Goldman Sachs 2012 Annual Report Download - page 177

Notes to Consolidated Financial Statements
Sumitomo Mitsui Financial Group, Inc. (SMFG) provides
the firm with credit loss protection on certain approved
loan commitments (primarily investment-grade commercial
lending commitments). The notional amount of such loan
commitments was $32.41 billion and $31.94 billion as of
December 2012 and December 2011, respectively. The
credit loss protection on loan commitments provided by
SMFG is generally limited to 95% of the first loss the firm
realizes on such commitments, up to a maximum of
approximately $950 million. In addition, subject to the
satisfaction of certain conditions, upon the firm’s request,
SMFG will provide protection for 70% of additional losses
on such commitments, up to a maximum of $1.13 billion,
of which $300 million of protection had been provided as
of both December 2012 and December 2011. The firm also
uses other financial instruments to mitigate credit risks
related to certain commitments not covered by SMFG.
These instruments primarily include credit default swaps
that reference the same or similar underlying instrument or
entity or credit default swaps that reference a market index.
Warehouse Financing. The firm provides financing to
clients who warehouse financial assets. These arrangements
are secured by the warehoused assets, primarily consisting
of commercial mortgage loans.
Contingent and Forward Starting Resale and
Securities Borrowing Agreements/Forward Starting
Repurchase and Secured Lending Agreements
The firm enters into resale and securities borrowing
agreements and repurchase and secured lending agreements
that settle at a future date. The firm also enters 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.
Investment Commitments
The firm’s investment commitments consist of
commitments to invest in private equity, real estate and
other assets directly and through funds that the firm raises
and manages. These commitments include $872 million
and $1.62 billion as of December 2012 and
December 2011, respectively, related to real estate private
investments and $6.47 billion and $7.50 billion as of
December 2012 and December 2011, respectively, related
to corporate and other private investments. Of these
amounts, $6.21 billion and $8.38 billion as of
December 2012 and December 2011, respectively, relate to
commitments to invest in funds managed by the firm, which
will be funded at market value on the date of investment.
Leases
The firm has contractual obligations under long-term
noncancelable lease agreements, principally for office
space, expiring on various dates through 2069. Certain
agreements are subject to periodic escalation provisions for
increases in real estate taxes and other charges. The table
below presents future minimum rental payments, net of
minimum sublease rentals.
in millions
As of
December 2012
2013 $ 439
2014 407
2015 345
2016 317
2017 306
2018 - thereafter 1,375
Total $3,189
Rent charged to operating expense for the years ended
December 2012, December 2011 and December 2010 was
$374 million, $475 million and $508 million, respectively.
Operating leases include office space held in excess of
current requirements. Rent expense relating to space held
for growth is included in “Occupancy.” The firm records a
liability, based on the fair value of the remaining lease
rentals reduced by any potential or existing sublease
rentals, for leases where the firm has ceased using the space
and management has concluded that the firm will not
derive any future economic benefits. Costs to terminate a
lease before the end of its term are recognized and measured
at fair value on termination.
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