Risk-Based Capital Ratios.

Leverage Ratios.

Risk-Based Capital.

 

 

The table below presents changes in CET1 capital, Tier 1 capital and Tier 2 capital.

 

Credit RWAs are calculated based on measures of exposure, which are then risk weighted under the Standardized and Advanced Capital Rules:

 

 

 

RWAs for market risk in accordance with the Standardized and Advanced Capital Rules are generally consistent. Market RWAs are calculated based on measures of exposure which include the following:

 

For both risk management purposes and regulatory capital calculations, the firm uses a single VaR model which captures risks, including those related to interest rates, equity prices, currency rates and commodity prices. However, VaR used for risk management purposes differs from VaR used for regulatory capital requirements (regulatory VaR) due to differences in time horizons, confidence levels and the scope of positions on which VaR is calculated. For risk management purposes, a 95% VaR is used, whereas for regulatory capital requirements, a 99% VaR is used to determine Market RWAs and a 99% VaR is used to determine regulatory VaR exceptions. In addition, the daily net revenues used to determine risk management VaR exceptions (i.e., comparing the daily net revenues to the VaR measure calculated as of the end of the prior business day) include intraday activity, whereas the Capital Framework requires that intraday activity be excluded from daily net revenues when calculating regulatory VaR exceptions. Intraday activity includes bid/offer net revenues, which are more likely than not to be positive by their nature. As a result, there may be differences in the number of VaR exceptions and the amount of daily net revenues calculated for regulatory VaR compared to the amounts calculated for risk management VaR.

The firm’s positional losses observed on a single day exceeded its 99% regulatory VaR on one occasion during 2021 and on six occasions during 2020 (all of which occurred during March 2020 and, as permitted by the FRB, did not have any impact on the firm’s VaR multiplier used to calculate Market RWAs);

 

 

 

 

Operational RWAs are only required to be included under the Advanced Capital Rules. The firm utilizes an internal risk-based model to quantify Operational RWAs.

The table below presents information about RWAs.

 

In the table above:

 

 

The table below presents changes in RWAs.

 

Advanced Credit RWAs as of December 2021 increased by $25.79 billion compared with December 2020, primarily reflecting an increase in commitments, guarantees and loans (principally due to increased lending activity). This increase was partially offset by a decrease in equity investments (principally due to the sale of equity positions). Advanced Market RWAs as of December 2021 increased by $7.79 billion compared with December 2020, primarily reflecting an increase in stressed VaR (principally due to increased exposures to interest rates). Advanced Operational RWAs as of December 2021 increased by $4.60 billion compared with December 2020, primarily associated with litigation and regulatory proceedings.

Advanced Credit RWAs as of December 2020 increased by $51.63 billion compared with December 2019, primarily reflecting an increase in derivatives (principally due to the impact of higher levels of volatility and counterparty credit risk) and an increase in commitments, guarantees and loans (principally due to increased lending activity). These increases were partially offset by a decrease in equity investments (principally due to the sale of certain equity positions). Advanced Market RWAs as of December 2020 increased by $4.34 billion compared with December 2019, primarily reflecting an increase in regulatory VaR (principally due to increased market volatility) and an increase in incremental risk (principally due to increased exposures in equities held for market-making purposes). These increases were partially offset by a decrease in specific risk (principally due to changes in risk measurements on certain exposures). Advanced Operational RWAs as of December 2020 increased by $9.13 billion compared with December 2019. The vast majority of this increase was associated with litigation and regulatory proceedings.

 

The Capital Framework includes the minimum risk-based capital and the capital conservation buffer requirements (consisting of a 2.5% buffer and the countercyclical capital buffer). The buffer must consist entirely of capital that qualifies as CET1 capital. In addition, the Capital Framework includes the leverage ratio requirement.

GS Bank USA is required to calculate the CET1 capital, Tier 1 capital and Total capital ratios in accordance with both the Standardized and Advanced Capital Rules. The lower of each risk-based capital ratio under the Standardized and Advanced Capital Rules is the ratio against which GS Bank USA’s compliance with its risk-based capital requirements is assessed. In addition, under the regulatory framework for prompt corrective action applicable to GS Bank USA, in order to meet the quantitative requirements for a “well-capitalized” depository institution, GS Bank USA must also meet the “well-capitalized” requirements in the table below. GS Bank USA’s capital levels and prompt corrective action classification are also subject to qualitative judgments by the regulators about components of capital, risk weightings and other factors. Failure to comply with the capital requirements, including a breach of the buffers described below, would result in restrictions being imposed by the regulators.

The table below presents GS Bank USA’s risk-based capital, leverage and “well-capitalized” requirements.

 

In the table above:

 

 

The table below presents information about GS Bank USA’s risk-based capital ratios.

 

In the table above:

 

 

 

 

 

 

The table below presents information about GS Bank USA’s leverage ratios.

 

In the table above:

 

 

 

 

 

The deposits of GS Bank USA are insured by the FDIC to the extent provided by law. The FRB requires that GS Bank USA maintain cash reserves with the Federal Reserve. As of both December 2021 and December 2020, the reserve requirement ratio was zero percent. The amount deposited by GS Bank USA at the Federal Reserve was $122.01 billion as of December 2021 and $52.71 billion as of December 2020.

The table below presents GSIB’s risk-based capital requirements.

 

The table below presents information about GSIB’s risk-based capital ratios.

 

In the table above, the risk-based capital ratios as of December 2021 reflected GSIB’s profits after foreseeable charges for the year ended December 2021 (which will not be finalized until verification by GSIB’s external auditors and approval by GSIB’s Board of Directors for inclusion in risk-based capital). These profits contributed approximately 68 basis points to the CET1 capital ratio.

The eligible retail deposits of GSIB are covered by the U.K. Financial Services Compensation Scheme to the extent provided by law.GSIB is subject to minimum reserve requirements at the Bank of England. The minimum reserve requirement was $172 million as of December 2021 and $126 million as of December 2020. The amount deposited by GSIB at the Bank of England was $2.20 billion as of December 2021 and $9.82 billion as of December 2020.

The table below presents GSBE’s risk-based capital requirements.

 

The table below presents information about GSBE’s risk-based capital ratios.

 

In the table above:

 

 

The table below presents GSBE’s leverage ratio requirement which became effective in June 2021 and the leverage ratio.

 

approximately 58 basis points to the leverage ratio.

The deposits of GSBE are covered by the German statutory deposit protection program to the extent provided by law. In addition, GSBE has elected to participate in the German voluntary deposit protection program which provides insurance for certain eligible deposits not covered by the German statutory deposit program. GSBE is subject to minimum reserve requirements at central banks in certain of the jurisdictions in which it operates. The minimum reserve requirement was $189 million as of December 2021 and $25 million as of December 2020. The amount deposited by GSBE at central banks was $20.36 billion as of December 2021 and $3.17 billion as of December 2020, substantially all of which was deposited with Deutsche Bundesbank.

Group Inc. may be limited in its ability to access capital held at certain subsidiaries as a result of regulatory, tax or other constraints. These limitations include provisions of applicable law and regulations and other regulatory restrictions that limit the ability of those subsidiaries to declare and pay dividends without prior regulatory approval. For example, the amount of dividends that may be paid by GS Bank USA are limited to the lesser of the amounts calculated under a recent earnings test and an undivided profits test. As a result of dividends paid in connection with the acquisition of GSBE in July 2021, GS Bank USA cannot currently declare any additional dividends without prior regulatory approval.

In addition, subsidiaries not subject to separate regulatory capital requirements may hold capital to satisfy local tax and legal guidelines, rating agency requirements (for entities with assigned credit ratings) or internal policies, including policies concerning the minimum amount of capital a subsidiary should hold based on its underlying level of risk.

Group Inc.’s equity investment in subsidiaries was $118.90 billion as of December 2021 and $103.80 billion as of December 2020, of which Group Inc. was required to maintain $77.22 billion as of December 2021 and $63.68 billion as of December 2020, of minimum equity capital in its regulated subsidiaries in order to satisfy the regulatory requirements of such subsidiaries.

Group Inc.’s capital invested in certain dollar functional currency subsidiaries is exposed to foreign exchange risk, substantially all of which is managed through a combination of derivatives and debt. See Note 7 for information about the firm’s net investment hedges used to hedge this risk.