Goldman Sachs 2015 Annual Report Download - page 198

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
‰Junior subordinated debt issued to trusts is reflected in both
Tier 1 capital (25%) and Tier 2 capital (75%) as of
December 2015. Such percentages were 50% for both Tier 1
and Tier 2 capital as of December 2014. Junior subordinated
debt issued to trusts is reduced by the amount of trust
preferred securities purchased by the firm and will be fully
phased out of Tier 1 capital into Tier 2 capital by 2016, and
then out of Tier 2 capital by 2022. See Note 16 for
additional information about the firm’s junior subordinated
debt issued to trusts and trust preferred securities purchased
by the firm.
‰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
upon reaching a remaining maturity of five years. See
Note 16 for additional information about the firm’s
subordinated debt.
The tables below present changes in CET1, Tier 1 capital and
Tier 2 capital for the period ended December 2015 and the
period from December 31, 2013 to December 31, 2014.
Period Ended
December 2015
$ in millions Standardized
Basel III
Advanced
Common Equity Tier 1
Beginning balance $69,830 $69,830
Increased deductions due to transitional
provisions 1(1,368) (1,368)
Increase in common shareholders’ equity 1,931 1,931
Change in deduction for goodwill and identifiable
intangible assets, net of deferred tax liabilities 75 75
Change in deduction for investments in
nonconsolidated financial institutions 1,059 1,059
Change in other adjustments (164) (164)
Ending balance $71,363 $71,363
Tier 1 capital
Beginning balance $78,433 $78,433
Increased deductions due to transitional
provisions 1(1,073) (1,073)
Other net increase in CET1 2,901 2,901
Redesignation of junior subordinated debt issued
to trusts (330) (330)
Increase in perpetual non-cumulative preferred
stock 2,000 2,000
Deduction for investments in covered funds (413) (413)
Change in other adjustments (7) (7)
Ending balance 81,511 81,511
Tier 2 capital
Beginning balance 12,861 12,545
Increased deductions due to transitional
provisions 1(53) (53)
Increase in qualifying subordinated debt 3,238 3,238
Redesignation of junior subordinated debt issued
to trusts 330 330
Change in the allowance for losses on loans and
lending commitments 286 —
Change in other adjustments 43 43
Ending balance 16,705 16,103
Total capital $98,216 $97,614
1. Represents the increased phase-in of deductions from 20% to 40%,
effective January 2015.
$ in millions
Period Ended
December 2014
Common Equity Tier 1
Balance, December 31, 2013 $63,248
Change in CET1 related to the transition to the Revised
Capital Framework 13,177
Increase in common shareholders’ equity 2,330
Change in deduction for goodwill and identifiable intangible
assets, net of deferred tax liabilities 144
Change in deduction for investments in nonconsolidated
financial institutions 839
Change in other adjustments 92
Balance, December 31, 2014 $69,830
Tier 1 capital
Balance, December 31, 2013 $72,471
Change in CET1 related to the transition to the Revised
Capital Framework 13,177
Change in Tier 1 capital related to the transition to the Revised
Capital Framework 2(443)
Other net increase in CET1 3,405
Increase in perpetual non-cumulative preferred stock 2,000
Redesignation of junior subordinated debt issued to trusts and
decrease related to trust preferred securities purchased by
the firm (1,403)
Change in other adjustments (774)
Balance, December 31, 2014 78,433
Tier 2 capital
Balance, December 31, 2013 13,632
Change in Tier 2 capital related to the transition to the Revised
Capital Framework 3(197)
Decrease in qualifying subordinated debt (879)
Trust preferred securities purchased by the firm, net of
redesignation of junior subordinated debt issued to trusts (27)
Change in other adjustments 16
Balance, December 31, 2014 12,545
Total capital $90,978
1. Includes $3.66 billion related to the transition to the Revised Capital
Framework on January 1, 2014 as well as $(479) million related to the firm’s
application of the Basel III Advanced Rules on April 1, 2014.
2. Includes $(219) million related to the transition to the Revised Capital
Framework on January 1, 2014 as well as $(224) million related to the firm’s
application of the Basel III Advanced Rules on April 1, 2014.
3. Includes $(2) million related to the transition to the Revised Capital
Framework on January 1, 2014 as well as $(195) million related to the firm’s
application of the Basel III Advanced Rules on April 1, 2014.
In the table above, “Change in CET1 related to the
transition to the Revised Capital Framework” primarily
reflects the change in the treatment of equity investments in
certain nonconsolidated entities. The Revised Capital
Framework requires only a portion of such investments that
exceed certain prescribed thresholds to be treated as
deductions from CET1 and the remainder are risk-
weighted, subject to the applicable transitional provisions.
As of December 2013, in accordance with the previous
capital regulations, these equity investments were treated as
deductions.
186 Goldman Sachs 2015 Form 10-K