1. International Financial Conglomerates: An Industry Perspective
Todd S. Thomson Chairman and Chief Executive Officer Citigroup Global Wealth Management
Todd:
Please note that the audience are governors and deputy governors of central banks and independent regulatory bodies. Although there are no attendees from media/press, you can assume everything you say is on the record. Also, the HSBC representative will be in the room.
You have 15 MINUTES ONLY
“My name is Todd Thomson, and I am the Chairman & CEO of Citigroup’s Global Wealth Management business. I was asked to discuss pros and cons of operating on an international basis. For Citigroup, this is not an issue. We are and we want to be an international operation. International activities are at the heart of our franchise -- our international reach is one of our key competitive advantages. We expect to grow outside the US faster than we grow inside the US. International activities give us a more diversified income stream and leverage our historical investments. It is not necessarily easy operating in 100 countries, but it is something we can and will do.”

2. Citigroup’s Global Presence
Citigroup presence in over 100 countries for more than 100 years
Citigroup Global Wealth Management presence in 31 countries
Citigroup has 300,000 employees around the world
GWM has almost 30,000 employees
53% of Citigroup revenues are from outside the US
GWM at 2.8%
52% of Citigroup employees are outside the US
GWM at 13%

3. Issues Facing Complex International Banking Organizations
Global Functional Business Organization vs. Legal Entity and Geographic Focus – Citigroup is organized around functional business units, but regulators tend to focus on legal entities
Rule of Law – Operating in a fair and functional judicial system
Exportation of US Standards – can create management challenges in different cultures
- Global Functional Business Organization vs. Legal Entity and Geographic Focus: “As a management matter, we are organized around functional business units on a world-wide basis. This makes sense -- permits the creation of common products, common training, common controls. [give example from GWM] Regulators, however, understandably and necessarily are focused more on the legal entities that are operating in the country for which they are responsible. We recognize that we operate by permission of the regulators and that of course we must follow the rules of the country in which we do business. This means paying careful attention to the limitations on what particular legal entities can do, and on the capital and other requirements applicable to different legal entities, even though we would prefer as a management matter to manage the business across legal entities in order to provide the customer with multiple products and services. In those countries that still have firewall restrictions between various different legal entities -- such as Japan -- we have to take special care not to let our global functional management organization lead us into actions that are inconsistent with local requirements. This is an on-going challenge.”
Rule of Law: “Sounds like my lawyer made me put this down, but fact is it is hard to do business where there is no fair and functioning and independent judicial system -- and where the rules and regulations applicable to what business you can do and how you can do it are unclear or created after the fact.”
-Exportation of US Standards: “Significant management challenges occur when US rules are exported to countries where the application of the rules is counter-cultural, even if legally permitted. example: KYC -- e.g., asking for driver's license or passport as ID in countries in which these forms of ID are not ordinarily carried or displayed to others.”

4. What Citigroup is Doing…
Five Point Plan – Our Shared Responsibilities and Becoming the Most Respected Financial Services Firm in the World.
Increased Compliance and Audit Resources – to pro-actively prevent legal and regulatory violations to US and local standards
Country and Regional Management of Franchise Issues – CCO (Citigroup Country Officer) global network
Five Point Plan: “We have set goal of being the most respected global financial institution. All 300,000 of our employees have to take a long-term and franchise view rather than a short-term and business or individual profit view. Tone being set at the top -- I have spent time rolling this program out to all 30,000 employees in my business via town halls, sharing ‘History of Citigroup’ videos, integrating into our review process, etc.”
Increased Compliance and Audit Resources: “We have significantly increased compliance and audit resources to identify and prevent legal and regulatory violations rather than just cleaning up after them. Focus on assuring compliance with all Citigroup-wide policies AND applicable US standards AND local rules and regulations outside US. Made compliance independent of the businesses and now reports to our Senior Risk Officer.”
Country and Regional Management of Franchise Issues: “We conducted a review of the governance relating to franchise issues in our international operations, and we have taken a number of steps to improve our operations in this regard. We have a designated CCO in each county, and we have clarified the CCO's responsibility and authority for regulatory relations and for franchise issues. The CCO is supported by legal, compliance and finance staff functions who report to the CCO and are charged with assisting on franchise issues. At the regional level, we have designated a Lead Regional CEO in each of our major regions outside the US; all franchise issues from any of the businesses in the region are to be reported to the Lead Regional CEO, who is supported by regional legal, compliance and finance regional staff in this regard. And we have emphasized the importance of escalation of issues. I had the GWM General Counsel send out a memo on importance of escalating issues quickly (discuss memo re you get in trouble not for the mistake but for not escalating it)”