Goldman Sachs 2012 Annual Report Download - page 70

Management’s Discussion and Analysis
Deposits. As part of our efforts to diversify our funding
base, deposits have become a more meaningful share of our
funding activities. GS Bank USA has been actively growing
its deposit base with an emphasis on issuance of long-term
certificates of deposit and on expanding our deposit sweep
program, which involves long-term contractual agreements
with several U.S. broker-dealers who sweep client cash to
FDIC-insured deposits. We utilize deposits to finance
activities in our bank subsidiaries. The table below presents
the sourcing of our deposits.
As of December 2012
Type of Deposit
in millions Savings and Demand 1Time 2
Private bank deposits 3$30,460 $ —
Certificates of deposit — 21,507
Deposit sweep programs 15,998 —
Institutional 51 2,108
Total 4$46,509 $23,615
1. Represents deposits with no stated maturity.
2. Weighted average maturity in excess of three years.
3. Substantially all were from overnight deposit sweep programs related to
private wealth management clients.
4. Deposits insured by the FDIC as of December 2012 were approximately
$42.77 billion.
Unsecured Short-Term Borrowings. A significant
portion of our short-term borrowings was originally
long-term debt that is scheduled to mature within one year
of the reporting date. We use short-term borrowings to
finance liquid assets and for other cash management
purposes. We primarily issue commercial paper,
promissory notes, and other hybrid instruments.
As of December 2012, our unsecured short-term
borrowings, including the current portion of unsecured
long-term borrowings, were $44.30 billion. See Note 15 to
the consolidated financial statements for further
information about our unsecured short-term borrowings.
Equity Capital
Capital adequacy is of critical importance to us. Our
objective is to be conservatively capitalized in terms of the
amount and composition of our equity base. Accordingly,
we have in place a comprehensive capital management
policy that serves as a guide to determine the amount and
composition of equity capital we maintain.
The level and composition of our equity capital are
determined by multiple factors including our current and
future consolidated regulatory capital requirements, our
ICAAP, CCAR and results of stress tests, and may also be
influenced by other factors such as rating agency guidelines,
subsidiary capital requirements, the business environment,
conditions in the financial markets and assessments of
potential future losses due to adverse changes in our
business and market environments. In addition, we
maintain a capital plan which projects sources and uses of
capital given a range of business environments, and a
contingency capital plan which provides a framework for
analyzing and responding to an actual or perceived
capital shortfall.
As part of the Federal Reserve Board’s annual CCAR, U.S.
bank holding companies with total consolidated assets of
$50 billion or greater are required to submit annual capital
plans for review by the Federal Reserve Board. The purpose
of the Federal Reserve Board’s review is to ensure that these
institutions have robust, forward-looking capital planning
processes that account for their unique risks and that
permit continued operations during times of economic and
financial stress. The Federal Reserve Board will evaluate a
bank holding company based on whether it has the capital
necessary to continue operating under the baseline and
stressed scenarios provided by the Federal Reserve. As part
of the capital plan review, the Federal Reserve Board
evaluates an institution’s plan to make capital distributions,
such as increasing dividend payments or repurchasing or
redeeming stock, across a range of macro-economic and
firm-specific assumptions. In addition, the rules adopted by
the Federal Reserve Board under the Dodd-Frank Act,
require us to conduct stress tests on a semi-annual basis and
publish a summary of certain results, beginning in
March 2013. The Federal Reserve Board will conduct its
own annual stress tests and is expected to publish a
summary of certain results in March 2013.
68 Goldman Sachs 2012 Annual Report