Goldman Sachs 2013 Annual Report Download - page 68

Management’s Discussion and Analysis
Consolidated Regulatory Capital Ratios
The table below presents information about our regulatory
capital ratios and Tier 1 leverage ratio under Basel I, as
implemented by the Federal Reserve Board. The
information as of December 2013 reflects the revised
market risk regulatory capital requirements. The
information as of December 2012 is prior to the
implementation of these revised market risk regulatory
capital requirements. In the table below:
‰Equity investments in certain entities primarily represent
a portion of our nonconsolidated equity investments.
‰Disallowed deferred tax assets represent certain deferred
tax assets that are excluded from regulatory capital based
upon an assessment which, in addition to other factors,
includes an estimate of future taxable income.
‰Debt valuation adjustment represents the cumulative
change in the fair value of our unsecured borrowings
attributable to the impact of changes in our own credit
spreads (net of tax at the applicable tax rate).
‰Other adjustments within our Tier 1 common capital
include net unrealized gains/(losses) on available-for-sale
securities (net of tax at the applicable tax rate), the
cumulative change in our pension and postretirement
liabilities (net of tax at the applicable tax rate) and
investments in certain nonconsolidated entities.
‰Qualifying subordinated debt represents subordinated
debt issued by Group Inc. with an original term to
maturity of five years or greater. The outstanding amount
of subordinated debt qualifying for Tier 2 capital is
reduced, or discounted, upon reaching a remaining
maturity of five years. See Note 16 to the consolidated
financial statements for additional information about our
subordinated debt.
As of December
$ in millions 2013 2012
Common shareholders’ equity $ 71,267 $ 69,516
Goodwill (3,705) (3,702)
Identifiable intangible assets (671) (1,397)
Equity investments in certain entities (3,314) (4,805)
Disallowed deferred tax assets (498) (1,261)
Debt valuation adjustment 10 (180)
Other adjustments 159 (124)
Tier 1 Common Capital 63,248 58,047
Perpetual non-cumulative preferred stock 7,200 6,200
Junior subordinated debt issued to trusts 12,063 2,750
Other adjustments (40) (20)
Tier 1 Capital 72,471 66,977
Qualifying subordinated debt 12,773 13,342
Junior subordinated debt issued to trusts 1687 —
Other adjustments 172 87
Tier 2 Capital 13,632 13,429
Total Capital $ 86,103 $ 80,406
Credit RWAs $268,247 $287,526
Market RWAs 164,979 112,402
Total RWAs $433,226 $399,928
Tier 1 Common Ratio 214.6% 14.5%
Tier 1 Capital Ratio 16.7% 16.7%
Total Capital Ratio 19.9% 20.1%
Tier 1 Leverage Ratio 38.1% 7.3%
1. On January 1, 2013, we began to incorporate the Dodd-Frank Act’s phase-
out of regulatory capital treatment for junior subordinated debt issued to
trusts by allowing for only 75% of these capital instruments to be included in
Tier 1 capital and 25% to be designated as Tier 2 capital in the calculation of
our current capital ratios. In July 2013, the Agencies finalized the phase-out
provisions of these capital instruments. See Note 16 to the consolidated
financial statements for additional information about the junior subordinated
debt issued to trusts.
2. The Tier 1 common ratio equals Tier 1 common capital divided by RWAs. We
believe that the Tier 1 common ratio is meaningful because it is one of the
measures that we, our regulators and investors use to assess capital
adequacy. The Tier 1 common ratio is a non-GAAP measure and may not be
comparable to similar non-GAAP measures used by other companies.
3. See Note 20 to the consolidated financial statements for additional
information about the firm’s Tier 1 leverage ratio.
66 Goldman Sachs 2013 Annual Report