Goldman Sachs 2007 Annual Report Download - page 135

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Notes to Consolidated Financial Statements
The firm has U.S. insurance subsidiaries that are subject to
state insurance regulation and oversight in the states in which
they are domiciled and in the other states in which they are
licensed. In addition, certain of the firm’s insurance subsidiaries
are regulated by the Bermuda Registrar of Companies. The firm’s
insurance subsidiaries were in compliance with all regulatory
capital requirements as of November 2007 and November 2006.
The firm’s principal non-U.S. regulated subsidiaries include
Goldman Sachs International (GSI) and Goldman Sachs Japan
Co., Ltd. (GSJCL). GSI, the firm’s regulated U.K. broker-dealer,
is subject to the capital requirements of the U.K.’s Financial
Services Authority. GSJCL, the firm’s regulated Japanese broker-
dealer, is subject to the capital requirements of Japan’s Financial
Services Agency. As of November 2007 and November 2006,
GSI and GSJCL were in compliance with their local capital
adequacy requirements. Certain other non-U.S. subsidiaries
of the firm are also subject to capital adequacy requirements
promulgated by authorities of the countries in which they
operate. As of November 2007 and November 2006, these
subsidiaries were in compliance with their local capital adequacy
requirements.
The regulatory requirements referred to above restrict
Group Inc.’s ability to withdraw capital from its regulated
subsidiaries. As of November 2007, approximately $18.10 billion
of net assets of regulated subsidiaries were restricted as to the
payment of dividends to Group Inc.
NOTE 15
Regulation
The firm is regulated by the U.S. Securities and Exchange
Commission as a Consolidated Supervised Entity (CSE). As such,
it is subject to group-wide supervision and examination by the
SEC and to minimum capital standards on a consolidated
basis. As of November 2007 and November 2006, the firm was
in compliance with the CSE capital standards.
The firm’s principal U.S. regulated subsidiaries include Goldman,
Sachs & Co. (GS&Co.) and Goldman Sachs Execution &
Clearing, L.P. (GSEC). GS&Co. and GSEC are registered U.S.
broker-dealers and futures commission merchants subject to
Rule 15c3-1 of the SEC and Rule 1.17 of the Commodity
Futures Trading Commission, which specify uniform minimum
net capital requirements, as defined, for their registrants, and
also require that a significant part of the registrants’ assets be
kept in relatively liquid form. GS&Co. and GSEC have elected
to compute their minimum capital requirements in accordance
with the “Alternative Net Capital Requirement” as permitted
by Rule 15c3-1. As of November 2007 and November 2006,
GS&Co. and GSEC had net capital in excess of their minimum
capital requirements. In addition to its alternative minimum net
capital requirements, GS&Co. is also required to hold tentative
net capital in excess of $1 billion and net capital in excess of
$500 million in accordance with the market and credit risk
standards of Appendix E of Rule 15c3-1. GS&Co. is also required
to notify the SEC in the event that its tentative net capital is less
than $5 billion. As of November 2007 and November 2006,
GS&Co. had tentative net capital and net capital in excess of
both the minimum and the notification requirements.
GS Bank USA, a wholly owned industrial bank, is regulated by
the Federal Deposit Insurance Corporation and the State
of Utah Department of Financial Institutions and is subject
to minimum capital requirements. As of November 2007,
GS Bank USA was in compliance with all regulatory capital
requirements. Substantially all of the firm’s bank deposits as of
November 2007 consisted of U.S. dollar-denominated savings
accounts at GS Bank USA. Savings accounts at GS Bank USA
have no stated maturity and can be withdrawn upon short notice.
The weighted average interest rates for savings deposits were
4.71% and 5.17% as of November 2007 and November 2006,
respectively. The carrying value of savings deposits approximated
fair value as of November 2007 and November 2006.
133Goldman Sachs 2007 Annual Report