Goldman Sachs 2015 Annual Report Download - page 105

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
The following are the critical modeling parameters of the
Modeled Liquidity Outflow:
‰Liquidity needs over a 30-day scenario;
‰A two-notch downgrade of our long-term senior
unsecured credit ratings;
‰A combination of contractual outflows, such as
upcoming maturities of unsecured debt, and contingent
outflows (e.g., actions though not contractually required,
we may deem necessary in a crisis). We assume that most
contingent outflows will occur within the initial days and
weeks of a crisis;
‰No issuance of equity or unsecured debt;
‰No support from additional government funding
facilities. Although we have access to various central bank
funding programs, we do not assume reliance on
additional sources of funding in a liquidity crisis; and
‰No asset liquidation, other than the GCLA.
The potential contractual and contingent cash and
collateral outflows covered in our Modeled Liquidity
Outflow include:
Unsecured Funding
‰Contractual: All upcoming maturities of unsecured long-
term debt, commercial paper, promissory notes and other
unsecured funding products. We assume that we will be
unable to issue new unsecured debt or rollover any
maturing debt.
‰Contingent: Repurchases of our outstanding long-term
debt, commercial paper and hybrid financial instruments
in the ordinary course of business as a market maker.
Deposits
‰Contractual: All upcoming maturities of term deposits.
We assume that we will be unable to raise new term
deposits or rollover any maturing term deposits.
‰Contingent: Withdrawals of bank deposits that have no
contractual maturity. The withdrawal assumptions
reflect, among other factors, the type of deposit, whether
the deposit is insured or uninsured, and our relationship
with the depositor.
Secured Funding
‰Contractual: A portion of upcoming contractual
maturities of secured funding due to either the inability to
refinance or the ability to refinance only at wider haircuts
(i.e., on terms which require us to post additional
collateral). Our assumptions reflect, among other factors,
the quality of the underlying collateral, counterparty roll
probabilities (our assessment of the counterparty’s
likelihood of continuing to provide funding on a secured
basis at the maturity of the trade) and counterparty
concentration.
‰Contingent: Adverse changes in value of financial assets
pledged as collateral for financing transactions, which
would necessitate additional collateral postings under
those transactions.
OTC Derivatives
‰Contingent: Collateral postings to counterparties due to
adverse changes in the value of our OTC derivatives,
excluding those that are cleared and settled through
central counterparties (OTC-cleared).
‰Contingent: Other outflows of cash or collateral related
to OTC derivatives, excluding OTC-cleared, including
the impact of trade terminations, collateral substitutions,
collateral disputes, loss of rehypothecation rights,
collateral calls or termination payments required by a
two-notch downgrade in our credit ratings, and collateral
that has not been called by counterparties, but is available
to them.
Exchange-Traded and OTC-cleared Derivatives
‰Contingent: Variation margin postings required due to
adverse changes in the value of our outstanding
exchange-traded and OTC-cleared derivatives.
‰Contingent: An increase in initial margin and guaranty
fund requirements by derivative clearing houses.
Customer Cash and Securities
‰Contingent: Liquidity outflows associated with our prime
brokerage business, including withdrawals of customer
credit balances, and a reduction in customer short
positions, which may serve as a funding source for long
positions.
Firm Securities
‰Contingent: Liquidity outflows associated with a
reduction or composition change in firm short positions,
which may serve as a funding source for long positions.
Goldman Sachs 2015 Form 10-K 93