Goldman Sachs 2015 Annual Report Download - page 118

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
Derivatives are reported on a net-by-counterparty basis
(i.e., the net payable or receivable for derivative assets and
liabilities for a given counterparty) when a legal right of
setoff exists under an enforceable netting agreement.
Derivatives are accounted for at fair value, net of cash
collateral received or posted under enforceable credit
support agreements. We generally enter into OTC
derivatives transactions under bilateral collateral
arrangements with daily exchange of collateral. As credit
risk is an essential component of fair value, we include a
credit valuation adjustment (CVA) in the fair value of
derivatives to reflect counterparty credit risk, as described
in Note 7 to the consolidated financial statements. CVA is a
function of the present value of expected exposure, the
probability of counterparty default and the assumed
recovery upon default.
The table below presents the distribution of our exposure to
OTC derivatives by tenor, both before and after the effect
of collateral and netting agreements. In the table below:
‰Tenor is based on expected duration for mortgage-related
credit derivatives and generally on remaining contractual
maturity for other derivatives.
‰Receivable and payable balances for the same counterparty
across tenor categories are netted under enforceable netting
agreements, and cash collateral received is netted under
enforceable credit support agreements.
‰Receivable and payable balances with the same
counterparty in the same tenor category are netted within
such tenor category.
‰Net credit exposure represents OTC derivative assets, all
of which are included in “Financial instruments owned,
at fair value,” less cash collateral and the fair value of
securities collateral, primarily U.S. government and
federal agency obligations and non-U.S. government and
agency obligations, received under credit support
agreements, which management considers when
determining credit risk, but such collateral is not eligible
for netting under U.S. GAAP.
$ in millions
Investment-
Grade
Non-Investment-
Grade / Unrated Total
As of December 2015
Less than 1 year $ 23,950 $ 3,965 $ 27,915
1 - 5 years 35,249 6,749 41,998
Greater than 5 years 85,394 4,713 90,107
Total 144,593 15,427 160,020
Netting (103,087) (6,507) (109,594)
OTC derivative assets $ 41,506 $ 8,920 $ 50,426
Net credit exposure $ 27,001 $ 7,368 $ 34,369
As of December 2014
Less than 1 year $ 30,147 $ 5,038 $ 35,185
1 - 5 years 40,787 6,589 47,376
Greater than 5 years 96,679 5,820 102,499
Total 167,613 17,447 185,060
Netting (117,144) (7,179) (124,323)
OTC derivative assets $ 50,469 $10,268 $ 60,737
Net credit exposure $ 34,658 $ 8,694 $ 43,352
The tables below present the distribution of our exposure to
OTC derivatives by tenor and our internally determined
public rating agency equivalents.
$ in millions
Investment-Grade
AAA/
Aaa
AA/
Aa2
A/
A2
BBB/
Baa2 Total
As of December 2015
Less than 1 year $ 411 $ 6,059 $ 10,051 $ 7,429 $ 23,950
1 - 5 years 1,214 10,374 16,995 6,666 35,249
Greater than 5 years 3,205 40,879 20,507 20,803 85,394
Total 4,830 57,312 47,553 34,898 144,593
Netting (2,202) (40,872) (36,847) (23,166) (103,087)
OTC derivative assets $ 2,628 $ 16,440 $ 10,706 $ 11,732 $ 41,506
Net credit exposure $ 2,427 $ 10,269 $ 6,652 $ 7,653 $ 27,001
As of December 2014
Less than 1 year $ 1,119 $ 8,260 $ 13,719 $ 7,049 $ 30,147
1 - 5 years 898 12,182 18,949 8,758 40,787
Greater than 5 years 3,500 40,443 26,649 26,087 96,679
Total 5,517 60,885 59,317 41,894 167,613
Netting (2,163) (42,513) (44,147) (28,321) (117,144)
OTC derivative assets $ 3,354 $ 18,372 $ 15,170 $ 13,573 $ 50,469
Net credit exposure $ 3,135 $ 12,453 $ 9,493 $ 9,577 $ 34,658
$ in millions
Non-Investment-Grade / Unrated
BB/Ba2
or lower Unrated Total
As of December 2015
Less than 1 year $ 3,657 $ 308 $ 3,965
1 - 5 years 6,505 244 6,749
Greater than 5 years 4,434 279 4,713
Total 14,596 831 15,427
Netting (6,472) (35) (6,507)
OTC derivative assets $ 8,124 $ 796 $ 8,920
Net credit exposure $ 6,769 $ 599 $ 7,368
As of December 2014
Less than 1 year $ 4,959 $ 79 $ 5,038
1 - 5 years 6,226 363 6,589
Greater than 5 years 5,660 160 5,820
Total 16,845 602 17,447
Netting (7,062) (117) (7,179)
OTC derivative assets $ 9,783 $ 485 $10,268
Net credit exposure $ 8,506 $ 188 $ 8,694
106 Goldman Sachs 2015 Form 10-K