Goldman Sachs 2015 Annual Report Download - page 20

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Regulation
As a participant in the financial services industry, we are
subject to extensive regulation worldwide. Our businesses
have been subject to increasing regulation and supervision
in the United States and other countries, and we expect this
trend to continue in the future.
In particular, the Dodd-Frank Act, and the rules
thereunder, significantly altered the financial regulatory
regime within which we operate. The capital, liquidity and
leverage ratios based on the Basel Committee’s final capital
framework for strengthening international capital
standards (Basel III), as implemented by the Federal
Reserve, the PRA and FCA and other national regulators
have also had a significant impact on our businesses. The
implications of such regulations for our businesses continue
to depend to a large extent on their implementation by the
relevant regulators globally, as well as the development of
market practices and structures under the regime
established by such regulations. Other reforms have been
adopted or are being considered by regulators and policy
makers worldwide, as described further throughout this
section.
Banking Supervision and Regulation
Group Inc. is a bank holding company under the Bank
Holding Company Act of 1956 (BHC Act), a financial
holding company under amendments to the BHC Act
effected by the U.S. Gramm-Leach-Bliley Act of 1999 (GLB
Act) and is subject to supervision and examination by the
Federal Reserve Board.
Under the system of “functional regulation” established
under the BHC Act, the Federal Reserve Board serves as the
primary regulator of our consolidated organization. The
primary regulators of our U.S. non-bank subsidiaries
directly regulate the activities of those subsidiaries, with the
Federal Reserve Board exercising a supervisory role. Such
“functionally regulated” U.S. non-bank subsidiaries include
broker-dealers registered with the SEC, such as our
principal U.S. broker-dealer, Goldman, Sachs & Co.
(GS&Co.), entities registered with or regulated by the U.S.
Commodity Futures Trading Commission (CFTC) with
respect to futures-related and swaps-related activities and
investment advisers registered with the SEC with respect to
their investment advisory activities.
Various of our subsidiaries are regulated by the banking
and securities regulatory authorities of the countries in
which they operate.
Our principal U.S. bank subsidiary, GS Bank USA, is
supervised and regulated by the Federal Reserve Board, the
FDIC, the New York State Department of Financial
Services and the Consumer Financial Protection Bureau
(CFPB). A number of our activities are conducted partially
or entirely through GS Bank USA and its subsidiaries,
including: origination of bank loans; interest rate, credit,
currency and other derivatives; leveraged finance; mortgage
origination; structured finance; deposit-taking; and agency
lending.
In addition, Group Inc. has two limited purpose trust
company subsidiaries that are not permitted to accept
deposits or make loans (other than as incidental to their
trust activities) and are not insured by the FDIC. The
Goldman Sachs Trust Company, N.A., a national banking
association that is limited to fiduciary activities, is regulated
by the Office of the Comptroller of the Currency and is a
member bank of the Federal Reserve System. The Goldman
Sachs Trust Company of Delaware, a Delaware limited
purpose trust company, is regulated by the Office of the
Delaware State Bank Commissioner.
Goldman Sachs International Bank (GSIB), our regulated
U.K. bank and principal non-U.S. bank subsidiary, is
regulated by the PRA and the FCA. GSIB acts as a primary
dealer for European government bonds and is involved in
market making in European government bonds, lending
(including securities lending) and deposit-taking activities.
In November 2014, a new Single Supervisory Mechanism
became effective, under which the European Central Bank
and national supervisors both have certain regulatory
responsibilities for banks in participating EU member
states. While the U.K. does not participate in this new
mechanism, it gives new powers to the European Central
Bank to take regulatory action with regard to the firm’s
banks in Germany and France.
8Goldman Sachs 2015 Form 10-K