Citigroup (C) has claimed that it's the best-capitalized big bank in the country, a distinction that means very little given how often it's been bailed out. 

But even that claim may not mean very much.  Rolfe Winkler explains how a major portion of its capital base may not be as real as investors might like. 

According to its recent 10-Q, Citi had $38 billion of deferred tax assets as of Sept. 30, more than a third of the bank’s tangible common equity of $107 billion. 

Backing that out, Citi’s TCE ratio — the inverse of leverage — is reduced from 5.7 percent to 3.7 percent.  And when Citi adopts new accounting rules for off-balance-sheet assets, the ratio will be reduced further to 2.8 percent. 

Bank regulators should be concerned.  To fortify their balance sheets so they can withstand systemic events without government support, banks need genuine capital available to absorb losses. 

Deferred tax assets, or DTAs, don’t fit that bill.  Imagine an individual in bankruptcy court asking to pay off his credit card debt with tax-loss carryforwards. 

So long as Citi generates profit, its DTAs have value.  But earnings could evaporate quickly if the Fed decides it has to prick the new asset price bubble being inflated by near-zero rates, or if an unanticipated systemic event puts stress on Citi’s balance sheet. 

He goes onto note other circumstances, whereby a chance in the company's capital structure may constitute a change-in-control, prompting an automatic write-off of these DTAs.  Presumably selling them near face value isn't really an option, because otherwise they'd probably do just that. 

Winkler isn't alone sounding this alarm. 

Last month, analyst Mike Mayo was making similar noises, and suggested that Citigroup could have to take a whopping $10 billion charge -- a number the bank dismissed as ludicrous.