Regulation and Capital Adequacy (Tables)

9 Months Ended

Sep. 30, 2018

The table below presents the applicable minimum ratios.


	As of
		September 2018	December 2017
Risk-based capital ratios
CET1 ratio		8.250%	7.000%
Tier 1 capital ratio		9.750%	8.500%
Total capital ratio		11.750%	10.500%
Leverage ratios
Tier 1 leverage ratio		4.000%	4.000%
SLR		5.000%	N/A

Capital Rollforward

The tables below present changes in CET1, Tier 1 capital and Tier 2 capital.


	Nine Months Ended September 2018
$ in millions		Standardized		Basel III Advanced
CET1
Beginning balance		$67,110		$67,110
Change in:
Common shareholders’ equity		5,169		5,169
Transitional provisions		(117	)	(117	)
Deduction for goodwill		(88	)	(88	)
Deduction for identifiable intangible assets		10		10
Other adjustments		(323	)	(323	)
Ending balance		$71,761		$71,761
Tier 1 capital
Beginning balance		$78,331		$78,331
Change in:
CET1		4,651		4,651
Transitional provisions		13		13
Deduction for investments in covered funds		(37	)	(37	)
Preferred stock		(650	)	(650	)
Other adjustments		28		28
Ending balance		82,336		82,336
Tier 2 capital
Beginning balance		14,977		13,899
Change in:
Qualifying subordinated debt		75		75
Junior subordinated debt		(125	)	(125	)
Allowance for losses on loans and lending commitments		166		–
Other adjustments		27		27
Ending balance		15,120		13,876
Total capital		$97,456		$96,212


	Year Ended December 2017
$ in millions		Standardized		Basel III Advanced
CET1
Beginning balance		$ 72,046		$ 72,046
Change in:
Common shareholders’ equity		(5,300	)	(5,300	)
Transitional provisions		(426	)	(426	)
Deduction for goodwill		(348	)	(348	)
Deduction for identifiable intangible assets		24		24
Deduction for investments in financial institutions		586		586
Other adjustments		528		528
Ending balance		$ 67,110		$ 67,110
Tier 1 capital
Beginning balance		$ 82,440		$ 82,440
Change in:
CET1		(4,936	)	(4,936	)
Transitional provisions		152		152
Deduction for investments in covered funds		(145	)	(145	)
Preferred stock		650		650
Other adjustments		170		170
Ending balance		78,331		78,331
Tier 2 capital
Beginning balance		16,074		15,352
Change in:
Qualifying subordinated debt		(1,206	)	(1,206	)
Junior subordinated debt		(225	)	(225	)
Allowance for losses on loans and lending commitments		356		–
Other adjustments		(22	)	(22	)
Ending balance		14,977		13,899
Total capital		$ 93,308		$ 92,230

Supplementary Leverage Ratio

The table below presents Tier 1 leverage ratio and SLR.


	For the Three Months Ended or as of
$ in millions		September 2018		December 2017
Tier 1 capital		$ 82,336		$ 78,331
Average total assets		$ 967,540		$ 937,424
Deductions from Tier 1 capital		(4,986	)	(4,508	)
Average adjusted total assets		962,554		932,916
Off-balance-sheet exposures		414,450		408,164
Total supplementary leverage exposure		$1,377,004		$1,341,080
Tier 1 leverage ratio		8.6%		8.4%
SLR		6.0%		5.8%

In the table above:

•

Tier 1 capital and deductions from Tier 1 capital are calculated on a transitional basis as of December 2017.

•

Average total assets represents the daily average assets for the quarter.

•

Off-balance-sheet exposures represents the monthly average and consists of derivatives, securities financing transactions, commitments and guarantees.

•

Tier 1 leverage ratio is defined as Tier 1 capital divided by average adjusted total assets.

•

SLR is defined as Tier 1 capital divided by supplementary leverage exposure.

Schedule of Minimum Ratios and Well Capitalized Minimum Ratios

The table below presents the minimum ratios and the “well-capitalized” minimum ratios required for GS Bank USA.

Minimum Ratio as of

September
2018

December
2017

“Well-capitalized”
Minimum Ratio

Risk-based capital ratios

CET1 ratio

6.375%

5.750%

6.5%

Tier 1 capital ratio

7.875%

7.250%

8.0%

Total capital ratio

9.875%

9.250%

10.0%

Leverage ratios

Tier 1 leverage ratio

4.000%

4.000%

5.0%

SLR

3.000%

N/A

6.0%

Basel III Advanced Rules [Member]

Capital Ratios

The table below presents risk-based capital ratios.


	As of
$ in millions		September 2018		December 2017
Common shareholders’ equity		$ 75,559		$ 70,390
Deduction for goodwill		(3,099	)	(3,011	)
Deduction for identifiable intangible assets		(313	)	(258	)
Other adjustments		(386	)	(11	)
CET1		71,761		67,110
Preferred stock		11,203		11,853
Deduction for investments in covered funds		(627	)	(590	)
Other adjustments		(1	)	(42	)
Tier 1 capital		$ 82,336		$ 78,331
Standardized Tier 2 and Total capital
Tier 1 capital		$ 82,336		$ 78,331
Qualifying subordinated debt		13,435		13,360
Junior subordinated debt		442		567
Allowance for losses on loans and lending commitments		1,244		1,078
Other adjustments		(1	)	(28	)
Standardized Tier 2 capital		15,120		14,977
Standardized Total capital		$ 97,456		$ 93,308
Basel III Advanced Tier 2 and Total capital
Tier 1 capital		$ 82,336		$ 78,331
Standardized Tier 2 capital		15,120		14,977
Allowance for losses on loans and lending commitments		(1,244	)	(1,078	)
Basel III Advanced Tier 2 capital		13,876		13,899
Basel III Advanced Total capital		$ 96,212		$ 92,230
RWAs
Standardized		$546,094		$555,611
Basel III Advanced		$576,912		$617,646
CET1 ratio
Standardized		13.1%		12.1%
Basel III Advanced		12.4%		10.9%
Tier 1 capital ratio
Standardized		15.1%		14.1%
Basel III Advanced		14.3%		12.7%
Total capital ratio
Standardized		17.8%		16.8%
Basel III Advanced		16.7%		14.9%

Effective January 2018, the firm became subject to CET1 ratios calculated on a fully phased-in basis. As of December 2017, the firm’s CET1 ratios calculated in accordance with the Standardized Capital Rules and Basel III Advanced Rules on a fully phased-in basis were 0.2 percentage points lower than on a transitional basis.

Beginning in the fourth quarter of 2018, the firm’s default experience will be incorporated into the determination of probability of default for the calculation of Basel III Advanced RWAs. The estimated impact of this change would have been an increase in the firm’s Basel III Advanced CET1 ratio of approximately 0.8 percentage points as of September 2018.

In the table above:

•

Deduction for goodwill was net of deferred tax liabilities of $655 million as of September 2018 and $654 million as of December 2017.

•

Deduction for identifiable intangible assets was net of deferred tax liabilities of $34 million as of September 2018 and $40 million as of December 2017. The deduction for identifiable intangible assets was fully phased into CET1 in January 2018. As of December 2017, CET1 reflects 80% of the identifiable intangible assets deduction and the remaining 20% was risk weighted.

•

Deduction for investments in covered funds represents the firm’s aggregate investments in applicable covered funds, excluding investments that are subject to an extended conformance period. See Note 6 for further information about the Volcker Rule.

•

Other adjustments within CET1 and Tier 1 capital primarily include credit valuation adjustments on derivative liabilities, pension and postretirement liabilities, the overfunded portion of the firm’s defined benefit pension plan obligation net of associated deferred tax liabilities, disallowed deferred tax assets, debt valuation adjustments and other required credit risk-based deductions. The deduction for such items was fully phased into CET1 in January 2018. As of December 2017, CET1 reflects 80% of such deduction. Substantially all of the balance that was not deducted from CET1 as of December 2017 was deducted from Tier 1 capital within other adjustments.

•

Qualifying subordinated debt is subordinated debt issued by Group Inc. with an original maturity of five years or greater. The outstanding amount of subordinated debt qualifying for Tier 2 capital is reduced upon reaching a remaining maturity of five years. See Note 16 for further information about the firm’s subordinated debt.

•

Junior subordinated debt represents debt issued to Trust. As of September 2018, 40% of this debt was included in Tier 2 capital and 60% was fully phased out of regulatory capital. As of December 2017, 50% of this debt was included in Tier 2 capital and 50% was fully phased out of regulatory capital. Junior subordinated debt is reduced by the amount of trust preferred securities purchased by the firm and will be fully phased out of Tier 2 capital by 2022 at a rate of 10% per year. See Note 16 for further information about the firm’s junior subordinated debt and trust preferred securities purchased by the firm.

Risk-weighted Assets

The tables below present the components of RWAs.


	Standardized Capital Rules as of
$ in millions		September 2018	December 2017
Credit RWAs
Derivatives		$124,477	$126,076
Commitments, guarantees and loans		159,681	145,104
Securities financing transactions		70,704	77,962
Equity investments		51,579	48,155
Other		68,844	70,933
Total Credit RWAs		475,285	468,230
Market RWAs
Regulatory VaR		7,709	7,532
Stressed VaR		24,843	32,753
Incremental risk		9,163	8,441
Comprehensive risk		1,948	2,397
Specific risk		27,146	36,258
Total Market RWAs		70,809	87,381
Total RWAs		$546,094	$555,611


	Basel III Advanced Rules as of
$ in millions		September 2018	December 2017
Credit RWAs
Derivatives		$ 98,094	$102,986
Commitments, guarantees and loans		153,284	163,375
Securities financing transactions		18,523	19,362
Equity investments		53,255	51,626
Other		74,509	75,968
Total Credit RWAs		397,665	413,317
Market RWAs
Regulatory VaR		7,709	7,532
Stressed VaR		24,843	32,753
Incremental risk		9,163	8,441
Comprehensive risk		1,948	1,870
Specific risk		27,146	36,258
Total Market RWAs		70,809	86,854
Total Operational RWAs		108,438	117,475
Total RWAs		$576,912	$617,646

Risk-weighted Assets Rollforward

The tables below present changes in RWAs.


	Nine Months Ended September 2018
$ in millions		Standardized		Basel III Advanced
Risk-Weighted Assets
Beginning balance		$555,611		$617,646
Credit RWAs
Change in:
Transitional provisions		7,766		8,232
Derivatives		(1,599	)	(4,892	)
Commitments, guarantees and loans		14,577		(10,091	)
Securities financing transactions		(7,258	)	(839	)
Equity investments		(4,225	)	(6,479	)
Other		(2,206	)	(1,583	)
Change in Credit RWAs		7,055		(15,652	)
Market RWAs
Change in:
Regulatory VaR		177		177
Stressed VaR		(7,910	)	(7,910	)
Incremental risk		722		722
Comprehensive risk		(449	)	78
Specific risk		(9,112	)	(9,112	)
Change in Market RWAs		(16,572	)	(16,045	)
Operational RWAs
Change in operational risk		–		(9,037	)
Change in Operational RWAs		–		(9,037	)
Ending balance		$546,094		$576,912


	Year Ended December 2017
$ in millions		Standardized		Basel III Advanced
Risk-Weighted Assets
Beginning balance		$496,676		$549,650
Credit RWAs
Change in:
Transitional provisions		(233	)	(233	)
Derivatives		1,790		(2,110	)
Commitments, guarantees and loans		29,360		40,583
Securities financing transactions		6,643		4,689
Equity investments		6,889		7,693
Other		12,368		12,608
Change in Credit RWAs		56,817		63,230
Market RWAs
Change in:
Regulatory VaR		(2,218	)	(2,218	)
Stressed VaR		10,278		10,278
Incremental risk		566		566
Comprehensive risk		(2,941	)	(2,680	)
Specific risk		(3,567	)	(3,567	)
Change in Market RWAs		2,118		2,379
Operational RWAs
Change in operational risk		–		2,387
Change in Operational RWAs		–		2,387
Ending balance		$555,611		$617,646

Hybrid Capital Rules [Member]

Capital Ratios

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


	As of
$ in millions		September 2018		December 2017
Standardized
CET1		$ 26,817		$ 25,343
Tier 1 capital		26,817		25,343
Tier 2 capital		4,961		2,547
Total capital		$ 31,778		$ 27,890
Basel III Advanced
CET1		$ 26,817		$ 25,343
Tier 1 capital		26,817		25,343
Standardized Tier 2 capital		4,961		2,547
Allowance for losses on loans and lending commitments		(711	)	(547	)
Tier 2 capital		4,250		2,000
Total capital		$ 31,067		$ 27,343
RWAs
Standardized		$240,337		$229,775
Basel III Advanced		$150,064		$164,602
CET1 ratio
Standardized		11.2%		11.0%
Basel III Advanced		17.9%		15.4%
Tier 1 capital ratio
Standardized		11.2%		11.0%
Basel III Advanced		17.9%		15.4%
Total capital ratio
Standardized		13.2%		12.1%
Basel III Advanced		20.7%		16.6%

GS Bank USA [Member]

Supplementary Leverage Ratio

The table below presents GS Bank USA’s Tier 1 leverage ratio and SLR.


	For the Three Months Ended or as of
$ in millions		September 2018		December 2017
Tier 1 capital		$ 26,817		$ 25,343
Average total assets		$178,890		$168,854
Deductions from Tier 1 capital		(109	)	(12	)
Average adjusted total assets		178,781		168,842
Off-balance-sheet exposures		186,200		176,892
Total supplementary leverage exposure		$364,981		$345,734
Tier 1 leverage ratio		15.0%		15.0%
SLR		7.3%		7.3%

In the table above:

•

Tier 1 capital and deductions from Tier 1 capital are calculated on a transitional basis as of December 2017.

•

Average total assets represents the daily average assets for the quarter.

•

Off-balance-sheet exposures represents the monthly average and consists of derivatives, securities financing transactions, commitments and guarantees.

•

Tier 1 leverage ratio is defined as Tier 1 capital divided by average adjusted total assets.

•

SLR is defined as Tier 1 capital divided by supplementary leverage exposure.