CITIZENS FINANCIAL GROUP INC/RI

Market risk refers to potential losses arising from changes in interest rates, foreign exchange rates, equity prices, commodity prices, and/or other relevant market rates or prices. Modest market risk arises from trading activities that serve customer needs, including the hedging of interest rate and foreign exchange risks. As described below, the market risk arising from our non-trading banking activities, such as the origination of loans and deposit gathering, is more significant. We have established enterprise-wide policies and methodologies to identify, measure, monitor, and report market risk. We actively manage market risk for both non-trading and trading activities.

Non-Trading Risk

Our non-trading banking activities expose us to market risk. This market risk is composed of interest rate risk, as we have no commodity risk and de minimis direct currency and equity risk. We also have market risk related to capital markets loan originations, as well as the valuation of our MSRs. There have been no significant changes in our sources of interest rate risk, interest rate risk practices, risk framework, metrics, or assumptions as described in “Market Risk – Non-Trading Risk” in our 2025 Form 10-K.

The following table presents the sensitivity of net interest income to parallel shifts in the yield curve from the market-implied forward curve. Our policies measure exposure as the percentage change in net interest income over the next twelve months resulting from either instantaneous or gradual parallel changes in rates relative to that curve. As the table illustrates, our balance sheet is slightly asset sensitive; net interest income would benefit from an increase in interest rates, and exposure to a decline in rates remains within our approved policy limits. Although this analysis includes an instantaneous and severe shift in rates, we believe any actual shift would be more gradual and would therefore have a more modest impact.

We manage asset sensitivity within the scope of our policy limits and in response to changing market conditions and changes in our balance sheet. Our base case assumes that the forward-rate path implied by the period-end yield curve is realized, with rate risk exposure measured based on changes from that base case.

Our risk position is slightly asset sensitive to a gradual change in rates as of September 30, 2026, consistent with our position as of December 31, 2025. Our interest rate sensitivity reflects changes in balance sheet mix, including securities, loans, deposits, borrowed funds, and hedging activity. Receive-fixed swaps that offset our naturally asset-sensitive balance sheet are our primary tool for managing overall asset sensitivity, and we use pay-fixed swaps against our securities portfolio to protect capital by reducing AOCI volatility.

As a supplement to net interest income simulation, we measure exposure to structural interest rate risk using EVE, which estimates risk over a long-term horizon. EVE measures the extent to which the economic value of assets, liabilities, and off-balance sheet instruments may change in response to fluctuations in interest rates, and the change in value is expressed as a percentage of regulatory capital. This analysis depends heavily on assumptions applied to assets and liabilities with non-contractual maturities. We use models for prepayments and for deposit pricing and attrition that provide a granular view of cash flows based on the characteristics of the underlying products and customer segments.

As part of our Asset and Liability Management strategy, we use interest rate derivative contracts to manage exposure to variability in the interest cash flows on our floating-rate assets and wholesale funding, to manage exposure to variability in the fair value of AFS securities, and to hedge market risk on fixed-rate capital markets debt issuances.

The following table presents interest rate derivative contracts that we have entered into as of September 30, 2026 and December 31, 2025:

Included in AOCI are pretax net losses from terminated swaps of $71 million that will reduce net interest income by $27 million in the fourth quarter of 2026 and $44 million thereafter.

Capital Markets

A key component of our capital markets activities is the underwriting and distribution of corporate credit facilities that finance M&A transactions and other corporate purposes for our clients. These activities are subject to a rigorous risk management process, including a limit structure that caps underwriting risk and potential loss and establishes sub-limits for specific asset classes. Authority to approve underwriting exposure is delegated only to senior individuals in our credit risk management and capital markets organizations, with each transaction requiring the approval of at least one business approver and one credit approver. Such approvals are generally handled in the context of a committee meeting forum known as the Loan Underwriting Approval Committee.

Mortgage Servicing Rights

We are exposed to market risk associated with the value of residential MSRs, which are subject to duration, basis, convexity, volatility, and yield curve risks.

As part of our overall risk management strategy, we enter into freestanding derivatives, including interest rate swaps, swaptions, and futures and forward contracts to purchase mortgage-backed securities to economically hedge changes in the fair value of our MSRs. For more information regarding the fair value of our MSRs and the associated derivatives, see Note 5 and Note 8.

Consistent with our traded market risk-based activities, earnings at risk excludes the impact of MSRs. MSRs are instead captured under our single price risk management framework, which is used to calculate a management VaR consistent with the definition used by banking regulators.

Trading Risk

We are exposed to market risk primarily through client facilitation activities involving certain derivative and foreign exchange products, as well as through underwriting and market making activities. This exposure arises from fluctuations in interest rates, basis spreads, commodity prices, foreign exchange rates, equity prices, and credit spreads across various financial instruments. There have been no significant changes in our market risk governance, market risk measurement, or market risk practices including VaR, stressed VaR, sensitivity analysis, stress testing, VaR model review and validation, and VaR backtesting as described in “Market Risk – Trading Risk” in our 2025 Form 10-K.

Market Risk Regulatory Capital

The U.S. banking regulators’ “Market Risk Rule” governs the calculation of market risk capital. Under this rule, our client facing trades and the associated hedges qualify as covered positions and maintain a low net risk. Our internal management VaR measure is calculated using the same population of trades as regulatory VaR.