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Regulation and Capital Adequacy (Tables)
 9 Months Ended
Sep. 30, 2020
Risk-based Capital and Leverage Requirements
The table below presents the risk-based capital and leverage requirements as of both September 2020 and December 2019.
 
 
  
 
Requirements
 
Risk-based capital requirements
  
CET1 capital ratio
  
 
9.5%
 
Tier 1 capital ratio
  
 
11.0%
 
Total capital ratio
  
 
13.0%
 
 
Leverage requirements
  
Tier 1 leverage ratio
  
 
4.0%
 
SLR
  
 
5.0%
 
In the table above:
 
•  
As of both September 2020 and December 2019, the CET1 capital ratio requirement includes a minimum of 4.5%, the Tier 1 capital ratio requirement includes a minimum of 6.0% and the Total capital ratio requirement includes a minimum of 8.0%. The requirements also include the capital conservation buffer of 2.5%, the
G-SIB
surcharge of 2.5% (Method 2) and the countercyclical capital buffer, which the FRB has set to zero percent.
 
•  
The
G-SIB
surcharge is updated annually based on financial data from the prior year and is generally applicable for the following year. The
G-SIB
surcharge is calculated using two methodologies, the higher of which is reflected in the firm’s risk-based capital requirements. The first calculation (Method 1) is based on the Basel Committee’s methodology which, among other factors, relies upon measures of the size, activity and complexity of each
G-SIB.
The second calculation (Method 2) uses similar inputs but includes a measure of reliance on short-term wholesale funding.
 
•  
The Tier 1 leverage ratio requirement is a minimum of 4%. The SLR requirement of 5% includes a
 
minimum of 3% and a 2% buffer applicable to
G-SIBs.
Risk-based Capital Ratios
The table below presents information about risk-based capital ratios.
 
$ in millions
     Standardized        Advanced  
As of September 2020
     
CET1 capital
  
 
$  77,503
 
   
 
$  77,503
 
Tier 1 capital
  
 
$  88,566
 
   
 
$  88,566
 
Tier 2 capital
  
 
$  16,018
 
   
 
$  14,067
 
Total capital
  
 
$104,584
 
   
 
$102,633
 
RWAs
  
 
$534,557
 
   
 
$599,626
 
 
CET1 capital ratio
  
 
14.5%
 
   
 
12.9%
 
Tier 1 capital ratio
  
 
16.6%
 
   
 
14.8%
 
Total capital ratio
  
 
19.6%
 
   
 
17.1%
 
 
As of December 2019
     
CET1 capital
     $  74,850        $  74,850  
Tier 1 capital
     $  85,440        $  85,440  
Tier 2 capital
     $  14,925        $  13,473  
Total capital
     $100,365        $  98,913  
RWAs
     $563,575        $544,653  
 
CET1 capital ratio
     13.3%        13.7%  
Tier 1 capital ratio
     15.2%        15.7%  
Total capital ratio
     17.8%        18.2%  
In the table above:
 
•  
The lower of the Standardized or Advanced ratio is the ratio against which the firm’s compliance with the capital requirements is assessed under the risk-based Capital Rules, and therefore, the Advanced ratios applied to the firm as of September 2020 and the Standardized ratios applied to the firm as of December 2019.
 
•  
As permitted by the FRB, the firm has elected to temporarily delay the estimated effects of adopting CECL on regulatory capital until January 2022 and to subsequently
phase-in
the effects through January 2025. In addition, during 2020 and 2021, the firm has elected to increase regulatory capital by 25% of the increase in the allowance for credit losses since January 1, 2020, as permitted by the rules issued by the FRB. The impact of this increase will also be phased in over the three-year transition period. Reflecting the full impact of CECL as of September 2020 would not have had a material impact on the firm’s Advanced risk-based capital ratios.
Leverage Ratio
The table below presents information about leverage ratios.
 
   
For the Three Months
Ended or as of
  
$ in millions
  
 
September
2020
 
 
    
 December
2019
  
 
Tier 1 capital
  
 
$    
 
88,566
 
     $     85,440  
 
Average total assets
  
 
$1,140,901
 
     $   983,909  
Deductions from Tier 1 capital
  
 
(5,087
) 
     (5,275 ) 
Average adjusted total assets
  
 
1,135,814
 
     978,634  
Impact of SLR temporary amendment
  
 
(198,954
) 
     –  
Average
off-balance
sheet exposures
  
 
365,008
 
     396,833  
Total leverage exposure
  
 
$1,301,868
 
     $1,375,467  
 
Tier 1 leverage ratio
  
 
7.8%
 
     8.7%  
SLR
  
 
6.8%
 
     6.2%  
In the table above:
 
•  
Average total assets represents the average daily assets for the quarter, and for the three months ended September 2020, reflected the impact of CECL transition.
 
•  
Impact of SLR temporary amendment represents the exclusion of average holdings of U.S. Treasury securities and average deposits at the Federal Reserve as permitted by the FRB. The impact of this temporary amendment was an increase in the firm’s SLR by approximately 0.9 percentage points for the three months ended September 2020. This temporary amendment is effective through March 31, 2021.
 
•  
Average
off-balance
sheet exposures represents the monthly average and consists of derivatives, securities financing transactions, commitments and guarantees.
 
•  
Tier 1 leverage ratio is calculated as Tier 1 capital divided by average adjusted total assets.
 
•  
SLR is calculated as Tier 1 capital divided by total leverage exposure.
Changes in CET1, Tier 1 Capital and Tier 2 Capital
The table below presents changes in CET1 capital, Tier 1 capital and Tier 2 capital.
 
$ in millions
     Standardized       Advanced  
Nine Months Ended September 2020
    
CET1 capital
    
Beginning balance
  
 
$  74,850
 
  
 
$  74,850
 
Change in:
    
Common shareholders’ equity
  
 
2,385
 
  
 
2,385
 
Impact of CECL transition
  
 
1,100
 
  
 
1,100
 
Deduction for goodwill
  
 
(115
) 
  
 
(115
) 
Deduction for identifiable intangible assets
  
 
5
 
  
 
5
 
Other adjustments
  
 
(722
) 
  
 
(722
) 
Ending balance
  
 
$  77,503
 
  
 
$  77,503
 
 
Tier 1 capital
    
Beginning balance
  
 
$  85,440
 
  
 
$  85,440
 
Change in:
    
CET1 capital
  
 
2,653
 
  
 
2,653
 
Deduction for investments in covered funds
  
 
481
 
  
 
481
 
Other adjustments
  
 
(8
) 
  
 
(8
) 
Ending balance
  
 
88,566
 
  
 
88,566
 
Tier 2 capital
    
Beginning balance
  
 
14,925
 
  
 
13,473
 
Change in:
    
Qualifying subordinated debt
  
 
25
 
  
 
25
 
Junior subordinated debt
  
 
(96
) 
  
 
(96
) 
Allowance for credit losses
  
 
1,217
 
  
 
–
 
Other adjustments
  
 
(53
) 
  
 
665
 
Ending balance
  
 
16,018
 
  
 
14,067
 
Total capital
  
 
$104,584
 
  
 
$102,633
 
 
Year Ended December 2019
    
CET1 capital
    
Beginning balance
     $  73,116       $  73,116  
Change in:
    
Common shareholders’ equity
     80       80  
Deduction for goodwill
     (432 )      (432 ) 
Deduction for identifiable intangible assets
     (307 )      (307 ) 
Other adjustments
     2,393       2,393  
Ending balance
     $  74,850       $  74,850  
 
Tier 1 capital
    
Beginning balance
     $  83,702       $  83,702  
Change in:
    
CET1 capital
     1,734       1,734  
Deduction for investments in covered funds
     5       5  
Other adjustments
     (1 )      (1 ) 
Ending balance
     85,440       85,440  
Tier 2 capital
    
Beginning balance
     14,926       13,743  
Change in:
    
Qualifying subordinated debt
     (300 )      (300 ) 
Junior subordinated debt
     (158 )      (158 ) 
Allowance for credit losses
     449       –  
Other adjustments
     8       188  
Ending balance
     14,925       13,473  
Total capital
     $100,365       $  98,913  
Minimum Risk-based Capital Under the Standardized and Advanced Capital Rules and the Leverage Ratios and "well-capitalized" Minimum Ratios
The table below presents GS Bank USA’s risk-based capital, leverage and “well-capitalized” requirements.
 
 
  
 
Requirements
 
  
 
“Well-capitalized”

Requirements
 
 
Risk-based capital requirements
    
CET1 capital ratio
  
 
7.0%
 
  
 
6.5%
 
Tier 1 capital ratio
  
 
8.5%
 
  
 
8.0%
 
Total capital ratio
  
 
10.5%
 
  
 
10.0%
 
 
Leverage requirements
    
Tier 1 leverage ratio
  
 
4.0%
 
  
 
5.0%
 
SLR
  
 
3.0%
 
  
 
6.0%
 
In the table above:
 
•  
The CET1 capital ratio requirement includes a minimum of 4.5%, the Tier 1 capital ratio requirement includes a minimum of 6.0% and the Total capital ratio requirement includes a minimum of 8.0%. The requirements also include the capital conservation buffer of 2.5% and the countercyclical capital buffer, which the FRB has set to zero percent.
 
•  
The “well-capitalized” requirements are the binding requirements for leverage ratios.
Basel III Advanced Rules [Member]  
Risk-based Capital
Risk-Based Capital.
The table below presents information about risk-based capital.
 
    As of  
$ in millions
  
 
September
2020
 
 
     
 December
2019
  
 
Common shareholders’ equity
  
 
$  81,447
 
      $  79,062  
Impact of CECL transition
  
 
1,100
 
      –  
Deduction for goodwill
  
 
(3,644
) 
      (3,529 ) 
Deduction for identifiable intangible assets
  
 
(599
) 
      (604 ) 
Other adjustments
  
 
(801
) 
      (79 ) 
CET1 capital
  
 
77,503
 
      74,850  
Preferred stock
  
 
11,203
 
      11,203  
Deduction for investments in covered funds
  
 
(129
) 
      (610 ) 
Other adjustments
  
 
(11
) 
      (3 ) 
Tier 1 capital
  
 
$  88,566
 
      $  85,440  
 
Standardized Tier 2 and Total capital
     
Tier 1 capital
  
 
$  88,566
 
      $  85,440  
Qualifying subordinated debt
  
 
12,872
 
      12,847  
Junior subordinated debt
  
 
188
 
      284  
Allowance for credit losses
  
 
3,019
 
      1,802  
Other adjustments
  
 
(61
) 
      (8 ) 
Standardized Tier 2 capital
  
 
16,018
 
      14,925  
Standardized Total capital
  
 
$104,584
 
      $100,365  
 
Advanced Tier 2 and Total capital
     
Tier 1 capital
  
 
$  88,566
 
      $  85,440  
Standardized Tier 2 capital
  
 
16,018
 
      14,925  
Allowance for credit losses
  
 
(3,019
) 
      (1,802 ) 
Other adjustments
  
 
1,068
 
      350  
Advanced Tier 2 capital
  
 
14,067
 
      13,473  
Advanced Total capital
  
 
$102,633
 
      $  98,913  
In the table above:
 
•  
Impact of CECL transition represents the impact of adoption as of January 1, 2020 and the impact of increasing regulatory capital by 25% of the increase in allowance for credit losses since January 1, 2020. The allowance for credit losses within Standardized and Advanced Tier 2 capital also reflects the impact of these adjustments.
 
•  
Deduction for goodwill was net of deferred tax liabilities of $689 million as of September 2020 and $667 million as of December 2019.
 
•  
Deduction for identifiable intangible assets was net of deferred tax liabilities of $33 million as of September 2020 and $37 million as of December 2019.
 
•  
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 8 for further information about the Volcker Rule.
•  
Other adjustments within CET1 capital and Tier 1 capital primarily include credit valuation adjustments on derivative 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. Other adjustments within Advanced Tier 2 capital include eligible credit reserves.
 
•  
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 14 for further information about the firm’s subordinated debt.
 
•  
Junior subordinated debt is debt issued to a Trust. As of September 2020, 20% of this debt was included in Tier 2 capital and 80% was phased out of regulatory capital. As of December 2019, 30% of this debt was included in Tier 2 capital and 70% was 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 14 for further information about the firm’s junior subordinated debt and Trust Preferred securities.
Risk-weighted Assets
The table below presents information about RWAs.
 
$ in millions
     Standardized        Advanced  
As of September 2020
     
Credit RWAs
     
Derivatives
  
 
$119,176
 
   
 
$112,940
 
Commitments, guarantees and loans
  
 
163,098
 
   
 
136,659
 
Securities financing transactions
 
  
 
56,441
 
   
 
9,883
 
Equity investments
  
 
45,142
 
   
 
47,305
 
Other
  
 
70,382
 
   
 
83,971
 
Total Credit RWAs
  
 
454,239
 
   
 
390,758
 
Market RWAs
     
Regulatory VaR
  
 
18,322
 
   
 
18,322
 
Stressed VaR
  
 
38,885
 
   
 
38,885
 
Incremental risk
  
 
5,385
 
   
 
5,385
 
Comprehensive risk
  
 
1,648
 
   
 
1,648
 
Specific risk
  
 
16,078
 
   
 
16,078
 
Total Market RWAs
  
 
80,318
 
   
 
80,318
 
Total Operational RWAs
  
 
–
 
   
 
128,550
 
Total RWAs
  
 
$534,557
 
   
 
$599,626
 
 
As of December 2019
     
Credit RWAs
     
Derivatives
     $120,906        $  72,631  
Commitments, guarantees and loans
     179,740        134,456  
Securities financing transactions
     65,867        13,834  
Equity investments
     56,814        61,892  
Other
     75,660        78,266  
Total Credit RWAs
     498,987        361,079  
Market RWAs
     
Regulatory VaR
     8,933        8,933  
Stressed VaR
     30,911        30,911  
Incremental risk
     4,308        4,308  
Comprehensive risk
     1,393        1,191  
Specific risk
     19,043        19,043  
Total Market RWAs
     64,588        64,386  
Total Operational RWAs
     –        119,188  
Total RWAs
     $563,575        $544,653  
Changes in Risk-weighted Assets
The table below presents changes in RWAs.
 
$ in millions
     Standardized        Advanced  
Nine Months Ended September 2020
     
RWAs
     
Beginning balance
  
 
$563,575
 
   
 
$544,653
 
Credit RWAs
     
Change in:
     
Derivatives
  
 
(1,730
) 
   
 
40,309
 
Commitments, guarantees and loans
  
 
(16,642
) 
   
 
2,203
 
Securities financing transactions
  
 
(9,426
) 
   
 
(3,951
) 
Equity investments
  
 
(11,672
) 
   
 
(14,587
) 
Other
  
 
(5,278
) 
   
 
5,705
 
Change in Credit RWAs
  
 
(44,748
) 
   
 
29,679
 
Market RWAs
     
Change in:
     
Regulatory VaR
  
 
9,389
 
   
 
9,389
 
Stressed VaR
  
 
7,974
 
   
 
7,974
 
Incremental risk
  
 
1,077
 
   
 
1,077
 
Comprehensive risk
  
 
255
 
   
 
457
 
Specific risk
  
 
(2,965
) 
   
 
(2,965
) 
Change in Market RWAs
  
 
15,730
 
   
 
15,932
 
Change in Operational RWAs
  
 
–
 
   
 
9,362
 
Ending balance
  
 
$534,557
 
   
 
$599,626
 
 
Year Ended December 2019
     
RWAs
     
Beginning balance
     $547,910        $558,111  
Credit RWAs
     
Change in:
     
Derivatives
     (1,605 )       (9,670 ) 
Commitments, guarantees and loans
     19,435        (8,900 ) 
Securities financing transactions
     (496 )       (4,425 ) 
Equity investments
     3,251        6,738  
Other
     5,064        8,585  
Change in Credit RWAs
     25,649        (7,672 ) 
Market RWAs
     
Change in:
     
Regulatory VaR
     1,151        1,151  
Stressed VaR
     2,959        2,959  
Incremental risk
     (6,161 )       (6,161 ) 
Comprehensive risk
     (1,377 )       (1,579 ) 
Specific risk
     (6,556 )       (6,556 ) 
Change in Market RWAs
     (9,984 )       (10,186 ) 
Change in Operational RWAs
     –        4,400  
Ending balance
     $563,575        $544,653  
Hybrid Capital Rules [Member]  
Risk-based Capital
The table below presents information about GS Bank USA’s risk-based capital ratios.
 
$ in millions
     Standardized        Advanced  
As of September 2020
     
CET1 capital
  
 
$  30,441
 
   
 
$  30,441
 
Tier 1 capital
  
 
$  30,441
 
   
 
$  30,441
 
Tier 2 capital
  
 
$    6,235
 
   
 
$    4,852
 
Total capital
  
 
$  36,676
 
   
 
$  35,293
 
RWAs
  
 
$247,064
 
   
 
$160,261
 
 
CET1 capital ratio
  
 
12.3%
 
   
 
19.0%
 
Tier 1 capital ratio
  
 
12.3%
 
   
 
19.0%
 
Total capital ratio
  
 
14.8%
 
   
 
22.0%
 
 
As of December 2019
     
CET1 capital
     $  29,176        $  29,176  
Tier 1 capital
     $  29,176        $  29,176  
Tier 2 capital
     $    5,293        $    4,486  
Total capital
     $  34,469        $  33,662  
RWAs
     $258,541        $135,596  
 
CET1 capital ratio
     11.3%        21.5%  
Tier 1 capital ratio
     11.3%        21.5%  
Total capital ratio
     13.3%        24.8%  
GS Bank USA [Member]  
Leverage Ratio
The table below presents information about GS Bank USA’s leverage ratios.
 
   
For the Three Months
Ended or as of
  
$ in millions
  
 
September
2020
 
 
      December
2019		  
 
Tier 1 capital
  
 
$  30,441
 
      $  29,176  
Average adjusted total assets
  
 
$288,159
 
      $220,974  
Total leverage exposure
  
 
$342,230
 
      $413,852  
 
Tier 1 leverage ratio
  
 
10.6%
 
      13.2%  
SLR
  
 
8.9%
 
      7.0%  
 
In the table above:
 
•
 
Average adjusted total assets represents the average daily assets for the quarter adjusted for deductions from Tier 1 capital, and for the three months ended September 2020, reflected the impact of CECL transition.
 
•  
Total leverage exposure, for the three months ended September 2020, excluded average holdings of U.S. Treasury securities and average deposits at the Federal Reserve as permitted by the FRB. The impact of this temporary amendment was an increase in GS Bank USA’s SLR by approximately 2.4 percentage points for the three months ended September 2020. This temporary amendment is effective through March 31, 2021.
 
•  
Tier 1 leverage ratio is calculated as Tier 1 capital divided by average adjusted total assets.
 
•  
SLR is calculated as Tier 1 capital divided by total leverage exposure.