5
Loans and advances to
customers 25 13 78 75 54 61 157 149
Investment securities 3 3 — — — — 3 3
Other assets — — — — — — — —
Total On Balance Sheet 35 19 82 77 60 62 177 158
Off Balance Sheet
Letters of credit 13
32
15
5
19
10
47 47
Undrawn commitments to
lend 18 5 58 21 — 7 76 33
Other commitments and
guarantees — — — — — — — —
Total Off Balance Sheet 31 37 73 26 19 17 123 80
Total 66 56 155 103 79 79 300 238
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
90
21. Risk management (continued)
21.2. Credit risk (continued)
The table below provides an indicative mapping of how the Company’s internal credit risk grades relate to PD
and to the external credit ratings of Standard & Poor’s.
Risk Rating Average Probability of Default (%) External Rating
Rating 1 to 4-: Investment Grade 0.00 - 0.34 AAA to BBB-
Rating 5+ to 6-: Non-investment Grade 0.89 - 12.16 BB+ to B-
Rating 7+ to 7-: Higher Risk 16.64 to 22.13 CCC+ to CCC-
Rating 8 to 10: Credit Impaired Loss estimate on individual basis to SD/D
The Company groups its exposures based on their ORR ratings as explained above:
Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
Loans and advances to banks at
amortised cost
Rating 1 to 4- 12,869 10,674 — — — — 12,869 10,674
Rating 5+ to 6- 311 314 207 43 — 3 518 360
Rating 7+ to 7- — — 8 6 — — 8 6
Rating 8 to 10 90 — — — 1 — 91 —
Total 13,270 10,988 215 49 1 3 13,486 11,040
Expected credit loss (4) (2) (4) (2) (6) (1) (14) (5)
Carrying amount 13,266 10,986 211 47 (5) 2 13,472 11,035
Loans and advances to
customers at amortised cost
Rating 1 to 4- 14,326 11,884 137 165 — 31 14,463 12,078
Rating 5+ to 6- 2,067 6,753 2,627 492 — 11 4,694 7,255
Rating 7+ to 7- 1 3 509 791 — 198 510 992
Rating 8 to 10 17 — — — 417 66 434 66
Total 16,411 18,638 3,273 1,448 417 305 20,101 20,391
Expected credit loss (25) (13) (78) (75) (54) (61) (157) (149)
Carrying amount 16,386 18,625 3,195 1,373 363 244 19,944 20,242
Loans held at fair value through profit
and loss
10,877 1,011
Total loans and advances to customers
30,821 21,253
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
91
21. Risk management (continued)
21.2. Credit risk (continued)
Credit quality – Trading Assets
The credit quality of the Company’s financial assets is maintained by adherence to the Company’s 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 trading portfolio of traded loans, corporate bonds and
government bonds by rating agency designation based on Standard & Poor’s or Moody’s ratings as at
31 December:
Trading Assets (FVTPL):
Traded loans
Corporate
bonds
Government
bonds Total
$m $m $m $m $m $m $m $m
2022 2021 2022 2021 2022 2021 2022 2021
AAA to A- — — — — 606 466 606 466
BBB+ to B- 419 1,052 — — 7,950 2,086 8,369 3,138
CCC+ and
lower 119 357 — 3 — — 119 360
Unrated 800 479 1 — — — 801 479
Total 1,338 1,888 1 3 8,556 2,552 9,895 4,443
Credit quality – Investment Securities
Government
bonds (FVOCI)
Corporate
bonds (FVOCI)
Equity
securities (FVTPL) Total
$m $m $m $m $m $m $m $m
2022 2021 2022 2021 2022 2021 2022 2021
AAA to A- 5,807 5,186 1,241 436 83 57 7,131 5,679
BBB+ to B- 1,854 1,765 — — — — 1,854 1,765
CCC+ and
lower — — — — — — — —
Unrated — — — — 87 81 87 81
Total 7,661 6,951 1,241 436 170 138 9,072 7,525
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
92
21. Risk management (continued)
21.2. Credit risk (continued)
Concentration Risk
The Company’s statement of financial position (on balance sheet – third party only) credit risk concentrations by
industry are as follows:
31 December
2022
31 December
2021
(Restated)
$m $m
Mining and quarrying 324
310
Manufacturing* 8,868
8,314
Electricity, gas, water, steam and air conditioning supply* 1,119
747
Construction 156
161
Wholesale and retail trade 2,405
2,435
Transport and storage 512
737
Accommodation and food service activities 314
118
Information and communication* 1,804
1,944
Credit and insurance institutions* 61,248
38,077
Real estate activities* 1,204
703
Professional, scientific and technical activities* 686
422
Administrative and support service activities* 836
922
Public administration and defence, compulsory social security* 21,321
10,579
Household/Retail 948
1,564
Other services* 157 1,516
101,902 68,549
Included in credit risk exposures carrying value are cash and cash equivalents, trading assets, derivative financial
instruments, loans and advances to banks and customers, investment securities and other assets.
The table below shows statement of financial position credit concentrations by region:
31 December
2022
31 December
2021
(Restated)
$m $m
Central Europe* 3,393 3,172
Western Europe* 88,169 55,750
Middle East / Africa 1,003 1,153
Central / South America 293 253
North America 6,580 5,942
Asia 2,464 2,279
101,902 68,549
The regions above represent the countries and its domiciled customers within these.
*Restated for prior year adjustment, as detailed in Note 38
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
93
21. Risk management (continued)
21.3. Market Risk - Trading book
Definition
Market risk in the trading portfolio is the potential for losses in the trading portfolio arising from changes in
market variables such as interest rates, foreign exchange rates and other market prices.
Sources of Market Risk
The trading portfolio comprises positions held with short term trading intent, where the business seeks to capture
the differences between buying and selling price and which derive primarily from customer flows. The products
traded include foreign exchange (FX) spot, swaps and forwards, interest rate swaps and sovereign bonds.
The primary sources of market risk within the trading portfolio, include, but are not limited to:
• Interest rate risk: The valuation risk resulting from interest rate changes.
• Currency risk: The valuation risk resulting from currency price changes.
• Credit spread risk: The valuation risk resulting from credit spread changes.
Governance and Organisation
The Mark to Market Risk Management Framework, approved by the Board provides a holistic outline of how
market risk in the trading portfolio is managed, establishes standards for measuring, managing, monitoring and
controlling market risk in the Company and sets responsibilities across the lines of defence. As documented in
the Mark to Market Risk Management Framework, the following committees perform an oversight role for
market risk related items:
• Board Risk Committee
• Executive Committee
• Risk Management Committee
The Risk Management Committee is the primary committee tasked with governing market risk in the trading
book in the Company, and is supported by the Market Risk Review Group, which monitors and oversees trading
book market risk in CEP. The Executive Committee ensures that appropriate risk considerations are incorporated
in the strategic planning process. The Board Risk Committee oversees the implementation of the Company’s
market risk strategy and the market risk management function.
The Head of Market Risk reports directly to the Company’s CRO and is responsible for second line of defence
oversight of the market risk portfolio of the Company. The Market Risk team monitors the market risk profile on
an ongoing basis and reports to the Risk Management Committee and BRC/Board on trading portfolio exposures
against approved limits.
Risk measurement
Market risk in the Company is measured in accordance with industry standard methodologies, which are
designed to:
• Promote the transparency and comparability of market risk-taking activities.
• Provide a consistent framework to measure market risk exposures in order to facilitate business
performance analysis.
Value at Risk (VaR). estimates the potential decline in the value of a position or a portfolio, under normal market
conditions, within a defined confidence level, and over a specific time period.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
94
21. Risk management (continued)
21.3. Market Risk - Trading book (continued)
VaR is calculated using a Monte Carlo approach where simulations of market rates or prices are generated.
Volatilities and correlations are updated at least quarterly based on three years’ worth of market data.
The key parameters used to calculate VaR include:
• The historical ‘look-back’ period used to calculate historical volatilities and correlations;
• The holding period, i.e. the number of days of changes in market risk factors the portfolio is subjected
to;
• A confidence interval is determined to estimate the potential loss, for Company’s risk management
purposes; and
• Factor sensitivities (“Greeks”) - sensitivities to market factor variables.
Factor sensitivities represent the change in the value of a position for a defined change in a market risk factor,
such as a change in the value of a bond for a one-basis-point change in interest rates. Independent Risk
Management ensure that factor sensitivities are calculated, monitored and, in most cases, limited, for all relevant
risks taken in a trading portfolio.
Stress testing is performed on trading portfolios on at least a weekly basis to estimate the impact of extreme
market movements. Independent Risk Management develops stress scenarios, reviews the output of weekly and
other periodic stress testing exercises and uses the information to make judgements as to the ongoing
appropriateness of exposure levels and limits.
Risk exposure
The following table sets out the allocation of assets and liabilities subject to market risk between trading and
non-trading portfolios.
31 December 2022
31 December 2021
(Restated)
Carrying
amount
Trading
portfolios
Non-trading
portfolios
Carrying
amount
Trading
portfolios
Non-trading
portfolios
$m $m $m $m $m $m
Assets
Cash and cash equivalents 32,911 — 32,911 27,482 — 27,482
Trading assets 9,895 9,895 — 4,443 4,443 —
Derivative financial instruments 22,347 22,347 — 13,126 13,126 —
Investment securities 9,072 — 9,072 7,525 — 7,525
Loans and advances to banks 13,472 — 13,472 11,035 — 11,035
Loans and advances to customers 30,821 10,877 19,944 21,253 1,011 20,242
Other assets* 10,183 — 10,183 6,841 — 6,841
Total financial assets 128,701 43,119 85,582 91,705 18,580 73,125
Liabilities
Deposits by banks 8,858 — 8,858 11,148 — 11,148
Customer accounts 49,072 — 49,072 38,977 — 38,977
Derivative financial instruments 22,844 22,844 — 14,429 14,429 —
Subordinated liabilities 4,455 — 4,455 4,773 — 4,773
Other liabilities* 29,761 — 29,761 11,168 — 11,168
Total financial liabilities 114,990 22,844 92,146 80,495 14,429 66,066
*Restated for prior year adjustment, as detailed in Note 38
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
95
21. Risk management (continued)
21.3. Market Risk - Trading book (continued)
Trading portfolio risk
The following table summarises the Company’s trading portfolio risk, disclosing the Company’s highest, lowest,
and average exposure of its trading book to VaR during the reporting period, together with the exposure as at
31 December:
31
December
2022
2022
31
December
2021
2021
USD $m
Outstanding MAX AVG MIN
Outstanding MAX AVG MIN
CEP VAR 11.7 69.9 11.2 3.8
10.1 13.1 3.1 1.8
21.3. Market Risk - Non-Trading Portfolio
Definition
Market risk in the non-trading portfolio is the potential for losses in the non-trading portfolio arising from
changes in the value of the Company’s assets and liabilities resulting from changes in market variables such as
interest rates, foreign exchange rates and other market prices.
Sources of Market Risk
The non-trading portfolio comprises positions, which are not held with a trading intent and arise mainly from
customer flows. The primary products in the non-trading portfolio include loans held at amortised cost, deposits
and investment securities. The main sources of market risk within the non-trading portfolio, include, but are not
limited to:
• Interest rate changes giving rise to a potential pre-tax impact on net interest margin (NIM).
• Fair value changes due to changes in underlying market risk factors.
Governance and Organisation
The Treasury Risk Management Framework, approved by the Board provides a holistic outline of how market
risk in the non-trading portfolios is managed, establishes standards for measuring, managing, monitoring and
controlling market risk in the Company and sets responsibilities across all three lines of defence. As part of the
Treasury Risk Management Framework, the following committees and sub-committees perform an oversight
role for market risk related items:
• Board Risk Committee
• Executive Committee
• Asset & Liability Committee (ALCO)
The ALCO is the primary committee tasked with governing market risk in the non-trading portfolio in the
Company. The Executive Committee ensures that appropriate risk considerations are incorporated in the
strategic planning process. The Board Risk Committee oversees the implementation of the Company’s market
risk strategy and the market risk management function.
CEP Treasury is responsible for the management and first line oversight of non-trading book market risk in the
Company.
The Head of Treasury Risk reports directly to the Company’s CRO and is responsible for second line of defence
oversight of the non-trading book market risk of the Company. The Treasury Risk team monitors the market risk
profile on an ongoing basis and reports to the ALCO and the BRC/Board on the non-trading portfolio exposures
against agreed limits.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
96
21. Risk management (continued)
21.3. Market Risk - Non-Trading Portfolio (continued)
Risk measurement
Market risk in the Company is measured in accordance with industry standard methodologies, which are
designed to:
• Promote the transparency and comparability of market risk-taking activities.
• Provide a consistent framework to measure market risk exposures in order to facilitate business
performance analysis.
The primary measurement concepts associated with market risk in the non-trading book are outlined below:
• Income metrics: Measures the potential pre-tax impact on net interest revenue, for accrual positions, due
to defined shifts in interest rates over a specified reporting period.
◦ Interest rate exposure (IRE): measures the potential earnings impact, over a 12-month
reporting period, from a defined standard set of parallel shifts in the curve.
◦ CEP manages and monitors such exposure on a -100bp shock with a -200bp floor.
• Valuation metrics: Measure the impact of interest rate changes on the Company’s capital.
◦ Factor sensitivities: Factor sensitivities are used to measure an instrument’s sensitivity to a
change in a 1 basis point move in interest rates for investment bonds.
◦ Economic value of equity (EVE): The net of the present value of assets, less the present value
of liabilities.
◦ Economic value sensitivity (EVS): The change in economic value of equity for a pre-defined
change in the yield curve.
◦ CEP manages and monitors such exposure on a -100bp shock with a -200bp floor.
• Risk capital: Interest rate risk in the banking book (IRRBB) capital is measured using an asset and
liability management risk capital model, which uses interest rate factor sensitivities for the underlying
accrual statement of financial position exposures.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
97
21. Risk management (continued)
21.3. Market Risk - Non-Trading Portfolio (continued)
Interest rate risk
The table below represents the expected profit / (loss) from a 100-basis point increase in interest rates on all
tenors.
Interest rate exposure report
31 December 2022 31 December 2021
12 Month 12 Month
$m $m
Income statement impact 198 184
Total 198 184
Equity impact 135 451
Total 135 451
The table below represents the expected profit / (loss) from a 100-basis point decrease in interest rates on all
tenors.
Interest rate exposure report
31 December 2022 31 December 2021
12 Month 12 Month
$m $m
Income statement impact (195) (100)
Total (195) (100)
Equity impact (133) (166)
Total (133) (166)
These results aren’t symmetrical due to the impact of scenario floors, CEP uses -200bp floors on all scenarios,
and the impact of non-maturity deposit beta matrices, which define how much of a rate change is applied to
specific portfolios.
Currency risk
It is the policy of the Company to reduce foreign currency risk that may arise in the normal course of business.
Currency risk in the trading portfolio is actively managed on a daily basis and is captured in the primary market
risk metrics, including VaR. Treasury monitors foreign currency risk that may arise in the normal course of its
non-trading business.
The net foreign currency exposure of the non-trading portfolio of the two main currencies with respect to the US
Dollar are:
31 December 2022 31 December 2021
EUR GBP EUR GBP
$m $m $m $m
Net exposure 286 228 (2,094) 288
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
98
21. Risk management (continued)
21.3. Market Risk - Managing interest rate benchmark reform and associated risks
LIBOR and other rates or indices deemed to be benchmarks have been subject of ongoing regulatory scrutiny
and reform. The LIBOR administrator ceased publication of non-USD LIBOR and one week and two-month
USD LIBOR on a representative basis on 31 December 2021, with plans to cease publication of all other USD
LIBOR tenors on 30 June 2023. As a result, Citi ceased entering into new contracts referencing USD LIBOR as
of 1 January 2022, other than for limited circumstances where regulators recognised that it may be appropriate
for banks to enter into new USD LIBOR contracts, including with respect to market-making, hedging or
novations of USD transactions executed before 1 January 2022.
LIBOR and other benchmarks have been used in a substantial number of the Company’s outstanding securities
and products, including, among others, derivatives, corporate loans, commercial and residential mortgages,
credit cards, securitised products and other structured securities. Citi recognises that a transition away from and
discontinuance of LIBOR, also the replacement of some interbank offered rates (IBORs) presents various risks
and challenges that could significantly impact financial markets and market participants, including Citi.
Accordingly, Citi has continued its efforts to identify and manage its interest rate benchmark reform risks. Citi
has established a LIBOR governance and implementation program focused on identifying and addressing the
impact of LIBOR transition on Citi’s clients, operational capabilities and financial contracts. The program
operates globally across Citi’s businesses and functions and includes active involvement of senior management.
As part of the program, Citi has continued to implement its LIBOR transition action plans and associated
roadmaps under the following key workstreams: program management; transition strategy and risk management;
customer management, including internal communications and training, legal/contract management and product
management; financial exposures and risk management; regulatory and industry engagement; operations and
technology; and finance, risk, tax and treasury.
During 2022, the Company continued its efforts to manage its interest rate benchmark reform risks. The
Company has been focused on further reducing its LIBOR exposure and remediating its remaining outstanding
LIBOR-linked contracts. In addition, the Company has continued to monitor and engage on legislative,
regulatory and other initiatives and developments related to interest rate benchmark reform matters.
The Company has also continued to use alternative reference rates in certain newly issued financial instruments.
The Company has issued floating rate benchmark and customer-related debt linked to SOFR and originated and
arranged loans linked to SOFR. The Company’s derivatives contracts are generally linked to SOFR and other
global alternative reference rates. The Company also provides term SOFR-linked products to clients in
accordance with industry best practices and recommendations.
The Company monitors the progress of transition from LIBORs and other IBORs to new benchmark rates by
reviewing the total amounts of contracts that have yet to transition to an alternative benchmark rate. The
Company considers that a contract is not yet transitioned to an alternative benchmark rate when interest under
the contract is indexed to a benchmark rate subject to IBOR reform, even if it includes a fallback clause that
deals with the cessation of the existing IBOR which would deem it remediated for contract management:
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
99
21. Risk management (continued)
21.3. Market Risk - Managing interest rate benchmark reform and associated risks(continued)
2022 Exposures impacted by interest rate benchmark reform
USD Libor CDOR ICE_SWAP KLIBOR SOR THBFIX
USD CAD GBP MYR SGD THB Total
$m $m $m $m $m $m $m
IBOR exposures by Benchmarks*
Financial Assets**
305 — — — — — 305
Financial Liabilities***
(15) — — — — — (15)
Derivatives Notional****
83,177 497 55 279 596 180 84,784
*by 31 December 2022, the Company has exposure indexed to a benchmark that is still subject to IBOR reform.
**Financial assets include drawn down contract amount of loans, cards, mortgage, deposits, repos, etc.
***Financial liabilities include deposits, repos, notes, etc.
****Derivatives presented are notional values.
2021 Exposures impacted by interest rate benchmark reform
USD Libor - ICE_SWAP - - SOR
USD EUR GBP JPY CHF SGD Total
$m $m $m $m $m $m $m
IBOR exposures by Benchmarks*
Financial Assets** 4,094 919 519 4 25 4 5,565
Financial Liabilities*** 172 6 — 19 — — 197
Derivatives Notional**** 187,066 — 4,118 1,054 181 — 192,419
*by 31 December 2021, the Company has exposure indexed to a benchmark that is still subject to IBOR reform.
**Financial assets include drawn down contract amount of loans, cards, mortgage, deposits, repos, etc.
***Financial liabilities include deposits, repos, notes, etc.
****Derivatives presented are notional values.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
100
21. Risk management (continued)
21.4. Liquidity Risk
Definition
Liquidity risk is defined as the risk that the Company will not be able to meet expected and unexpected current
and future cash flows and collateral needs without adversely affecting either daily operations or the financial
condition of the Company.
Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations
when they fall due under both normal and plausible stress circumstances or satisfy regulatory liquidity
requirements.
The Company’s funding and liquidity objectives aim to ensure adequate liquidity is available to fund the existing
asset base and grow the core businesses, while always maintaining sufficient liquidity, is structured
appropriately, to continue operating under adverse market conditions, involving severe yet plausible
idiosyncratic and market-wide stresses while continuing to satisfy regulatory liquidity requirements.
Governance and Organisation
The Treasury Risk Management Framework, approved by the Board, provides a holistic outline of how liquidity
risk is managed, establishes standards for measuring, managing, monitoring and controlling risk in the Company
and set responsibilities across all three lines of defense.
As part of the Treasury Risk Management Framework, the following committees perform an oversight role for
liquidity risk related items:
• Board Risk Committee (BRC)
• Executive Committee (ExCO)
• Asset & Liability Committee (ALCO)
• Intraday and Collateral Management Sub-Committee
Management of liquidity is the responsibility of the Corporate Treasurer who aims to ensure that all funding
obligations are met when due and all Regulatory Liquidity requirements are satisfied at all times.
The forum for oversight of liquidity risk is the ALCO, which includes senior executives within the Company.
The ALCO reviews the current and prospective funding requirements for the Company, as well as the position
and recommends a risk appetite framework of limits and triggers to the Board for its approval. The ultimate
responsibility for liquidity risk management rests with the Board.
A Funding and Liquidity plan (FLP) and Internal Liquidity Adequacy Assessment Procedure (ILAAP) are
prepared on an annual basis and the liquidity profile is monitored and reported daily. The ILAAP is approved
annually by the Board confirming their opinion of the Company’s capability to withstand a set of severe but
plausible liquidity stress conditions for the duration of the Company’s survival period.
The Head of Treasury Risk reports directly to the Company’s CRO and is responsible for second line of defense
independent oversight of liquidity risk.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
101
21. Risk management (continued)
21.4. Liquidity Risk (continued)
Risk measurement
The Company’s internal Treasury Risk Management Framework includes a set of indicators enabling the
assessment of the Company’s resilience to liquidity risk.
The Company is required to comply with the liquidity requirements set out by its Regulator. The Capital
Requirements Directive IV and V (CRD IV and CRD V) related liquidity metrics are monitored and reported,
namely the liquidity coverage ratio (LCR) net stable funding requirement (NSFR) and Asset Encumbrance Ratio.
LCR measures the stock of liquid assets against net cash outflows arising in a 30 day stress scenario. NSFR is
intended to ensure that a firm has an acceptable amount of stable funding to support its assets and activities over
the medium term (one year period). Asset Encumbrance measures total encumbered assets plus collateral
received re-issued divided by total assets and collateral received available for encumbrance.
The Company also monitors internal liquidity risk metrics, which compare liquidity reserves with liquidity
deficits. These indicators are also assessed where applicable for the major currencies through which the
Company has significant operations.
Risk exposure
Analysis of financial assets and liabilities by remaining contractual maturities
The table below shows an analysis of financial assets and liabilities analysed according to when they are
contractually expected to be recovered or settled.
Less
than 3 months
3
months - 1 year
1 - 5
years
More than
5 years
Total
As at 31 December
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
$m $m $m $m $m $m $m $m $m $m
Assets
Cash and cash
equivalents
32,911
27,482 — — — — — — 32,911 27,482
Loans and advances to
banks
11,599
10,082 577 576 1,296 377 — — 13,472 11,035
Loans and advances to
customers
20,141
11,257 5,267 5,149 4,546 3,664 867 1,183 30,821 21,253
Derivative financial
instruments
2,757 3,712 1,784 2,580 7,163 3,864 10,643 2,970 22,347 13,126
Trading assets
133 17 1,090 30 3,224 2,750 5,448 1,646 9,895 4,443
Investment securities
350 211 1,485 1,084 7,036 6,018 201 212 9,072 7,525
Other assets*
10,183
6,841 — — — — — — 10,183 6,841
Total financial assets
78,074
59,602 10,203 9,419
23,265
16,673 17,159 6,011 128,701 91,705
Liabilities
Deposits by banks
8,684 10,542 37 454 137 150 — 2 8,858 11,148
Customer accounts
47,832
38,869 1,226 106 3 — 11 2 49,072 38,977
Derivative financial
instruments
2,705 4,202 1,918 3,040 7,431 4,173 10,790 3,014 22,844 14,429
Subordinated liabilities
— — — — 722 810 3,733 3,963 4,455 4,773
Other liabilities*
29,761
11,168 — — — — — — 29,761 11,168
Total financial
liabilities
88,982
64,781 3,181 3,600 8,293 5,133 14,534 6,981 114,990 80,495
*Restated for prior year adjustment, as detailed in Note 38
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
102
21. Risk management (continued)
21.4. Liquidity Risk (continued)
Risk exposure (continued)
Contractual maturities of undiscounted cash flows of financial liabilities
The table below analyses the Company’s undiscounted contractual cash flows from financial liabilities into
relevant maturity groupings.
Less than 3
months
3 months -
1 year
1 - 5 years More than 5 years Total
As at 31 December
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
$m $m $m $m $m $m $m $m $m $m
Liabilities
Deposits by banks 9,042 10,589 39 11,045 141 151 — 2 9,222 11,198
Customer accounts 49,802 39,043 1,277 39,149 3 — 11 2 51,093 39,152
Derivative financial
instruments 2,816 4,221 1,997 6,416 7,683 3,702 11,156 4,387 23,652 14,503
Subordinated liabilities — — — — 878 857 4,483 4,074 5,361 4,931
Other liabilities* 35,652 11,218 — — — — — — 35,652 11,218
Total undiscounted
financial
liabilities 97,312 65,071 3,313 3,616 8,705 5,205 15,650 7,110
124,980
81,002
*Restated for prior year adjustment, as detailed in Note 38
The following table analyses the Company’s commitments and guarantees into relevant maturity groupings
based on the remaining period at the statement of financial position date to the contractual maturity date. These
instruments can be called at any time prior to their contractual maturity.
Less
than 3 months
3 months -
1 year
1 - 5 years More than 5 years Total
As at 31 December
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m $m $m
Letters of credit 6,232 1,270 3,369 8,443 4,986 3,443 837 646 15,424 13,802
Undrawn commitments to
lend 1,239 1,297 3,891 4,932 21,987 19,699
1,663
649 28,780 26,577
Other commitments and
guarantees 729 961 1,216 1,853 391 1,494 24 29 2,360 4,337
Total commitments and
guarantees 8,200 3,528 8,476 15,228 27,364 24,636 2,524 1,324 46,564 44,716
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
103
21. Risk management (continued)
21.4. Liquidity Risk (continued)
Risk exposure (continued)
Analysis of encumbered and un-encumbered assets
This table summarises encumbered and un-encumbered assets by asset categories.
Encumbered Un-
Encumbered
Total
Assets as at 31 December
2022
2021
(Restated)
2022
2021
(Restated)
2022
2021
(Restated)
$m $m $m $m $m $m
Cash and cash equivalents
1,352 1,118 31,559 26,364 32,911 27,482
Equity Instruments
— — 170 138 170 138
Investment Securities & Debt
Trading Instruments
10,412 2,419 7,047 7,523 17,459 9,942
– of which: covered bonds
— — — — — —
– of which: asset-backed
securities
— — — — — —
– of which: by general
governments
10,412 2,301 6,639 7,189 17,051 9,490
– of which: by financial
corporations
— 118 400 309 400 427
– of which: by non-financial
corporations
— — 3 1 3 1
– of which: securitisations — — 5 24 5 —
Loans and advances
131 17 45,501 34,159 45,632 34,176
Other Assets*
5,791 4,805 27,324 15,716 33,115 20,521
Assets subtotal
17,686 8,359 111,601 83,900 129,287 92,259
*Restated for prior year adjustment, as detailed in Note 38
21.5. Operational Risk
Definition
Operational risk is the risk of loss resulting from inadequate or failed internal processes, human factors or
systems or from external events. It includes reputational and franchise risk associated with business practices or
market conduct that the Company undertakes. It also includes legal risk - which is the risk of loss (including
litigation costs, settlements, and regulatory fines) resulting from the failure of the bank to comply with laws,
regulations, prudent ethical standards, and contractual obligations in any aspect of the bank’s business - but
excludes strategic and reputation risks. The Company also recognises the impact of Operational Risk on the
reputation risk associated with its business activities.
Operational Risk Management (ORM), operating within the second line of defence, proactively assists the
businesses, operations, technology and other functions in enhancing the effectiveness of controls and managing
operational risks across products, business lines and regions. Furthermore, operational risks are considered as
new products and business activities are developed and processes are designed, modified or sourced through
alternative means. The objective is to keep operational risk at appropriate levels relative to the characteristics of
the Company businesses, the markets in which it operates, its capital and liquidity, and the competitive,
economic and regulatory environment.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
104
21. Risk management (continued)
21.5. Operational Risk (continued)
Governance and Organisation
The Operational Risk Management Framework, approved by Board provides a holistic outline of how
operational risk is managed, establishes standards for measuring, managing, monitoring and controlling
operational risk in the Company and sets responsibilities across the lines of defence. As documented in the
Operational Risk Management Framework, the following committees perform an oversight role for operational
risk related items:
• Board of Directors
• Board Risk Committee
• Audit Committee
• Risk Management Committee
• Business Risk Controls Committee
The CEP BRCC is responsible for reviewing and monitoring CEP’s operational risk profile, material operational
risks, significant events and new and emerging risks while promoting a culture of risk awareness and high
standards of culture and conduct across CEP.
CEP Risk Management monitor the Operational risk profile on an ongoing basis and ensure detailed reports are
sent to the BRCC, the Audit Committee and the BRC/Board on the Operational risk profile which also outline
adherence to agreed limits.
Risk Measurement
To anticipate, mitigate and control operational risk, the Company maintains a system of policies and has
established a consistent framework for monitoring, assessing and communicating operational risks and the
overall effectiveness of the internal control environment.
The Operational Risk Management framework comprises components to identify, assess and manage operational
risk:
• Annual risk assessment
• Manager`s Control Assessment (MCA) independent challenge
• Operational risk scenario analysis
• Capture of operational risk event data
• Formal assurance programme
• Issue/corrective action planning
Manager`s Control Assessment (MCA) is a diagnostic tool used in the management of operational risks as a key
component of the Business Environment and Internal Control Factors (BEICFs) required under Basel capital
standards. It uses input of the components of the Operational Risk Management Framework to provide an overall
view of the operational risk profile of an entity be that a business, country or legal entity view.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
105
21. Risk management (continued)
21.5. Operational Risk (continued)
The Company’s Operational Risk Management Framework relies on strong governance, with clearly defined
roles and responsibilities.
The following committees are responsible for operational risk at Company level:
• Risk Committee: Has oversight of the prospective aspects of operational risk, including, but not limited
to parameters of the Operational Risk Management Framework, the operational risk capital model and
the operational risk component of internal capital adequacy approval process.
• Audit Committee: Has oversight of operational risk, including the individual operational losses, the
causes and remedies.
• Business Risk and Controls Committee (BRCC): is the principal forum maintaining oversight over the
adequacy and effectiveness of the Operational Risk Management Framework and associated standards
towards the anticipation and mitigation of operational risks.
The Head of Operational Risk reports directly to the Company’s CRO and is responsible for second line of
defence oversight and management of operational risk.
Operational Risk comprises of a number of sub-risks including Third Party Management risk (TPM), Supply
Chain risk and Cyber Security risk.
Third Party Management risk (TPM)
Third Party Management risk (TPM) including Supply Chain risk involves the management and mitigation of
risks associated with the use of third parties that provide products and services to the Company.
The Company utilises third parties in many ways to achieve its strategic goals. This utilisation does not diminish
the Company’s responsibility to ensure that all third-party activity is conducted in a safe and sound manner and
in compliance with applicable laws, rules, regulations, policies and standards of conduct.
As documented in the Operational Risk Management Framework, the following committees perform an
oversight role for third-party risk at Company level:
• CEP Outsourcing Committee
• CEP Business Risk and Control Committee (BRCC)
• Executive Committee
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
106
21. Risk management (continued)
21.5. Operational Risk (continued)
Cyber Security Risk (Incl. information security)
Cybersecurity risk is defined as “the risk to organisational operations (including mission, functions, image,
reputation), organisational assets, individuals, other organisations, and the Nation due to the potential for
unauthorised access, use, disclosure, disruption, modification, or destruction of information and/or information
systems.”
As documented in the Operational Risk Management Framework, the following committees perform an
oversight role for cyber security risk at Company level:
• Technology Oversight Committee (TOC)
• CEP Business Risk and Control Committee (BRCC)
• Executive Committee
The Company’s TOC is responsible for reviewing and monitoring CEP’s cyber risk profile, material operational
risks, significant events and new and emerging risks while promoting a culture of risk awareness and high
standards of culture and conduct across CEP.
21.6. Strategic risk
Definition
Strategic risk is defined as the risk of a sustained impact (not episodic impact) to the firm’s core strategic
objectives as measured by impacts on anticipated earnings, market capitalisation, or capital, arising from the
external factors affecting the firm’s operating environment; as well as the risks associated with defining the
strategy and executing the strategy.
Governance and Organisation
The Risk Management Framework is the overarching risk governance framework in CEP and is based on sound
principles of good risk governance and management taking into account guidance issued by regulatory
authorities and best practice standards. The Framework outlines the risk governance structure in CEP and is
based on a lines of defence model, the core governance processes of the bank and the roles and responsibilities
of those involved in their delivery and oversight. As part of the Risk Management Framework, the following
committees and their sub-committees perform an oversight role for strategic risk related items:
• Board Risk Committee
• Executive Committee
The Executive Committee oversees the implementation of the strategic objectives, business strategy financial
plan and operating plan set by the Board and the ongoing business activities of the branches. In addition, the
Executive Committee ensures that appropriate risk considerations are incorporated into the strategic planning
process and recommends the Strategic Plan to the Board for approval. The Board Risk Committee is tasked with
overseeing the assessment of the Strategic Plan by Enterprise Governance and Risk Management. The Board
ultimately reviews and approves the Strategic Plan.
The Head of Enterprise Governance and Risk Management reports directly to the Chief Risk Officer and is
responsible for leading the second line independent risk review and challenge of the Strategic Plan prior to
submission to the Executive Committee and the Board.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
107
21. Risk management (continued)
21.6. Strategic risk (continued)
Risk measurement
CEP manages Strategic Risk through the development of a three-year Strategic Plan which is reviewed and
Board-approved annually. The plan articulates CEP’s strategy with respect to target markets and clients and
includes an outlook on the global economy, an overview of the evolving regulatory environment, and a view on
the competitive landscape. The Strategic Plan additionally provides an overview of CEP’s statement of financial
position and risk management and control strategies, as well as individual business strategies and financial
projections. The information contained in this Plan informs CEP’s updated risk appetite statement, and the
financial projections form the base case scenario for CEP’s ICAAP and ILAAP.
Strategic risk is considered in both ICAAP and ILAAP using stressed scenarios under events such as trade wars
and climate change. CEP has defined stress scenarios incorporating macroeconomic and financial market
stresses, as well as stressed operational and strategic risk considerations, to calculate potential losses for CEP
during stressed macroeconomic conditions.
21.7. Inter-Affiliate Risk
Definition
Inter-Affiliate Risk is driven by inter-affiliate exposures and funding and can materialise as either operational
risk (including execution risk), credit risk or liquidity risk. It arises in many of the Company’s business
activities, including:
• Management of currency balances between CEP and CBNA London / New York;
• Reverse repos under which CEP borrows highly liquid assets from CBNA; and
• Placement of CEP’s surplus liquidity with CBNA London / New York or other affiliates.
Governance and Organisation
The operational, credit and liquidity risk impacts of Inter-Affiliate Risk are managed in line with the applicable
frameworks, policies and standards for these risk types with specific limits set and monitored for inter-affiliate
transactions.
Risk measurement
Inter-Affiliate Risk’s components credit and liquidity risk are measured using the methodologies outlined.
The CEP strategies and controls used to manage and mitigate inter-affiliate risk include:
• Collateral arrangements with appropriate collateral haircuts and daily margining
• Intercompany Limits in CEP’s risk appetite statement
From a credit risk perspective, an annual credit analysis of Citibank N.A. and relevant affiliates is undertaken
and presented to the appropriate committees for approval. Limits exist for Citibank N.A. and all other affiliates
separately. In addition, a limit for the daily intraday overdraft utilisation from Citibank N.A. is in place.
From a liquidity perspective, a risk appetite metric to monitor CEP’s dependency on intercompany funding is
included under risk appetite statement monitoring. This metric measures available stable intercompany funding
as a proportion of overall Available Stable Funding aligned to regulatory definitions of stable funding.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
108
21. Risk management (continued)
21.8. Reputational Risk
Definition
Reputational Risk is the risk of a threat or danger to the good name or standing of the entity vis- à-vis customers,
shareholders or other stakeholders. Reputational Risk is a consequence of other risks, however, in recognition of
the potential significant impact on CEP, this risk is monitored separately. This risk may impair CEP’s
competitiveness by affecting its ability to establish new relationships or services or continue servicing existing
relationships. It arises directly from how we conduct our business and can impact how key stakeholders, such as
customers or clients, employees, regulators, shareholders or other stakeholders view the integrity of the Bank.
External economic, industry, market, competitive, regulatory or legislative pressures can also contribute to
reputational risk. Reputational risk can occur even when all actions are legal and in accordance with all policies,
processes and current practices.
Governance and Organisation
CEP`s Executive Committee has direct oversight of reputational risk in CEP. All product lines and functions are
responsible for identifying and managing material reputational risks and for promptly escalating concerns to
CEP`s Executive Committee.
Risk measurement
Key risk identification, escalation and reporting processes include, but are not limited to:
• Regulatory Inventory and Regulatory Change Management
• Policies, Procedures and Controls
• Training
• Manager’s Control Assessments
In addition to the above, the second line of defence in CEP completes oversight of reputational risk through
various activities including, but not limited to:
• Regular measurement of:
◦ adherence to CEPs quantitative risk appetite statement
◦ qualitative reputational risk key indicators
• Challenge the potential reputational risk implications of new, expanded or modified businesses,
products or services and strategic initiatives through the New Activity Committee.
• Providing senior management and the Board of Directors with an independent view of the firm’s
reputational risk profile, as part of the periodic reporting cycle.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
109
21. Risk management (continued)
21.9. Capital management
The Company’s Regulator sets and monitors capital requirements for the Company.
In implementing current capital requirements, the Regulator requires the Company to maintain a prescribed ratio
of total capital to risk weighted assets.
The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and customer
confidence and to sustain future development of the business. The impact of the level of capital on shareholders’
return is also recognised and the need to maintain a balance between the higher returns that might be possible
with greater gearing and the advantages and security afforded by a sound capital position.
The Company is required by the Regulator to maintain adequate capital and the Company is subject to the risk of
having insufficient capital resources to meet minimum regulatory capital requirements. The Company’s
minimum capital requirement is calculated in accordance with CRDIV regulatory capital requirements. The
Company has complied with its capital requirements throughout the period.
For further details, please refer to the Directors Report – ‘Capital Management’
22. Reserves
The nature of the reserve balances presented in the statement of changes in equity are described below:
Translation reserve
The translation reserve represents the cumulative gains and losses on the translation of the Company's net
investment in its foreign operations, excluding any ineffectiveness, of investment hedge derivatives. Gains and
losses accumulated in this reserve are reclassified to the income statement when the Company loses control, joint
control or significant influence over the foreign operation or on disposal or partial disposal of the operation.
Fair value reserve
The fair value reserve represents the cumulative net change in the fair value of the financial instruments
measured as FVOCI on statement of financial position until the assets are derecognised or reclassified.
Equity reserve
The equity reserve represents amounts expensed in the income statement in connection with share based
payments, net of transfers to retained earnings on the exercise, lapsing or forfeiting of share awards.
Capital reserve
The capital reserve represents capital contributions received from parent companies. In 2022, the Company
received $1,700 million capital contribution from its parent company (2021: $nil).
Merger reserve
The merger reserve represents the difference between the fair value and book value and any transferred over
reserve balances from the merger and capital transactions.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
110
23. Financial assets and liabilities
The below tables outline the total financial assets and liabilities held as at 31 December 2022 and as at
31 December 2021.
31 December
2022
31 December
2021
(Restated)
$m $m
Derivative financial instruments 22,347 13,126
Trading assets 9,895 4,443
Investment securities at FVTPL 170 138
Reverse Repurchase agreements designated at FVTPL 10,274 —
Other loans designated at FVTPL 602 1,011
Total financial assets held at FVTPL 43,289 18,718
Investment securities at FVOCI 8,902 7,387
Total financial assets held at FVOCI 8,902 7,387
Cash and cash equivalents 32,911 27,482
Loans and advances to banks at amortised cost 13,472 11,035
Loans and advances to customers at amortised cost 19,944 20,242
Other assets* 10,183 6,841
Total financial assets at amortised cost 76,510 65,600
Total financial assets 128,701 91,705
31 December
2022
31 December
2021
(Restated)
$m $m
Derivative financial instruments 22,844 14,429
Repurchase agreements designated at FVTPL
4,481 —
Short sales held at FVTPL 13,514 2,118
Other financial liabilities held at FVTPL* — 4
Total financial liabilities held at fair value 40,839 16,551
Deposits by banks 8,858 11,148
Customer accounts 49,072 38,977
Other liabilities excluding liabilities at FVTPL 16,247 9,046
Subordinated liabilities
4,455
4,773
Total financial liabilities at amortised cost 78,632 63,944
Total financial liabilities 119,471 80,495
*Restated for prior year adjustment, as detailed in Note 38
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
111
23. Financial assets and liabilities (continued)
Fair value measurement
IFRS 13 - Fair Value Measurement, defines fair value, establishes a consistent framework for measuring fair
value and requires disclosures about fair value measurements. Fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date, and therefore represents an exit price. Among other things, the standard requires the
Company to maximise the use of observable inputs and minimise the use of unobservable inputs when
measuring fair value. Under IFRS 13, the probability of counterparty default is factored into the valuation of
derivative and other positions, and the impact of Company’s own credit risk is also factored into the valuation of
derivatives and other liabilities that are measured at fair value.
Fair value hierarchy
IFRS 13 specifies a hierarchy of inputs based on whether the inputs are observable or unobservable. Observable
inputs are developed using market data and reflect market participant assumptions, while unobservable inputs
reflect the Company’s market assumptions.
These two types of inputs have created the following fair value hierarchy:
• Level 1: Quoted prices for identical instruments in active markets.
• Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs
and significant value drivers are observable in the markets.
• Level 3: Valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
As required under the fair value hierarchy, the Company considers relevant and observable market inputs in its
valuations where possible. The fair value hierarchy classification approach typically utilises rules-based and data
driven selection criteria to determine whether an instrument is classified as Level 1, Level 2, or Level 3:
• The determination of whether an instrument is quoted in an active market and therefore considered a
Level 1 instrument is based upon the frequency of observed transactions and the quality of independent
market data available on the measurement date.
• A Level 2 classification is assigned where there is observability of prices / market inputs to models, or
where any unobservable inputs are not significant to the valuation. The determination of whether an
input is considered observable is based on the availability of independent market data and its
corroboration, for example through observed transactions in the market.
• Otherwise, an instrument is classified as Level 3.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
112
23. Financial assets and liabilities (continued)
Determination of fair value
For assets and liabilities carried at fair value, the Company measures fair value using the procedures set out
below, irrespective of whether the assets and liabilities are measured at fair value as a result of an election.
When available, the Company uses quoted market prices from active markets to determine fair value and
classifies such items as Level 1. In some specific cases where a market price is available, the Company will
apply practical expedients (such as matrix pricing) to calculate fair value, in which case the items may be
classified as Level 2.
The Company may also apply a price-based methodology that utilises, where available, quoted prices or other
market information obtained from recent trading activity in positions with the same or similar characteristics to
the position being valued. If relevant and observable prices are available, those valuations may be classified as
Level 2. However, when there are one or more significant unobservable “price” inputs, those valuations will be
classified as Level 3. Furthermore, when a quoted price is considered stale, a significant adjustment to the price
of a similar security may be necessary to reflect differences in the terms of the actual security or loan being
valued, or alternatively, when prices from independent sources may be insufficient to corroborate a valuation,
the “price” inputs are considered unobservable and the fair value measurements are classified as Level 3.
If quoted market prices are not available, fair value is based upon internally developed valuation techniques that
use, where possible, current market-based parameters, such as interest rates, currency rates and option
volatilities. Items valued using such internally generated valuation techniques are classified according to the
lowest level input or value driver that is significant to the valuation. Thus, an item may be classified as Level 3
even though there may be some significant inputs that are readily observable.
Fair value estimates from internal valuation techniques are verified, where possible, to prices obtained from
independent vendors or brokers. Vendors’ and brokers’ valuations may be based on a variety of inputs ranging
from observed prices to proprietary valuation models, and the Company assesses the quality and relevance of
this information in determining the estimate of fair value. The following section describes the valuation
methodologies used by the Company to measure various financial instruments at fair value. Where appropriate,
the description includes details of the valuation models, the key inputs to those models and any significant
assumptions.
Market Valuation Adjustments
Generally, the unit of account for a financial instrument is the individual financial instrument. The Company
applies market valuation adjustments that are consistent with the unit of account, which does not include
adjustment due to the size of the Company’s position, except as follows. Portfolio Exception (IFRS 13) permits
an entity to measure the fair value of a group of financial assets and financial liabilities with offsetting risk on
the basis of the price that would be received to sell or transfer the net open risk position (i.e. on a portfolio basis),
in line with how positions are risk managed. Citi has elected to measure certain portfolios of financial
instruments that meet those criteria, such as derivatives, on the basis of the net open risk position. The Company
applies market valuation adjustments, including adjustments to account for the size of the net open risk position,
consistent with market participant assumptions.
Valuation adjustments are applied to items classified as Level 2 or Level 3 in the fair value hierarchy to ensure
that the fair value reflects the price at which the net open risk position could be exited. These valuation
adjustments are based on the bid/offer spread for an instrument in the market. When Citi has elected to measure
certain portfolios of financial investments, such as derivatives, on the basis of the net open risk position, the
valuation adjustment may take into account the size of the position.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
113
23. Financial assets and liabilities (continued)
Market Valuation Adjustments (continued)
Credit valuation adjustments (CVA) and funding valuation adjustments (FVA) are applied to the relevant
population of over-the-counter (OTC) derivative instruments where adjustments to reflect counterparty credit
risk, own credit risk and term funding risk are required to estimate fair value. This principally includes
derivatives with a base valuation (e.g., discounted using overnight indexed swap (OIS)) requiring adjustment for
these effects, such as uncollateralised interest rate swaps. The CVA represents a portfolio-level adjustment to
reflect the risk premium associated with the counterparty’s (assets) or the Company’s (liabilities) non-
performance risk.
The FVA represents a market funding risk premium inherent in the uncollateralised portion of a derivative
portfolio and in certain collateralised derivative portfolios that do not include standard credit support annexes
(CSAs), such as where the CSA does not permit the reuse of collateral received. The Company’s FVA
methodology leverages the existing CVA methodology to estimate a funding exposure profile. The calculation of
this exposure profile considers collateral agreements in which the terms do not permit the Company to reuse the
collateral received, including where counterparties post collateral to third-party custodians. The Company’s
CVA and FVA methodologies consist of two steps:
• First, the exposure profile for each counterparty is determined using the terms of all individual derivative
positions and a Monte Carlo simulation or other quantitative analysis to generate a series of expected cash
flows at future points in time. The calculation of this exposure profile considers the effect of credit risk
mitigants and sources of funding, including pledged cash or other collateral and any legal right of offset
that exists with a counterparty through arrangements such as netting agreements. Individual derivative
contracts that are subject to an enforceable master netting agreement with a counterparty are aggregated
as a netting set for this purpose, since it is those aggregate net cash flows that are subject to non-
performance risk. This process identifies specific, point-in-time future cash flows that are subject to non-
performance and term funding risk, rather than using the current recognised net asset or liability as a basis
to measure the CVA and FVA.
• Second, for CVA, market-based views of default probabilities derived from observed credit spreads in the
credit default swap (CDS) market are applied to the expected future cash flows determined in step one.
Citi’s own credit CVA is determined using Citi-specific CDS spreads for the relevant tenor. Generally,
counterparty CVA is determined using CDS spread indices for each credit rating and tenor. For certain
identified netting sets where individual analysis is practicable (e.g., exposures to counterparties with
liquid CDSs), counterparty-specific CDS spreads are used. For FVA, a term structure of spreads is
applied to the expected funding exposures (e.g., the market liquidity spread used to represent the term
funding premium associated with certain OTC derivatives).
The CVA and FVA are designed to incorporate a market view of the credit and funding risk, respectively,
inherent in the derivative portfolio. However, most unsecured derivative instruments are negotiated bilateral
contracts and are not commonly transferred to third parties. Derivative instruments are normally settled
contractually or, if terminated early, are terminated at a value negotiated bilaterally between the counterparties.
Thus, the CVA and FVA may not be realised upon a settlement or termination in the normal course of business.
In addition, all or a portion of these adjustments may be reversed or otherwise adjusted in future periods in the
event of changes in the credit or funding risk associated with the derivative instruments.
During 2022, the Company recorded CVA loss of $11.5 million (2021: loss of $5.1 million) and FVA loss of
$3.2 million (2021: gain of $3.9 million).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
114
23. Financial assets and liabilities (continued)
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
No quoted prices exist for these instruments, since fair value is determined using a discounted cash flow
technique. Cash flows are estimated based on the terms of the contract, taking into account any embedded
derivative or other features. These cash flows are discounted using interest rates appropriate to the maturity of
the instrument as well as the nature of the underlying collateral. Generally, when such instruments are recorded
at fair value, they are classified within Level 2 of the fair value hierarchy, as the inputs used in the valuation are
readily observable. However, certain long-dated positions are classified within Level 3 of the fair value
hierarchy.
Trading Account Assets and Liabilities - Trading Securities and Trading Loans
When available, the Company uses quoted market prices in active markets to determine the fair value of trading
securities; such items are classified as Level 1 of the fair value hierarchy. Examples include government
securities and exchange-traded equity securities.
For bonds and secondary market loans traded over the counter, the Company generally determines fair value
utilising various valuation techniques, including discounted cash flows, price-based and internal models. Fair
value estimates from these internal valuation techniques are verified, where possible, to prices obtained from
independent sources, including third-party vendors.
A price-based methodology utilises, where available, quoted prices or other market information obtained from
recent trading activity of assets with similar characteristics to the bond or loan being valued. The yields used in
discounted cash flow models are derived from the same price information. Trading securities and loans priced
using such methods are generally classified as Level 2. However, when the primary inputs to the valuation are
unobservable, or prices from independent sources are insufficient to corroborate valuation, a loan or security is
generally classified as Level 3. Fair value estimates from these internal valuation techniques are verified, where
possible, to prices obtained from independent sources, including third party vendors.
When the Company’s principal exit market for a portfolio of loans is through securitisation, the Company uses
the securitisation price as a key input into the fair value of the loan portfolio. The securitisation price is
determined from the assumed proceeds of a hypothetical securitisation within the current market environment.
Where such a price verification is possible, loan portfolios are typically classified as Level 2 in the fair value
hierarchy.
For most of the subprime mortgage backed security (MBS) exposures, fair value is determined utilising
observable transactions where available, or other valuation techniques such as discounted cash flow analysis
utilizing valuation assumptions derived from similar, more observable securities as market proxies. The
valuation of certain asset-backed security (ABS) CDO positions is inferred through the net asset value of the
underlying assets of the ABS CDO.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
115
23. Financial assets and liabilities (continued)
Trading Account Assets and Liabilities—Derivatives
Exchange-traded derivatives, measured at fair value using quoted (i.e., exchange) prices in active markets, where
available, are classified as Level 1 of the fair value hierarchy.
Derivatives without a quoted price in an active market and derivatives executed over the counter are valued
using internal valuation techniques. These derivative instruments are classified as either Level 2 or Level 3
depending on the observability of the significant inputs to the model.
The valuation techniques depend on the type of derivative and the nature of the underlying instrument. The
principal techniques used to value these instruments are discounted cash flows and internal models, such as
derivative pricing models (e.g., Black-Scholes and Monte Carlo simulations).
The key inputs depend upon the type of derivative and the nature of the underlying instrument and include
interest rate yield curves, foreign exchange rates, volatilities, and correlation.
Investments
The investments category includes FVOCI debt and FVTPL equity securities whose fair values are generally
determined by utilizing similar procedures described for trading securities above or, in some cases, using vendor
pricing as the primary source.
Also included in investments are non-public investments in private equity and real estate entities. Determining
the fair value of non-public securities involves a significant degree of management’s judgment, as no quoted
prices exist and such securities are not generally traded. In addition, there may be transfer restrictions on private
equity securities. The Company’s process for determining the fair value of such securities utilises commonly
accepted valuation techniques, including guideline public company analysis and comparable transactions. In
determining the fair value of non-public securities, the Company also considers events such as a proposed sale of
the investee company, initial public offerings, equity issuances or other observable transactions. Private equity
securities are generally classified as Level 3 of the fair value hierarchy.
In addition, the Company holds investments in certain alternative investment funds that calculate NAV per share,
including hedge funds, private equity funds and real estate funds. Investments in funds are generally classified as
nonmarketable equity securities carried at fair value. The fair values of these investments are estimated using the
NAV per share of the Company’s ownership interest in the funds where it is not probable that the investment
will be realised at a price other than the NAV.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
116
23. Financial assets and liabilities (continued)
Financial instruments at fair value
The following table shows an analysis of financial instruments recorded at fair value by level of the fair value
hierarchy:
Fair value at 31 December 2022 Fair value at 31 December 2021
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
$m $m $m $m $m $m $m $m
Financial assets
Derivative financial
instruments
1 22,274 72 22,347 1 12,931 194 13,126
Trading assets
8,457 1,279 159 9,895 2,418 1,947 78 4,443
Investment securities
8,277 650 145 9,072 6,895 492 138 7,525
Reverse Repurchase
agreements designated
at FVTPL
— 10,274 — 10,274 — — — —
Other loans designated
at FVTPL
— 208 394 602 — 917 94 1,011
Financial assets held
at fair value
16,735 34,685 770 52,190 9,314 16,287 504 26,105
Financial liabilities
Derivative financial
instruments
1 22,436 407 22,844 — 14,239 190 14,429
Repurchase agreements
designated at FVTPL
— 4,481 — 4,481 — — — —
Short sales held at
FVTPL and other
financial liabilities held
at FVTPL
13,522 (8) — 13,514 1,214 909 — 2,122
Financial liabilities
held at fair value
13,523 26,909 407 40,839 1,214 15,148 190 16,552
Loans held at fair value through profit or loss, totalling $602 million (2021: $1,010 million) are included in the
statement of financial position within loans and advances to customers.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
117
23. Financial assets and liabilities (continued)
Changes in Level 3 Fair Value Category
The following tables present the changes in the Level 3 fair value category for the years ended 31 December
2022 and 2021. The gains and losses presented below include changes in the fair value related to both observable
and unobservable inputs.
The Company often hedges positions with offsetting positions that are classified in a different level. For
example, the gains and losses for assets and liabilities in the Level 3 category presented in the tables below do
not reflect the effect of offsetting losses and gains on hedging instruments that may be classified in the Level 1
and Level 2 categories. In addition, the Company hedges items classified in the Level 3 category with
instruments also classified in Level 3 of the fair value hierarchy. The hedged items and related hedges are
presented gross in the following tables:
31 December 2022 31 December 2021
Derivative
financial
assets
Trading
assets
Investment
securities
Loans held
at fair
value
through
profit/ loss
Derivative
financial
liabilities
Total Derivative
financial
assets
Trading
assets
Investment
securities
Loans held
at fair
value
through
profit/ loss
Derivative
financial
liabilities
Total
$m $m $m $m $m $m $m $m $m $m $m $m
Balance at 1
January
194 78 138 94 (191) 313 485 84 98 — (487) 180
Reclassified
from Trading
assets to loans at
FVTPL
— — — — — — — (45) — 45 — —
Purchases
— 275 — — (1) 274 2 25 — 37 — 64
Issues
— — — 54 — 54 — — — — — —
Sales
— (199) — (94) — (293) — (19) — — — (19)
Settlements
(121) — — — 82 (39) 7 — — — (5) 2
Transfer into
Level 3
90 205 — 334 (423) 206 94 — — 12 (95) 11
Transfer out of
Level 3
(215) (119) — — 217 (117) (129) — — — 132 3
Total gains/
(losses)
– in Profit or
loss
124 (81) 7 6 (91) (35) (265) 33 40 — 264 72
– in OCI
— — — — — — — — — — — —
Balance at 31
December
72 159 145 394 (407) 363 194 78 138 94 (191) 313
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
118
23. Financial assets and liabilities (continued)
Changes in Level 3 Fair Value Category (continued)
Total gains or losses for the year are presented in the income statement as follows:
2022 2021
Derivative
financial
assets
Trading
assets
Investment
securities
Loans
held at
fair value
through
profit/
loss
Derivative
financial
liabilities
Total Derivative
financial
assets
Trading
assets
Loans
held at
fair value
through
profit/
loss
Investment
securities
Derivative
financial
liabilities
Total
$m $m $m $m $m $m $m $m $m $m $m $m
Total gains/
(losses) 124 (81) 7 6 (91) (35) (265) 33 — 40 264 72
Realised
gains and
losses
- Net trading
income 26 (90) — — 8 (56) (279) 34 — — 278 33
- Net
investment
income — — — — — — — — — — — —
Unrealised
gains and
losses
- Net trading
income
98 9 — — (99) 8 14 (1) — — (14) (1)
- Net
investment
income
— — 7 — — 7 — — — 40 — 40
- Net income
from other
financial
instruments
designated at
FVTPL
— — — 6 — 6 — — — — — —
Total 124 (81) 7
6
(91) (35) (265) 33
—
40 264 72
During the 12 months ended 31 December 2022, transfers of Margin Loan of $0.3 billion asset and Equity
Derivatives of $0.3 billion liability from Level 2 to Level 3 was due to decreased observability on Volatility and
Forward. Transfers of Corporate Loans into/out of L3 was due to change in observability and pricing uncertainty
became more/less significant relative to the overall valuation.
Valuation Techniques and Inputs for Level 3 Fair Value Measurements
The Company’s Level 3 inventory consists of both cash instruments and derivatives of varying complexity.
The following tables present the valuation techniques covering the majority of Level 3 inventory and the most
significant unobservable inputs used in Level 3 fair value measurements. Differences between this table and
amounts presented in the Level 3 Fair Value Rollforward table represent individually immaterial items that have
been measured using a variety of valuation techniques other than those listed.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
119
23. Financial assets and liabilities (continued)
2022 Fair value
$m Methodology Input Low High
Assets
Model-based Credit Spread (basis point)
24.8 320.4
Model-based Inflation Volatility %
0.48 2.77
Model-based Yield %
-0.5 1.53
Model-based FX Volatility %
2 40
Derivative contracts 72 Model-based IR basis %
-4.23 9.68
Model-based IR Normal Volatility %
0.33 112.51
Price-based Price $
100.12 102.49
Model-based Recovery Rate %
40 40
Trading assets 159 Price-based Price ($) 0.01 100.0
Model-based Equity Volatility % 0.05 300.72
Loans held at fair value
through profit/loss
394 Model-based Equity Forward % 68.34 271.61
Price-based Price $ 0.00 110.00
Investment equity
securities
145 Price-based
Discount to price %
27.00 28.00
Comparables
Analysis
PE Ratio 15.7 15.70
Comparables
Analysis
EBITDA Multiples 17.1 17.10
Comparables
Analysis
PE Ratio 15.2 15.20
Liabilities
Model-based Credit Spread (basis point)
24.83 246.9
Model-based Recovery Rate %
40 40
Model-based Upfront Points %
8.53 8.53
Price-based Price $
100 100.21
Derivative contracts 407 Model-based FX Volatility %
2 40
Model-based IR basis %
-4.23 9.68
Model-based Yield %
-0.5 1.53
Model-based IR Normal Volatility % 0.33 112.51
Model-based Inflation Volatility % 0.48 2.77
Model-based Equity Volatility % 0.05 300.72
Model-based Equity Forward % 68.34 271.61
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
120
23. Financial assets and liabilities (continued)
2021 Fair value
Assets $m Methodology Input Low High
Model-based Credit Spread (basis point) 81.0 318.8
Model-based Forward Price % 8.0 599.4
Model-based Yield % — 1.5
Model-based FX Volatility % 2.1 107.4
Derivative contracts 194
Model-based IR basis % (4.6) 10.4
Model-based IR Normal Volatility % 0.2 0.9
Price-based Price $ 101.5 101.5
Model-based Recovery Rate % 25.0 40.0
Model-based Commodity Volatility % 10.9 188.3
Model-based Commodity Correlation % (50.5) 89.8
Model-based Equity Forward % 58.0 165.8
Trading assets 78 Price-based Price ($) 109.8
Loans held at fair value
through profit/loss
94 Price-based Price ($) 91.0 99.3
Investment equity
securities
138 Price-based
Market Price of Common Stock;
conversion factor from investor
relations publication and liquidity
discount
No discount for
conversion ratio
100% liquidity
discount
Comparable Price Earning Ratio 11 20.6
Analysis Discount for lack of Marketability % 34 36
Liabilities
Model-based Credit Spread (basis point) 41.6 100.0
Model-based Price $ 96.6 99.7
Model-based FX Volatility % 2.1 107.4
Model-based Yield % — 1.5
Derivative contracts 191 Model-based IR basis % (4.6) 10.4
Model-based IR Normal Volatility % 0.2 0.9
Model-based Recovery Rate % 25.0 40.0
Uncertainty of Fair Value Measurements Relating to Unobservable Inputs
Valuation uncertainty arises when there is insufficient or disperse market data to allow a precise determination of
the exit value of a fair-valued position or portfolio in today’s market. This is especially prevalent in Level 3 fair
value instruments, where uncertainty exists in valuation inputs that may be both unobservable and significant to
the instrument’s (or portfolio’s) overall fair value measurement.
The uncertainties associated with key unobservable inputs on the Level 3 fair value measurements may not be
independent of one another. In addition, the amount and direction of the uncertainty on a fair value measurement
for a given change in an unobservable input depends on the nature of the instrument as well as whether the
Company holds the instrument as an asset or a liability. For certain instruments, the pricing, hedging and risk
management are sensitive to the correlation between various inputs rather than on the analysis and aggregation
of the individual inputs.
The following section describes some of the most significant unobservable inputs used by the Company in Level
3 fair value measurements.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
121
23. Financial assets and liabilities (continued)
Uncertainty of Fair Value Measurements Relating to Unobservable Inputs (continued)
Correlation
Correlation is a measure of the extent to which two or more variables change in relation to each other. A variety
of correlation-related assumptions are required for a wide range of instruments, including equity and credit
baskets, foreign exchange options, Credit Index Tranches and many other instruments.
For almost all of these instruments, correlations are not directly observable in the market and must be calculated
using alternative sources, including historical information. Estimating correlation can be especially difficult
where it may vary over time, and calculating correlation information from market data requires significant
assumptions regarding the informational efficiency of the market (e.g., swaption markets).
Uncertainty therefore exists when an estimate of the appropriate level of correlation as an input into some fair
value measurements is required. Changes in correlation levels can have a substantial impact, favorable or
unfavorable, on the value of an instrument, depending on its nature. A change in the default correlation of the
fair value of the underlying bonds comprising a CDO structure would affect the fair value of the senior tranche.
For example, an increase in the default correlation of the underlying bonds would reduce the fair value of the
senior tranche, because highly correlated instruments produce greater losses in the event of default and a portion
of these losses would become attributable to the senior tranche. That same change in default correlation would
have a different impact on junior tranches of the same structure.
Volatility
Volatility represents the speed and severity of market price changes and is a key factor in pricing options.
Volatility generally depends on the tenor of the underlying instrument and the strike price or level defined in the
contract. Volatilities for certain combinations of tenor and strike are not observable and need to be estimated
using alternative methods, such as comparable instruments, historical analysis or other sources of market
information. This leads to uncertainty around the final fair value measurement of instruments with unobservable
volatilities.
The general relationship between changes in the value of an instrument (or a portfolio) to changes in volatility
also depends on changes in interest rates and the level of the underlying index. Generally, long option positions
(assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses. Some
instruments are more sensitive to changes in volatility than others. For example, an at-the-money option would
experience a greater percentage change in its fair value than a deep-in-the-money option. In addition, the fair
value of an option with more than one underlying security (e.g., an option on a basket of equities) depends on the
volatility of the individual underlying securities as well as their correlations.
Yield
In some circumstances, the yield of an instrument is not observable in the market and must be estimated from
historical data or from yields of similar securities. This estimated yield may need to be adjusted to capture the
characteristics of the security being valued. Whenever the amount of the adjustment is significant to the value of
the security, the fair value measurement is classified as Level 3. Adjusted yield is generally used to discount the
projected future principal and interest cash flows on instruments, such as asset-backed securities. Adjusted yield
is impacted by changes in the interest rate environment and relevant credit spreads.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
122
23. Financial assets and liabilities (continued)
Uncertainty of Fair Value Measurements Relating to Unobservable Inputs (continued)
Prepayment
Voluntary unscheduled payments (prepayments) change the future cash flows for the investor and thereby
change the fair value of the security. The effect of prepayments is more pronounced for residential mortgage-
backed securities. Prepayment is generally negatively correlated with delinquency and interest rate. A
combination of low prepayments and high delinquencies amplifies each input’s negative impact on a mortgage
securities’ valuation. As prepayment speeds change, the weighted average life of the security changes, which
impacts the valuation either positively or negatively, depending upon the nature of the security and the direction
of the change in the weighted average life.
Recovery
Recovery is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a
liquidation scenario. For many credit securities (e.g., commercial mortgage backed securities), the expected
recovery amount of a defaulted property is typically unknown until a liquidation of the property is imminent.
The assumed recovery of a security may differ from its actual recovery that will be observable in the future.
Generally, an increase in the recovery rate assumption increases the fair value of the security. An increase in loss
severity, the inverse of the recovery rate, reduces the amount of principal available for distribution and, as a
result, decreases the fair value of the security.
Credit Spread
Credit spread is a component of the security representing its credit quality. Credit spread reflects the market
perception of changes in prepayment, delinquency and recovery rates, therefore capturing the impact of other
variables on the fair value.
Changes in credit spread affect the fair value of securities differently depending on the characteristics and
maturity profile of the security. For example, credit spread is a more significant driver of the fair value
measurement of a high yield bond as compared to an investment grade bond. Generally, the credit spread for an
investment grade bond is also more observable and less volatile than its high yield counterpart.
Sensitivity of Level 3 measurements
The implementation of valuation techniques involves a considerable degree of judgement. While the Company
believes its estimates of fair value are appropriate, the use of different measurements or assumptions could lead
to different fair values. The following table sets out the impact of using reasonably possible alternative
assumptions in the valuation methodology at 31 December 2022 and 2021:
2022 2021
Level 3 Level 3
Effect on income statement Effect on income statement
Favourable
$m
Unfavourable
$m
Favourable
$m
Unfavourable
$m
Classes of financial assets
Derivative financial assets
19 (19) 8 (8)
Investment securities - equity
17 (17) 24 (24)
Loans and advances to customers measured at FVTPL
36 (36) 10 (10)
Total
72 (72) 42 (42)
Classes of financial liabilities
Derivative financial liabilities
19 (19) 9 (9)
Other financial liabilities measured at FVTPL
17 (17) 2 (2)
Total
36 (36) 11 (11)
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
123
23. Financial assets and liabilities (continued)
Estimated fair value of financial instruments not carried at fair value
Set out below, is a comparison by class of the carrying amounts and fair values of the Company’s financial
instruments that are not carried at fair value in the financial statements. This table does not include the fair values
of non-financial assets and non-financial liabilities.
Other financial assets are primarily made up of receivables balances from the Company’s treasury and trade
solutions and markets and securities services businesses.
The following summarises the major methods and assumptions used in estimating the fair value of the financial
assets and financial liabilities used in the tables on the next page:
• The fair value for loans and advances and other lending are estimated using internal valuation
techniques such as discounted cash flow analysis. If available, the Company may also use quoted prices
for recent trading activity of assets with similar characteristics to the loan being valued. In certain cases,
the carrying value approximates fair value because the instruments are short term in nature or reprice
frequently.
• Fair values of customer account, deposit liabilities, other assets and other liabilities are estimated using
discounted cash flows, applying either market rates where practicable, or rates currently offered by the
Company for deposits of similar remaining maturities. Where market rates are used no adjustment is
made for counterparty credit spreads.
• The carrying amount of cash and balances at central bank is a reasonable approximation of fair value
due to the short term nature of the balances.
The table below sets out the estimated fair value, at Level 1, 2 and 3 of those assets and liabilities not held at fair
value in the statement of financial position.
31 December 2022 Estimated fair value
Carrying
value
Estimated
fair value
Level 1 Level 2 Level 3
$m $m $m $m $m
Assets
Cash and cash equivalents 32,911 32,911 32,911 — —
Loans and advances to banks 13,472 13,472 — 13,472 —
Loans and advances to customers 19,944 19,869 — — 19,869
Other assets 10,183 10,183 — — 10,183
Total financial assets 76,510 76,435 32,911 13,472 30,052
Liabilities
Deposits by banks 8,858 8,814 — 8,814 —
Customer accounts 49,072 48,827 — 48,827 —
Subordinated liabilities 4,455 4,432 — 4,432 —
Other liabilities 16,247 16,166 — 7,646 8,520
Total financial liabilities 78,632 78,239 — 69,719 8,520
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
124
23. Financial assets and liabilities (continued)
Estimated fair value of financial instruments not carried at fair value (continued)
31 December 2021
(Restated)
Estimated fair value
Carrying
value
Estimated fair
value
Level 1 Level 2 Level 3
$m $m $m $m $m
Assets
Cash and cash equivalents 27,482 27,482 27,482 — —
Loans and advances to banks 11,035 11,035 — 11,035 —
Loans and advances to customers 20,242 20,234 — — 20,234
Other assets* 6,841 6,841 — — 6,841
Total financial assets 65,600 65,592 27,482 11,035 27,075
Liabilities
Deposits from banks 11,148 11,116 — 11,116 —
Customer accounts 38,977 38,866 — 38,866 —
Subordinated liabilities 4,773 4,759 — 4,759
—
—
Other liabilities* 9,046 9,020 — 7,164 1,856
Total financial liabilities 63,944 63,761 — 61,905 1,856
*Restated for prior year adjustment, as detailed in Note 38
24. Property and equipment
Cost Right-of-use assets Leasehold improvements
Vehicles, furniture and
equipment Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
At 1 January 112 97 75 74 91 90 278 261
Additions 66 17 7 8 16 14 89 39
Acquisitions — — 2 — 1 — 3 —
Disposals — (9) (2) (2) (1) (6) (3) (17)
Write-offs — — — — (2) (2) (2) (2)
Foreign exchange (4) 7 (5) (5) (10) (5) (19) (3)
At 31 December 174 112 77 75 95 91 346 278
Depreciation Right-of-use assets Leasehold improvements
Vehicles, furniture and
equipment Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
At 1 January 50 34 37 34 51 52 138 120
Charged in year 20 20 7 7 12 13 39 40
Acquisitions — — — — — — — —
Disposals — (2) (1) (3) (1) (8) (2) (13)
Write-offs — — — — (1) (2) (1) (2)
Foreign exchange 2 (2) (8) (1) (5) (4) (11) (7)
At 31 December 72 50 35 37 56 51 163 138
Net carrying value 102 62 42 38 39 40 183 140
There were no capitalised borrowing costs related to the acquisition of property and equipment during the year
(2021: $nil).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
125
25. Intangible assets
Cost Goodwill Computer software Other Intangibles Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
At 1 January 47 48 225
185
32 35 304 268
Additions — — 25
42
— — 25 42
Transfer In — — —
—
— — — —
Acquisitions — — —
—
— — — —
Transfer out — — —
—
— — — —
Disposals — — —
(1)
— — — (1)
Impairment — — —
—
— — — —
Foreign exchange (2) (1) 1
(1)
(2) (3) (3) (5)
At 31 December 45 47 251 225 30 32 326 304
Amortisation and
impairment losses Goodwill Computer software Other Intangibles Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
At 1 January 27
27
138
110
30
31
195 168
Additions —
—
—
15
—
—
— 15
Amortisation —
—
16
15
1
1
17 16
Acquisitions —
—
—
—
—
—
— —
Transfer out —
—
—
—
—
—
— —
Disposals —
—
—
(1)
—
—
— (1)
Impairment —
—
(1)
—
—
—
(1) —
Foreign exchange —
—
—
(1)
(5)
(2)
(5) (3)
At 31 December 27 27 153 138 26 30 206 195
Net carrying value 18 20 98 87 4 2 120 109
An intangible asset is impaired when its carrying amount exceeds its recoverable amount. When testing
intangible assets for impairment, the Company will determine the recoverable amount of an asset or a cash-
generating unit to be the higher of its fair value less costs of disposal and its value in use. The value in use
amount is determined using a model based on the discounted cash flow method. The cash flow projections are
based on business plans approved by management covering a five year period, or greater if deemed appropriate
by management.
Goodwill was allocated to the Direct Custody and Clearing business and the Fund administration business. The
cash flow projections in respect of the Direct Custody and Clearing business and Fund administration business
cover a ten year period.
The cash flows used to estimate the operating profit projections reflect the current market assessment of the risk
of the cash-generating units. Operating profit in the business plan, approved by management reflects the best
estimate of future profits based on both historical experience and expected growth rates.
The discount rate used to estimate the cash flows is the SOFR (Secured Overnight Financing Rate). The key
assumptions reflect past experience and consider external sources of information, and are detailed in the table
below.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
126
25. Intangible assets (continued)
There was no evidence of impairment arising from the review of the goodwill. A summary of the allocation of
goodwill within the units is presented below:
Goodwill Growth rate Discount rate
Cash generating unit
2022 2021 2022 2021 2022 2021
Institutional Clients Group
$m $m
– Direct custody and clearing business 12
13 8% 8% -3.438 -1.420
– Fund administration business 6
7 1 % — -3.438 —
Total 18
20
The model is sensitive to changes in the growth rate. The growth rate is aligned to the cash generating units
strategic plan.
Management believes that reasonable changes in key assumptions used to determine the recoverable amounts
would not result in a material impairment.
26. Deferred tax
The movement on the deferred tax is as follows:
Balances at
1 January
2022
Recognised in
the Income
statement
Recognised in
statement of
other
comprehensive
income
Balances at
31 December
2022
$m
$m
$m
$m
Property, equipment and intangible assets
170
(44)
—
126
Investment securities at FVOCI
4
(1)
70
73
Pension and other retirement benefits
29
(5)
(16)
8
Allowances for expected credit losses
—
—
—
—
Tax loss carry-forward
45
(7)
—
38
Other temporary differences
12
4
—
16
FX Translation
(33)
—
10
(23)
Total Deferred Tax
227
(53)
64
238
– of which Deferred Tax Asset
247
255
– of which Deferred Tax Liability
20
17
Balances at
1 January
2021
Recognised in
the Income
statement
Recognised in
statement of
other
comprehensive
income
Balances at
31 December
2021
$m $m $m $m
Property, equipment and intangible assets 169 1 — 170
Investment securities at FVOCI (20) — 24 4
Pension and other retirement benefits 33 — (4) 29
Allowances for expected credit losses 6 (6) — —
Tax loss carry-forward 48 (3) — 45
Other temporary differences 15 (3) — 12
FX Translation (22) — (11) (33)
Total Deferred Tax 229 (11) 9 227
– of which Deferred Tax Asset 248 247
– of which Deferred Tax Liability 18 20
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
127
26. Deferred tax (continued)
Current tax asset of $14 million includes $9.7 million in relation to the Italian branch, $2.9 million in relation to
the Luxembourg branch and $1.1 in relation to the Sweden branch for the year2022.
27. Shares in subsidiaries
31 December
2022
31 December
2021
$m $m
Beginning of period
14 14
Disposal — —
End of period 14 14
The Company has an investment in the following subsidiary:
Name Country of
incorporation
business
Nature of
business
Year end Registered office Percentage
ownership
CitiCapital Leasing (March) Limited England Lease finance
31 March
United Kingdom 100%
28. Subordinated liabilities
First call date Currency 2022 $m 2021 $m Interest Rate Maturity Date
2021 GBP
722
809
0.98% + 5 years
SONIA
6 December 2026
2021 EUR
3,733
3,964
0.99% + 7 years
ESTR
31 October 2028
As at 31 December 2022, subordinated liabilities consists of $4,455 million (2021: $4,773 million) of
subordinated loan borrowings from Citibank Holdings Ireland Limited. Interest expense incurred during the year
with respect to subordinated loans and charged to the income statement amounted to $54 million (2021: $2
million).
The loan is subordinated to the claims of other creditors, pari passu with creditors in respect of other liabilities
that have the lower ranking of claims that is referred to in Section 1428A(1)(c)(iii) of Companies Act 2014, but
will rank ahead of the rights of the shareholders, and the holders of (or other creditors in respect of) Additional
Tier 1 instruments and Tier 2 instruments.
The Company did not have any defaults of principal or interest or other breaches with respect to its subordinated
liabilities during the year ended 31 December 2022 (2021: none).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
128
29. Provisions
Provisions recorded for restructuring largely relate to termination benefits. Termination benefits are payable
when employment is terminated before the normal retirement date or whenever an employee accepts voluntary
redundancy in exchange for these benefits.
Provision for expected credit loss (ECL) for commitments and guarantees given are recorded for committed
loans, when the Company has contractual obligation to provide funds for clients, or for any contractual
commitments which are not recorded on the statement of financial position.
Provisions are recognised when there is a present obligation as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. Provisions are measured at the present value of
management’s best estimate of the expenditure required to settle the present obligation at the statement of
financial position date. The provisions are expected to be used during the year ending 31 December 2023.
Restructuring
provision
Other
provisions
Total
$m $m $m
31 December 2022
Opening balance 6 3 9
Provisions made during the year 5 — 5
Provisions utilised during the year (2) — (2)
Provisions released during the year (1) (1) (2)
Other movements (2) — (2)
Closing balance 6 2 8
Commitments and guarantees
123
Total provision balance 131
Restructuring
provision
Other
provisions
Total
$m $m $m
31 December 2021
Opening balance 14 3 17
Provisions made during the year 1 — 1
Provisions utilised during the year (5) — (5)
Provisions released during the year (4) — (4)
Other movements — — —
Closing balance 6 3 9
Commitments and guarantees 80
Total provision balance 89
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
129
30. Other liabilities
31 December
2022
31 December
2021
(Restated)
$m $m
Other liabilities
Accounts payable 4,778 4,290
Margin account obligations* 5,419 2,905
Securities sold under repurchase agreements 5,397 1,065
Short sales 13,514 2,118
Retirement obligations (Note 14) 121 228
Right-of use lease liability 110 71
Accruals and deferred income 278 182
Other 144 309
29,761 11,168
Accounts payable predominantly relates to obligations arising from the Company’s transaction services business.
The other balances include amounts payable to other financial institutions, corporates and other group entities,
primarily relating to prepaid risk participations, items in the process of settlement and margin account
obligations.
Settlement of these accounts are short term in nature, balances can fluctuate depending on the underlying
business activity.
Margin accounts obligations reflects the Company’s obligation to pay collateral back to clients upon their own
settlement of margin calls as they arise.
Short sales represent payables arising from short sale transactions where securities and money market
instruments are sold but not owned at the time of the transaction.
*Restated for prior year adjustment, as detailed in Note 38
31. Called up share capital
31 December
2022
31 December
2021
31 December
2022
31 December
2021
Number of Ordinary shares $m $m
Authorised
At the end of the year 5,000,000,000 5,000,000,000 4,692 4,692
Share capital
Allotted, called-up and fully paid
Ordinary shares of a par value of €1 each 9,741,290 9,741,290 11 11
Share premium
At the end of the year 1,963 1,963
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
130
32. Share-based incentive plans
As part of the Company’s remuneration programme it participates in a number of Citigroup share-based
incentive plans. These plans involve the granting of stock options, restricted or deferred share awards and share
payments. Such awards are used to attract, retain and motivate officers and employees to provide incentives for
their contributions to the long-term performance and growth of the Company, and to align their interests with
those of the shareholders. The award programmes are administered by the Personnel and Compensation
Committee of the Citigroup Inc. Board of the Directors, which is composed entirely of non-employee Directors.
In the share award programme Citigroup issues common shares in the form of restricted share awards, deferred
share awards and share payments. For all stock award programmes 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 the participants (in the case of a restricted stock award), until after the vesting conditions have be
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 dividend-equivalent payments during the vesting period.
Recipients of restricted share awards are entitled to a limited voting right and to receive dividend or dividend-
equivalent payments during the vesting period. Once a share award vests the shares become freely transferable,
but in the case of certain employees, may be subject to transfer restriction by their terms or share ownership
commitment.
Stock award programme
The Company participates in Citigroup’s Capital Accumulation Programme (CAP) programme, under which
shares of Citigroup 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 rateably over a three or four-year period beginning on or around the first anniversary of the award date.
Continuous employment within Citigroup is generally required to vest in CAP and other stock award
programmes.
The programme 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 specified 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 as effectively there
are no vesting conditions.
For all stock award programmes, during the applicable vesting period, the shares awarded cannot be sold or
transferred by the participant, and the award is subject to cancellation if the participant’s employment is
terminated. After the award vests, the shares become freely transferable (subject to the stock ownership
commitment of senior employees). From the date of award, the recipient of a restricted stock award can direct
the vote of the shares and receive regular dividends to the extent dividends are paid on Citigroup common stock.
Recipients of deferred stock awards receive dividend equivalents to the extent dividends are paid on Citigroup
common stock, but cannot vote.
Information with respect to current year stock awards is as follows:
2022 2021
Shares awarded 662,008 341,241
Weighted average fair market value per share $59.59 $62.85
2022 2021
$m $m
Compensation cost charged to earnings 36 24
Fair value adjustments recorded to equity (8) —
Total carrying amount of equity-settled transaction liability 42 33
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
131
32. Share-based incentive plans (continued)
2022 2021
$m $m
Stock Awards
Granted in 2022 28 —
Granted in 2021 6 18
Granted in 2020 2 2
Granted in 2019 — 1
Granted in 2018 — —
Granted in 2017 — —
Cash Accrued — 3
Total Expense
36 24
The Company did not operate or have any stock option programme (2021: $nil).
33. Contingent liabilities and commitments
The following tables give the nominal principal amounts and risk weighted amounts of contingent liabilities and
commitments. The nominal principal amounts indicate the volume of business outstanding at the statement of
financial position date and do not represent amounts at risk.
Contract
amount
Contract
amount
31 December
2022
31 December
2021
$m $m
Undrawn credit lines
28,780 26,577
Other commitments
– less than 1 yr 11,320 6,470
– 1 yr and over 6,464 11,669
Total 46,564 44,716
Other commitments primarily relate to the Trade business in Ireland. The Company held an ECL of $122 million
as at 31 December 2022 (2021: ECL of $80 million), with respect to its commitments.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
132
33. Contingent liabilities and commitments (continued)
Expected credit loss – Contingent liabilities and commitments
The following table shows an analysis of changes in the gross carrying amount and the corresponding ECL
allowances:
Exposure Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
Outstanding exposure as at 1
January 42,475 45,171 2,076 1,739 166 107 44,717 47,017
New assets originated or
purchased 6,461 3,503 815 541 6 29 7,282 4,073
Asset derecognised or matured (4,669) (6,129) (681) (210) (85) (34) (5,435) (6,373)
Transfers to Stage 1 732 453 (666) (453) (66) — — —
Transfers to Stage 2 (2,064) (478) 2,082 478 (18) — — —
Transfers to Stage 3 (72) (45) (24) (19) 96 64 — —
Changes due to modifications
not resulting in derecognition — — — — — — — —
Amounts written off — — — — — — — —
Other movements — — — — — — — —
At 31 December 42,863 42,475 3,602 2,076 99 166 46,564 44,717
ECL Stage 1 Stage 2 Stage 3 Total
2022 2021 2022 2021 2022 2021 2022 2021
$m $m $m $m $m $m $m $m
IFRS 9 ECL as at 1 January 36 19 27 57 17 22 80 98
ECL on new assets originated
or purchased 22 1 28 — 1 — 51 1
Exposure derecognised or
matured — (2) (3) (6) (4) (7) (7) (15)
Transfers to Stage 1 18 6 (9) (6) (9) — — —
Transfers to Stage 2 (1) — 2 — (1) — — —
Transfers to Stage 3 — — (1) (1) 1 1 — —
Net remeasurement of loss
allowance (13) (3) 18 3 9 6 14 6
Other movements (32) 15 12 (20) 5 (5) (15) (10)
At 31 December 30 36 74 27 19 17 123 80
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
133
34. Business transfer under common control
Foreign Exchange business within the Italian Branch
On 1 May 2021, a Foreign Exchange business was transferred to the Italian Branch of CEP from Citibank N.A.
(“CBNA”). The Company paid a consideration of $15 million for the acquired Foreign Exchange business
within the Italian Branch. No goodwill was recognised as the consideration deemed in excess was recorded in
merger reserve.
The assets and liabilities which were transferred in 2021 were $75 thousand and $75 thousand respectively.
On 17 September 2021, a Trustee and Fiduciary Services Business was transferred from the CEP UK branch to
Citibank UK Limited (“CUKL”). The Company received a consideration of $31 million for the disposed Trustee
and Fiduciary Services Business from CUKL. No goodwill was recognised as the consideration deemed in
excess was recorded in merger reserve. There were no business transfers under common control during the year
ended 31 December 2022.
The Trustee and Fiduciary Business did not have any separately identifiable assets, tangible or intangible, on
CEP’s statement of financial position.
35. Involvement with unconsolidated structured entities
Nature, purpose and extent of the Company’s interests in unconsolidated structured entities
The Company engages in various business activities with structured entities which are designed to achieve a
specific business purpose. A structured entity is one that has been set up so that any voting rights or similar
rights are not the dominant factor in deciding who controls the entity. An example is when voting rights relate
only to administrative tasks and the relevant activities are directed by contractual arrangements.
Structured entities are consolidated when the substance of the relationship between the Company and the
structured entities indicate that the structured entities are controlled by the Company. The entities covered by this
disclosure note are not consolidated because the Company does not control them through voting rights, contract,
funding agreements, or other means. The extent of the Company’s interests to unconsolidated structured entities
will vary depending on the type of structured entities.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
134
35. Involvement with unconsolidated structured entities (continued)
Asset Based Financing
The Company provides loans and other forms of financing to structured entities that hold assets. Those loans are
subject to the same credit approvals as all other loans originated or purchased by the Company.
The Company does not have the power to direct the activities that most significantly impact these structured
entities economic performance. These vehicles are funded usually via a syndicate of lenders.
The table below sets out an analysis of carrying amounts of interests held by the Company in unconsolidated
structured entities by the type of underlying assets, which is the Company’s maximum exposure to loss, and also
the total assets of these unconsolidated structured entities. All exposures are included in loans and advances to
customers.
Carrying amount
Total assets of the
unconsolidated structured
entities
2022 2021 2022 2021
$m $m $m $m
Airplanes, ships and other assets 169 149 532 6,351
Commercial and other real estate 579 1,008 6,261 7,034
Total 748 1,157 6,793 13,385
The above exposure is the asset based financing provided to 20 entities (2021: 30). The Company has further
commitments of $77 million (2021: $208 million) to these entities.
The asset based financing represents the statement of financial position carrying amount of the Company’s
financing in the structured entities. It reflects the initial financing in the structured entities adjusted for any
accrued interest and cash principal payments received. The carrying amount may also be adjusted for increases
or declines in fair value or any impairment in value recognised in the income statement.
36. Leases
A. Leases as a lessee
Information about leases for which the Company is a lessee is presented below.
Right-of-use assets
Right-of-use assets related to leased office buildings in branches.
2022 2021
$m $m
Balances at 1 January
62 63
Additions to right-of-use assets 66 17
Disposals — (9)
Depreciation charge for the year (20) (19)
Foreign exchange (6) 9
Balances at 31 December
102 62
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
135
36. Leases (continued)
Lease liabilities
Maturity analysis
31 December
2022
31 December
2021
$m $m
Expiring:
– within one year 2 4
– between one and five years 31 27
– in five years and more 76 39
Total discounted lease liabilities at 31 December 109 71
Lease liabilities included in the statement of financial position at 31
December
109 71
Current 2 5
Non-current 107 66
Amounts recognised in profit or loss
2022 2021
Leases under IFRS 16 $m $m
Interest on lease liabilities — —
Amounts recognised in statement of cash flows
2022 2021
$m $m
Total cash outflow for leases
(39) 5
37. Related party transactions
The Company is a wholly owned subsidiary undertaking of Citibank Holdings Ireland Limited, which is
incorporated in Ireland. The largest Group in which the results of the Company are consolidated is that headed
by Citigroup Inc., which is incorporated in the United States of America. The Company defines related parties as
the Board of Directors, senior management, their close family members, parent and fellow subsidiaries and
associated companies. The Company considers the key management of the Company to be the members of the
Executive Committee (ExCo).
Transactions with key management personnel
Key management personnel compensation comprised the following:
2022
2021
Remuneration
$m
$m
Salaries and other short term benefits
16
9
Post-Employment Benefits
1
1
Termination Benefits
—
1
17
11
Number of KMP YTD 25 20
Number of KMP 31st December 20 18
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
136
37. Related party transactions (continued)
Transactions with key management personnel (continued)
Key Management Personnel (KMP) are those persons having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or indirectly, including any director (whether executive or
otherwise) of that entity. This has been defined as CEP Executive Committee (ExCo) and any Executive, Non-
Executive or Independent Non-Executive Directors for the entity.
Remuneration data includes full KMP population year to date i.e. including part year cases. For any internal
Non-Executive Directors who are not employed by the entity, their remuneration data is excluded from the
figures provided and only headcount is reported.
Salaries and other short term benefits, comprises salary, role based allowance, variable compensation, cash in
lieu of pension and the value of other benefits.
Post employment benefits, Includes employer contributions paid to pension funds. Termination benefits data
reflects severance payments.
Number of KMP population includes interim KMPs, Individuals who are standing attendees of the ExCo only
are excluded.
Salaries and other short term benefits comprise salary, role based allowance, variable compensation, cash in lieu
of pension and the value of other benefits. Post-employment benefits include employer contributions paid to
pension funds.
At 31 December 2022, there were no outstanding exposures to Directors including loans (2021: $nil).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
137
37. Related party transactions (continued)
A number of transactions are entered into with other Citigroup companies. These include loans and deposits that
provide funding to other Citigroup companies as well as derivative contracts used to hedge residual risks that are
included in the other assets and other liabilities balances. Various services are provided between related parties.
The table below summarises balances with related parties.
31 December 2022 31 December 2021
Parent
company
undertakings
Other Citigroup
undertakings Total
Parent
company
undertakings
Other
Citigroup
undertakings Total
Assets $m $m $m $m $m $m
Cash and cash equivalents — 2,624 2,624 — 4,960 4,960
Loans and advances to banks — 9,238 9,238 — 7,768 7,768
Loans and advances to customers — 57 57 — 10 10
Other assets — 1,865 1,865 — 3,418 3,418
Derivatives — 13,015 13,015 — 7,000 7,000
Liabilities
Deposits by banks — 5,849 5,849 — 8,171 8,171
Customer accounts 2 1,010 1,012 — 888 888
Other liabilities — 1,533 1,533 — 1,284 1,284
Derivatives — 14,186 14,186 — 10,206 10,206
Subordinated liabilities 4,455 — 4,455 4,773 4,773
Commitments and guarantees
— 911 911 — 769 769
Income statement
Interest and similar income — 129 129 — 28 28
Interest payable (54) (104) (158) (2) (32) (34)
Net fee and commission expenses — 302 302 — 260 260
Net income from other financial
instruments at FVTPL
— 4 4 — — —
Other operating income — 744 744 — 634 634
Net trading income — (2,800) (2,800) — (1,930) (1,930)
Net investment income — — — — — —
Personnel expenses — (1) (1) — — —
Other expenses — (254) (254) — (247) (247)
There were no transactions during the year or the previous year with the Company’s subsidiary, CitiCapital
Leasing (March) Ltd.
The total carrying amount of equity-settled transaction liability due to Citigroup Inc was $42 million (2021: $33
million). A $19 million (2021:$15 million) cash payment was made to Citigroup Inc in relation to the equity-
settled transaction liability. Please refer to Note 32 Share-based incentive plans for further details.
No dividends were paid by the Company to its direct parent, Citibank Holding Ireland Limited (CHIL) in
relation to 2022 earnings during the year (2021: $nil).
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
138
38. Prior year adjustment
Following a review of the offsetting of financial assets and liabilities in consideration of the increasing derivative
portfolio, the Company concluded that the applied offsetting of cash variation margin receivables and cash
variation margin obligations in the prior year did not meet the offsetting criteria set out by IAS 32. As a result,
the Company restated its 2021 accounts in this regards as follows:
As originally reported
31 December 2021
$m
Adjustment
$m
As restated
31 December 2021
$m
Assets
Cash and cash equivalents 27,482 — 27,482
Trading assets 4,443 — 4,443
Derivative financial instruments 13,126 — 13,126
Investment securities 7,525 — 7,525
Loans and advances to banks 11,035 — 11,035
Loans and advances to customers 21,253 — 21,253
Shares in subsidiary undertakings 14 — 14
Other assets 4,832 2,009 6,841
Current tax asset 44 — 44
Goodwill and Intangible assets 109 — 109
Property and equipment 140 — 140
Deferred tax assets 247 — 247
Total assets
90,250 2,009 92,259
Liabilities
Deposits by banks 11,148 — 11,148
Customer accounts 38,977 — 38,977
Derivative financial instruments 14,429 — 14,429
Subordinated liabilities 4,773 — 4,773
Current tax liability 56 — 56
Provisions 89 — 89
Deferred tax liabilities 20 — 20
Other liabilities 9,159 2,009 11,168
Total liabilities
78,651 2,009 80,660
Equity shareholders' funds
Share capital 11 — 11
Share premium account 1,963 — 1,963
Other reserves (net) 604 — 604
Retained earnings 9,021 — 9,021
Total equity attributable to equity
shareholders
11,599 — 11,599
Total liabilities and equity
shareholders' funds
90,250 2,009 92,259
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
139
39. Parent companies
The Company is a subsidiary undertaking of Citibank Holding Ireland Limited (CHIL), incorporated in Ireland.
The largest Group in which the results of the Company are consolidated is Citigroup Inc., registered at 1209
Orange Street, Wilmington, New Castle, DE, 19810, United States of America. The audited consolidated
financial statements of Citigroup Inc. are made available to the public annually in accordance with Securities and
Exchange Commission regulations and may be obtained from http://www.citigroup.com/citi/investor/
corporate_governance.html
The smallest Group in which the results of the Company are consolidated is CHIL. Copies of the Group accounts
are available to the public and may be obtained from its offices at 1 North Wall Quay, IFSC, Dublin 1.
40. Events after reporting period
Capital injections of $803m from Citi Investments Bahamas Ltd (CIBL – parent of COHBL) and $397m from
Citi Overseas Holdings Bahamas Limited (“COHBL" – parent of CHIL) were received by the Company in
March 2023.
41. Approval of financial statements
The financial statements of the Company were approved by the Board of Directors on the 16 March 2023.
CITIBANK EUROPE PLC
NOTES TO THE FINANCIAL STATEMENTS
140
CITIBANK EUROPE PLC
(Registered Number: 132781)
COUNTRY BY COUNTRY REPORTING
for the year ended 31 December 2022
141
Independent auditor’s report to the Directors of Citibank Europe plc
Opinion
We have audited the accompanying Country-by-Country (“CBC”) financial information of Citibank Europe plc
(“the Company”) for the year ended 31 December 2022 pursuant to European Union (Capital Requirements)
Regulations, 2014 ("the Regulations") which is required to be audited by Regulation 77 of those Regulations.
The CBC financial information set out on pages 146 to 148 in the Citibank Europe plc Country-by-Country
Reporting (collectively "the CBC financial information"), has been prepared on a single entity basis in
accordance with management’s basis of preparation set out on page 146.
In our opinion, the CBC financial information as at 31 December 2022:
• is properly prepared, in all material respects, in accordance with the special purpose basis of preparation
set out on page 146 to the CBC financial information; and
• discloses the items of CBC financial information required to be published, having applied the relevant
principles of International Financial Reporting Standards (IFRS) as adopted by the European Union,
and by Regulation 77 of the European Union (Capital Requirements) Regulations, 2014.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (“ISAs (Ireland)”),
including ISA (Ireland) 805, and the terms of our engagement letter dated 31 January 2023. Our responsibilities
are described in the Auditor's responsibilities for the audit of the CBC financial information section of our report.
We are independent of the Company in accordance with ethical requirements that are relevant to our audit of the
CBC financial information in Ireland, including the Ethical Standard issued by the Irish Auditing and
Accounting Supervisory Authority (IAASA), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Emphasis of matter – special purpose basis of preparation
In forming our opinion on the CBC financial information, which is unmodified, we have considered the
adequacy of the disclosure made on page 146 concerning the definitions applied by the Company to the items of
CBC financial information required to be published. Regulation 77 of the European Union (Capital
Requirements) Regulations, 2014 does not set out definitions of the items of CBC financial information to be
disclosed. The Company has applied definitions, as applicable, to the items of CBC financial information which
are consistent with the definitions of those items in accordance with IFRS as adopted by the European Union and
of those items in the Company’s annual statutory financial statements.
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS OF
CITIBANK EUROPE PLC
142
Conclusions relating to going concern
In auditing the CBC financial information, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the CBC financial information is appropriate. Our evaluation of the directors'
assessment of the Company's ability to continue to adopt the going concern basis of accounting included:
• We used our knowledge of the Company, the financial services industry, and the general economic
environment to identify the inherent risks to the business model and analysed how those risks might affect the
Company's financial resources or ability to continue operations over the going concern period. The risks that
we considered most likely to adversely affect the Company's available financial resources over this period
were:
o the availability of funding and liquidity in the event of a market wide stress scenario; and
o the impact on regulatory capital requirements in the event of an economic slowdown or recession.
• We also considered whether these risks could plausibly affect the availability of financial resources in the going
concern period by comparing the Directors’ severe, but plausible, downside scenarios that could arise from
these risks individually and collectively against the level of available financial resources indicated by the
Company’s financial forecasts.
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a
going concern for a period of at least twelve months from the date when the CBC financial information is
authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Detecting irregularities including fraud
We identified the areas of laws and regulations that could reasonably be expected to have a material effect on the
CBC financial information and risks of material misstatement due to fraud, using our understanding of the
entity’s industry, regulatory environment and other external factors and inquiry with the directors. In addition,
our risk assessment procedures included:
• Inquiring with the directors and other management as to the Company’s policies and procedures regarding
compliance with laws and regulations, identifying, evaluating and accounting for litigation and claims, as well
as whether they have knowledge of non-compliance or instances of litigation or claims.
• Inquiring of directors, the audit committee, and internal audit and inspection of policy documentation as to the
Company’s high-level policies and procedures to prevent and detect fraud and the Company’s channel for
whistleblowing, as well as whether they have knowledge of any actual, suspected or alleged fraud.
• Inquiring of directors, the audit committee, and internal audit regarding their assessment of the risk that the
CBC financial information may be materially misstated due to irregularities, including fraud.
• Inspecting the Company’s regulatory correspondence.
• Reading minutes of meetings of the Board of Directors, and the audit committee.
• Considering remuneration incentive schemes and performance targets for management and directors.
• Performing planning analytical procedures to identify any usual or unexpected relationships.
We discussed identified laws and regulations, fraud risk factors and the need to remain alert among the audit
team.
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS OF
CITIBANK EUROPE PLC
143
Firstly, the Company is subject to laws and regulations that directly affect the CBC financial information
including the European Union (Capital Requirements) Regulations, 2014, companies and financial reporting
legislation. We assessed the extent of compliance with these laws and regulations as part of our procedures on
the related CBC financial information including assessing the CBC financial information disclosures and
agreeing them to supporting documentation when necessary.
Secondly, the Company is subject to many other laws and regulations where the consequences of non-
compliance could have a material effect on amounts or disclosures in the CBC financial information, for instance
through the imposition of fines or litigation or the loss of the Company’s licence to operate. We identified the
following areas as those most likely to have such an effect: regulatory capital and liquidity and certain aspects of
company legislation recognising the financial and regulated nature of the Company’s activities and its legal
form.
Auditing standards limit the required audit procedures to identify non-compliance with these non-direct laws and
regulations to inquiry of the directors and other management and inspection of regulatory correspondence, if any.
These limited procedures did not identify actual or suspected non compliance.
We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. As required by auditing standards, we performed procedures to address the risk of
management override of controls.
As the Company is regulated, our assessment of risks involved obtaining an understanding of the legal and
regulatory framework that the Company operates and gaining an understanding of the control environment
including the entity’s procedures for complying with regulatory requirements.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some
material misstatements in the CBC financial information, even though we have properly planned and performed
our audit in accordance with auditing standards. For example, the further removed non-compliance with laws
and regulations (irregularities) is from the events and transactions reflected in the CBC financial information, the
less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not
responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and
regulations.
Respective responsibilities and restrictions on use
Responsibilities of directors for the CBC financial information
The directors are responsible for: the preparation of the CBC financial information in accordance with the
requirements of the European Union (Capital Requirements) Regulations, 2014 relevant to preparing such CBC
financial information; such internal control as they determine is necessary to enable the preparation of the CBC
financial information that is free from material misstatement, whether due to fraud or error; assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS OF
CITIBANK EUROPE PLC
144
Auditor’s responsibilities for the audit of the CBC financial information
Our objectives are to obtain reasonable assurance about whether the CBC financial information as a whole are
free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance
with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the CBC financial information.
A fuller description of our responsibilities is provided on IAASA’s website at https://iaasa.ie/publications/
description-of-the-auditors-responsibilities-for-the-audit-of-the-financial-statements/.
The purpose of our audit work and to whom we owe our responsibilities
Our report is made solely to the Company’s Directors, as a body, in accordance with our engagement letter to
provide a report pursuant to Regulation 77 of the European Union (Capital Requirements) Regulation, 2014. Our
audit work has been undertaken so that we might state to the Company’s Directors those matters we are required
to state to them in an auditor's report on CBC financial information 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 Directors as a body, for our audit work, for this report, or for the opinions we have formed.
James Black
for and on behalf of KPMG
Chartered Accountants, Statutory Audit Firm
1 harbourmaster Place,
IFSC Dublin 1
16 March 2023
INDEPENDENT AUDITOR’S REPORT TO THE DIRECTORS OF
CITIBANK EUROPE PLC
145
Country by Country Reporting
The Country by Country is a reporting requirement per the European Commission as detailed under Article 89 of
the CRD IV directive 2013/36/EU.
The Commissions aims through this report to allow stakeholders to gain a better understanding of the structures
of financial groups, their activities and geographical presence and to understand the payment of taxes vis a vie
the location of where actual business activity takes place.
The requirement lays out that all “Banks” and “Investment Firms” have to report annually, for each country in
which they have an establishment, data on:
• Name(s), activities, geographical location
• Turnover
• Staff Numbers
• Profit and loss before Tax
• Tax on profit or Loss
• Public Subsidies received
Once approved by the Board the report will be duly saved to the Citigroup Inc website under Investor Relations.
Article 89 of the CRD requires credit institutions to disclose certain information on a branch by branch basis.
Basis of Preparation:
The Table below presents CEP’s turnover, average number of employees, profit or loss before tax, tax on profit
and public subsidies received based on the geographic locations in which CEP operates. The Company prepares
statutory financial statements under International Financial Reporting Standards as adopted by the European
Union (EU). The CBC disclosures are prepared under International Financial Reporting Standards as adopted by
the EU and as regards the scope of consolidation on a prudential basis as required by the EU Capital
Requirements Regulations. There is no difference between the Company’s statutory financial statements and its
prudential basis of consolidation.
Overview of the table:
The Table below presents the CEP’s turnover, number of employees, profit and loss before tax, tax on profit or
loss and public subsidies received. Set out below are the definitions which have been applied in preparing the
information within Table 1.
Turnover:
Turnover represents total operating income, which comprises net interest income, net fee and commission
income, net trading income, dividend income and other operating income.
Employees:
This represents the average number of Full Time Equivalents being full and part time employees but excluding
any agency and contracting staff.
Profit and Loss before Tax:
Profit and loss before tax is reported in a manner consistent with that included in these Annual Financial
Statements.
CITIBANK EUROPE PLC
COUNTRY BY COUNTRY REPORTING
146
Country by Country Reporting (continued)
Tax on profit:
Tax on profit or loss represents the tax expense recognised within the income statement and does not reflect the
actual amount of corporation tax paid. Included within the tax on profit or loss is both current tax and deferred
tax.
Public Subsidies Received:
Subsidies received is considered a direct transfer of funds, such as a grant from a state body.
Nature of activities:
Citibank Europe Plc. (CEP) is a licenced credit institution authorised by the Central Bank of Ireland (CBI) and is
headquartered in Ireland. Pursuant to its authorisation by the CBI, CEP has passported under the European
Union’s (EU) Banking Consolidation Directive and accordingly is permitted to conduct a broad range of banking
and financial-services activities across the EEA through branches and on a cross border basis.
The Company’s overseas passported branches are located in Austria, Belgium, Bulgaria, Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Italy, Luxembourg, Netherlands, Norway, Portugal,
Romania, Slovakia, Spain, Sweden and the United Kingdom. In addition to the overseas passported branches,
CEP has two branches in Poland and Hungary which provide key operation and technology support services to
other Citigroup affiliates.
A Country by Country Reporting (CBCR) obligation was introduced through Article 89 of the EUR Directive
2013/36/EU, otherwise known as the Capital Requirements Directive IV (CRD IV). CEP is required on a
standalone basis to report the following information for each period of account.
CITIBANK EUROPE PLC
COUNTRY BY COUNTRY REPORTING
147
Country by Country Reporting (continued)
Country by Country Report 31 December 2022
Turnover
$m
Number of
Employees
Profit or
(Loss) before
tax
$m
Tax (charge)/
release on
profit or loss
$m
Public
subsidies
received
$m
Austria 2 8 1 — —
Belgium 2 13 1 — —
Bulgaria 23 49 15 (2) —
Czech Republic 142 247 88 (19) —
Germany 58 125 22 (8) —
Denmark 5 14 (1) — —
Spain 39 168 11 (4) —
Finland 4 16 — — —
France 95 155 23 (6) —
United Kingdom 182 90 55 (19) —
Greece 24 102 (1) (1) —
Hungary 242 2,752 50 (8) —
Ireland 1,604 2,394 739 (118) —
Italy (2) 50 10 (5) —
Luxembourg 87 234 65 (16) 0.041
Netherlands 21 90 53 (13) —
Norway 6 15 8 (2) —
Poland 294 5,801 26 (5) —
Portugal 1 18 1 (1) —
Romania 113 176 93 (15) —
Sweden 40 85 4 — —
Slovakia 21 42 11 (2) —
Total
3,003 12,644 1,274 (244) 0.041
CITIBANK EUROPE PLC
COUNTRY BY COUNTRY REPORTING
148
