Goldman Sachs 2013 Annual Report Download - page 67

Management’s Discussion and Analysis
The Federal Reserve Board evaluates a bank holding
company based, in part, on whether it has the capital
necessary to continue operating under the baseline and
stress scenarios provided by the Federal Reserve Board and
under the scenarios developed by the bank holding
company. This evaluation also takes into account a bank
holding company’s process for identifying risk, its controls
and governance for capital planning, and its guidelines for
making capital planning decisions. In addition, as part of its
review, the Federal Reserve Board evaluates a bank holding
company’s plan to make capital distributions (i.e., dividend
payments, repurchases or redemptions of stock,
subordinated debt or other capital securities) across a range
of macroeconomic scenarios and firm-specific assumptions.
Additionally, the Federal Reserve Board evaluates a bank
holding company’s plan to issue capital.
In addition, the DFAST rules require us to conduct stress
tests on a semi-annual basis and publish a summary of
certain results. The annual DFAST submission is
incorporated into the CCAR submission. The Federal
Reserve Board also conducts its own annual stress tests and
publishes a summary of certain results.
As part of our initial 2013 CCAR submission, the Federal
Reserve Board informed us that it did not object to our
proposed capital actions, including the repurchase of
outstanding common stock, a potential increase in our
quarterly common stock dividend and the possible
issuance, redemption and modification of other capital
securities through the first quarter of 2014. As required by
the Federal Reserve Board, we resubmitted our 2013
capital plan in September 2013, incorporating certain
enhancements to our stress testing process. In
December 2013, the Federal Reserve Board informed us
that it did not object to our resubmitted capital plan. We
submitted our 2014 CCAR to the Federal Reserve in
January 2014 and expect to publish a summary of our
annual DFAST results in March 2014. See “Business —
Available Information” in Part I, Item 1 of the 2013
Form 10-K.
In addition, we submitted the results of our mid-cycle
DFAST to the Federal Reserve Board in July 2013 and
published a summary of our mid-cycle DFAST results under
our internally developed severely adverse scenario in
September 2013. Our internally developed severely adverse
scenario is designed to stress the firm’s risks and
idiosyncratic vulnerabilities and assess the firm’s pro-forma
capital position and ratios under the hypothetical stressed
environment. We provide additional information on our
internal stress testing process, our internally developed
severely adverse scenario used for mid-cycle DFAST and a
summary of the results on our web site as described under
“Business — Available Information” in Part I, Item 1 of the
2013 Form 10-K.
Our consolidated regulatory capital requirements are
determined by the Federal Reserve Board, as
described below.
As of December 2013, our total shareholders’ equity was
$78.47 billion (consisting of common shareholders’
equity of $71.27 billion and preferred stock of
$7.20 billion). As of December 2012, our total
shareholders’ equity was $75.72 billion (consisting of
common shareholders’ equity of $69.52 billion and
preferred stock of $6.20 billion). See “— Consolidated
Regulatory Capital Ratios” below for information
regarding the impact of regulatory developments.
Consolidated Regulatory Capital
The Federal Reserve Board is the primary regulator of
Group Inc., a bank holding company under the Bank
Holding Company Act of 1956 (BHC Act) and a financial
holding company under amendments to the BHC Act
effected by the U.S. Gramm-Leach-Bliley Act of 1999. As a
bank holding company, we are subject to consolidated risk-
based regulatory capital requirements. These requirements
are computed in accordance with the Federal Reserve
Board’s risk-based capital regulations which, as of
December 2013, were based on the Basel I Capital Accord
of the Basel Committee and also reflected the Federal
Reserve Board’s revised market risk regulatory capital
requirements which became effective on January 1, 2013.
These capital requirements are expressed as capital ratios
that compare measures of capital to risk-weighted assets
(RWAs). The capital regulations also include requirements
with respect to leverage. The firm’s capital levels are also
subject to qualitative judgments by its regulators about
components of capital, risk weightings and other factors.
Beginning January 1, 2014, the Federal Reserve Board
implemented revised consolidated regulatory capital and
leverage requirements.
See Note 20 to the consolidated financial statements for
additional information regarding the firm’s current RWAs,
required minimum capital ratios and the Revised Capital
Framework (defined below).
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