Goldman Sachs 2015 Annual Report Download - page 202

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Broker-Dealer Subsidiaries
U.S. Regulated Broker-Dealer Subsidiaries. The firm’s
U.S. regulated broker-dealer subsidiaries include GS&Co.
and GSEC. GS&Co. and GSEC are registered U.S. broker-
dealers and futures commission merchants, and are subject
to regulatory capital requirements, including those imposed
by the SEC, the U.S. Commodity Futures Trading
Commission (CFTC), the Chicago Mercantile Exchange,
the Financial Industry Regulatory Authority, Inc. (FINRA)
and the National Futures Association. Rule 15c3-1 of the
SEC and Rule 1.17 of the CFTC specify uniform minimum
net capital requirements, as defined, for their registrants,
and also effectively require that a significant part of the
registrants’ assets be kept in relatively liquid form. GS&Co.
and GSEC have elected to calculate their minimum capital
requirements in accordance with the “Alternative Net
Capital Requirement” as permitted by Rule 15c3-1.
As of December 2015 and December 2014, GS&Co. had
regulatory net capital, as defined by Rule 15c3-1, of
$14.75 billion and $14.83 billion, respectively, which
exceeded the amount required by $12.37 billion and
$12.46 billion, respectively. As of December 2015 and
December 2014, GSEC had regulatory net capital, as
defined by Rule 15c3-1, of $1.71 billion and $1.67 billion,
respectively, which exceeded the amount required by
$1.59 billion and $1.53 billion, respectively.
In addition to its alternative minimum net capital
requirements, GS&Co. is also required to hold tentative net
capital in excess of $1 billion and net capital in excess of
$500 million in accordance with the market and credit risk
standards of Appendix E of Rule 15c3-1. GS&Co. is also
required to notify the SEC in the event that its tentative net
capital is less than $5 billion. As of December 2015 and
December 2014, GS&Co. had tentative net capital and net
capital in excess of both the minimum and the notification
requirements.
Non-U.S. Regulated Broker-Dealer Subsidiaries. The
firm’s principal non-U.S. regulated broker-dealer
subsidiaries include Goldman Sachs International (GSI) and
Goldman Sachs Japan Co., Ltd. (GSJCL). GSI, the firm’s
U.K. broker-dealer, is regulated by the PRA and the FCA.
GSJCL, the firm’s Japanese broker-dealer, is regulated by
Japan’s Financial Services Agency. These and certain other
non-U.S. subsidiaries of the firm are also subject to capital
adequacy requirements promulgated by authorities of the
countries in which they operate. As of December 2015 and
December 2014, these subsidiaries were in compliance with
their local capital adequacy requirements.
Restrictions on Payments
Group Inc.’s ability to withdraw capital from its regulated
subsidiaries is limited by minimum equity capital
requirements applicable to those subsidiaries, provisions of
applicable law and regulations and other regulatory
restrictions that limit the ability of those subsidiaries to
declare and pay dividends without prior regulatory
approval even if the relevant subsidiary would satisfy the
equity capital requirements applicable to it after giving
effect to the dividend. For example, the Federal Reserve
Board, the FDIC and the New York State Department of
Financial Services have authority to prohibit or to limit the
payment of dividends by the banking organizations they
supervise (including GS Bank USA) if, in the relevant
regulator’s opinion, payment of a dividend would
constitute an unsafe or unsound practice in the light of the
financial condition of the banking organization.
As of December 2015 and December 2014, Group Inc. was
required to maintain $48.09 billion and $33.62 billion,
respectively, of minimum equity capital in its regulated
subsidiaries in order to satisfy the regulatory requirements
of such subsidiaries. The increased requirement is primarily
a result of higher regulatory capital requirements in GS
Bank USA, reflecting the implementation of the
Standardized Capital Rules.
Other
The deposits of GS Bank USA are insured by the FDIC to
the extent provided by law. The Federal Reserve Board
requires that GS Bank USA maintain cash reserves with the
Federal Reserve Bank of New York. The amount deposited
by GS Bank USA held at the Federal Reserve Bank of New
York was $49.36 billion and $38.68 billion as of
December 2015 and December 2014, respectively, which
exceeded required reserve amounts by $49.25 billion and
$38.57 billion as of December 2015 and December 2014,
respectively.
190 Goldman Sachs 2015 Form 10-K