Goldman Sachs 2015 Annual Report Download - page 121

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis
As of December 2015, our total credit exposure to Russia
was $292 million and primarily related to loans and lending
commitments. Such exposure was substantially all with
non-sovereign counterparties or borrowers. In addition,
our total market exposure to Russia as of December 2015
was $791 million, which was primarily with non-sovereign
issuers or underliers and was primarily related to equities
and credit derivatives.
As of December 2015, our total credit exposure to China
was $3.7 billion and primarily related to deposits with
banks and loans and lending commitments. Such exposure
was primarily with non-sovereign counterparties or
borrowers. In addition, our total market exposure to China
as of December 2015 was $2.5 billion and was primarily
related to equities.
As of December 2015, our total credit exposure to Brazil
was $3.2 billion and primarily related to secured
receivables and initial margin placed with clearing
organizations. Substantially all of such exposure was with
non-sovereign counterparties or borrowers. In addition,
our total market exposure to Brazil as of December 2015
was $1.9 billion and was primarily related to sovereign
debt.
Our total credit and market exposure to each of Argentina,
Iraq, Venezuela and Nigeria as of December 2015 was not
material.
We have a comprehensive framework to monitor, measure
and assess our country exposures and to determine our risk
appetite. We determine the country of risk by the location
of the counterparty, issuer or underlier’s assets, where they
generate revenue, the country in which they are
headquartered, the jurisdiction where a claim against them
could be enforced, and/or the government whose policies
affect their ability to repay their obligations. We monitor
our credit exposure to a specific country both at the
individual counterparty level as well as at the aggregate
country level.
We use regular stress tests, described above, to calculate the
credit exposures, including potential concentrations that
would result from applying shocks to counterparty credit
ratings or credit risk factors. To supplement these regular
stress tests, we also conduct tailored stress tests on an ad
hoc basis in response to specific market events that we deem
significant. These stress tests are designed to estimate the
direct impact of the event on our credit and market
exposures resulting from shocks to risk factors including,
but not limited to, currency rates, interest rates, and equity
prices. We also utilize these stress tests to estimate the
indirect impact of certain hypothetical events on our
country exposures, such as the impact of credit market
deterioration on corporate borrowers and counterparties
along with the shocks to the risk factors described above.
The parameters of these shocks vary based on the scenario
reflected in each stress test. We review estimated losses
produced by the stress tests in order to understand their
magnitude, highlight potential loss concentrations, and
assess and mitigate our exposures where necessary.
See “Stress Tests” above, “Liquidity Risk Management —
Liquidity Stress Tests” and “Market Risk Management —
Stress Testing” for further information about stress tests.
Industry Exposures. Significant declines in the price of oil
have led to market concerns regarding the creditworthiness
of certain companies in the oil and gas industry. As of
December 2015, our credit exposure to oil and gas
companies related to loans and lending commitments was
$10.6 billion ($1.8 billion of loans and $8.8 billion of
lending commitments). Such exposure included $4.2 billion
of exposure to non-investment-grade counterparties
($1.5 billion related to loans and $2.7 billion related to
lending commitments). In addition, we have exposure to
our clients in the oil and gas industry arising from
derivatives. As of December 2015, our credit exposure
related to derivatives and receivables with oil and gas
companies was $1.9 billion, primarily with investment-
grade counterparties. As of December 2015, our market
exposure related to oil and gas companies was
$(677) million, which was primarily to investment-grade
issuers or underliers.
Goldman Sachs 2015 Form 10-K 109