Commitments, Contingencies and Guarantees

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies and Guarantees

Note 18.

Commitments, Contingencies and Guarantees

Commitments

The table below presents commitments by type.



	As of

$ in millions		September 2021	December 2020
Commitment Type
Commercial lending:
Investment-grade		$ 97,902	$ 83,801
Non-investment-grade		74,111	56,757
Warehouse financing		10,801	9,377
Credit cards		31,718	21,640
Total lending		214,532	171,575
Risk participations		9,992	8,054
Collateralized agreement		110,163	55,278
Collateralized financing		34,366	35,402
Letters of credit		375	367
Investment		12,625	6,456
Other		9,909	7,836
Total commitments		$391,962	$284,968

The table below presents commitments by expiration.



	As of September 2021

$ in millions		Remainder of 2021	2022 - 2023	2024 - 2025	2026 - Thereafter
Commitment Type
Commercial lending:
Investment-grade		$ 2,981	$35,540	$34,512	$24,869
Non-investment-grade		3,300	18,719	22,195	29,897
Warehouse financing		1	5,065	4,655	1,080
Credit cards		31,718	–	–	–
Total lending		38,000	59,324	61,362	55,846
Risk participations		380	4,976	3,224	1,412
Collateralized agreement		99,421	10,571	168	3
Collateralized financing		34,114	251	–	1
Letters of credit		160	169	–	46
Investment		5,394	4,106	1,566	1,559
Other		8,722	1,144	33	10
Total commitments		$186,191	$80,541	$66,353	$58,877

Lending Commitments

The firm’s commercial and warehouse financing lending commitments are agreements to lend with fixed termination dates and depend on the satisfaction of all contractual conditions to borrowing. These commitments are presented net of amounts syndicated to third parties. The total commitment amount does not necessarily reflect actual future cash flows because the firm may syndicate portions of these commitments. In addition, commitments can expire unused or be reduced or cancelled at the counterparty’s request. The firm also provides credit to consumers by issuing credit card lines.

The table below presents information about lending commitments.



	As of

$ in millions		September 2021	December 2020
Held for investment		$198,358	$162,513
Held for sale		13,847	6,594
At fair value		2,327	2,468
Total		$214,532	$171,575

In the table above:

•

Held for investment lending commitments are accounted for at amortized cost. The carrying value of lending commitments was a liability of $1.07 billion (including allowance for credit losses of $833 million) as of September 2021 and $775 million (including allowance for credit losses of $557 million) as of December 2020. The estimated fair value of such lending commitments was a liability of $4.02 billion as of September 2021 and $4.05 billion as of December 2020. Had these lending commitments been carried at fair value and included in the fair value hierarchy, $2.13 billion as of September 2021 and $2.43 billion as of December 2020 would have been classified in level 2, and $1.89 billion as of September 2021 and $1.62 billion as of December 2020 would have been classified in level 3.

•

Held for sale lending commitments are accounted for at the lower of cost or fair value. The carrying value of lending commitments held for sale was a liability of $112 million as of September 2021 and $68 million as of December 2020. The estimated fair value of such lending commitments approximates the carrying value. Had these lending commitments been included in the fair value hierarchy, they would have been primarily classified in level 3 as of both September 2021 and December 2020.

•

Gains or losses related to lending commitments at fair value, if any, are generally recorded net of any fees in other principal transactions.

Commercial Lending.

The firm’s commercial lending commitments were primarily extended to investment-grade corporate borrowers. Such commitments primarily included $119.80 billion as of September 2021 and $110.31 billion as of December 2020, related to relationship lending activities (principally used for operating and general corporate purposes) and $32.43 billion as of September 2021 and $15.81 billion as of December 2020, related to other investment banking activities (generally extended for contingent acquisition financing and are often intended to be short-term in nature, as borrowers often seek to replace them with other funding sources). The firm also extends lending commitments in connection with other types of corporate lending, as well as commercial real estate financing. See Note 9 for further information about funded loans.

To mitigate the credit risk associated with the firm’s commercial lending activities, the firm obtains credit protection on certain loans and lending commitments through credit default swaps, both single-name and index-based contracts, and through the issuance of credit-linked notes. In addition, Sumitomo Mitsui Financial Group, Inc. provides the firm with credit loss protection on certain approved loan commitments.

Warehouse Financing.

The firm provides financing to clients who warehouse financial assets. These arrangements are secured by the warehoused assets, primarily consisting of residential real estate, consumer and corporate loans.

Credit Cards.

The firm’s credit card lending commitments included $29.79 billion as of September 2021 and $21.64 billion as of December 2020 related to credit card lines issued by the firm to consumers. These credit card lines are cancellable by the firm. Credit card commitments also includes approximately $2.0 billion relating to the firm’s commitment to acquire a credit card portfolio in connection with its agreement, in January 2021, to form a

co-branded

credit card relationship with General Motors. This amount represents the portfolio’s outstanding credit card loan balance as of September 2021. However, the final amount will depend on the outstanding balance of credit card loans at the closing of the acquisition, which is expected to occur by the first quarter of 2022.

Risk Participations

The firm also risk participates certain of its commercial lending commitments to other financial institutions. In the event of a risk participant’s default, the firm will be responsible to fund the borrower.

Collateralized Agreement Commitments/ Collateralized Financing Commitments

Collateralized agreement commitments includes forward starting resale and securities borrowing agreements, and collateralized financing commitments includes forward starting repurchase and secured lending agreements that settle at a future date, generally within three business days. Collateralized agreement commitments also includes transactions where the firm has entered into commitments to provide contingent financing to its clients and counterparties through resale agreements. The firm’s funding of these commitments depends on the satisfaction of all contractual conditions to the resale agreement and these commitments can expire unused.

Letters of Credit

The firm has commitments under letters of credit issued by various banks which the firm provides to counterparties in lieu of securities or cash to satisfy various collateral and margin deposit requirements.

Investment Commitments

Investment commitments includes commitments to invest in private equity, real estate and other assets directly and through funds that the firm raises and manages. Investment commitments included $1.79 billion as of September 2021 and $1.69 billion as of December 2020, related to commitments to invest in funds managed by the firm. If these commitments are called, they would be funded at market value on the date of investment.

Investment commitments also included approximately $1.90 billion as of September 2021 related to the firm’s commitment to acquire NN Investment Partners, a leading European asset manager with approximately $320 billion in assets under supervision, in an all-cash transaction. In addition, investment commitments included approximately $2.0

billion as of September 2021 related to the firm’s commitment to acquire GreenSky, Inc. (GreenSky), a leading technology company Powering Commerce at Point of Sale® for a growing ecosystem of merchants, consumers and banks. Both acquisitions are expected to close by the end of the first quarter of 2022. The GreenSky acquisition will be an all-stock transaction in which stockholders of GreenSky and unit holders of GreenSky Holdings, LLC (GreenSky Holdings) will receive

0.03

shares of the firm’s common stock for each share of GreenSky Class A common stock and each GreenSky Holdings common unit. The investment commitment in the table above represents the purchase price of the acquisition based on the closing stock price of Group Inc. as of September 2021. However, the final purchase price of the acquisition will depend upon the stock price of Group Inc. at the time of the closing of the transaction. In connection with this transaction, the firm has provided a commitment to acquire up to

$800 million of loans originated by GreenSky’s bank partners. This commitment is included in other commitments in the table above.

In the event that the acquisition is not completed, the firm has agreed to provide a commitment to purchase up to an additional

$1.00

billion of loans originated by GreenSky’s bank partners. This commitment is not included in the table above.

Contingencies

Legal Proceedings.

See Note 27 for information about legal proceedings.

Guarantees

The table below presents derivatives that meet the definition of a guarantee, securities lending and clearing guarantees and certain other financial guarantees.



$ in millions	Derivatives	Securities lending and clearing	Other financial guarantees
As of September 2021
Carrying Value of Net Liability	$ 3,222	$ –	$ 229
Maximum Payout/Notional Amount by Period of Expiration
Remainder of 2021	$ 43,636	$12,484	$ 830
2022 - 2023	74,282	–	2,579
2024 - 2025	28,667	–	2,108
2026 - thereafter	35,591	–	681
Total	$182,176	$12,484	$6,198
As of December 2020
Carrying Value of Net Liability	$ 4,357	$ –	$ 253
Maximum Payout/Notional Amount by Period of Expiration
2021	$ 89,202	$21,352	$1,263
2022 - 2023	56,204	–	3,304
2024 - 2025	23,389	–	2,787
2026 - thereafter	32,244	–	268
Total	$201,039	$21,352	$7,622

In the table above:

•

The maximum payout is based on the notional amount of the contract and does not represent anticipated losses.

•

Amounts exclude certain commitments to issue standby letters of credit that are included in lending commitments. See the tables in “Commitments” above for a summary of the firm’s commitments.

•

The carrying value for derivatives included derivative assets of $1.47 billion as of September 2021 and $1.66 billion as of December 2020, and derivative liabilities of $4.69 billion as of September 2021 and $6.02 billion as of December 2020.

Derivative Guarantees.

The firm enters into various derivatives that meet the definition of a guarantee under U.S. GAAP, including written equity and commodity put options, written currency contracts and interest rate caps, floors and swaptions. These derivatives are risk managed together with derivatives that do not meet the definition of a guarantee, and therefore the amounts in the table above do not reflect the firm’s overall risk related to derivative activities. Disclosures about derivatives are not required if they may be cash settled and the firm has no basis to conclude it is probable that the counterparties held the underlying instruments at inception of the contract. The firm has concluded that these conditions have been met for certain large, internationally active commercial and investment bank counterparties, central clearing counterparties, hedge funds and certain other counterparties. Accordingly, the firm has not included such contracts in the table above. See Note 7 for information about credit derivatives that meet the definition of a guarantee, which are not included in the table above.

Derivatives are accounted for at fair value and therefore the carrying value is considered the best indication of payment/performance risk for individual contracts. However, the carrying values in the table above exclude the effect of counterparty and cash collateral netting.

Securities Lending and Clearing Guarantees.

Securities lending and clearing guarantees include the indemnifications and guarantees that the firm provides in its capacity as an agency lender and in its capacity as a sponsoring member of the Fixed Income Clearing Corporation.

As an agency lender, the firm indemnifies most of its securities lending customers against losses incurred in the event that borrowers do not return securities and the collateral held is insufficient to cover the market value of the securities borrowed. The maximum payout of such indemnifications was $12.48 billion as of September 2021 and $19.86 billion as of December 2020. Collateral held by the lenders in connection with securities lending indemnifications was $12.87 billion as of September 2021 and $20.39 billion as of December 2020. Because the contractual nature of these arrangements requires the firm to obtain collateral with a market value that exceeds the value of the securities lent to the borrower, there is minimal performance risk associated with these indemnifications.

As a sponsoring member of the Government Securities Division of the Fixed Income Clearing Corporation, the firm guarantees the performance of its sponsored member clients to the Fixed Income Clearing Corporation in connection with certain resale and repurchase agreements. To minimize potential losses on such guarantees, the firm obtains a security interest in the collateral that the sponsored client placed with the Fixed Income Clearing Corporation. Therefore, the risk of loss on such guarantees is minimal. There were no amounts outstanding under the guarantee as of September 2021. As of December 2020, the maximum payout on this guarantee was $1.49 billion and the related collateral held was $1.50 billion.

Other Financial Guarantees.

In the ordinary course of business, the firm provides other financial guarantees of the obligations of third parties (e.g., standby letters of credit and other guarantees to enable clients to complete transactions and fund-related guarantees). These guarantees represent obligations to make payments to beneficiaries if the guaranteed party fails to fulfill its obligation under a contractual arrangement with that beneficiary. Other financial guarantees also include a guarantee that the firm has provided to the Government of Malaysia that it will receive at least $1.4 billion in assets and proceeds from assets seized by governmental authorities around the world related to 1Malaysia Development Berhad, a sovereign wealth fund in Malaysia (1MDB). The firm evaluates progress toward satisfying this obligation based on the report that it receives on a semi-annual basis, expected in February and August. Based on the latest report as of August 2021, approximately $450 million in assets or proceeds from assets has been returned to the Government of Malaysia in connection with this guarantee, which must be satisfied by August 18, 2025. Any amounts paid by the firm under this guarantee would be subject to reimbursement in the event the assets or proceeds received by the Government of Malaysia through August 18, 2028 exceeds $1.4 billion. See Note 27 for further information about matters related to 1MDB.

Guarantees of Securities Issued by Trusts.

The firm has established trusts, including Goldman Sachs Capital I, the APEX Trusts and other entities, for the limited purpose of issuing securities to third parties, lending the proceeds to the firm and entering into contractual arrangements with the firm and third parties related to this purpose. The firm does not consolidate these entities. See Note 14 for further information about the transactions involving Goldman Sachs Capital I and the APEX Trusts.

The firm effectively provides for the full and unconditional guarantee of the securities issued by these entities. Timely payment by the firm of amounts due to these entities under the guarantee, borrowing, preferred stock and related contractual arrangements will be sufficient to cover payments due on the securities issued by these entities. No subsidiary of Group Inc. guarantees the securities of Goldman Sachs Capital I or the APEX Trusts. Management believes that it is unlikely that any circumstances will occur, such as nonperformance on the part of paying agents or other service providers, that would make it necessary for the firm to make payments related to these entities other than those required under the terms of the guarantee, borrowing, preferred stock and related contractual arrangements and in connection with certain expenses incurred by these entities.

Indemnities and Guarantees of Service Providers.

In the ordinary course of business, the firm indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees and administrators, against specified potential losses in connection with their acting as an agent of, or providing services to, the firm or its affiliates.

The firm may also be liable to some clients or other parties for losses arising from its custodial role or caused by acts or omissions of third-party service providers, including

sub-custodians

and third-party brokers. In certain cases, the firm has the right to seek indemnification from these third-party service providers for certain relevant losses incurred by the firm. In addition, the firm is a member of payment, clearing and settlement networks, as well as securities exchanges around the world that may require the firm to meet the obligations of such networks and exchanges in the event of member defaults and other loss scenarios.

In connection with the firm’s prime brokerage and clearing businesses, the firm agrees to clear and settle on behalf of its clients the transactions entered into by them with other brokerage firms. The firm’s obligations in respect of such transactions are secured by the assets in the client’s account, as well as any proceeds received from the transactions cleared and settled by the firm on behalf of the client. In connection with joint venture investments, the firm may issue loan guarantees under which it may be liable in the event of fraud, misappropriation, environmental liabilities and certain other matters involving the borrower.

The firm is unable to develop an estimate of the maximum payout under these guarantees and indemnifications. However, management believes that it is unlikely the firm will have to make any material payments under these arrangements, and no material liabilities related to these guarantees and indemnifications have been recognized in the consolidated balance sheets as of both September 2021 and December 2020.

Other Representations, Warranties and Indemnifications.

The firm provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The firm may also provide indemnifications protecting against changes in or adverse application of certain U.S. tax laws in connection with ordinary-course transactions, such as securities issuances, borrowings or derivatives.

In addition, the firm may provide indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or an adverse application of certain

non-U.S.

tax laws. These indemnifications generally are standard contractual terms and are entered into in the ordinary course of business. Generally, there are no stated or notional amounts included in these indemnifications, and the contingencies triggering the obligation to indemnify are not expected to occur. The firm is unable to develop an estimate of the maximum payout under these guarantees and indemnifications. However, management believes that it is unlikely the firm will have to make any material payments under these arrangements, and no material liabilities related to these arrangements have been recognized in the consolidated balance sheets as of both September 2021 and December 2020.

Guarantees of Subsidiaries.

Group Inc. is the entity that fully and unconditionally guarantees the securities issued by GS Finance Corp., a wholly-owned finance subsidiary of the firm. Group Inc. has guaranteed the payment obligations of Goldman Sachs & Co. LLC (GS&Co.), GS Bank USA and Goldman Sachs Paris Inc. et Cie, subject to certain exceptions. In addition, Group Inc. has provided guarantees to Goldman Sachs International (GSI) and Goldman Sachs Bank Europe SE (GSBE) related to agreements that each entity has entered into with certain of its counterparties. Furthermore, Group Inc. provided a guarantee to GS Bank USA in 2020 related to securities that GS Bank USA acquired from certain affiliated funds of Group Inc. and loans and lending commitments that GS Bank USA acquired from certain subsidiaries of Group Inc. As of September 2021, none of the securities acquired from the affiliated funds were outstanding.

Group Inc. guarantees many of the obligations of its other consolidated subsidiaries on a

transaction-by-transaction

basis, as negotiated with counterparties. Group Inc. is unable to develop an estimate of the maximum payout under its subsidiary guarantees. However, because these obligations are also obligations of consolidated subsidiaries, Group Inc.’s liabilities as guarantor are not separately disclosed.