Goldman Sachs 2013 Annual Report Download - page 196

Notes to Consolidated Financial Statements
Broker-Dealer Subsidiaries
The firm’s U.S. regulated broker-dealer subsidiaries include
GS&Co. and GSEC. GS&Co. and GSEC are registered U.S.
broker-dealers and futures commission merchants, and are
subject to regulatory capital requirements, including those
imposed by the SEC, the U.S. Commodity Futures Trading
Commission (CFTC), the Chicago Mercantile Exchange,
the Financial Industry Regulatory Authority, Inc. (FINRA)
and the National Futures Association. Rule 15c3-1 of the
SEC and Rule 1.17 of the CFTC specify uniform minimum
net capital requirements, as defined, for their registrants,
and also effectively 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 December 2013 and December 2012, GS&Co. had
regulatory net capital, as defined by Rule 15c3-1, of
$15.81 billion and $14.12 billion, respectively, which
exceeded the amount required by $13.76 billion and
$12.42 billion, respectively. As of December 2013 and
December 2012, GSEC had regulatory net capital, as
defined by Rule 15c3-1, of $1.38 billion and $2.02 billion,
respectively, which exceeded the amount required by
$1.21 billion and $1.92 billion, respectively.
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 December 2013 and
December 2012, GS&Co. had tentative net capital and net
capital in excess of both the minimum and the
notification requirements.
Other Non-U.S. Regulated Subsidiaries
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 regulated by the PRA
and the FCA. GSJCL, the firm’s Japanese broker-dealer,
is regulated by Japan’s Financial Services Agency. These
and 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 December 2013 and December 2012,
these subsidiaries were in compliance with their local
capital adequacy requirements.
The Basel Committee’s guidelines for calculating
incremental capital requirements for D-SIBs may also
impact certain of the firm’s non-U.S. regulated subsidiaries,
including GSI. However, the impact of these guidelines will
depend on how they are implemented in local jurisdictions.
Restrictions on Payments
The regulatory requirements referred to above restrict
Group Inc.’s ability to withdraw capital from its regulated
subsidiaries. As of December 2013 and December 2012,
Group Inc. was required to maintain approximately
$31.20 billion and $31.01 billion, respectively, of minimum
equity capital in these regulated subsidiaries. This minimum
equity capital requirement includes certain restrictions
imposed by federal and state laws as to the payment of
dividends to Group Inc. by its regulated subsidiaries. In
addition to limitations on the payment of dividends
imposed by federal and state laws, the Federal Reserve
Board, the FDIC and the New York State Department of
Financial Services have authority to prohibit or to limit the
payment of dividends by the banking organizations they
supervise (including GS Bank USA) if, in the relevant
regulator’s opinion, payment of a dividend would
constitute an unsafe or unsound practice in the light of the
financial condition of the banking organization.
194 Goldman Sachs 2013 Annual Report