Goldman Sachs 2013 Annual Report Download - page 71

Management’s Discussion and Analysis
The table below presents the changes in these RWAs from
December 31, 2012 to December 31, 2013.
in millions
Period Ended
December 2013
Risk-Weighted Assets
Balance, December 31, 2012 $399,928
Credit RWAs
Decrease in OTC derivatives (12,516)
Increase in commitments and guarantees 1,390
Decrease in securities financing transactions (17,059)
Change in other 8,906
Change in Credit RWAs (19,279)
Market RWAs
Increase related to the revised market risk rules 127,608
Decrease in regulatory VaR (2,038)
Decrease in stressed VaR (13,700)
Decrease in incremental risk (17,350)
Decrease in comprehensive risk (9,568)
Decrease in specific risk (32,375)
Change in Market RWAs 52,577
Total RWAs, end of period $433,226
Credit RWAs decreased $19.28 billion compared with
December 2012, primarily due to a decrease in securities
financing exposure. Market RWAs increased by
$52.58 billion compared with December 2012, reflecting
the impact of the revised market risk regulatory capital
requirements, which became effective on January 1, 2013,
partially offset by, among other things, a decrease in
specific risk due to a decrease in inventory.
We also attribute RWAs to our business segments. As of
December 2013, approximately 80% of RWAs were
attributed to our Institutional Client Services segment and
substantially all of the remaining RWAs were attributed to
our Investing & Lending segment.
Revised Capital Framework
The Agencies have approved revised risk-based capital and
leverage ratio regulations establishing a new comprehensive
capital framework for U.S. banking organizations (Revised
Capital Framework). These regulations are largely based on
the Basel Committee’s December 2010 final capital
framework for strengthening international capital
standards (Basel III), and significantly revise the risk-based
capital and leverage ratio requirements applicable to bank
holding companies as compared to the previous U.S. risk-
based capital and leverage ratio rules, and thereby,
implement certain provisions of the Dodd-Frank Act.
Under the Revised Capital Framework, Group Inc. is an
“Advanced approach” banking organization. See Note 20
to the consolidated financial statements for further
information about the Revised Capital Framework,
including the difference between the “Standardized
approach” and the Basel III Advanced approach.
Estimated Capital Ratios. We estimate that the firm’s
ratio of Basel III Common Equity Tier 1 (CET1) to RWAs
calculated under the Basel III Advanced approach (Basel III
Advanced CET1 ratio) as of December 2013 would have
been 9.8% on a fully phased-in basis (i.e., after the
expiration of transition provisions). The estimate of the
Basel III Advanced CET1 ratio will continue to evolve as we
assess the details of these rules and discuss their
interpretation and application with our regulators.
Management believes that the estimated Basel III Advanced
CET1 ratio is meaningful because it is one of the measures
that we, our regulators and investors use to assess capital
adequacy. The estimated Basel III Advanced CET1 ratio is a
non-GAAP measure as of December 2013 and may not be
comparable to similar non-GAAP measures used by other
companies (as of that date). It will become a formal
regulatory measure for the firm on April 1, 2014.
Goldman Sachs 2013 Annual Report 69