Goldman Sachs 2013 Annual Report Download - page 102

Management’s Discussion and Analysis
Lending and Financing Activities. We manage the firm’s
lending and financing activities using the credit risk process,
measures, limits and risk mitigants described above. Other
lending positions, including secondary trading positions,
are risk-managed as a component of market risk.
‰Lending Activities. The firm’s lending activities include
lending to investment-grade and non-investment-grade
corporate borrowers. Loans and lending commitments
associated with these activities are principally used for
operating liquidity and general corporate purposes or in
connection with contingent acquisitions. The firm’s
lending activities also include extending loans to
borrowers that are secured by commercial and other real
estate. See the tables below for further information about
our credit exposures associated with these
lending activities.
‰Securities Financing Transactions. The firm enters
into securities financing transactions in order to, among
other things, facilitate client activities, invest excess cash,
acquire securities to cover short positions and finance
certain firm activities. The firm bears credit risk related to
resale agreements and securities borrowed only to the
extent that cash advanced or the value of securities
pledged or delivered to the counterparty exceeds the value
of the collateral received. The firm also has credit
exposure on repurchase agreements and securities loaned
to the extent that the value of securities pledged or
delivered to the counterparty for these transactions
exceeds the amount of cash or collateral received.
Securities collateral obtained for securities financing
transactions primarily includes U.S. government and
federal agency obligations and non-U.S. government and
agency obligations. We manage our credit risk on
securities financing transactions using the credit risk
process, measures, limits and risk mitigants described
above. We had approximately $29 billion and $37 billion
as of December 2013 and December 2012, respectively,
of credit exposure related to securities financing
transactions reflecting both netting agreements and
collateral that management considers when determining
credit risk.
‰Other Credit Exposures. The firm is exposed to credit
risk from its receivables from brokers, dealers and
clearing organizations and customers and counterparties.
Receivables from brokers, dealers and clearing
organizations are primarily comprised of initial cash
margin placed with clearing organizations and receivables
related to sales of securities which have traded, but not
yet settled. These receivables generally have minimal
credit risk due to the low probability of clearing
organization default and the short-term nature of
receivables related to securities settlements. Receivables
from customers and counterparties are generally
comprised of collateralized receivables related to
customer securities transactions and generally have
minimal credit risk due to both the value of the collateral
received and the short-term nature of these receivables.
Our net credit exposure related to these activities was
approximately $18 billion as of both December 2013 and
December 2012, and was primarily comprised of initial
margin (both cash and securities) placed with
clearing organizations.
In addition, the firm extends other loans and lending
commitments to its private wealth clients that are
generally longer-term in nature and are primarily secured
by residential real estate or other assets. The gross
exposure related to such loans and lending commitments
was approximately $11 billion and $7 billion as of
December 2013 and December 2012, respectively. The
fair value of the collateral received against such loans and
lending commitments exceeded the gross exposure as of
both December 2013 and December 2012.
Credit Exposure by Industry, Region and Credit
Quality
The tables below present the firm’s credit exposures related
to cash, OTC derivatives, and loans and lending
commitments (excluding Securities Financing Transactions
and Other Credit Exposures above) broken down by
industry, region and credit quality.
100 Goldman Sachs 2013 Annual Report