Goldman Sachs 2013 Annual Report Download - page 184

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 $29.24 billion and $32.41 billion as of
December 2013 and December 2012, 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 $870 million and $300 million of protection had
been provided as of December 2013 and December 2012,
respectively. 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 corporate loans and 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, generally within three business
days. 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 $659 million
and $872 million as of December 2013 and
December 2012, respectively, related to real estate private
investments and $6.46 billion and $6.47 billion as of
December 2013 and December 2012, respectively, related
to corporate and other private investments. Of these
amounts, $5.48 billion and $6.21 billion as of
December 2013 and December 2012, respectively, relate to
commitments to invest in funds managed by the firm. If
these commitments are called, they would 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 2013
2014 $ 387
2015 340
2016 280
2017 271
2018 222
2019 - thereafter 1,195
Total $2,695
Rent charged to operating expense was $324 million for
2013, $374 million for 2012 and $475 million for 2011.
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.
Contingencies
Legal Proceedings. See Note 27 for information about legal
proceedings, including certain mortgage-related matters.
Certain Mortgage-Related Contingencies. There are
multiple areas of focus by regulators, governmental
agencies and others within the mortgage market that may
impact originators, issuers, servicers and investors. There
remains significant uncertainty surrounding the nature and
extent of any potential exposure for participants in
this market.
182 Goldman Sachs 2013 Annual Report