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SEC asked Citi for more information regarding its exposure to Russia

Recently, the Securities and Exchange Commission (SEC) questioned Citigroup closely in an effort to better understand how Russia's invasion of Ukraine affected the bank's exposure to that country.

Citi stated on May 9 that it had decreased its overall exposure to Russia from nearly $10 billion in December 2021 to $7.9 billion in March 2022 as it "began actively reducing its operations in Russia and Russia-related exposures" in response to a letter from the SEC's Division of Corporation Finance dated May 2. The exchange was made public on Friday in a regulatory filing.

A month before Russia's invasion of Ukraine began, Citi claimed to have started lowering its exposure there. The reduction was made possible through the bank's risk-mitigation efforts, a decrease in the volume of loans approved and its credit exposure, and the winding down of positions with financial institutions and clearinghouse counterparties. According to the bank, some of the divestitures Citi completed in 2022 had already started before Russia's invasion of Ukraine.

In its initial letter, the SEC stated that Citi should provide more information about the risks associated with its Russian portfolio.

1. The material impact of sanctions and export controls;

2. Possible impediments to the sale of Citi assets in Russia, due to sanctions affecting purchasers or the possibility the Russian government may nationalize those assets;

3. Risks posed by Citigroup acting as the paying agent on Russian corporate- and government-issued bonds;

4. Material reputational risks posed to Citigroup “in connection with action or inaction arising from or relating to the conflict”; and

5. The extent and nature of the bank’s board of directors’ oversight of material risks caused by Russia’s invasion of Ukraine, including relating to “cybersecurity, sanctions, the employee base in affected regions, and your reputation in connection with operations or halted operations in affected regions.”

Due to Russia's invasion of Ukraine and the sanctions that the US, UK, EU, and other nations subsequently put in place, Citi has been forced to comply with "significantly more sanctions screening and other requirements," which has "resulted in increased operational complexity for Citi related to its Russia-related exposures, including delaying payments to counterparties as a result of the need for additional controls." According to Citi's disclosure, some of its corporate clients received sanctions from various governmental bodies.

According to the disclosure, Citi listed establishing a "new Russia special review process with management’s reputations risk committee with oversight for significant Russia-related reputation risks" and finishing "a number of reputation risk reviews of matters with a Russian nexus" as among the steps it has taken to evaluate and mitigate risks related to its Russian portfolio.

The SEC's request to Citi coincided with the division's publication of a model letter outlining the disclosure requirements for public companies regarding their direct or indirect exposure to Russia, Belarus, or Ukraine on May 3.



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